Finding yourself deep in a rabbit hole of debt is a very stressful place to be. It can sometimes affect your mental well being and your ability to cope in usual day to day life, as it constantly plays on your mind.
The good news is, this is not permanent and paying any amount of debt off is perfectly doable. It’s easy to feel overwhelmed and get caught up in the numbers. Do not view it as an impossibility. Instead, take a step back, create a plan of attack and get cracking.
So, where to start?
Set a goal
Now, you must’ve landed on this blog because you want to pay off your debt. So, what’s your ‘why’?
It could be you wish to become debt free in ‘x’ years. Or maybe pay off 50% of your total debt in ‘x’ months, so you can start a savings kitty.
Whatever your goal is, write it down. Make it seem more real. This will give you the motivation and drive you require to keep you on the right path.
Budget, budget, budget
It all starts with a good budget.
How will you know how much cash you have available to pay debts if you don’t have a decent budget?
If you don’t have a budget yet, head over to my ‘Beginner’s Guide‘ to get started. If you do have a budget, then brilliant – you’re halfway there!
Once you have your budget prepared, you will be able to visualise how much disposable income you have i.e. what is available to help you start chipping away at the debt.
Create a debt tracker
The trick is, to get organised.
It can be confusing where to even begin if your debt is spread across multiple credit cards and paying different rates of interest. So, start by writing down all of the different debt types you have, the amounts you owe and the effective interest rate you’re paying. Next, rank these in priority (higher interest debt first).
This will make your repayments much easier to manage, as you know which debt needs to be paid off first. It’ll also save you some money too!
Cut costs
If your goal is to become debt free in say, 12 months, is this actually feasible given your current budget?
If the answer to that question is no, then delve into your expenditure budget and examine whether any costs can be cut or decreased.
Check all of your subscriptions are still relevant or whether you can cease paying for them. Shop around for any better deals on your electric or broadband, perhaps.
If you have discretionary costs built into your budget such as nights out or treats, maybe re-evaluate and decrease these, where possible. You may see this step as being quite restrictive, however it will help you in reaching your goal quicker so it depends on which is more important to you.
Ask for financial assistance
Asking for help is nothing to be ashamed of and not something to shy away from out of pride.
Some creditors are able to offer payment breaks or delay your payments, given your circumstance. This won’t be the case for every company, but it’s certainly worth checking.
Asking for financial assistance doesn’t necessarily mean it’ll cost you anything, there are many free services out there which you can use. One service I have used, is the ‘coaching’ section on Clearscore. Which offers free advise on various areas such as: clearing debt, improving your credit score and helping you to select the correct credit providers. This service is fully personalised based on your information.
Increase your income
This may be easier said than done, but it isn’t totally impossible.
Reach out to your boss and see if there’s wiggle room for a raise (you don’t ask, you don’t get, right?!).
Or try something completely new! I’ve written a blog post surrounding ways to earn extra income, which you can read here.
Consolidate your debt
You may find that, in the long run, it’s actually cheaper to store all of your debt in one place.
You will inevitably be charged a fee for completing balance transfers (unless you’re offered a promotional rate), however if you weigh this amount up against the effective interest you would pay on the original card and it works out to be cheaper, then do it!
Shop around
There will always be a better deal for you, that’s waiting around the corner. You just need to find it.
Comparison sites and handy recommendations from oracles such as Martin Lewis have made this much less painful than it used to be. Simply key in your details and the site will find the deal that’s perfect for you. Be careful of running too many searches as this may affect your credit rating.
Many companies offer promotional rates for signing up which give you interest free periods so always look out for these.
My advice to you, would be to not panic. I’ve been there before and I know how hard the climb is; but believe me, the view is worth it!
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