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Everyone can say they have money issues, but those with savings are making a profit from the interest on their account balance, while those with debts are paying interest that gets them deeper into debt. The following article will help you get out of debt so you can join the money saving elite.
Big Debt List
Make a list of every debt you owe, who you owe it to, and the interest rate. Include everything from your mortgage or car payments, to the tenner you borrowed from your friend in the pub.
Budgeting
Create a budget of how you are going to spend your monthly income. Use Money Dashboard's budgeting software to identify all your regular monthly payments and make sure they are included in the budget. Work out how much you can afford to pay monthly, and pay off the debts with the largest interest rate first. Don't just pay the minimum due; pay as much as you can afford to while staying in budget.A good rule of thumb is to put 20% of your income towards repaying debts. If you're spending more than that then you may need to consider debt consolidation.
Stick to Your Budget
If you have difficulty controlling impulse purchasing, try leaving your wallet or purse at home and only bring the cash you need. Report what you've spent your money on weekly to a friend or family member, and if you went over budget, explain why. The accountability will keep you in line.
Keep Daily Spend Down
Check your Money Dashboard account regularly to make sure you see the effect of everything you purchase on your overall budget. If you think you're overspending on something, find ways to save money.Don't borrow any more money or take on any new debts until you have cleared your old ones.
Pay by Direct Debit
Utility, telecoms, and any other regular monthly bills should be paid by direct debit. You are less likely to miss a payment and incur penalty charges or hits to your credit score as a result, plus many providers give discounts to customers that pay by direct debit.
Find Cheaper Suppliers
We've published guides in the past to help you save money on many different types of bills and accounts:
- Current Account
- Savings Account
- Credit Card
- Gas & Electricity
- Broadband, TV & Phone
- Car Insurance
- Mobile Phone Insurance
- Life Insurance
Destroy your Store Cards
Store cards usually have high rates of interest for credit. If you shop in a store often then make use of any points or loyalty schemes they offer, but avoid buying on store credit. Pay with your debit card, but only after you've shopped around to see if you can get the item cheaper online.
Switch to a Better Mortgage Deal
If you have a mortgage, it's likely to be your biggest monthly expense. Speak to an Independent Financial Advisor or mortgage broker about remortgaging options. If you are struggling to keep on top of your debts, you might need a new mortgage with smaller payments and a longer term. Otherwise, you may still be able to get lower interest rates from another mortgage provider, especially if your financial circumstances have changed since you first took your mortgage out. However, be aware of transfer costs and legal fees before going ahead with the transfer, and take that into account when determining if you can switch to a better deal.
