How to get out of debt and stay out of debt

Many of us have bills coming out of our ears, and often if can feel as though there is more month than money. If you are struggling with your finances, don’t panic. Taking a few simple yet practical steps could help you to get out of debt and stay out of debt.

  1. Work out exactly how much debt you’re in. You may have been pretending your debt doesn’t exist in the hope that it will go away, but the bad news is that it won’t disappear unless you start facing it head on. Take a deep breath and make a list of every credit card, store card, overdraft, loan and other debt you owe. Work out the total of all your minimum monthly payments.
  2. Write yourself a detailed budget. This is a really important step if you are serious about getting back in the black. Include all the regular money coming in and going out. Don’t forget to account for irregular items such as travel, gifts, holidays and haircuts. It may help to start paying for goods in cash rather than on credit so you know exactly what you are spending and how much money you have left over. You might also wish to keep a money diary detailing every penny you spend so that any hidden costs soon become clear.
  3. Reduce your outgoings. If money is tight, it’s worth thinking about how you can cut back on unnecessary expenditure. Do you have a gym membership you never use? Do you buy lunch out every day rather than making it at home? Could you buy a travel pass to cut costs? Could you switch utilities providers to make your monthly bills cheaper? Could you buy supermarket rather than premium brands? Might it be worth downsizing your home or selling your car?
  4. Increase your earnings. There may be ways to get more money coming in each month. Perhaps you could take on overtime at work or ask for a pay rise. Maybe you could look for a second job or freelance work. Perhaps you are entitled to benefits or incentives you are not yet receiving. Could you rent out rooms in your home or a parking space to earn extra cash? Or have a clear-out and sell unwanted items online?
  5. Stop taking on new debt. If there is any way of avoiding it, don’t borrow any more money. Particularly avoid short-term fixes such as payday loans, which tend to have very high interest rates.
  6. Start paying down your existing debt. It’s really important that you keep making the minimum payments on all your debts if you possibly can. Work out which need to be repaid most urgently (for example the ones with the highest interest rates, the ones that put your home at risk or the ones where an interest-free period is about to run out), and if you have any money left at the end of the month, use it to pay these debts down as quickly as possible. It may be worth transferring debt to an interest-free deal if your current rates are high, though this will push your debt up in the short term as most deals come with an upfront fee.
  7. Get some help. If you are still unable to make ends meet, it’s time to speak to someone who can help. There is plenty of information online, and there is no shame in asking for help. Check out Christians Against Poverty (CAP), the Debt Advice Foundation or Citizens Advice for free advice.