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Debt sucks. It’s easy to fall into and hard to climb out of. It can leave you feeling hopeless and unmotivated, and the more debt you have, the easier it is to fall deeper.
It’s also really common, although at the time it can feel like you’re completely alone in it. There are all sorts of reasons people fall into debt; research from debt charity StepChange shows the top three reasons being unemployment, reduced income, and illness or injury.
Individuals who feel their debt is too far gone can consult credit repair specialists likeCredit Sagebefore throwing in the towel.
Whatever your personal situation and reasons for getting into debt, the good news is that being in debt doesn’t mean you have to stay in debt.
“The only way you will ever permanently take control of your financial life is to dig deep and fix the root problem.” Suze Orman
I won’t lie and say it’s easy because it isn’t, but once you decide to commit to getting out of debt, every small step towards becoming debt free is a victory, and each victory helps build motivation to get rid of debt permanently.
If you are in serious debt and unsure what to do, professional and confidential advice is available. Contact StepChange or CAP for support and guidance on your next steps.
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7 Practical Steps To Pay Off Debt Faster
Once you’ve made the decision you want to stop being broke and get out of debt for good, you probably want to get rid of it as fast as possible. Here are some steps to help speed up your debt free journey.
1. Know your situation inside out
The first step to being able to pay off debt is to know exactly what you owe, and to whom. It can be scary to see everything laid bare, but it’s really important to have a full picture of where you’re at.
Go through everything and write down the figures so you’ve got a complete picture. Note down the interest (if any) on each debt too.
You will want to decide which method of paying off debt will work best for you.
a) Use the snowball method – this basically involves tackling each debt one at a time, starting with the smallest. Once that’s paid you add the money you were paying towards that to paying off the next biggest, hence ‘snowball’. This takes no notice of how much interest you’re paying, rather the aim is to see progress faster and stay motivated.
b) The debt avalanche method – with this you list your debts in order of which has the highest interest, then any money you have on top of the minimum payments you put towards you highest interest debt first. This method means you pay less interest overall.
Budgeting is key to being able to pay off debt while still managing your current bills and living expenses.
If you don’t already have a budget, set one up. You can use our free budget spreadsheet and guide if you need help getting started.
You’ll need to include all your outgoing and fixed expenses. These will include your mortgage payments or rent, utility bills such as energy and water etc, along with your debt repayments.
Add any other outgoings, such as TV and internet subscriptions, mobile phone contracts and anything else you pay regularly.
You might want to try using a spending tracker to get a good idea of your overall spending habits and expenses.
Your total income minus your total outgoings will give you a good idea of how your finances stand and how much you might need to adjust things so yourbudget works for you.
2. Cut your spending
Once you’ve got your budget in place, you can look through and see if there are any easy places to cut costs or save money.
Save on subscriptions
The first place to start is to look at your subscriptions and services and see if there’s anything you can do without. Gym membership you barely use? Cancel it. Monthly hairdressing appointment? Start reducing to two monthly.
Look at your TV package. Is it expensive? Could you live without some of those channels?
Personally, we cancelled our TV licence, which saves £13.50, but we didn’t want to have no TV options at all, so now we share a Netflix subscription with a friend which works out much cheaper and we can still watch pretty much everything we want to.
You can try phoning your provider and threatening to leave, in the hopes that they offer a better deal, or switch to another option such as Netflix, Amazon Video or Now TV.
It might also be possible to get a better deal on your utilities and services, such as energy and insurance. If you’re not locked in, or coming to the end of your contract, it’s always worth shopping around for a better deal. New customer deals are often cheaper than renewal quotes, but always compare to find the best quote.
When looking at changing provider it’s worth checking cashback sites such as Quidco as providers will often offer a cash back switching bonus.
Read more:17 things to cut from your budget to pay debt faster >>
Spend less on groceries
Another place you might be able to cut down spending a little is on grocery shopping.
Start by meal planning. Plan your meals in advance and write your shopping list according to what you need for those meals.
Stick to your planned list when you go shopping and avoid impulse buys.
Bulk buy to save money by getting a cheaper price per unit, and try some batch cooking and freezing portions to make the most of those bigger, cheaper packets.
This will help by making sure you only buy what you need, reduce the cost of the things you do buy, and help to cut down on food waste, all of which will save money overall.
