As is often repeated on our Dealing with Debt discussion board, there are only two ways to get out of debt. 1. Spend less. 2. Earn More.
It sounds so simple and yet anyone struggling to get out of debt will know that it's easier said than done. It requires patience, determination and above all, an action plan. And as we like to say a journey of a thousand miles begins with a single step so follow as many of these tips as you can and start your long walk to Debt Freedom Day:
1. Start by working out how much you owe
Do the sums. You need to know precisely how much in hock you are and who you owe money to. Make a particular note of any priority debts as these are the most important ones.
2. Find out what you spend your money on
If you're not sure where your money is going every month, then find out! Just for a month, make a written note of every single penny you spend. It's a bore but you really need to know what you're spending it on so you know which areas you can cut back on.
3. Work out a budget
Write down all your essential expenditure mortgage/rent, Council Tax, utility and food bills. And by 'essential', I mean the bills that absolutely have to be paid every month if you're not to be cold, homeless etc. You need to know how much you have left over to put towards the debts.
4. Get hold of your credit file
Before you start shopping around for better deals you should take a look at your credit file to see whether it looks good or not. The reason is because you can damage your credit rating if you're not careful as we explain here.
5. Contact your creditors
You only need to do this if you are in real financial difficulty. Most lenders would rather work out a repayment plan that you can handle, which could include reducing the interest rate you're paying, than bring in an expensive debt collector. So call them, tell them you have a plan of action - and that you need their help to enable you to pay them back in full. If you can't face it, you can get free help via these organisations.
6. Shop around for better deals
This is where you start to try and free up your money so you have more to chuck at your debts. Are you paying too much for your household bills? Can you get a cheaper mortgage? Insurance? What about your utility bills? Check to see if there are cheaper gas or electricity suppliers in your area using our search tool.
7. Make your debts cheaper
Shift your credit card debts to a card offering an introductory 0% interest rate for balance transfers. Some balance transfer cards will even let you transfer an overdraft - but if you can't find one, consider moving your current account to a different bank which charges less. The more you can save paying interest the more it'll free up money to throw at the debt itself.
8. Snowball your debts
This involves throwing as much money as you can at the most expensive debts first - you want to get shot of high-interest rate debts as quickly as possible.
9. Use your savings to pay off debt.
Debts usually cost you far more in interest than you gain on your savings so if it makes sense to do so
use your savings to prune the debts.
10. Get cheaper phone bills
If you tend to use your landline a great deal, you can do it cheaply by signing up to Call 18866 and Call 1899. It's saved me an absolute fortune.
11. Cut the cost of your mobile phone bills
Mobile phones seem to be considered an essential these days although somehow we all seemed to manage perfectly well without one before they were invented. If you can't do without yours then at least pay less for the cost of your calls.
12. Look for a better internet deal
You can get broadband deals for as little as £15 a month and dial-up is even cheaper.
13. Cancel your gym membership
If you don't use your gym membership much, this is one expense you can cut.
14. Reduce your grocery bill
You can't stop eating but you can stop buying ready-made meals and there's no rule that says you have to have meat every day of the week. Another tip is to make sure you don't go shopping on an empty stomach - being hungry while in a supermarket always makes you buy more.
15. Cut out the takeaways
It's all too easy to nip off to the takeaway when you're hungry and you can't face the idea of cooking but try and halve the number of times you indulge in on. Instead, when you do cook, make double quantities of meals that you can freeze so that you can draw on those when you're feeling too tired to cook.
16. Save money on petrol
It's not always possible to walk or cycle everywhere and for many people cars are essential. Use these five ways to save money on your petrol bill.
17. Make your own sandwiches
People spend an extraordinary amount of money on buying sandwiches for lunch when they could easily make one for far less. If you're spending a fiver a day on a sandwich, a can of coke and a packet of crisps, then you're parting with at least £100 a month. Make your own.
18. Stop buying newspapers
Most daily newspapers are available online and, for the most part, you can read them for free. Besides think of all those trees!
19. De-clutter the house and sell the stuff
Remember that one person's trash is another's treasure so just because you don't like something doesn't mean someone else won't. Car boot fairs are wonderful places to get shot of your junk - and make some money while you're at it.
20. Get a second job.
A couple of evenings a week working behind a bar or in a restaurant, or even just a Saturday job, is a quick and easy way to make money even after paying tax and insurance.
> Find out more about getting out of debt, 0% credit cards and the cheapest personal loans.
