Saturday 11 July 2009

How to Get Out of Debt

Everbody has a reason they are in debt, and it is usually down to their finances being all over the place.

Here are 8 simple steps for getting out of debt:

1. Work out your debt
Who do you owe and how much do you owe them?

2. Budget your money
Draw up an excel spreadsheet to show your income, and what you will be spending it on. Make sure you include monthly debt payments.

3. Discipline yourself
Don't get into further debt with recless purchases or taking any more loans.


4. Cut your daily spending
Give yourself a weekly budget and withdraw that much from the bank. Leave your cards at home and spend only the money you have withdrawn. If you have some left at the end of the week, put it in a jar on the side and repeat. In a few months, check the jar and see how much you have saved.

5. Organise your bills
Account for all utilities bill, making sure they are ALL in your spreadsheet with the actual figure.

6. Change your utility suppliers
Get the best possible deal. Many people use the same utility supplier from the moment they move into a property. Always shop around.

7. Change to a cheaper credit card/loan
Many loans and credit cards will offer better rates then the one you are using right now, and when you switch you will usually be given a 6 month interest free period.

8. Discard store cards
Store cards are a great way for a store to make money... from you. You pay for the product and then some! They have higher rates then any credit card and should be cut up and thrown away.

9. Organise your bank account
Make sure you are getting the best deal you can on you bank account such as low interest on overdrafts, and high interest on savings accounts. Increase your overdraft limit if you often go into it.

10. Change your mortgage
Shop around and find the best deal on your mortgage. Remember that you want to pay as little as possible each month until your debts have cleared. If you have been paying off your mortage for 10 out of 25 years thats 15 years left at the same rate as day one, like £500 a month. You can switch to another mortgage for another 25 years on as low as £300 a month.

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