Paying off debt that's weighing you down can help you to move closer to financial stability. Mortgage arrears, bank loans, overdrafts, utilities and credit card debt can be overwhelming but analysing your financial situation can help. We’ve compiled a step-by-step guide to help you begin to dent your debt. Take a look below.
1 Create a budget
Creating a budget will allow you to keep track of how much money you are spending and what you are spending it on. There are useful apps out there to create household budgets but a simple spreadsheet will work well.
When creating a budget, put your biggest regular expenses, like mortgage payments, insurance, and bills into the spreadsheet first. Then calculate your other household expenses like groceries, transport costs and medical costs and add them in. Make sure to also include your discretionary expenses. Try to scale back spending where you can.
2 Tackle the most expensive debt first
It is a good idea to tackle the debt that has the highest interest rates first. You might think it would be better to pay the smaller debts first, but once you begin to chip away at the biggest, the rest will seem a lot less overwhelming.
3 Pay more than the minimum balance
It’s a good idea to pay more than the minimum balance if possible. Strengthen your commitment to pay everything off by making weekly, instead of monthly payments. You’ll reduce your debt load much faster and the weekly progress will allow you to feel much more productive.
4 Change your habits
Buying a morning coffee or pre-packed sandwich may not seem like much at the time, but if you add up money spent on small daily purchases, it can be quite substantial. Get into a routine of making lunch the evening before and invest in a travel mug so you can take a coffee to work.
5 Stop your credit card spending
It’s a good idea to stop credit card spending where possible if you are tackling your debt. Simply remove your credit card from your purse or wallet to reduce the temptation.