Back to the Black: Ideas to Help you Clear Debt

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

 

8 Comments on "Back to the Black: Ideas to Help you Clear Debt"

  1. What? An average family spends £37 a month on takeaways? Well I can only assume that there are a lot of families that spend a heck of a lot more than this….I think I’ve had one this year….as a `treat’. Mind you a lot of people don’t seem to calculate what it all costs they have `what they like’ – and we never used to live like this. We had what was `good value’ that went the furthest and that was the healthiest that you could buy. We have become a society that wastes an awful lot of money – so of course people will get into debt.

    Interest blog Graham.

    • Hi Shirley and thanks for getting in touch. Yes you are right we do waste a lot. I am a former maths teacher and I certainly agree people don’t calculate what they spend. Even worse is smoking; ignoring the health issues do you know each cigarette, individually, costs 34 to 40p. Some people spend north of £8 daily on ciggies, that’s £56 per week or £2912 per year literally going up in smoke.
      regards
      Graham

  2. Graham

    Firstly, this is a generalisation and is from my own observations in and around the areas I know reasonably well!

    I own properties in the North East that I rent out mainly to DSS tenants and the majority of them are smokers and fill their larders with cheap meals from Iceland and others. I’m sure they would not only be better off, but probably more healthy if they bought ingredients and cooked their own meals as well as giving up the fags.

    I had one guy explain to my letting agent that he couldn’t pay all his rent as he had no money for food and this from a guy who had a 200 pack of fags sitting on his table and two empty bottles of Jack Daniels in his bin.

    These people expect the government to continually bail them out and their lack of self-esteem in not trying to find work and improve their lifestyles is a symptom of the welfare state that was brought in after the last war where families have not worked for years and use their children as their income. This is then carried on to the next generation and so on!

    Until someone says STOP and changes things drastically then the country as a whole will never be wealthy! But no government has the balls to do this on either side despite rhetoric that says they will!

    Just my two penneth and excuse the rant

    DaveT

  3. Hi Graham

    Thanks for the excellent tips. I myself have been guilty of doing credit card balance transfers and not paying off the debt even though I should and could have. There seems to be a fear of wiping out any money I have saved even though it should be payed into debt. In light of your article though this is something I will be reassessing.

    Thanks

    Graeme

  4. What do you say to the creditors? Especially if you are already paying on your credit cards? My girlfriend’s friend is always complaining about all the debt she has to pay before she can move from her parents’ place, and I don’t know what to suggest to her (apart from the spending less on non-necessities).

    • Hi Jennifer
      the best way forward is to write to creditors. I write about this in Back to the Black
      First of all tell your friend to get her debts in order of interest size. She needs to pay off the minimum of all except the highest interest debt and pay down that one first. She MUST write to all creditors and tell them her plan and she must stick to it. They WILL object but if she sticks to her guns they will have no choice but to accept it. She is not saying I will not pay at all, she is saying here is the spending plan to clear this debt. In terms of spending less, use the 80:19:1 rule. She must live on 80p in every pound and no more. This then means she has 1p in every pound for charity ( yes she can afford it) and 19p to clear the debt. She needs to work out a time plan of how long the repayments will take and it maybe that she needs to do an extra job to raise revenue. Tell her to look at odesk. This is a site that she can apply for online work. Some of the payments are low but hey money is money!
      Come back to me if you want more help
      regards
      Graham

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