If you are in debt it can be easy to stick your head in the sand and try and ignore it, well it might go away ?! The only thing that will happen is it might get worse so now is the time to take things in hand. Here we have 7 steps to help you get out of debt.
Step one: Work out income and expenditure
Sit down and work out exactly how much you owe and who you owe it to. Be honest or you’ll only store up more problems for the future. If your debt repayments take more than 20% of your net monthly income you are entering a danger zone and must take steps to cut back.
Step two: Budget
Once you know how much you owe you can draw up a budget. Be realistic and work out what you can afford to repay and still stay within your budget.
Step three: Cut your daily spending
Take a set amount of money out of the bank at the beginning of the week and leave your debit and credit cards in a safe place. That way you cannot spend more than you have in cash.
Step four: Organise your bills
Make sure you are paying all your utility bills by direct debit. It’s much easier to manage and it is also cheaper as most providers offer discounts for direct debit payments. This is probably the easiest way to cut your bills. You can do it today simply by calling your bank with the details of your energy suppliers.
Step five: Switch utility suppliers
You could save hundreds of pounds each year on your gas, electricity, water and phone bills by switching. It is best to switch your energy and phone suppliers before you set up direct debits or you will end up having to change them again.
Step six: Sort out your bank account
If you’re a customer of one of the big four – Barclays, HSBC, Lloyds and NatWest – then you’re probably not getting the best deal on your overdraft or interest rates.
The rise in the number of internet banks means there is far more choice, so it makes sense to switch and take advantage of offers such as fee-free banking and lower overdraft rates.
Step seven: Switch your mortgage
The mortgage is probably your biggest expense each month, so it’s important to ensure you have the best possible deal. Speak to an independent financial adviser or a mortgage broker about your remortgaging options.
Remember to take into account any transfer charges from your current provider and any legal fees for switching. Weigh up the all-in cost of remortgaging before you decide if it’s worthwhile, you may still find that the savings you’ll make with a new mortgage will more than cover any transfer expenses.