I spent all my 20s and 30s in debt. I normalised debt for two decades of my life, in a constant state of owing money, monthly repayments, living beyond my means. I switched from one 0% credit deal to the next, occasionally taking loans for all these years. The amounts I owed would reduce with monthly payments and occasional windfalls and go back up on a cyclical basis.
Turning 40 was the lightbulb moment of recognition that this debt needed to be gone. I was thinking about money all the time, it was affecting my mental health. My mindset shifted and I was determined to clear the debt, at that point 16k, and stay debt free from that point forward. These are the steps I recommend paying off your debt.
1) Face Up to your Debt. Write it all down
The most difficult step is this first one, facing up to your debt and addressing the need to repay it. Now is the time to collate the credit card and loan details of everything you owe. Call them, check your statements and apps up for an up-to-date balances and interest rate.
Write it all down and face that reality of how much debt you have. Understand what your interest rates are on each debt, the period of time the repayments last if a loan, monthly repayments amounts and minimum repayments.
2) Come up with a plan and share it
Well done facing up to your debt and setting the intention to repay it. The next stage is to come up with a plan. You can do this by yourself, but it will help you immensely if you can talk it through with a trusted friend, particularly someone who will not judge and who is good with money.
Another wonderful resource with debt support is Instagram! There is a wonderful community using #debtfreecommunity who are hugely supportive of a debt journey. Setting up an Instagram account (which can be anonymous) is a brilliant way to be accountable and to get encouragement and support from a community.
What are your minimum monthly payments? And are these affordable? If you cannot make the minimum repayments, then you have a more serious debt issue. Please, please go straight to the Citizens Advice, CAP or Step Change. Three amazing and FREE places for debt advice.
3) Restructure any debt if you can
If you have debt with a high interest rate check your credit rating to see if you can restructure your debt and move it to a lower interest rate. You may be able to consolidate with a loan, with fixed monthly payments and period of time agreed. Or you might be able to move to a different credit card with a lower or 0% interest rate.
4) Focus on clearing the debt that is costing you the most interest FIRST
The minimum payments or monthly repayment need to be made on each debt but focus on paying more on the debt that is costing you the most in interest with overpayments.
Do what you can to save money and make extra money. And pour those extra savings /income into your debt repayment.
- Switch your essential bills to get a cheaper deal
- Cancel direct debits that are non-essential
- Have a no-spend month
- Read this article I recently wrote for Zopa about savings on food, energy and fuel
- Can you make some extra cash from a side hustle?
- Sell items you no longer need on Facebook/eBay
5) At the same time build up an emergency fund
At the same time as paying off your credit card, consider creating a small emergency fund.
Create a fund to pay for an emergency if needed. Things like the washing machine breaking down or essential car repairs, not a holiday. This should help you in the long run with having a saving pot to dip into so you don't slip backwards with your debt.
6) Keep going until the debt is gone
It might take you two years, or it might take you five years but keep going. Keep making those monthly payments until the debt is gone and you are free. Expect ups and downs. Expect to feel like the journey may never end, but you will get some glimmers of hope and the light at the end of the tunnel does get brighter. And then suddenly you reach the day when you are debt free.
I slipped, a couple of times. The summer holidays were always a problem for me with higher living expenses with the children and lower income. You may well slip, but don't beat yourself up too much. Every week/month is a new week/month, and you can re-set positive intentions to get that debt to £0!!!
The feeling of being debt free is incredible. It’s a freedom from worry, from always having to cover those monthly costs.
*How do I get debt advice?
*StepChange, the UK’s leading debt advice charity, helps over 600,000 people with free, impartial debt advice each year. They see first hand how talking openly about money issues helps people.
*Once you’re ready to get debt advice, we recommend gathering up-to-date information about your finances, including your income, outgoings and debts.
You can then use our online debt help tool to get debt advice online at your own pace.
Or, if you’d prefer to talk to someone, you can call our debt experts on 0800 138 1111. They’re available Monday to Friday, 8am to 8pm or Saturday 8am to 4pm.
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