Getting out of debt

WHY DO PEOPLE GET INTO DEBT?

Debt can happen to anyone, especially in these unpredictable times. It can be because you lose a job, a relationship breaks up, you lose track of money, unexpected repairs, ill health, a car loan or student debt. People I know have recently got into debt because of high energy increases and have received higher bills for winter than expected. The new monthly payments and the struggle to meet them have highlighted all their other outgoings connected to getting credit.

WHY I GOT INTO DEBT

Some of my debt in the past was because I used to go shopping when I was lonely or unhappy. Debt can leave you feeling depressed and too scared to open your mail. You feel ashamed, out of control, constantly worry and find that you don’t have enough for essentials. When I was ill and my job was under threat, I suddenly woke up to how much debt I was in. It is so easy to acquire debt as credit is advertised everywhere and easy to obtain, even if your earnings are low. I had a good wage and repayments were manageable, which lulls you into a false sense of security. Then life threw me a curve ball, as it does, and I had to do something about it before I lost everything.

MY STRATEGY FOR GETTING OUT OF DEBT

1. I found out exactly what I owed and consolidated some of the debts together. In my case I remortgaged and got an Off Set mortgage which gave me control of my mortgage. I left the interest free loans as they were.
2. I set a budget. I set up direct debits for all bills and gave myself so much for food, entertainment, presents, petrol etc and stuck to those amounts.
3. I took out the cash for food, entertainment etc and didn’t use or take my card anywhere so that I wasn’t tempted to use it. I spent as little as I could.
4. I looked through my bank statements to see where my money was going and where I could reduce out goings. Eg buying coffees each day or lunches in the canteen.
5. I cancelled unneeded insurances (the ones they sell you in the shops), subscriptions etc, and anything I didn’t absolutely need.
6. Each month when I got paid I would pay extra off a bill or put a large amount in savings to pay something back later or as an emergency fund for those unexpected car repairs etc. This money was then out of my bank and there was only what I needed left. This stopped me being tempted to buy extras and meant I didn’t have to get more credit when I had an unexpected expense. Sometimes I needed to borrow some savings back, but if it had been sitting in my currant account I would have spent it.
7. I checked to see if I could get my bills cheaper and changed provider (this isn’t easy with energy now as they are all the same, but might work for a mobile contract or other outgoings.). I also got a water meter which cut my monthly bill in half (this doesn’t work out cheaper if you are a large family).
8. I learned how to live differently eg finding free entertainment, growing my hair to reduce hairdressing costs, growing my own food etc.
9. I shopped from my cupboards and used what I had. It is amazing how much extra food, toiletries and cleaning products we have tucked away.
10. I didn’t let myself take out any new debt but saved for things if I really wanted or needed them.
11. I did overtime to make more money and set myself SMART goals to pay the debt off. (Specific, measurable, achievable, relevant and time bound).eg. by 21st September I will pay £700 off my credit card.
12. I cooked from scratch and made ‘fakeaways’ rather than takeaways. I would invite people to dinner rather than going out. I took packed meals to work and would plan and prepare meals so that there was no wastage or unplanned trips to the supermarket.
13. I only bought things I absolutely needed except for now and again when I would celebrate a milestone to keep me motivated. If I needed to buy clothes or appliances I would buy good quality at reduced prices.
14. I found cheaper ways to have holidays when I needed a break eg. camping, or finding deals on line.
15. I researched ways to save money on energy etc and got myself into good habits unplugging appliances, turning off lights, planning journeys to do a few things at once etc.

Saving money and reducing debt is not easy and you have to make sacrifices. It feels great though as you watch the debt reduce, and the feeling of relief, and the choices that you have when debt has finally gone are immeasurable. If you are having real debt problems and live in the UK, contact ‘Step change’.  They are a free service that will help you. They really helped a friend of mine, stopped all the interest, dealt with the creditors so that the threatening letters stopped, and took her worry away.

I have been out of debt for over 10 years now and having an emergency fund and saving up for things helps me stay out of debt.  As does living within in my means.  It is so much less stressful and each month I can allocate my income to what I need and want rather than have to use half of it to pay off debts.  I can therefore live on less. What tips do you have that have helped you avoid, or get out of debt?