How to get out of debt and stay debt-free

Now regular readers will know that I’ve been pretty open with my previous debt. If you’ve not read it before, here is my debt story. But the short version is that I was in a lot of debt thanks to my ex-boyfriend. Fast forward five years and not only did I manage to clear more than £20,000 worth of debt. But I also managed to save for a house deposit. All while earning a normal amount of money. It wasn’t easy. But here is how to get out of debt and stay debt-free.

LIST EVERYTHING YOU OWN

Now if you’re struggling to take control of your finances, the first thing you need to do is face them. List out every single debt to the penny to all your creditors. So every credit card, loan, or store card. This is the scary part. Facing up to something that the majority of us, myself included, usually put our heads in the sand about is tough. But it’s the first step to taking back control and clearing your debt.

WORK OUT MINIMUM PAYMENT

Now that you know the total amount of debt you owe. You want to work out the minimum payment amount for each debt. And then add that together to get the total amount that you’ll need to pay each month on your debts. Now, this total is the minimum amount you need to pay every month to service your debt. But if this is all you pay towards your debt on a monthly basis, it will be nearly impossible to pay it all off.

SPEAK TO YOUR LENDERS

I know that this might seem terrifying to talk to the people that you usually avoid. But speaking to your lenders about freezing interest rates could make a huge difference in how quickly you can clear your debt. And usually, the people on the other end of the phone just want to help you.

CLEAR YOUR SMALLEST DEBT FIRST

Now, this is known as the snowball method and is something I used myself to clear my debt. Once you have your list of the smallest to largest debt, along with what the minimum repayments are, work out how you can save money.

Can you give up subscriptions you no longer need? Or can you take on additional work? Whatever extra money you can raise, put it all into paying off the smallest debt first. While also making the minimum payments on your other debts.

Once the smallest debt is repaid, then roll the money you were using, onto paying off the next debt. And then just repeat until each debt is paid. Which I know is simpler said than done. But by paying off the smallest debts first (while still making minimum payments on your other debts), you’ll start to get hope that you can be debt-free.

REMAIN DEBT FREE

Now that you’ve out of debt, one of the biggest challenges is not to find yourself back in debt. Like someone who loses weight, it can be challenging to keep the weight off and not fall back into old habits. And debt is no different.

For me, I found working towards goals and having reminders of those goals really helped. I have different saving pots for different things. So I have one for holidays, one for a future house move, one for a rainy day and one simply called a f**k it pot. Which is what I use when I want to treat myself to something I absolutely do not need. But really want.

Having goals helps keep me on track. But so does only having one credit card, with a small credit limit, and having a direct debit set up to pay it all off every single month. I no longer buy things on credit, purely because I don’t have access to a lot of credit. If I want something now I have to have the cash to buy it. And that’s really helped with staying debt free.

So that’s my advice on how to get out of debt and stay debt-free. What are your thoughts on the subject? Do you have any other tips to share?