Most of us use short term borrowing at some point.
Used well, it can be a very cheap way of borrowing and provide you with some great consumer protection (like when you’re booking a holiday – more on that here!).
But sometimes, things go wrong.
- Maybe you’ve ended up with more on your card than you planned.
- Maybe they’re cards you had when you were younger and you’ve never been able to clear them (so common with the women I work with!).
- Maybe you had a plan to repay it each month, but things changed.
- Maybe you’ve ended up with a whole load of credit card debt – and you’re starting to wonder how you’ll ever pay it off (especially if there’s a stack of interest being added every month).
It’s so stressful when your finances feel out of control.
This blog is about the modern way to deal with your debt and get on with your life.
I’m not writing this from some idealistic high horse – but as someone who once had to scrape together Clubcard vouchers, to buy food for the week. So I truly do get what that financial pressure and stress feels like. It’s not a fun place to be.
Getting out of debt – once and for all – is entirely possible, with the right plan in place.
That’s not to say it’s easy! It takes discipline and determination, like anything in life.
But if you hate the feeling of those cards hanging over your head and you’re ready to make a change, these 3 steps are a great place to start!
1. Stop Digging
As the old saying goes…if you’re in a hole, stop digging.
That means stop using your cards. Right now.
And don’t put anything else on them.
I know this may feel easier said than done. But often, reaching for the cards becomes a habit.
Don’t destroy them (yet!). If the temptation to keep spending is too strong, put them in a lunchbox full of water in the freezer. That way, they’re still there – but the time to defrost them gives you the headspace to think about whether you really want to increase your debt in that way.
Ultimately, it’s unrealistic to expect to clear any debt, if you keep increasing it at the same time.
2. Make your Debt Escape Plan
This starts by getting honest about the extent of your debt (often the part my clients find hardest, facing up to the numbers they’ve been ignoring for years!).
But without taking true responsibility for the position we’re in, nothing will change. And without being completely honest, any plan you come up with is unlikely to work.
Once you know the real position, you can then figure out how much you can afford to repay. The key here is all about making overpayments, to start bringing your overall balance down (crucial if interest is being added).
Depending on how you manage your overall finances, making a budget plan might be necessary here (not the most fun – but it feels amazing to take control of your money!).
As well as setting up the multi-account system that we always recommend for our clients.
Not all debt is created equal. So the next step is then working our which debts to prioritise repaying first.
Logic would dictate that you start with the highest interest rates first. Which may be 100% right for you. But our relationship with money is not always logical (and our spending habits are most definitely not!).
Maybe you have a debt you seriously resent, like from a previous relationship or purchase you regret.
This is what I mean about the modern way to get out of debt. Because sometimes, it’s about feeling free of the emotions around money, as much as the financial burden itself.
There’s much more on creating the right system for you – including a worksheet to help prioritise your repayments – over in the 8-step ‘Demolish your Debt’ plan (which at £74, is a lot less than paying thousands more in interest payments!).
3. Keep Going
This is where the discipline and determination I mentioned earlier come in…sticking to your plan!
Which is why we always recommend setting everything up, making it automatic and then leaving it alone.
I think the biggest thing here is NOT using every single penny you have, to repay your debt.
It’s a bit like trying to stick to a strict diet. You’re ‘good’ all week – and then binge at the weekend, either to reward yourself and/or to rebel against your self-imposed rules. It’s the same with money.
I’m a massive believer that life is for living. You can plan for your financial future and your big goals, while still drinking gin and going on holiday.
So while you’re focused on getting out of debt, do make sure you leave a little money spare, to have fun along the way!
I hope the steps in this blog have given you an idea of where to start.
If I can help more with this – to help you escape your debt, once and for all – do take a look at the ‘Demolish your Debt Plan’. You’ll discover your exact next steps, to help you get out of debt faster and save thousands in interest payments.
‘Demolish your Debt’ is also included as a module in our monthly membership, which helps you sort your money more broadly; get your financial basics in place and plan for your future. Doors only open a few times a year but here’s where you can get on the waiting list now!
Until next time,