The UK has become an attractive destination for immigrants for many reasons, but it can be an expensive place to live. Between rent, relocation costs and the high cost of living, it’s easy for bills to pile up. And on top of that, many immigrants to the UK have obligations to support family back in their home country.
At Remitly, we not only make it easy and affordable to send money home, we also want to make financial planning easier with high-quality advice and information. Read on for tips about how to manage your finances and how to balance your personal needs with your family commitments.
Creating and managing a personalised budget
The first and most important thing if you get into debt is knowing what not to do. Don’t ignore bills and final demands — this won’t solve the problem. Here are some things you can do:
- Consider negotiating with your creditors (the people you owe) first. They may agree to a payment plan to help spread out the repayments.
- Carefully write down a budget plan: include your income and essential expenses, and cut out any unnecessary costs. Then, you can calculate how much you can afford to send to debt collectors and family every month. There are many free budget planning tools available online that may be useful.
- Speak to your family back home and let them know your circumstances. As much as they might rely on your help, they’re likely to understand that you need to send a little less home or even take a break from payments until you recover financially.
- Prioritise your debts and pay off the most important ones first. If you miss a payment on your mortgage or rent it will have much more serious consequences than, for example, a debt to a friend or family member.
- If you’re using credit cards, even to pay essential bills, cut them up. They just accumulate more debt. Remember that credit cards carry some of the highest interest rates, which means you end up paying much more in the long run.
Savings and cost-cutting measures
One thing you can do straight away is to reduce your outgoings as much as possible. Consider any expenditure that you can stop completely or change to a cheaper alternative.
- Are you using the gym membership you’re paying for? Maybe you can get your exercise in another, cheaper way. Jogging in the park is free!
- Have you had the same mobile phone contract for years without looking around for a better deal? Now’s the time; there are a lot of competing providers, so shop around and negotiate. The same goes for things like insurance and even utilities these days.
- Are you paying a lot every month for streaming and TV services? These can really add up, so consider trimming your expenses to the minimum you can live with.
- Do you order takeaways or eat out frequently? Skip the restaurants and pubs — it’s much cheaper to cook and eat at home.
- Do you tend to go for premium-brand staple items at the shops? Most supermarkets have their own brands for everyday essentials. Try them out — you probably won’t even notice the difference.
Other ways to save or raise money
Discipline in the supermarket can really help, and that goes beyond buying the shops’ own-branded products. Write a shopping list and stick to it, eliminating impulse buys and only getting what you need.
The same goes for clothes. Replace old clothes when you have to, or repair them if possible, rather than splashing the cash on new ones all the time.
In fact, selling clothes or good-as-new items that you never use can be a good way to raise a few extra pounds. So have a look around and see what you can do without. Somebody else may want that top in your wardrobe that you’ve never worn.
Strategies for debt management
Getting your spending down should make a difference, but it’s just a start. There are many free resources for debt advice and support in the UK, and Citizens Advice is a great starting point. They provide information on everything from tax relief to alternatives to bankruptcy, the last resort when dealing with debt.
The UK government’s website has lots of information on dealing with debt too, from free debt advice in your area to a free Debtline phone service. There’s also information about the different options available to you, depending on your circumstances:
Debt Relief Order
If you owe less than £50,000, have very little spare income each month and don’t own your home, you may be able to apply for a Debt Relief Order. You won’t have to pay your debts for a year, but you will still have to pay your everyday bills like rent and utilities.
Generally, you have to meet all these criteria to be able to apply for a Debt Relief Order:
- you owe less than £50,000
- you have less than £75 per month spare income
- you have less than £2,000 worth of assets
- you don’t own a vehicle worth £4,000 or more
- you’ve lived or worked in England and Wales within the last three years
- you have not applied for a DRO within the last six years
You can’t apply for a DRO on your own — an approved debt advisor does it for you.
Breathing Space (Debt Respite Scheme)
In England and Wales you can get some time to sort out your finances with the free Breathing Space debt respite scheme. This gives you protection from your creditors for up to 60 days, depending on your eligibility. To apply, you’ll have to speak to a debt advisor first, but these too are free.
Debt Management Plan
If you’re in arrears but still able to make payments, you can set up a Debt Management Plan with an authorised company for unsecured debts (debts that aren’t guaranteed against your property, for example). Keep in mind that these plans may carry fees.
