As we grow older there are many reasons why we might want to think about becoming debt free. It could be to put away savings for a deposit on a house and to prepare for a mortgage, to plan a holiday of a lifetime, or just to ensure the day-to-day grind doesn’t become too unbearable in how we face our finances. Whether you are paying down an instalment loan from a responsible payday loan lender, or just looking at ways to become debt free for other reason, here we have put together a guide to help you break free of debt over time. The second part will follow.
The first thing to do is to sit down with a calculator and a pen and piece of paper and work out all of your incomings and outgoings each month. Write down every single debt you have and the dates you pay back that debt each month, so you have a clear picture in front of you. Find out the rates of interest on each debt too, to discover how much you are paying extra over the duration of a loan or line of credit. A spreadsheet or other easy way to itemise your debt is a great place to start here, as it allows you to visualise your debt and other outgoings and not to get swamped by it or distracted through ignorance.
Once you have everything written down you can begin to review your spending patterns and begin to think of areas in which you can make real savings. Draw up a realistic budget and stick to it each month. Are there areas where you spend excessively on leisure activities or eating out, and could cut back on spending? If your debts are becoming unmanageable you’ll have to cut down in other areas to remove the stress from your shoulders.
During this period of debt never look to take on even more debt. It might seem like short-term relief at the time to have some extra cash, but it will just add more stress in the long-term. If you have any store cards, credit cards, or other types of credit that you no longer use, call up the companies and close those accounts (and cut up the cards so you can’t use them in the meantime).
Next up, look at all of your remaining debt and make it a priority to repay the most expensive debt first – that with the highest level of interest attached. It will feel really good when you first rid yourself of a big debt, and it is a positive habit to get into. There is also scope to shift some credit between different cards, utilising 0% interest or low balance transfer cards, lowering the level of interest you are paying overall and making the repayment process on all debt more manageable.
There are several more ways in which you can begin to plan a debt-free life, with part two of this guide coming shortly.