Debt clearing strategy advice please

[IdLikeToBelieveItsTrue]

Hello,

throughout my life I was always proud that I had avoided debt but over the past few years I have accrued around £20k debt and am really keen to clear it all and to be able to start saving. Debt is so stressful. Money is tight every month and it makes me feel so worthless and like a big failure.

I keep hearing about how people have cleared massive sums and I’m really keen to be proactive but just don’t really know where to start. Could wise MumsNetters share their strategies for clearing debt, please? 🙏

NC for this post.

thankyou in advance x

If you post an overview of your income and outgoings, and then your debts along with their associated interest rates, you’ll probably get some advice that’s more useful than anything generic. There’s a debt free wannabe board on MSE that will also give excellent advice.

Firstly well done for wanting to tackle this problem.

Secondly paying off debt is not easy so don’t underestimate how hard this might be.

If you’re really serious about this I have found the best way is to budget properly. It’s a lot of work initially but once it is set up it is fairly easy to maintain.

To do this you need to get a complete idea of your debt by writing down every single person or organisation/company you owe money to, the total balance, and the exact interest rate.

Then you need to consider your monthly income.

Finally you look at bills (like council tax, electricity, gas, insurance, mortgage/rent, etc.) and look at bank statements for how much you spend on groceries, clothes, gifts, eating out, etc. Money Saving Expert has a great spreadsheet which can help you. I use an adapted version of this.

Citizen’s advice may be able to help.

Once you have all this information you can set a budget. Look at things you spend money on that you don’t really need and identify if you can increase your income.

Even thou I am now completely debt free, I still budget and review it monthly.

Good Luck

If you have credit cards I contacted the companies and managed to arrange to pay them off interest free. You need to provide a statement of means . As PP said lots of support and information on the MSE forums . It’s taken me a few years but have cleared a similar amount to you . I don’t buy anything on credit now . Good luck .

Agree with PP that you need to make a budget (understand your outgoings) - have a look at Money Saving Expert for a thorough budget list.

Have you tackled the reasons behind the debt?

Google debt snowball method and see if that would work for you.

I had a debt management plan with stepchange, then managed to finally clear it quicker with some money saved during Covid as I wasn’t commuting.

I’d recommend going over to the moneysavingexpert website and go on the debt free wannabe website. There are many people on there in the same situation (so you don’t feel so alone) and lots of expert advice on debt management plans, how to approach creditors, how to manage your finances.

I got into a similar amount of debt years ago and found I was only paying off the minimum payments on each card, so the balance was never reducing. For me, the solution was a consolidated loan. All the cards were paid off and I had one monthly payment to deal with. I took the loan over several years to make it affordable, but I had an end date in sight that got closer and closer. When I took out the loan I also got rid of all my store and credit cards and haven't had one since. Now, I either save for things or go without. I'll never use credit again.

I discovered YNAB on MN.

it’s amazing & totally changed my finances. Look up
threads on it for more details.

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I was in about £20,000 of debt in my 20s. I can also recommend MoneySavingExpert. They have a debt free wannabe forum that helped me massively. I would recommend (either here or there) posting your statement of affairs and people can give advice. Also found out the APR for each of your debts - it’s usually recommended to either do a balance transfer, or focus on repaying the highest debt first.

I ended up getting a second job to clear the debt faster but I was young and had more energy 😂

Although it wasn’t a great experience, it has taught me to be frugal in some ways and now I’m good at saving!

YNAB and look out for Dave Ramsey on You tube.

Definitely look at the MSE budgeting and get out of debt advice.

However how you pay off your debt depends more on your disposable income than the total amount because for some, £20k could be paid off in a year or two with a bit of belt tightening, use of interest free balance transfer offers and crucially, no damage to your credit history, if you currently just spend your disposable income on non essentials and have got into a habit of using credit cards to supplement your lifestyle, while only paying the minimum. This could be because if, like most people, your disposable income has reduced over the last few years but you've carried on buying the same things without noticing you can't afford them any more.

For others, various formal solutions up to and including a debt relief order. But all that is dependant on whether or not you have any assets and also how much money after essential costs you have to pay debt off, and we don't know that.

I have just taken a loan to consolidate ours .

between the two of us we had £6k on cc , and although we were (sort of) managing it , monthly we were paying back nearly £400 and one had a very high apr now and it would have taken years to get anywhere.

Now everything is paid off apart from the loan , which is £160 per month. We can overpay it and save time and money which is the hopeful plan .

im keeping one credit card with a £200 limit .

everything else is closed/closing

I want to be debt and mortgage free by 45 - and it’s an achievable goal if we are sensible