At the Money and Mental Health Policy Institute, we regularly talk to...
6 StepChange debt management plan (DMP) survival tips
With our guide to debt management plans (DMPs) on the BBC website today we thought we’d look at the best tips for surviving when you’re on one.
These tips aren’t just about sticking to your budget and watching your spending (although those are a major part of a successful DMP); there’s a lot more we can reveal…
1. Stick to your budget and watch your spending
The first and most obvious: you’ve got a budget and you’ve got guidelines for spending so the most important thing is to stick to this. For many people being on a debt management plan is the first time in their lives that they have ever drawn up a budget so it will take a few months to get used to it.
Survival tips for living on budget include making lists of when, where and how much you spend, so that you can accurately record where your money is going.
Other survival tips include making sure you save money for categories that you don’t spend on every month. For example: your car MOT is once a year, but it’s in your budget to save every month.
Make sure you stick to saving Car Servicing costs, Dental costs, Hairdressing costs etc. You need to start to build these savings up for when you need them.
2. Monitor your creditor balances
If you’re on a DMP with StepChange Debt Charity you’ll get regular statements from us so that you can see how things are progressing but it’s important to continue to check the statements from your creditors.
You need to check creditor statements to make sure there is nothing on there that you don’t know about, and check for balances, interest and charges. Remember, no debt management company can guarantee that your creditors will stop interest and charges.
If you want your DMP to go smoothly it’s best that there are no nasty surprises so keep checking!
3. Keep us updated with your current situation
Once your DMP is set up you need to keep us updated with changes to your circumstances. If you start to struggle you need to let the debt management company know. Your budget should be accurate and sustainable at all times.
If your work hours have reduced you can’t be expected to make the same payments to your debt management plan. No creditor wants to see people suffering in poverty because they’re scared to rock the boat on their debt management plan.
However a plan should be a true reflection of your circumstances at all times.
4. Monitor your extra income
We don’t usually recommend including overtime or bonuses in your regular income amount because it’s not always guaranteed.
It can be easy to fritter that extra cash away on everyday expenditure if you’re not budgeting carefully but if you really want to focus on reducing your debts as quickly as possible it’s better to keep putting it to one side.
Consider setting up an online saving account which you can transfer money to and from easily. In this way it’s easy to monitor how much is going in each month and if something unexpected does crop up you’ve got the funds available.
Every six months or so you can assess how well you’re doing and it can really boost your morale knowing you might be able to clear a few debts quicker than expected.
5. Don’t be tempted by extra credit
If you find it difficult to budget properly it can get tricky when big events like Christmas pop up. We all know that these things come round at the same time each year yet somehow it can still catch us off guard!
The temptation of using an old overdraft or taking out a payday loan is all too tempting if it means that the little ones can get their dream present, even If that involves you struggling for months afterward.
As we’ve mentioned before this can only ever make the situation worse and often leads to a debt spiral. It’s better to plan carefully in advance to avoid the need for extra credit.
6. Don’t make payments outside your DMP
A DMP isn’t a legally-binding solution so we can’t stop the creditors from contacting you and asking for extra payments.
The constant phone calls pressurising for extra payments can easily bog you down and sometimes it feels like the only way to get rid of them is to agree to pay an extra £10 over the phone.
This isn’t the answer and if they know that this type of pressure works on you, they will continue to do the same, week after week.
Most budgets are prepared meticulously and those extra payments will easily eat into expenditure set aside for essentials such as clothing or even worse, food or utility bills.
It’s easier said than done but it’s much more effective to ignore these calls and maintain your payments through your DMP.
We hope you find our survival tips useful, but if you have any queries we’re always on hand to help. We regularly post on moneysavingexpert.com and there’s plenty of support available for Debt Free Wannabes.