I took to single life like a duck to water. Out every weekend, holidays to Ibiza and Dublin, and a reckless abandon with taking on rent for a fancy apartment that was definitely not sustainable. Fast forward two years and I found myself wondering how to go about clearing debt.
We’re all human, and getting into debt is nothing to be ashamed of. Yet, if like me, you want a future with a home that you own and want to be able to buy a pint of milk each week without scraping the barrel of your coppers, it might be time to consider some tips about how to clear your debt.
I was pretty ruthless with my finances, and put a plan in place that finally meant I cleared two credit cards and an overdraft within eighteen months. At the time, I really struggled to find any clear advice, so hopefully you’ll find this advice useful.
Excel is your new best friend
It was time to get serious. I set up a spreadsheet which included all the various financial incomings and outgoings. Whether that was my rent, my gym fees, even the coffee I wanted to have with a friend, it all got tracked.
Doing so not only gave me better understanding and control over my cashflow for the future, but it helped me understand how much I could realistically afford to pay off each month without putting myself in a desperate situation. Whilst I was keen to get my debt cleared, it was unrealistic to put most of my wage into this each month – as inevitably I’d end up going past my overdraft when paying for travel to work etc.
As part of this
One big reason for wanting to clear my debt was my credit score. Experian offers a free service which I signed up to – as well as using their paid service (it’s a really small fee) to get hold of my entire credit record.
They release your credit score every sixty days – and this helps keep you motivated each time as it either stabalises or goes up – giving you a guide as to how you’re getting yourself in a better financial position.
A little bit of a fun fund with keep you sane
Whilst clearing debt means you might need to dial down the fun antics, going hell for leather to clear it and leaving yourself with nothing each month is nothing short of demoralising.
As much as I knew paying more per month could knock off a few months off my overall repayment window, I knew it was going to take a while and therefore doing nothing fun for eighteen months was going to be dire. Each month I’d set aside a small amount, enough for a nice meal or some drinks with friends, just to ensure I wasn’t a hermit.
Appreciate the need to consolidate
With small pockets of debt in different places, its easy to feel like clearing a little bit off each is more manageable. However, when I calculated the interest, I was actually paying way more interest
Whilst consolidation loans aren’t for everyone, doing so for me meant not only did I reduce the amount of overall interest I would have ended up paying, but I ended up with one monthly payment, as a direct debit. The loan I had also had a countdown for the number of payments left, meaning I had a monthly barometer of how I was doing which was really motivating.
Track it now, track it good
With 18 months in mind, it’s safe to say I was pretty close to losing the will to live nine months in. With an overwhelming amount of debt still to clear, and another nine months ahead, it felt like an eternity until I was going to be debt free.
In my spreadsheets, I kept a log of the total debt amount at the start, and then each month the amount would go down. Keeping track of the constantly reducing figure helped keep my spirits up and my motivation high.
So now, eighteen months later, I am finally debt free! What are your favourite ways to manage your finances?