Getting Out Of Debt

In recent years, credit has become readily available and, in Britain at least, a culture of spending has developed. This has led to an enormous national debt and the current financial crisis is making things worse for many as house prices fall and redundancies rise.

Here are some tips to help in getting out of debt:

• Make a list of all of your necessary monthly expenditure including food, fuel, rent or mortgage, and utility bills. Use this list to create a monthly budget within your means. Once you have a realistic budget, try to stick to it and only allow yourself to spend any surplus you have available.
• Use a process known as snowballing. Make increased repayments to the debt that has the highest interest rate while maintaining the minimum payments on your other debts. Once this debt is paid off, move to the next one, making the minimum payment plus the amount you were paying per month to the previous debt. Very soon you will be repaying your debts at levels you may never have previously been able to afford.
• Try not to use credit cards where you can pay by cash. Try to only hold one credit card and only use it for emergencies.
• Make sure your salary is paid directly into your bank account and set a withdrawal limit to restrict the amount of cash you can spend.
• Cut down on unnecessary expenses such as dining out and take-away meals.
• Ideally, your housing costs should be no more than 33% of your income including rent/mortgage, insurance, council tax and utilities. It is worth shopping around to find the best deal on your insurance and utilities. You may be able to save a couple of hundred pounds a year doing this.
• If you are looking for ways of getting out of debt, remember that the least favourable option is to borrow more money. However, you can look for a family member or friend who can give you money without charging any interest rate or at a very low interest rate.
• You can contact your creditor and try to agree upon a better repayment plan. Most of the creditors will willingly work with you so that they can get their money faster and easily.
• While shopping, look out for bargains, savings and deals, compare the different offers and opt for the one which is most economical.
• If you need extra income, consider taking on an additional part-time job. This may increase your income enough that you can make increased payments to your creditors.