Why not take financial control back?
The start of a new year can be a time for reflection and new beginnings, and if this year you are thinking of tackling your Debt, then you are not alone. Many people have committed to reducing their deficit as part of their New Year Resolutions, and it is not hard to see why. Reducing debt can help relieve stress levels and give you control of your finances again.
The first thing you should do is confront your debt. Is it growing? Has it been hiding in the background, untouched for a few years? Is it a credit card debt that spiralled out of control over Christmas. Or, is it a gradual build-up of debt, which accumulated over several years? Look at how this debt has come about, and try to put a stop to excess spending now.
Another pointer is that you should be honest about your debt. If you have hidden debt from your partner, you should consider telling him or her about it. As the saying goes, a problem shared is a problem halved, and however embarrassed you are, it could really help your situation overall.
You now need to look at what extra money you have come into the household, which you help pay down your existing debt. Look at saving money by setting up a regular savings schedule. Wonga suggests many small sacrifices you can make to help you save money. Remember that a little goes a long way! Their comprehensive list of savings includes cutting down on electricity use, growing your own vegetables and ditching that weekly takeaway.
You should create a good plan for paying off your debt and stick to it. You may want to ask a professional debt consolidation company to help. CNBC says that one of the most effective ways to clear your debt, which you might want to consider, is the avalanche method.
They say, “Mathematically, the most effective way to eliminate debt is to follow the avalanche method, in which you list your debts from highest to lowest by the interest rate. Pay the minimum balance on each, then dedicate as much extra as you can each month to the one with the highest interest rate.”
Alternatively, you might consider the snowball method, which “prioritises your smallest debts first, regardless of interest rate. To try it, start by listing out all of your debts, smallest to largest. Pay the minimum balance on each one, except the smallest. For that one, dedicate as much cash as possible each month until it is repaid. Then move on to the second-smallest debt…” This works for people who like to see the debts disappear quickly. It helps you to gain momentum, just as you would watch a snowball grow bigger and bigger. This can be a much more motivating method to pay down debt.