The world is in staggering debt (so is the government). In August 2023, the average household in England owes £2000 on credit cards and £60,000 in overall debt. This is no time to feel guilty or ashamed. Being in debt just helps banks (huge profits for shareholders) and lawyers. Also read posts on giving up lotteries and gambling.
If you’re in debt, it’s not going to go away. Get a cup of tea (or large glass of wine), sit at the table and write down how much you owe and to who. Most companies prefer a token payment (it’s less hassle than taking you to court). Download sample letters (also for business) to offer a payment plan. If no joy, then contact a debt charity (below).
The Multibank has branches nationwide that distribute donated goods to families in debt. You can donate clothes and shoes, unwanted toiletries, bedding and home furnishings, or businesses can donate production-line runs so people can buy or receive goods at the lowest price.
List All Your Debts
Create a detailed list of all your debts. Name the creditors, interest rates, minimum payments, and due dates. A spreadsheet or a simple handwritten sheet works well for this. This exercise is like taking inventory before a sale. Once you know what you’re up against, you can plan effectively.
Calculate Your Monthly Income
Next, you’ll want to determine your net monthly income. This includes salaries, side gigs, rental income—everything. Subtract taxes, savings, and any automatic deductions. What’s left is your spending money. From this, you’ll allocate funds for debt repayment.
Create a Realistic Budget
A budget is like a map that guides you to your destination. Without it, it’s easy to get lost in the wilderness of expenses.
Identify Fixed and Variable Expenses
Separate your expenses into fixed and variable. Fixed expenses include rent, mortgage, insurance, and car payments—basically what doesn’t change month to month. Variable expenses, like groceries, dining out, and entertainment, can fluctuate. Recognising this helps you pinpoint areas to cut back.
Set Debt Repayment Goals
Set realistic short-term and long-term objectives. Short-term might mean targeting a small debt or saving a hundred pounds more per month. Long-term could be paying off a car loan in five years. Treat these goals like a game—winning means less debt.
Choose a Debt Repayment Strategy
With the Debt Snowball Method, you focus on paying off the smallest debts first. It’s motivating to see debts disappear one by one, gaining momentum like a snowball rolling downhill. Once a small debt is gone, roll that payment over to the next smallest debt.
Alternatively, the Debt Avalanche Method focuses on debts with the highest interest rates. This method saves you the most money in interest payments. It’s less about size and more about tackling the debts that cost you over time.
Pay off essential debts first (energy, water, council tax), along with debts to family/friends. most payday loans are now banned (don’t go near them). If you’ve got involved with loan sharks, contact a debt charity (below) for advice.
Bailiffs can only enter homes with permission and take goods to sell (TV, furniture, jewellery, cars). They can’t take pets, nor ‘things’ you need (washing machines, beds, cookers, vehicles with disabled badges and ‘home’ camper vans).
Still in Trouble? Contact a Debt Charity
Rather than consolidate debts, Stepchange (a charity funded by sponsors) can sort out your debts. Give them a calla ((they’ve heard it all so if you’ve blown £100K on drugs, they won’t judge). Their experts will then come up with a remedy:
- Debt management plan is when they take over your debts (often freezing interest) and you pay one monthly affordable payment until back in the black (creditors deal with them, not you).
- Debt relief orders (sometimes debts are written off, for low incomes).
- Debt respite (‘breathing space’) gives 60 days to stop paying, until you sort life out (especially if caused by illness including mental health issues).
- Bankruptcy writes off your debts. It’s an option to start over. You won’t get credit (but won’t need it if you live simply). Creditors are told but unless someone searches your history, no-one knows.
- Equity release is when companies part-buy your home (to inherit) then give money up-front. For people over 55, be careful as there are sharks around. StepChange has free impartial advice.
Other Trustworthy Debt Charities
- National Debtline runs a good website and phoneline. It has a fact sheet library ((self-employed people can visit Business Debtline).
- Debt Advice Foundation (be careful as others have similar names) is a non-profit with a good reputation to help.
- Christians Against Poverty (helps people of all faiths and none) can set up a plan to save and pay off debt. Churches can run their free budgeting courses (they also run job clubs to help write CVs and brush up on interview skills).
