There are many reasons why people get into crippling debt and it isn’t always because you are a stereotypical spendthrift. My story involved being thrown out of home at the age of 18. With nowhere to live and no-one to turn to I often had no choice but to use my credit card for food and rent. At the time I made foolish financial choices, so despite working three jobs I struggled to make ends meet.
In the end I found myself in my early 20’s with nearly £20,000 of debt. In the same way that money breeds money, debt breeds debt, and try as I might I just couldn’t make any headway. Eventually I called a debt charity to ask for help. They advised me to go on a debt management plan, but this would have destroyed my credit score. Instead, I decided to find a different path and although it was by no means clear sailing, I am now debt free with a perfect credit score.
If you are struggling with your debt but don’t want to take out a debt management plan, the advice below may help you to get debt free with your credit intact.
Complete a budget plan
The first step to getting your debt under control is to understand where your money is going. The best way to do that is to complete a budget. Make sure you enter every penny coming into and going out of your home. It’s very important that this is as true to life as possible.
Try this budget from Money Saving Expert to get yourself on the right track. images2.moneysavingexpert.com/attachment/budget_planner.xls
Work out your priorities and cut your outgoings
Now that you have a budget and you can see where your money is going you can make some small changes to free up some cash.
Go through all of your expenses and ask yourself “is this something I need or just something I want?” if the answer is that it’s just something that you want, cancel it. You can get another gym membership or subscription once your debts are more manageable.
Switch to a better deal
One of the quickest way to save money on your bills is to switch suppliers. Go through all of your utility and regular bills and check on Go Compare, Money Supermarket, or U Switch to see if you couldn’t save money by using a different supplier.
Change your shopping habits
One of your biggest weekly expenses is likely your food. There are a few things that you can do to bring this cost down. Avoid eating out, take a packed lunch to work, and switch to a budget supermarket like Aldi or Liddle.
Pay off your debts at 0%
Most credit cards offer 0% on balance transfers for a certain length of time. If you have a good credit rating you can take advantage of this to ensure you never pay any interest.
To do this, apply for a new credit card with a 0% offer, transfer as much of your debt as possible onto the new card and make sure you set an alarm to move your debt to a different card before the offer runs out.
The best part about this is that you won’t have to keep applying for cards, as once you have cleared a card they will often offer you another 0% balance transfer. If you don’t receive an offer like this it is always worth calling the credit card provider as nine times out of ten they will offer you a deal over the phone.
Remember, once you have transferred money onto your new card you shouldn’t use it for any purchases. In fact, the best thing to do is cut it up!
Sell, sell, sell
This is an obvious one, but the quickest way to free up cash is to sell some of your possessions. When you’re choosing what to sell be bold, if you haven’t used it in over a year, you probably don’t need it.
Cut your spending
You may not really appreciate how much of your money goes on impulse buys. From now on, when you see something you want, be it a new top or a video game, ask yourself “do I need this?”, be honest with yourself and then walk away and wait a day or two.
If at the end of a couple of days you are still thinking about the item and you can afford it, buy it. Otherwise you’ve just saved yourself some money.
Consider big lifestyle changes
Making big lifestyle changes is scary but sometimes worthwhile. While you’re getting serious about cutting your expenses so that you can pay your debt, why not ask yourself some bigger questions. Could you get by on one car, or even no car? Or, how about down-sizing? Would ditching the spare room get you closer to a debt free life?
Use credit wisely
If you’re trying to get debt free it seems counter intuitive to get into more debt but this advice isn’t just about getting debt free, it’s about getting debt free without destroying your credit rating.
Sometimes things happen and if you’re living on a tight budget unexpected expenses can ruin all of your hard work but the important thing is to never allow this to affect your credit rating by causing you to miss payments.
In this situation careful use of companies like Cash Lady a payday loan online service, can be a valuable tool. If you do need to use a payday loan remember that it is a quick fix to be used sparingly to make ends meet for a few days and not a long term solution.
My final bit of advice is to keep a close eye on your money. Record what you’ve spent and compare to what you should have spent every month to keep yourself “honest”. Also, keep a tally of how much debt you have at the end of each month. Although you may find that this reduces slowly to begin with it will gradually increase in speed and seeing the downward trend will keep you motivated.
All of the advice above is based on things that I have done to get out of crippling debt with a perfect credit score, it is the result of my experience however I have no financial training so if you are concerned about your debt I highly recommend that you contact a debt charity to discuss your options.
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