You need to be living on Mars not to realise there was and still is a financial crisis across the world. Rising bills and wages or salaries that have been kept down mean incomes are squeezed. This has meant many have stumbled into debt. If there is not enough to go around then you may well have to borrow. But remember, when you are debting, you are spending someone else’s money. Debting is like accidentally walking into quicksand. It is easy to do but incredibly difficult to get out of in one piece. The more you struggle to get out, the more you sink in. So these ideas should help you move towards a debt-free life and believe me it is possible, I have been where you are now and it can be improved.
1.Understand your present situation: you need to analyse the problem first. I have said this before in other blogs and make no apology for repeating myself it is essential.
You need to be clear on:
a) how much debt you have.
b) the type of debt, (loan, credit card payment or mortgage)
c) if your expenditure is greater than your income.
d) the value of your assets, like your home, car, investments, savings.
This will give you an overview. It is vital to determine your current position. If you don’t know where you are, you will not know how to plan to get to a debt free state of living.
Having analysed the current situation then you are ready to create a spending plan. Here you can work out the expenditures and incomes, the values of your assets and the value of your debts. Some people do suggest that it is useless to write down your spending. This is crazy thinking. If you are in debt it is because you spent more than you earned. You spent someone else’s money and now you need to pay it back. So to know how you are spending your money, you need to track it, daily.
Your future debt free strategy
When you have completed your spending plan, stating what your essentials are and what discretionary spending you have planned for, then you are ready to move on.
Spending more than you earn: This is the biggest cause of debt, so it is the one area you should tackle first. Examine your spending, where can you cut down? According to a recent UK press report, the average British family spends £37 per month on take way/takeout food. That is £444 per year. Why are you doing this? Are you addicted to monosodium glutomate? At the same time we are becoming, along with many other countries, fatter and fatter. maybe there is a connection? Try going down to your local farmer’s market and buy fresh food straight from the farm. I used to eat takeways/takeouts twice weekly, Wednesdays and Saturdays. I also ballooned to more than 17 stone (238 pounds), I am now a far healthier 42 pounds lighter and another 7 to go to reach my target weight. I was 49 pounds over weight and always extremely tired. I wonder why!
Pay down expensive debts first. Look at the highest interest rates and pay them down first. Make sure you shift credit card and store card payments first and take a pair of scissors and cut those consumer smack items into little pieces, you don’t need them anymore.
Savings: use them. Interest rates on savings are currently very low. Make use of the savings to clear debt and you will benefit.
Speak to your creditors. I talk about this in Back to the Black, tell them you have a repayment plan and stick to it. Some of them may not like it BUT stick to your guns and do not back down. You are not saying you will not pay, you are saying when you will pay and that is different.
So your strategy needs to include:
1) Your goal, in this case debt free living and peace of mind
2) a list of your debts and their values
3) priority assessment of the debts to be cleared first
4) money you can save to be used for debt clearance
5) planned reductions in your spending plan
6) assets that you can cash in, for instance unused household items that can be sold on ebay
7) A planned timeline to implement this plan
8) monitoring and control of your spending plan.
Point 8 is ongoing. If you are like me, it didn’t take a day to get into this situation and it will take more than a day to get out of it.
Remember, do NOT debt today.
Once you have cleared your debt you are ready for the next stage in the Back to the Black Debt to Wealth Programme and that is making money. Do sign up on the form on the right and we will keep you informed.
To your success