Six Steps toward a Debt-Free Future
Posted May 8th, 2007 by debt guru
If you’re trying to get out of debt, it can be difficult to know where to start. Here’s six steps that should help you on your way to getting back in control of your debt.
1. Stop ignoring your Debt!
Your debt isn’t going anywhere unless you start to deal with it. Write down everything that you owe and don’t panic when you get to the final sum.
2. Stop spending on Credit!
Now that you know what you owe, its time to either cut back on using or cut up your credit and store cards. Don’t take out any more credit or store cards or continue borrowing.
3. Prioritise!
Your debts can be divided into two categories, priority and non-priority. Priority debts are things like mortgage payments, taxes, rent, utilities and telephone. Usually the penalties of not paying priority debts can be severe, like prison, losing your home or having utilities turned off.
Non-priority debts include things like credit cards, store cards, small loans, student loans, overdrafts and money you owe to family and friends. Because the penalties for not paying a priority debt are severe, it’s important to get these sorted first.
4. Work out your Income and Expenses
Add up all the after tax income you would receive in one month, including things like benefits and child support. Also include contributions from others (for example your partner, family or lodger).
Write a detailed list of all of your expenses for an average month and add them together. It might help to start writing down every thing you purchase for a couple of days first to make sure you don’t miss things out.
5. Make a Budget
Now that you’ve written down all your income and expenses, it’s time for some maths. Take away your expenses from your income and you’ll be left with your monthly disposable income. This is what you should be paying to creditors. Review your list of expenses and see what you can cut down on. Make yourself a realistic budget that increases your disposable income.
6. Ask for Advice
Now that you know how much you owe and how much of your income you can use to pay off your debts, it’s a good idea to get some more debt advice.
The best debt solution for you will depend on the size of your debt and your individual situation. A debt councillor can give you more information on the options you have from here to repay your debts. At Debt Advice Trust, our free helpline is confidential and unbiased too, so you know you’re just going to get honest advice on how to head towards a debt-free future.
1. Stop ignoring your Debt!
Your debt isn’t going anywhere unless you start to deal with it. Write down everything that you owe and don’t panic when you get to the final sum.
2. Stop spending on Credit!
Now that you know what you owe, its time to either cut back on using or cut up your credit and store cards. Don’t take out any more credit or store cards or continue borrowing.
3. Prioritise!
Your debts can be divided into two categories, priority and non-priority. Priority debts are things like mortgage payments, taxes, rent, utilities and telephone. Usually the penalties of not paying priority debts can be severe, like prison, losing your home or having utilities turned off.
Non-priority debts include things like credit cards, store cards, small loans, student loans, overdrafts and money you owe to family and friends. Because the penalties for not paying a priority debt are severe, it’s important to get these sorted first.
4. Work out your Income and Expenses
Add up all the after tax income you would receive in one month, including things like benefits and child support. Also include contributions from others (for example your partner, family or lodger).
Write a detailed list of all of your expenses for an average month and add them together. It might help to start writing down every thing you purchase for a couple of days first to make sure you don’t miss things out.
5. Make a Budget
Now that you’ve written down all your income and expenses, it’s time for some maths. Take away your expenses from your income and you’ll be left with your monthly disposable income. This is what you should be paying to creditors. Review your list of expenses and see what you can cut down on. Make yourself a realistic budget that increases your disposable income.
6. Ask for Advice
Now that you know how much you owe and how much of your income you can use to pay off your debts, it’s a good idea to get some more debt advice.
The best debt solution for you will depend on the size of your debt and your individual situation. A debt councillor can give you more information on the options you have from here to repay your debts. At Debt Advice Trust, our free helpline is confidential and unbiased too, so you know you’re just going to get honest advice on how to head towards a debt-free future.
