This post is written in collaboration with Money Plus Advice.
As somebody who lived with low-level debt for many years, I know how disheartening it can be. I used to look forward to pay-day, only to find a large chunk of my money disappeared into my overdraft or debt repayments. But there are ways to deal with debt, and here is what I did.
Develop a frugal mindset
My first move was to begin reading about frugal living. The wonderful classic book The Tightwad Gazette* was a huge inspiration. It made me realise that I could do things differently. Amy Dacyczyn has hundreds of tried and tested suggestions about how you can have a happy life without getting into debt. It’s an old book now and geared mainly to an American audience, but there are still so many useful nuggets of advice and inspiration.
I began to question all my purchases. Do I really need this? Can I use something I already own instead, borrow it or get it second-hand? I looked at doing things differently. For example, we would still have days out, but they might consist of a homemade picnic at the beach rather than a day at an expensive theme park and a trip to their cafe.
Developing a frugal mindset is a useful starting point to deal with debt and stop your debts from growing.
Write a budget
A written budget seems such a simple step to take, yet how many of us bothers? A written budget was a game changer for me. Knowing how much you have coming in and how much is going out is crucial. You can see in black and white any areas of potential change and where you can save money.
For example, when you are trying to deal with debt, can you justify a food box subscription or an expensive TV package? Can you join the library rather than buying lots of books? Can you take up running or exercise at home instead of paying for a gym membership?
Can you shop around and haggle down the costs of some of your regular payments? Can you get a cheaper phone deal or reduce the cost of your car insurance?
Set a budget for incidental costs such as groceries, entertainment, clothing, toiletries, gifts, etc. You can go through your last three or four months bank statements to find how much you have been spending, then aim to reduce them as much as possible.
Track your spending
Once you have your budget in place, it is a good idea to track your spending to ensure you are sticking to your plan. This takes me 10 minutes once a week but is a worthwhile investment of my time.
Tracking your spending is a question of getting into the habit and makes you very aware of your finances at any given time.
Learn to say no
Once you have spent time making a budget and tracking your spending, you are likely to be very motivated. However, it can be more difficult to bring your partner and children on-board.
I found that having open and honest discussions around money was the best way to get support from the family. Involving them and making them understand your aim is crucial. There is little point scrimping and saving if your husband/wife/partner is still maxing out the credit cards and your teenagers are demanding designer trainers.
I also feel that teaching children about money is a crucial life skill and will help them into adulthood.
Saying no – to yourself or to your family – is important when you are getting your finances in order.
Earn more money
Earn more money, she says, as if it were an easy thing to do…. It may not be possible to get a wage rise (although you can but ask), but sometimes it doesn’t matter how frugal you are if there simply isn’t enough money coming in.
I developed a series of side hustles to help me in my bid to deal with debt. If you have a spare room, you could take in a lodger, host foreign language students or offer bed and breakfast with Air B&B. I have a post on how to make money from your spare room here.
I turned my hobby into a second income by teaching yoga, so look at skills and talents you have to see if they can bring you in extra. Can you teach music, crafts or art, offer book-keeping services, bake wedding cakes, or do some gardening? If you don’t have those kind of skills, can you clean houses (I did this for a year and enjoyed it), walk dogs, take in ironing or clean windows?
Could you become an online reseller? Buying things cheaply and reselling them at a profit is one of the main ways I make money.
These things are hard work and take time, but can be possible if you are motivated, and you don’t have to do them forever.
Have a plan
Planning for both the short term and longer term is helpful. In the short term, you can make sure you put money aside each month for annual expenses, such as your MOT, birthdays and Christmas. Ideally, you should save at least £1000 as an emergency fund. This will ensure that you can deal with any sudden crises such as your oven or boiler breaking down without going into further debt.
In the longer term, if your debts are building and you can’t afford repayments, you need to take financial advice. Charities like StepChange and CAB offer good advice. You can also consider a Debt Management Plan (DMP). DMPs allow you to pay one affordable payment a month, rather than many expensive repayments. The debt management company will negotiate with your creditors and can usually freeze interest payments and other charges. However, do be aware that there is often a fee involved in a DMP and do your research on the pros and cons before proceeding.
It is possible to deal with debt and get your finances in order, although it takes effort and determination. For more inspiration on how you can reduce your costs, you might like this video, Extreme Frugality: 26 Tips for Thrifty Living, on my YouTube channel.
*This is my affiliate code. If you click through and make a purchase, I will earn a small commission.
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