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Follow my 5 steps to get out of debt and stay out of debt. You will soon have the tools to be in control of your financial situation.
Make a start
One of the most important impacts on your mental health is your financial situation. Although it is tempting to ignore your position, it’s best to tackle it head on. Don’t delay as it won’t go away on its own.
Being in financial difficulty affects how you feel on a daily basis, so make today the day that you are going to take control and start doing something to get out of debt.
Often, the hardest part of paying off your debts is making a start.
It’s easy to feel overwhelmed if you know you’re struggling financially. It’s tempting to bury your head in the sand and ignore your bank statements and demands for payment, but it won’t make the problem any better and could even make it worse.
These 5 steps will help you to take control of your financial situation and get out of debt.
Step 1: Be honest with yourself
The first step to get out of debt is to recognise your predicament and decide to do something about it.
So, take a deep breath and open any letters you’ve been ignoring – this isn’t going to go away!
Once you’ve done this, at least you’ll know what you have to deal with and you can work out what you need to do next to get out of debt.
Your debt is a huge obstacle to reaching your financial goals, as well as having an impact on your peace of mind.
Step 2: Plan of action
Now you have made a start, you are beginning to take control of your situation. The next step is to make a plan of action to get out of debt.
Write down all of your debts
Make minimum payments
Pay one debt off at a time
Once all debt is cleared, commit to staying out of debt
Cut up your credit cards
Plan for all expenditure
I know that seems a simplistic view, but it is that simple. It is just a case of making a plan and sticking to it. Do not spend more than you earn and take steps to improve your financial situation.
Speak to your accountant if you are not sure where to start, or you can also contact your local Citizens Advice Bureau.
Keep following the steps and take action. You are in control. You can get yourself out of debt.
Step 3: Consider how you can accumulate extra cash:
To help the process, think of ways you could get more money, either by spending less or earning more.
Maybe you have items you can sell on eBay or a clothing exchange site to give you extra cash. Perhaps, as the weather is improving, have a garage sale or go to a car boot sale – but don’t go spending your own money!
A second job can help to clear debts – it could be worth the extra work in the short term for your peace of mind.
Look for areas in your budget where you can cut spending to increase your debt payments too. It’s helpful to make a note of exactly what you are spending your money on otherwise it seems to just disappear! Most banks now have an App you can use to monitor your spending.
Step 4: Review your household bills and mortgage
For many of us, household bills make up a large chunk of our spending (and has increased recently), so it’s important to take control of them. Review the utility and phone payment amounts regularly, say every year.
Don’t forget to review all your subscriptions as well, e.g. Amazon Prime, Sky. You may even be able to negotiate a reduced price.
You can also save hundreds and even thousands of pounds by shopping around for a new mortgage, or reviewing the one you already have.
Step 5: Pay off loans and credit cards
If you have loans or owe money on credit cards, it usually makes sense to pay off the debt that charges the highest rate of interest first. However, take account of the emotion attached to the debt. There may be a debt that is negatively affecting your energy – say an interest free loan from your parents that they regularly mention. If this is the case, it might be worth paying this off first.
Possibly one of your credit agreements is offering a 0% transfer from the higher interest rates for a time, so you could get out of debt more quickly – do not use it as an excuse to spend more!
It is important to make sure you don’t break the terms of your agreements.
So even if you’re focusing on paying off another debt, you must pay at least the minimum on any credit cards and your monthly required payments on any loan agreements.
It may be that your circumstances have changed and that’s why you’re in this situation. It may be unusual for you. Alternatively, it could be that whatever you do you end up back in debt. If this is the case you could have a debt mindset and attending one of my Master your Money Mindset workshops could help you.
Once you get out of debt, you need to make a commitment to stay out of debt. Stop carrying your credit cards around with you, and save up an emergency fund to cover unexpected expenses so you do not need to turn to a credit card to cover them.
It’s a good idea to take these steps to protect your mental health by tackling your debt situation. Take control and you will start to feel better. It may feel like an uphill struggle at times, but it’s worth continuing with it! Good luck!