Are you up to your eyeballs in debt and have no idea how to begin to claw your way back to zero? First of all, you are not alone as research shows that the average family in the UK in 2014 was £54,000 in debt including mortgages and £6,000 per person not including mortgages. These figures prove that staying out of debt is a nationwide problem but it’s important to know that there is a way out.
Making some subtle changes can make a huge difference, so let’s take a look at the top five things that you can do to pay off your debt:
Table of Contents
1. Create a Budget
Calculate your incomings and outgoings to help you to identify where you are haemorrhaging money, so that you can make cutbacks.
- Create an Excel spreadsheet
- Scrutinise your expenditures to identify where you can make savings
- Include small outgoings such as the cost of lunch, as these add up throughout a month
Scaling back on your spending habits is the first thing to do in order to begin the process of getting out of debt and saving money is easier when you can clearly see exactly what you are spending money on.
2. Consolidate your Debts
Studies show that £11 million is written off by banks and building societies in the UK every day, as people consolidate their debts into more manageable payment plans.
Take some time to do the following:
- Work out the individual amounts of all of your debt owed to different companies
- Get some help from a financial planner if you are unsure how to calculate your debt
- Always make more than the minimum payment
Consolidating your debts can reduce the confusion about how much debt you are really in and can help you to feel in control again.
3. Stop Using your Credit Card
The best way to stop accumulating more debt is to pay for everything with cash. Avoid temptation by taking your credit cards out of your purse or wallet, and live more within your means on a cash-only lifestyle.
4. Stop Treating Yourself
It can be easy to try to justify the occasional unnecessary expenditure to keep you motivated but getting out of debt is far quicker when you reduce your spending.
Try the following:
- Put work bonuses towards your debt
- Spend any left over money at the end of the month on your payments
- If you receive money for a birthday or Christmas, spend that on your debt payments
5. Change your Lifestyle
No one said getting out of debt would be fun and you might need to make some changes to your lifestyle such as foregoing your daily latte from Starbucks and making your own coffee instead and take lunch to work instead of eating out.
By doing all of the above, you will soon be able to see the difference it makes to your financial situation, which in itself will help you to feel more motivated to continue to make your way out of debt.