In less than 50 years, debt has become such a norm that conversations about how to get out of debt can be heard all around us every day.There are many thousands of people just like you who want to change their life and get out of debt. By taking this massive step, you’re guaranteeing yourself a stress-free, financially secure future and here are 7 tips to help you on your way.
Get real!
The first step to get out of debt is to admit how much money you owe. It’s too easy to kid yourself you don’t owe a lot really, especially if your debts are spread around on many different cards, loans and overdrafts. This can lull you into a false sense of security and you end up being half-hearted about trying to get out of debt. Until you see that total debt figure written down you won’t be motivated enough to take action.
Plan ahead
Half the battle to try and get out of debt is to get your creditors paid off. The other half is about forecasting for the big expenses that will come up in the future. i.e. it’s a good idea to start putting money away every month for things such as car expenses, i.e. MOT’s, tax, insurance so you are not burdened with them all in one go. This form of budgeting will help you ride the waves of unexpected bills which we receive throughout the year when we don’t keep on top of things.
Have an emergency savings account
Some people like to have a credit card handy to cover major emergencies, but it’s better to have cash handy because it’s not always possible to use a card in these situations. For example, if your boiler broke down in the middle of winter how long could you go without heat while saving up because the repairman doesn’t take credit cards as payment?
Start paying cash for everything
Fantastic plastic makes our lives so much quicker and easier – and it’s made us get into debt quicker and easier too! To really get a grip on your spending and get out of debt, work out what your expenses are each week and then withdraw that amount in cash. Then leave all your cards at home. Having a set amount of cash in your hand will make you really consider every penny you spend because you know when it’s gone, it’s gone.
Wean yourself off the credit
Stopping yourself from using credit, particularly credit cards, is one of the hardest things to do when trying to get out of debt. Some people decide to ‘go cold turkey’ and cut up their credit cards and store cards. Others like to keep a credit card handy for that little bit of extra security for the unexpected. If you decide to keep one line of credit open for this reason, promise yourself it will only ever be used for major emergencies and not to go shopping to cheer yourself up after a bad day at work!
Make sure you and your partner support each other
While you’re all fired up with enthusiasm about trying to get out of debt you might not have noticed your other half isn’t. In fact, if your other half has been responsible for building up part of the debt, they may not be willing to stop spending at all, resulting in them sabotaging your efforts to get out of debt.
Be creative and find alternatives
Half of the battle when trying to get out of debt is to come up with low cost alternatives to everyday items you are used to slapping down money for. For example, make your own cappuccinos instead of visiting Starbucks, use the library instead of buying new books, read newspapers for free online instead of buying them, and cook for friends instead of going out to dinner. Try and come up with as many ways of having the things you enjoy at lower cost.
Its important to celebrate milestones
Each time you reach a milestone along your ‘get out of debt’ journey, celebrate and reward yourself to keep you motivated and your enthusiasm high. Each reward should fit within your budget and be appropriate to the milestone achieved on your ‘get out of debt’ journey, but should also be worthwhile and something that you would really like. Examples of motivators might be dining out a good restaurant, going to the cinema, a city break, a couple of DVDs and a bottle of nice wine, or maybe even a course at the local college. Choose rewards that will make you happy.
Did you know you can legally get out of debt by using the law to your advantage through what’s called an Unenforceable Credit Agreement. Why struggle, use the law to your advantage!