How to Get Out of Debt Forever

It’s easy to find yourself with debts that you never expected.  Sometimes it is a change in circumstance, losing your job, falling ill, losing a partner (and their income) sometimes it is just too easy to spend.   Whatever the reason – having got into debt, it can be incredibly difficult to fight your way out.

So what can you do?

Well to start with there are 10 easy steps to stop the debt and start …….

Step 1:          

First of all you need to know exactly how bad the problem is.  So take a big breath and a large sheet of paper and make a list of every bill, the amount owed, the interest rates (if there is one) and how overdue the bill is.

Step 2:          

Prioritise the list.  So note which ones are essential (ie utilities, mortgage etc) and with store cards and credit cards list them in order with the highest interest rate at the top.  The essential ones you have to pay as these are the ones that keep a roof over your head, all others you will pay as best as you can.

Step 3:          

Now look at your income.  Make a note of exactly what your income is, list all of it.  The salary you earn, (after tax) the benefit you receive, the extras that you earn for any 2^nd job or business – list it all.  You should arrive at a total.

Step 4:          

Now you need to make a note of all your outgoings that you need to pay every week or month.  Make sure you list everything, including treats, extras, sweets for the kids, the newspaper or the magazine you buy on the way to work.  Take from the total income the total expenditure.  Is there anything left over?  Yes – then allocate this to paying off the debts.  No – then you need to look very carefully at your budgeting to see what you can cut out or cut back in some way.  Look at the costs of alcohol, smoking, nights out, takeaways, any unnecessary spending.  Can you catch the bus or walk rather than use the car?  Can you forgo that morning cup of coffee, perhaps make lunch and take it with you rather than buying lunch at the sandwich shop round the corner.

Step 5:          

You need to allocate money to paying the debts off.  How much you have is dependent upon your income.  I have already said that some are essential as these keep the roof over your head.  The others have to be prioritised.  With credit cards and store cards you need to clear the most expensive first, which is the one with the highest rate of interest.  

Step 6:          

If you really can’t meet all of your payment you MUST contact every company that you owe money to and tell them that you are having financial problems but… and this is important… that you a have put together a plan to clearing all your debts.  You need to get them to suspend you account so you cannot spend any more on it, you need to destroy all your credit cards and store cards.  Ideally also you need to ask the companies that you owe money to; to freeze the account so that no more interest will be added to the account whilst you are clearing it.  You might need to talk to a debt councillor to get help with this bit but it is worthwhile. 

Step 7:          

Allocate an amount every month to paying off your debts.  Make sure you pay something to every debt.  Make sure you allocate the largest amount to the highest costing debt.  Once this is cleared you re-allocate all the money you were using to pay that one off to the next one.  This process will allow you to clear the debts quickly and efficiently.

Step 8:          

If you are able to, you need to boost your income in some way to create extra income to clear the debts.  Can you take on extra shifts at work?  Could you take on a 2^nd job or even start up a new career as an agent for one of the many companies that enable you to work from home and fit around your current commitments?  Everybody has extra time to devote to this, it just means reallocating your priorities and give up watching 2 or 3 hours TV in the evening.  Perhaps now is the time to look at starting that business you have always dreamed of? However, please make sure that all the income you create is used to pay off the debts

Step 9:          

Keep a file or a spreadsheet of each debt, the payments made, the reducing figure that you owe.  It will get tough on this journey so you need to see that you are making progress to keep you focused and on target.

Step 10:          

Make a promise to yourself that you will never allow yourself to get out of control again and get into debt.  Learn how to Save rather than spend and put a little aside whenever you can for that rainy day or that dream holiday, perhaps even start saving for your old age.