Is debt a part of your day to day life? Are you spending your days wishing for a debt free life but nothing seems to be really changing for you?
If so, you’re not alone. There are many people in debt plodding along, trying to get out of debt (at least it feels that way) but without making much progress.
The hubby and I spent years in debt wishing that things would change – hoping that some kind of financial miracle would come our way.
Surely we were going to have a little win on the lottery or our house would magically increase in value leaving us a small fortune to do what we liked with. Of course, it never happened! We believed for a long time that we were destined to be in debt for the best part of our lives.
And then one day, we had our wake up call. We knew then that getting out of debt was our priority and there was nothing we wanted more (except good health of course)!
Do you want a debt free life?
If you want to get out of debt more than anything, let this be the last day that things stay the same for you. The chances are that you could go above and beyond what you’re already doing and really make some headway in getting your debts paid off. Let this be the last day that you make excuses! Today, why not start tackling your debt for real and give yourself a chance at a debt free life?
Here are five steps that you could take now to start clearing your debts
Step 1 – Review your finances
Do you know where your money is going? If not, find out now. Get online banking if you don’t already have it and start tracking your income and expenditure. I use a tracking spreadsheet to forecast how much money will be left in my bank account at the end of every month. I list the dates that my bills will go out of my account and have categories for different areas of spending. I also check my bank balance every day to make sure that the numbers tally up. If they don’t, I can instantly see why and do something about it.
Having a forecast for any leftover money will mean that you can anticipate how much you can pay extra towards your debts.
Step 2 – Decide which debts you’re going to tackle first
Write the details of all your debts down – your creditors; the balances; the minimum payments and the interest rates. Work out whether you’re going to tackle the highest interest rate debts first or perhaps the smallest debts first if you want to follow the debt snowball plan like we are. I’ve listed all ours in a spreadsheet so I can see the debt total coming down each month.
Step 3 – Start cutting back on your bills
Whilst you’re checking your bank account, make a note of any bills that you can cut right out of your budget. Do you really need that ‘all singing all dancing’ pet insurance? Perhaps a lower level of cover will be just what you need. Get rid of any unnecessary subscriptions and take some time to make sure you’re getting the best deal on your utility and phone providers.
One big area that many people can cut back on is food shopping. If you find yourself doing top up shops every other day, then maybe you could plan your food shopping more effectively so that you just get the things you really need in your monthly shop. Plan your meals, cook in bulk and freeze. You’ll be surprised at how much money you can save.
Step 4 – Cut up your credit cards
One good way of making sure you don’t accumulate any more debt is to make spending on credit harder for yourself. If you’ve decided that you really do want a debt free life, cut up those cards (and if you have an emergency savings fund, you could cut up the card that you keep for emergencies too).
Step 5 – Make an extra payment towards your debts
If you’ve checked your bank and know how much money you’ll have leftover at the end of the month, why not make an extra payment towards your debts today? You’ll feel on top of the world when you’ve done it. If you can only afford £10, that’s ok, make the payment! Even the smallest start is the most important step in the right direction.
You could even start a debt free diary on the Money Saving Expert Debt Free Wannabe Forum. It’s a great way to keep motivated and track your progress with like minded people on hand for support.
What say you? Will you change the state of your finances today?
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26 Comments
I’m still waiting on that winning lottery ticket myself 🙂
The grocery tip is a great idea! My fiance and I started grocery shopping only on Sunday after we had planned our meals for the week and it has saved us a ton! I do know some people that plan monthly and freeze what they cook, but that’s just too far ahead for me to think.
Blake @ Bean Counter by Day recently posted…Are You Willing to Bet on Your Discipline?
Ha ha! Planning meals ahead monthly is pretty boring but well worth it when you start to see the savings add up.
Step 1 is SO important. I don’t know anyone who has successfully done steps 2 to 5 without first writing down their current position, writing down their goals and then determining the road map of how to get there.
moneystepper recently posted…2013 UK unemployment rate falls to 7.2% – Is the unemployment rate higher or lower than average in your region?
I agree Moneystepper – taking stock of your current financial situation is the key to changing things!
I also saved big time on groceries. I was using coupons, but after planning my meals and eating clean vice packaged and processed foods, I save a ton.
Until I finally decided to get out of debt I never wrote my budget or financial goals down. Now that I have a clear roadmap, it’s been easy street for me. It is so refreshing to have a plan that is going to change my life forever. Great post!
Petrish @ Debt Free Martini recently posted…Look What Budget Did For Me?
