Dealing With Debt
Leave The Debt Monster Behind.
Debt is often wrongly considered to be a tool to help aid prosperity. Many of you may know from first hand experience that this couldn't be further from the truth. In reality, debt is merely a tool to generate huge incomes for lenders.
It takes a lot of hard work and determination to get out of debt, but this guide aims to help you achieve just that.
Getting Out Of Debt
Like many of life's problems or addictions, the first step on your route to getting out of debt, should be accepting that you are in debt. It is then hugely important that you stop adding to your debt. That means putting away the credit cards to avoid the tempting buy now, pay later option, which as I'm sure you know is a downward spiral. Take a moment to imagine how it would feel to be completely debt free. This is your goal. Try our 10 easy tips to get you out of debt.
- Step One: Work Out What You Owe. At this point, you need to sit down and make a list of exactly what you owe, and who you owe it to. Make sure that you're honest with yourself as any omissions here are bound to cause problems in the future.
- Step Two: Budget Yourself. Once you know exactly how much you owe, you can design a suitable budget, including your debt payments. Ideally, you should be paying off as much as possible while still allowing yourself enough of your income to live on.
- Step Three: Show Self Discipline. This means resisting the temptation to take on further lending to ease the stress. Remember what you imagined it would be like to be debt free and keep aiming to achieve it.
- Step Four: Limit Your Spending. It's very easy these days to spend far more than you realise. One cause of this problem is paying for small things by debit card. £5.99 here, £7.49 there and £13.99 somewhere else soon adds up to just shy of £30. The way to limit this 'hemorrhaging' of money is to set yourself an amount of money which you are happy to spend in a week. Then, at the beginning of the week withdraw this money from a cash machine, and aim not to use your bank card again until the beginning of the following week.
- Step Five: Pay Bills With Direct Debits. This may be old news to many people, but Direct Debits really are the way forward when it comes to paying bills. Direct Debits that are set up to be paid straight after pay-day mean that you don't have to worry about them. It also means that you avoid any late payment charges/fines. Many companies offer a discount for those people that elect to pay by this service.
- Step Six: Switch Providers. You could save hundreds of pounds each year on your gas, electricity, water and phone bills by switching provider. Price comparison sites offer this service and are straight forward enough to use. Try uSwitch.com or MoneySupermarket as a starting point.
- Step Seven: Reduce The Interest You Pay.There are plenty of lending companies out there, and as a result, competition between them is fierce. You can take advantage of this and find a loan or credit card with a lower rate. Exercise caution with some lenders though, (especially credit cards) as initial 'special offer' low rates will often rise drastically after an introductory period. This doesn't cause too much of a problem though, providing you are willing to switch again when the introductory rate expires. This is one of the most important steps, as it could save you from just paying off the interest on your debt, and allow you to start reducing the actual amount owed.
- Step Eight: Ditch ALL Store Cards. Store cards are evil. Full stop. You are enticed into taking them at the checkout, then every time you return to the store you can spend what you like without having to worry about paying for goods with your own money. Instead, you later start to receive bills complete with extraordinary amounts of interest. Cut them up to remove temptation. Do it now!
- Step Nine: Switch Mortgage Provider. It is probably your biggest outgoing every month, but most people probably aren't getting the best deal. It is definitely worth speaking to an independent financial advisor (there's plenty of them out there) to see what options are available to you. This really could make a huge difference to your situation. Don't forget to check transfer charges before you make a decision, although bear in mind that the savings you make with your new mortgage may dwarf any transfer fees incurred.
- Step Ten: Wasting Money on Insurance? It is not uncommon to take out an insurance policy, and then stay with that company for the rest of time. However, there are other companies out there, and in much the same way as the lending sector, competion between insurers is fierce. Take advantage, shop around and you'll almost certainly find a better deal. This applies to all types of insurance, whether it's car, mortgage protection or home contents.