Mo Money, Mo Problems

Over the weekend, I became debt free.

When I first moved out from my parent's house, nearly 10 years ago now! I was extremely naive and foolish with money. In a few short years, I'd racked up about £8,000 worth of debt through various bad decisions and living well beyond my means. It got to the point where I would go to the shop and get 60 packs of 11p noodles (for lunch and dinner) and big boxes of bran flakes to see me through the month.

One day, I looked around and thought "this is ridiculous". I was earning a good wage, but everything was going towards paying of creditors but not in a very smart way. I lived in a nice flat in Leeds, I was going out and doing what I wanted but things that had to be paid for such as bills, etc. weren't being paid. It had to stop!

Here's how I did it:

1. What is your monthly income? It seems like such a silly and simple thing to say but you should keep your pay slips and bank statements to hand. Ensure your tax code is correct (You don't want to be paying too much tax!) and make sure you know exactly what is coming into your account and when it's due in there.

2. What do you owe? In order to get firm grip on your debt you need to know how much you owe, to who and how long the repayment period is.
Start by going through your monthly bills. First and foremost, you should make sure you can afford the roof over your head, utilities and food. Everything else can wait.

Once you've done that, have a look at other expenditures. Do you need a Sky Subscription? Do you need a £50 a month phone tariff? If you can make your non-essential expenditure go down, you'll have more funds to play with and things won't feel as tight.

If you have more than one creditor, are you in a position where you can consolidate your loans? Generally, this will depend upon your credit rating. You can check out your credit rating for free through sites such as Noddle.com (you still have to have a credit card, but it doesn't charge your card). If you can't consolidate your loans, its not the end of the world.

3. Speak to your creditors. If, after looking at your monthly outgoings, you worked out that you can't afford your repayments, speak to your creditors to see if you can arrange altering payments - maybe making them smaller but over a longer period of time. Make sure you get confirmation of all agreements in writing. I don't mean to sully the good names of Call Centres but we've all had it where we've spoken to someone only to call back next week and theres' no record of the conversation!
If you're in receipt of any benefits from your local authority/government, you should be able to freeze any interest on any loans you have as well, which is super handy!

4. Be Organised & Take control! I have a spreadsheet that I update monthly when I know what's been paid, what's due to be paid and where I'm standing on repayments. It looks like this:

This isn't my financial information, is filled in like this to give you an idea.
So I know how much I have to do whatever I want with each month, after everything else is paid. I use internet banking constantly, I'm able to log on and check what's in my accounts (savings, loan, Credit Card and current account) and move money accordingly. I can see whats been paid and when direct debits are coming and going.

The HSBC Fast Balance app is super handy and also I receive daily text messages telling me whats in my current account, updated with the 5 most recent transactions.
You can also control your Standing Orders & Direct Debits such as how much you want to go out and when. Seems pretty obvious, but if you can arrange them for the day after you get paid - then the funds won't be sitting in your account for days/weeks and you won't be tempted to spend!
5. Hide your credit cards! It's tempting to use your credit cards for extra splurges and treats, DON'T! You'll undo your hard work! When I was sent a new credit card, I didn't activate it. I hid it! I actually can't tell you where it is - but each month I see the £20 I put towards it, chip away at whats there and its gone down and down and down! When you can close down an account after it's hit it's zero balance- do it!
When you first sit down to tackle it, debt can look like a big, scary, untameable monster - the longer you bury your head in the sand, the bigger that monster will become! But once it's tackled and a payment plan is in place - the monster goes away. There are loads of free debt management plans online and the Consumer Credit Counselling Service is fantastic at answer any questions you may have!
GOOD LUCK!
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