Debt; none of us like it but over the past 18 months it’s become a necessary evil to surviving the Covid-19 pandemic. According to the latest statistics, the average credit card debt per household is £2,030, although outstanding credit card balances are dropping. But when you take into consideration the total unsecured debt per UK adult is £3,734 and the average total debt per UK household is £62,670 (including a mortgage), it’s time to get serious about paying off our debts.
Ways to get out of debt fast
It can be challenging getting out of debt and sometimes, it’s hard to see where you can save money, let alone ways to get out of debt fast but you’re not alone. Below we’ve shared our top tips to getting out of debt in 2021.
Understand your level of debt
Before you make any decisions where you can save money and pay off your debts, you need to completely understand how much debt you have. Firstly, get your credit record reports. Credit reference agencies will have your credit details – Experian and Equifax being the most well-known – you can access them online. Go through the reports and find out what you owe and to whom, which could include:
● Your mortgage(s)
● Personal and student loans
● Car loans/HP agreements
● Credit/store cards.
Make a detailed list of your debt
Make a list of your debts – using a spreadsheet helps to keep it organised – and include the following details:
● The creditor’s name
● Your current balance, i.e. how much you owe them
● The required minimum monthly payment
● The interest rate on your debt.
Next comes the nasty bit – add it all up so that you have a total debt figure. Then decide how long you’re going to give yourself to pay off all your debt, i.e. 36 months, 60 months or 72 months. This may change but for now, make this your benchmark. Divide your total debt figure, including interest, by the number of months you’ve chosen to become debt free to calculate your average monthly payment figure to clear your debt.
Pay a little more than the required minimum payment
It’s easy to just pay the required minimum amount each month but by doing that, you’re not actually getting ahead of your debt. So, try to pay a little bit more over the minimum payment every month. Just £10 extra per month, particularly on credit cards and store cards, will have an impact on the interest you’ll be paying on your total balance as well as the amount you owe.
Set out a new budget plan
With your debt information, set out a new budget plan of all your incomings and outgoings as a way of getting out of debt fast. Start with your regular monthly bills, such as your mortgage or rent, your utilities, council tax, internet/telephone costs, TV licence, insurances (car and home), travelling to work expenses, weekly shopping, your monthly debt repayment and any other bills you may have. Add it up and deduct from your monthly income, such as your salary and any part time jobs you may have, to calculate how much of your income is left each month, which you can put towards your savings.
Always make sure you are realistic with your budget figures and stick to them. You may not have much left over but saving just a little each month will soon add up. Budget apps, like Money Dashboard, Emma, Cleo and Snoop are becoming popular as a way to track your monthly spending, boost your credit score and plenty of other savings features; plus they are free to use.
Cut out the unnecessary spending
Once you’ve set up your new budget plan, you’ll be able to work out just where all your money goes. Work on cutting out the unnecessary spending to reduce your outgoings, such as:
● We all like a takeaway but do you need one two or three times a week? Just cutting down to one takeaway a week will save you in the region of £60 to £80 a month.
● Before you go shopping, create your weekly meals menu, make a list of the ingredients you need together with any household items and stick to your list. Opt for the supermarket’s own brand on your everyday products, such as bread, pasta and cereals, and you could save as much as £500 a year on just your shopping bill.
● Avoid the coffee shop on your way to work. On average, in the UK, we spend £22.50 a week on our coffee shop beverages. Cutting out, or at least cutting back, on your visits to Costa or Starbucks could save you around £1,000 a year.
Switch and reduce your outgoings
Start to shop around for the best deals on a regular basis, for example:
● Are you on the best energy deal? With energy prices rising fast, now’s the time to get on to an energy comparison website, like Uswitch, and see if you can reduce your utilities outgoings. Ofgem’s research showed that the average household could save as much as £300 per year just by switching to a better deal.
● If you’re paying interest on a credit card balance, consider transferring it to a 0% balance credit card instead. Many credit card companies offer new customers great deals and you could get as much as 0% for up to 30 months. However, always read the small print as you may find you are charged a balance transfer fee. Comparison sites, like Money Supermarket or Compare the Market, will help find the best 0% balance transfer deals for you.
● Don’t just accept the latest renewal figure from your car insurance or home insurance providers. Use comparison websites to check whether there’s a better deal available.
● Make use of retailers’ loyalty schemes, like Tesco’s Clubcard, Sainsbury’s Nectar, Boots Advantage, Costa’s Coffee Club or Superdrug’s Health & Beauty card. You’ll be surprised how the points you earn on your spending can add up to a free coffee or money off your next purchase.
Nobody likes being in debt, but burying your head in the sand about it doesn’t make it go away. The sooner a financial problem is recognised, the sooner it can be dealt with and the more potential you have in becoming debt free. If you are struggling with debt, contact Simple Liquidation for assistance. For more information on how our professional debt management team may be able to help you, contact us today.