Read more:13 Ways To Seriously Cut Down Your Grocery Spend >>
4. Build an emergency fund
It sounds counter intuitive to try and save whilst trying to pay off debt, but it actually makes so much sense. If you have an emergency fund available to cover you if something goes wrong, like a washing machine breakdown, or unexpected car repair, you’re much less likely to get into further debt needing to borrow more.
It also gives you peace of mind, and since being in debt has its own stresses, it’s helpful to have one less thing to worry about.
If you’re thinking how on earth am I gonna find money to save an emergency fund when I’m already broke, I get it! But it’s not impossible. It just takes small steps and plenty of patience.
Read more:How to build an emergency fund (even if you think you can’t) >>
5. Be more frugal
Wanting to pay off your debt faster probably means you might need to make a few adjustments to live more frugally.
It might seem like making frugal adjustments only make minimum savings, when you take a more frugal approach to everyday living the savings all add up and really can make a difference.
Making sure not to use lights or heating in rooms you’re not using
Not leaving the water running while you wash up or brush teeth
Using energy saving lightbulbs
Choosing to walk instead of drive where possible
Cutting down on non essentials
Read more:The best frugal living tips to save money everyday >>
6. Don’t spend what you don’t have
This one might sound obvious, but it’s the thing that got most of us into debt in the first place! Try not to buy things on credit card, don’t borrow more money and try to only spend money on things are affordable and within your budget.
Don’t forget to have fun though – you’re more likely to get miserable and less motivated to pay off debt if you’re never enjoying anything. Try to set aside a small amount of your budget to do things that make you feel happy. That might mean a trip to a coffee shop with a friend, an exercise class, or an occasional takeaway.
7. Make extra money to throw at the debt
When you’ve cut down spending as much as you can, the next thing to consider is whether you can make any extra money to throw towards paying your debt quicker.
This is the step that has made the most difference to me. I’ve worked from home doing freelance writing, virtual assistance, blogging, taking part in research studies and surveys, which have all given me extra money to throw at my debt.
Whilst it might not be practical to try and find a second job, there are plenty of ways to make extra money from home to top up your income.
You could think about:
Trying out a work from home job in your spare time
Having a declutter and selling things on Facebook or Ebay
Doing paid market research interviews – Companies you can join for this are:Respondent– online remote research studiesUserTribe– remote research studies (may require webcam/microphone)
Taking online surveys for cash. – Whilst not the best paid, this is definitely a simple and really flexible option as you can take surveys in your own spare time, in front of the TV or even spend a few minutes in bed before going to sleep. Some of the best paid survey sites include: Prolific – academic research studies (min £5 per hour) PopulusLive – surveys via email (pays £1 per 5 mins)
If you are able to pay all your extra earnings towards debt, it can really help speed things up and pay off debt faster.
Snowball method: With this method, you prioritize paying off your credit card debts with the lowest balances first. The first balance may be small, but you feel accomplished and motivated to tackle the next one.
Then, continue paying down debts with the next highest interest rates to save on your overall cost. This is sometimes referred to as the “avalanche method” of paying down debt.
The debt avalanche is a systematic way of paying down debt to save money on interest. Individuals who use the debt avalanche strategy make the minimum payment on each debt, then use any remaining available funds to pay the debt with the highest interest rates.
With the debt snowball method, you start with your smallest debts and work your way up to the largest ones. While it may not save you as much in interest as other repayment methods, the debt snowball method can keep you motivated to continue paring down your debt.
This review process is based on a review of five key factors that predict the probability of a borrower defaulting on his debt. Called the five Cs of credit, they include capacity, capital, conditions, character, and collateral.
The Snowball Method refers to paying the smallest debt first, then the next smallest – and on and on until you are living debt free. Ramsey suggests lining up debts “by balance, smallest to largest,” then paying as much of the smallest debt as possible while making minimum payments on the rest.
There are a number of debt management strategies that can be implemented to accelerate wealth accumulation involving cash flow, repayment and consolidation.
To pay off $40,000 in credit card debt within 36 months, you will need to pay $1,449 per month, assuming an APR of 18%. You would incur $12,154 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
Introduction: My name is Rueben Jacobs, I am a cooperative, beautiful, kind, comfortable, glamorous, open, magnificent person who loves writing and wants to share my knowledge and understanding with you.
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