Me too Petrish – I never used to have a budget either. In fact, I only checked my bank account a couple of times per month. How things change! 🙂
Having a clear plan of action with specific steps I can take always makes me feel like I’m making good progress towards a goal and keeps me motivated to continue.
Stefanie @ The Broke and Beautiful Life recently posted…Is Playing the Lottery Insane?
Absolutely – having a clear plan is great and you can treat it a bit like a checklist!
Great tips! I think being debt-free is everyone’s dream and having a great plan is the best way to achieve it.
Mark Ross recently posted…Best Thing You Can Do With Your Saved Money
Thanks Mark! Getting out of debt definitely requires a plan.
Dealing with debt is a challenge not just financially but emotionally. Devising a game plan to tackle your debt and pay it off in a manageable way helps to get your finances under control. Look to eliminate any unnecessary expenses if possible and use that money to help pay down debt. Keeping a debt free diary is a great idea too! It could help decrease any stress you have and help keep track of the progress you are making but may not realize.
Thanks for stopping by Leslie! Keep track of progress when paying off debt is really important for motivation as it’s easy to see the impact that you’re having on them. I agree that dealing with debt is an emotional challenge too – especially if it goes on for a long period of time!
Great tips, Hayley! Taking action, even small actions, make the world of difference and lead to bigger and bolder steps. I absolutely agree that if you have a little money leftover at the end of the month, use it towards your debt. It does feel amazing to make an extra payment, even if the amount is small. You feel motivated to keep going.
Shannon @ The Heavy Purse recently posted…The Slippery Slope of “Don’t Tell Mom or Dad”
Making extra payments no matter how small is definitely a good thing to do for motivation! I usually work out how much I think I’ll have left and make a payment at the beginning of the month as well as at the end of the month. Double whammy!
Hey Hayley and thanks for the tips 🙂
I like the idea of paying off a bunch of small debts first. That way, you see some movement on your debt reduction while being able to check-mark “done” off your debt list!! Psychologically this works wonders i would imagine.
Take care and my best to all.
Lyle
lyle @ the Joy of Simple recently posted…Please Welcome The Joy of Simple’s First Guest Post 🙂
This is the only method that really is working for us Lyle. We’ve tried paying off the highest interest debts first before and we couldn’t stick at it long enough to see any real progress! 🙂
Cutting up the cards really is a necessary step for some people. I joke, half-way, that credit cards to a habitual spender are like cocaine to an addict: there is no chance of success if the temptation is right there in your pocket.
Good tips, as always. Having a solid plan like this really can help.
Done by Forty recently posted…President Obama Emailed Me About the Minimum Wage
It took me a long time to part with my credit cards, they were almost like a comfort blanket to me! Now that they are gone though, I just feel relief! Thanks DB40. 🙂
Good list here. Deciding what to tackle was pretty easy for me since I only had student debt, but cutting back wasn’t nearly as easy. All the “extras” had to go away for a couple of years while I cleaned up my mess. It wasn’t fun, but necessary.
KK @ Student Debt Survivor recently posted…Hey High Schools! Where’s My Financial Education?
Making some sacrifices financially isn’t pleasant but as you say necessary if things are to change!
I am constantly struggling to pay down debt, simply because I don’t want to dramatically reduce the amount of money that I put into my investing.
With a $10m investment goal over 20 years, the less I invest now, the harder it’s going to be to hit my goals.
But I suppose with a credit card interest rate of ~20%, i should be concentrating on getting rid of it as soon as possible
Mr Ikonz recently posted…Saving money buying no-name brands – $209 Thermoblend
$10m investment goal? Ok, I’m definitely going to have to read your site now! 😉
This is a great post. I am currently working on the steps. I have done most of them at least partway. But, I admit, I haven’t cut up my cards. I don’t know why I’m holding on to them. I guess as an emergency blanket, but really most of them are store cards and are only usable in stores that I would never have to go to in a true emergency. Maybe I should cut up those first and only keep my mastercard for now, which can be used anywhere and therefore could actually be used if needed in an emergency situation… I am also no throwing extra $$ at the debt yet, I am still putting my extra into my emergency fund until I hit $1k. I am almost 60% done now and making progress all the time!
Shoeaholicnomore recently posted…Thing Thursday 2/27/2014
For me, the two biggest impacts on paying off my debt were to (a) increase my income and (b) start to live more frugally.
Doing so meant more cash available each month to pour into debt repayments.
However I did keep *one* card safely, just to spend on and pay off to keep my credit growing while paying off my debts.
FrugalityMagazine.com recently posted…How To Create Your Best Resume Ever: My Proven Formula
Good point about keeping one card for responsible use. I need to get around to doing this in order to make sure my own credit score doesn’t get hit!