Administration orders
If you have a County Court Judgement against you but you can still make some payments, you can apply for an administration order from a court using form N92. You must meet these requirements:
- owe less than £5,000
- owe money to at least two different creditors
- make one payment per month to your local court, which divides the money between your creditors
Individual Voluntary Agreement
If you owe more than £10,000, an Individual Voluntary Agreement (IVA) may be better, though the fees for this are higher. This should help stop creditors chasing you for payment and charging interest on your debts. With an IVA you can include a wider range of debts, such as:
- utilities — gas, electricity, and water
- credit cards
- Council Tax arrears
- so-called ‘payday loans’
- store cards
- personal loans
- overdrafts
Get specialist advice before setting up an IVA. If you’re making monthly payments, they can last five or six years.
All of these schemes, while helpful, will affect your credit rating for some time. You may have trouble getting a mortgage or a bank loan for six years, even if by then you have no debt. So consider what’s right for you and get some specialist advice first.
Where can I get help in Scotland and Northern Ireland?
In Scotland and Northern Ireland, the rules and the available help are a bit different.
Debt advice in Scotland
There’s a useful list of places to get free help and resources on the Scottish government website. Scotland has its own system to help protect you from your creditors while you pay off your debts, known as the Debt Arrangement Scheme.
Debt advice in Northern Ireland
Northern Ireland has its own, independent advice network. They’ll put you in touch with the debt help services available in your local council area, or you can speak to them on the phone.
Supporting family without compromising on debt
At Remitly, we see how many immigrants help out their families back home by sending whatever money they can. But if you’re asked to help out a loved one who’s in debt, consider what it might get you into. Here are some questions to ask yourself:
- If it’s one-off help, can you afford it without ruining your own budget?
- How will this affect your relationship with them? Keep in mind it may affect your relationship with other family members too, if you help one person but can’t then help somebody else.
- Can you afford to help them in the long term, when the cost of living in the UK is rising and your own circumstances may change? Only send what you can afford.
- Have they tried other ways first before they came to you? Back home there may be similar schemes to the UK’s to help people manage their debt.
- Are there other ways you can help? If making a personal budget has helped you get on top of your situation, for example, you could help them do the same thing.
Can my family be held responsible for my debts?
In the UK, debt doesn’t pass down to family members if somebody dies. It would be the responsibility of that person’s estate to pay their debts, not their family.
However, if you and your partner have a joint bank account, you generally share responsibility for debt, and definitely share responsibility for any loans or credit both of you have signed for.
Debt collectors can’t ask family members to pay off your individual debts for you, though, even if they’re living in the UK. In fact, they can’t even tell your family you have debts to pay if they’re not directly involved.
What if I owe money to a parent or family member?
You might think that it’s better to borrow money from friends and family than a bank or other institution. However, that is still considered a debt in the eyes of UK law, and it could affect your relationship if you can’t pay. If you have to borrow money, there may be better ways that won’t affect your family, like a credit union.
But if you find yourself in that position, there’s free advice on MoneyHelper and the debt charity StepChange. They generally offer the same basic advice about dealing with debt to friends or family:
- Don’t ignore it — talk to them.
- Consider showing them your household bills and your budget. They’re more likely to understand and give you time when they see your circumstances.
As we’ve seen, there are lots of free resources and help out there to get you back on your feet. So the first thing to do is get some advice from a professional. They can help with everything from setting down your budget to applying for debt management schemes. Don’t underestimate the effect of debt on your personal finances and your mental health — reach out for help.
When talking to your family about debt, remember that communication and honesty can go a long way in reaching an understanding. It’s better to lower the amount you send back home and clear your debts first than to keep building up more and more interest on owed money. With careful management, getting out of debt while still supporting your family back home is possible.
Frequently Asked Questions
Where can I get debt management advice in the UK?
There’s free advice available from Citizen’s Advice, MoneyHelper, and even the UK government’s website. Scotland and Northern Ireland have their own pages of advice, too.
Should I declare myself bankrupt if I can’t pay my debts?
In the UK, there are plenty of other options before declaring bankruptcy, like the Breathing Space debt relief scheme, Individual Voluntary Agreements, and Debt Management Plans. Bankruptcy is really a last resort.
Where can I find a budget planning tool?
The MoneyHelper website has a handy free tool to make sure you’ve covered everything.
If I can’t pay my debts, will my family have to pay them?
Not unless they’ve co-signed for the debt or acted as guarantors.