- Payplan is the non-profit arm of a for-profit company, to help with mortgage problems and negative equity.
Cut Unnecessary Expenses
Take a hard look at your subscriptions. Are you using them all? Gym memberships, streaming services, and magazines can add up. Cancel or downgrade those you rarely use.
Dining out is convenient but expensive. Cooking at home saves money and is often healthier. Plan meals and shop smart to maximise those savings. Who knows, you might discover a passion for culinary arts in the process.
Lifestyle Changes to Reduce Debt
- Don’t waste time on energy-comparison sites (listing costs are passed to you). It’s simpler to live simply that will naturally reduce energy bills.
- Give up smoking and drinking (or cut down).
- Go car-free or join a car-sharing club. Train for a couple of years to do what you love (to earn more money for less hours).
- You could (if viable) downsize to a smaller place (a city flat could be swapped for a small home in a cheaper area). Or rent out a room (tax-free).
- Extended family homes are an idea for families who get on. Each relative sells properties (say 3 people sell tiny flats, to buy one larger garden property with free baby/pet/granny sitting on top). For no mortgage (or cheaper payments).
Five Steps to Financial Wellbeing
Five Steps to Financial Wellbeing is a simple and hopeful book, for anyone to find the balance between life and money, while refusing the consumerist lifestyle. This book walks you through five simple steps to change your relationship with money for good, in order to make life better.
Money is not the most important thing on earth, but having financial stability can enable you to live your life in line with your values, rather than living in order to work in order to stay above water financially.
The book also digs deeper to address building self-worth without buying things, and establishing a healthy and positive relationship with money, like avoiding debt and investing for the future. In short, taking control of your finances, instead of letting your finances control you. The author herself got out of £27,000 of debt, using the advice she now gives you in 5 steps:
- Overcoming your financial baggage
- Separating net worth from self worth
- Creating money habits and rituals
- Learning to spend mindfully
- Planning and preparing for the future
It’s perfectly possible to live a happy life without abundant wealth. And to live a miserable life with millions in the bank. But it is difficult to live a happy life, if you are locked in a constant battle with your finances.
Its effects can put a strain on relationships, affect our mental health and dictate the career and lifestyle choices that we make. I want to help fix your relationship with money. And once you do that, I think a lot of other things will change for you.
Books to Help You Get Out of Debt
Get Good with Money is an American book with terrific reviews, which using a simple 10-step process by a former kindergarten teacher who lost her nest egg when a recession (and encounter with a shady advisor) put her in a huge financial hole.
She used her teaching skills to pay it all off, buy a house and mandate into law financial education for schools in New Jersey. An uplifting alternative to money management systems, the 10 steps are:
- Build a budget
- Save like a squirrel
- Dig out of debt
- Score high credit
- Learn to earn
- Invest like an insider
- Get good with insurance
- Increase your net worth
- Pick your money team
- Leave a legacy
There are moments when you see someone aligned with their true calling, and that is Tiffany. She can take the most complex of money concepts and distill them into something understandable. No matter where you stand in your money journey, this book has a lesson or two for you. Erin Lowrey
Helps you put all the pieces of your financial life together, without making you feel overwhelmed or ashamed about your circumstances. Whether you need to budget better, slash debt or save more money, Tiffany offers great advice to let you know you can do this. Lynnette Khalfani-Cox
How to Get Out Of Debt is a wonderful 3-step process to get out of debt by a Canadian woman who cleared massive debt after becoming ‘tired of listening to middle-aged men in suits telling her to consolidate her debt – she got into more debt, and they got rich. Most people who read her book are debt-free in 2 years. A judgement-free zone from cover-to-cover, download free budget plans and spreadsheets at Erin’s website.
How to Attack Debt is a book by a Catholic family, but is for anyone. It looks at what money is (not to buy stuff or invest) and shows how the authors paid off almost $25,000 of debt in less than 8 months.
Stay away from debt at all costs. Debt (not poverty) is the greatest energy of financial well-being and peace of mind. Debt causes us to mortgage our future for the present. They will dress debt up in a suit, and call it credit. But it all comes down to the same thing. You will have mortgaged your future, to pay for your present. And that is something you never want to do. Kent Nerburn
