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Tips to Get Out of Debt

Debt happens. Maybe an unexpected event came along and you didn't have cash reserves to deal with it, perhaps you lost your job, or you might have suffered an illness or injury and were unable to work – not to mention the out-of-pocket medical expenses! Sometimes debt happens simply because you took your eye off the ball and were living outside your means. How you deal with debt makes a difference to how much it impacts your life – and often how much you pay. Here’s how to get back on your feet as quickly as possible.

Get – and stay – inspired

You're not the first person to get into debt, and you won't be the last. Wanting to do something about it is just the first step. At this stage, your debt can seem overwhelming, but there will be a way out – you just need a little inspiration. The internet is full of stories about people who have been where you are and are now debt-free – often they picked up some great money habits along the way. Our current favourite is Amy Jones, from Map Your Progress, who literally coloured her way out of debt and into a completely new business.

Figure out how much debt you’re in

Sit down with all of your bills and credit card statements, and list any bills likely to come in over the next few months. List due dates and amounts, and include interest – pull in as much information as you can to build a clear picture. Use a calendar to map out what is due and when.

Figure out how much you earn as a household

Note down how much income comes into your household and when. Add this information to the calendar.

Think about how you can bring in extra money

Have you got two cars when you only need one? Do you own a bunch of snowboards that are unlikely to get used again in a hurry? Look at what you can sell, and put that money against your debt. Alternatively, you could consider taking on a part-time job while you get your debt under control – casual babysitting or gardening might not seem to earn much at the time, but over an extended period they can help make a dent in your debt.

Get help from an expert

If you are not confident with your finances and you are struggling to work out the best way to deal with your debts, don't be frightened to look for advice. Have you got an accountant, or a trusted financial planner might help. Trust is important with this, so it's important to be careful when searching online. Not only will it bring up advice from the government and not-for-profit organisations, you will also see advice from companies just looking sell you a new loan to consolidate your debts and earn themselves a commission. Or financial planners that are not reputable and not free. Take care when choosing a provider and check out their About Us page to be safe.

Be honest

Talk to the people you owe money to as soon as you know there is a problem. Let them know how you have planned to pay the money back, and when they can expect payment. Most companies or businesses would rather you came to them with a plan than not hear anything at all.

Stay on top of it, and reward yourself

Make all payments when they are due. If something comes up that will delay a payment, immediately make contact with whoever you owe money to, and readjust your plans. As you mark off each month, make sure to celebrate in some way – obviously it shouldn’t cost money, but even putting a line through payments on your calendar will keep you motivated to stick to your plan.

Build a budget for your new debt-free circumstances

Having worked so hard to get out of debt, you don't want to go back there. If you've found a good financial planner you trust, work with them to build a plan for the future. You may find that the money lessons you've learned along the way to freeing yourself from debt will hold you in good stead to balance your incomings versus your outgoings, while still leaving room for a little fun. Good luck.

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