Acting on your finances and reviewing existing credit agreements can help you get debt free, so you don’t get trapped in a vicious circle.  Maybe you’ve had to resort to credit cards, accessing your savings account, catalogues or possibly an overdraft to help finance regular outgoings lately?  Well now’s the time to do something about it and make a plan to deal with your debts NOW – ignoring the problem only makes things worse!

Remember, be realistic and honest about how much debt you owe and always work to pay off the most expensive borrowing first.

1. Take stock of your debts

Confirm the balances of all your bank accounts, credit cards, loans and other debts and find out the rate of interest you’re being charged on each.  It helps to write this all down either in a spreadsheet like Excel or even handwritten on paper which you can draw your own lines on, if that helps.

The point of this exercise is to get a realistic view of your finances to enable you to identify what needs to change.  Good or bad, once you know where you stand, you are in a position to do something about it.

2. Put your budget under the microscope

Fully itemise what you spend each month.  Again, use a spreadsheet or a (free) budgeting app.  I love my Monzo bank account, every payment I make gets filed into type eg. family, bills, transport etc so I can clearly see where my money’s going.  Too many coffees for a start! 

There are plenty of budgeting apps around too, you can read more here.

3. Where are savings to be had?

Once you have all your budget figures together, take a good look at your spending.  Review if some of your commitments are really necessary if you are looking to save money, like coffees, eating out, gym memberships etc.  What about insurance and utilities?  Is there a better deal to be had by switching?  The more you can save, the more you can put towards repaying your debt.

4. Remove the temptation to take on more debt

Bin any shopping catalogues and cut up any credit or store cards you are trying to pay off so you are not tempted to start spending on them. Close any credit cards you don’t use if they have a zero balance. Alternatively, if you are disciplined enough, you could ask your credit card providers to lower your credit limits (you have a right to ask them to do this).

5. Pay off your most expensive debts first

Repay your debts in order of the interest rates they charge and aim to pay as much as possible each month.  Store cards tend to be much more expensive than standard credit cards so try to increase your repayments to this kind of debt.

Although you’re prioritising debt, do please make sure you continue to make your minimum payments on all your other debts, as missing a month could result in extra charges and a mark against your credit score.

If you make any monthly savings contributions suspend them temporarily.  While it’s great to have some funds put away for emergencies, you won’t be gaining as much in interest as you’ll save on repaying your debts.  Focus on getting rid of your debts first and then you can return to your savings pot.

6. Repay your debts more efficiently

You may be able to save money just by shifting balances from your more expensive credit cards to your least expensive card.  This also goes for any store cards, which tend to be more expensive than the standard interest rates charged by credit card providers.

Ideally, be on the lookout for cards that offer a 0% balance transfer deal.  If you’re really struggling with debts you may find it difficult to be accepted, but you might get an offer from one  of your current providers, so pay attention to any marketing you receive from them.

7. Automate your debt repayments

Eliminate the risk of forgetting your debt repayments by automating them.  A standing order will allow you to pay a set amount on a set date of the month and most credit card providers will allow you to pay in this way.

Alternatively, a better option is to pay by Direct Debit.  The provider gives options to take the minimum payment, the full statement balance or a fixed amount.  Ideally, you’ll want to pay off more than just the minimum as it will help your credit score and otherwise take much longer to clear your debt.

8. Keep motivated to get debt free

You will need to keep on top of things to make sure that you reach your ultimate goal of clearing what you owe completely.  Once you have a plan in place and get into the practice of thinking before you spend, things can seem a lot more manageable than they feel right now.

9. Act early

There’s no debt problem that can’t be solved, even if you’re apprehensive about the measures you may need to take.  But with debt, you can be sure that the longer you leave a problem unaddressed, the worse it will get. 

If you think you’re in over your head, act early.  Talk to a charitable organisation such as those listed below and you can be sure of honest, supportive and balanced advice.

https://www.citizensadvice.org.uk/

https://www.stepchange.org/