How to get debt free in a year
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Beating problem debt is one of the best resolutions you can have. Here’s how to get started.
For many people the New Year is an opportunity to turn over a new leaf. Maybe there’s a skill you’ve always wanted to learn, a bad habit you want to kick, or an aspect of your life you want to improve on.
If your New Year’s resolution is to become debt free – we can help. No matter how much debt you have, there will be a way to achieve your goal. Not sure where to start? Here are some ideas to put you on the right track.
1. Look at your budget – or create one
If your finances have become complicated and stressful over the years, creating a budget will really help you get a clear idea of the situation you’re in, and what you need to do next.
You need to work out how much money you have coming in and how much you have going out each month. Be sure to take absolutely everything into account, and open all your letters from your creditors. Take the outgoing figure away from the income figure and see what you have left. This is known as your disposable income, and is the amount of money you should be putting towards your debts.
You might find that, if cut back on certain areas of spending, you can put more money towards your debts than you’re doing at the moment. Maybe there’s a credit card that would be paid off much faster if you committed to paying more than the minimum payment, for example. Make sure your essential bills are being paid, and you’re prioritising your most important payments, like your food, utility bills and council tax. As long as you’re doing that, you should aim to make your payments on time and, if possible, pay them off faster.
2. Stay in touch with your creditors
If you’ve let things slide in terms of keeping in touch with the companies you owe money to, the New Year is an opportunity to change this and make sure you keep them informed of what’s going on.
Make a list of all the companies you owe money to and how much you owe. If you can afford these payments, make a commitment to paying them on time. If not, get in touch with the creditors before you miss too many payments and explain the situation to them. See if you can come to an arrangement with them to pay less, freeze interest and charges or have your payments suspended for a while.
3. Speak to an expert
When you look at how much money you have coming in and out of your bank account, you may find that you actually don’t have any money to put towards your debts, or that you have a shortfall, meaning if you were to pay all your contractual payments when they’re due, you would end up with more going out than coming in.
If this is the case – don’t panic. All you need to do is pick up the phone and chat to an expert. Our advisors are available to talk to free of charge and there's lots of advice available from the Money Advice Service. You can do this at any point in your journey to become debt free – in fact you can choose to speak to an expert before you speak to your creditors, if you’re not sure what to say to them or if you don’t feel you’ll get anywhere.
An expert can help you put together a plan to become debt free. If you need help working out your budget they can assist, or if you need to start a debt solution, they can recommend the best one for your situation.
A fresh start to your finances
If 2016 was plagued by debt worries, you can put a stop to these feelings. There’s so much help and advice regarding debt, there’s no reason why you need to carry that worry with you into the New Year.
For some, a New Year’s resolution is quickly forgotten, but there are some resolutions that are more important than others. Freeing yourself from problem debt is a hugely positive thing to achieve in your life and if this if your goal for the New Year, keep at it. You might not be able to get rid of all your debt in a year, but you will definitely be able to start the right plan for you. Putting a plan place to deal with your debts might just make 2017 one of the best years yet.
by Christine WalshBack to blog home