Debt is the ultimate enemy whether you are working towards financial independence, or just want to live a happy, fulfilling life. When we first fought to get out of the debt trap, we were a one (ridiculously low) income family and had just had a baby. Seriously low, as in the take home pay was in the region of £900 per month for a family of 3.
I am constantly seeing the posts of ‘How i paid off a trillion pounds in 60 days’ that turns out they used their savings to clear. Sorry luvvies, but if you had that amount of money in your savings accounts then you were daft to be in debt in the first place. The only savings you should have when paying off debt is an emergency fund.
We are slowly destroying our remaining debt but here is how we have cleared over £20,000 of debt so far.
Quite simply if you are serious about getting out of debt as quickly as possible then all non-essentials have to go.
Cancel the Sky TV and just have Netflix (you can also get rid of the TV license if you only have a streaming service), even if you only have a basic Sky package, that is a minimum £30 a month saving – Boom! If you have family or friends that use Netflix then why not share a package and the costs? Even cheaper!
When we first starting clearing our mountain of debt, we didn’t even have a tv package of any kind. We just watched dvds that we were given or found for pennies in charity shops. Reducing debt was and still is our priority and certainly more important than being up-to-date on the latest TV shows.
Don’t have more vehicles than you absolutely need. Cars are crazy expensive from finance payments, fuel, insurance and tax, the costs can really add up. If you do not really need 2 cars (or a car at all) then get rid. We had one car as Hubby Hedgehog needed it for working shifts and even living in a rural location was manageable. If i really needed the car then i would take him to work that day, even when we was on a crazy shift pattern. The extra fuel is easily outweighed by the costs of a second vehicle.
Where possible, always buy a car outright but if you are really struggling then speak to your finance company and see if they can extend the term to reduce monthly payments. You will have more money to throw at priority debts and can choose to overpay if you have it.
Food! Oh my goodness, doesn’t a food shop get expensive! Take advantage of everything you have access to to reduce these costs. Are there any local farms that do veg boxes or have their own farm shop? Also check out the local car boot sales, lots of farms have stalls for their wonky veg that aren’t pretty enough for the supermarkets.
There is a car boot on a Sunday and Wednesday in Gloucester that has a meat man van too! These are butchers that have crazy deals on bulk meat as there is no middle man making a profit. We spend around £60 every 3 months on meat from the meat man van and our last haul had 3 whole chickens, around 20 sirloin and rump steaks, 3 pork joints, 20 pork steaks, 30 chicken portions and loads of chicken breasts. We do not have a big freezer at all but we make it fit! (a mini chest freezer is on the wishlist should we come across a cheap one)
All of this is completely pointless if you do not set a budget! Deduct your essential bills such as rent/mortgage, council tax, gas/elec, vehicle running costs, food etc from your income to leave your disposable income. This is all of the extra money that you can use for your debts.
If you find that there isn’t enough left over for your debt repayments then call your creditors. Seriously, don’t stress and struggle to find the money to pay everyone or just not pay at all. Give them a call, explain the situation and see what they can do.
Some of our creditors in the past have given us up to a 6 month payment break, reduced the interest rates and reduced the monthly payment. Remember that they are people too and most will do whatever they can to make things easier for you whilst still getting paid.
I know that this sounds a little extreme but intentionally defaulting will let your accounts be passed onto the collections team who you can then negotiate a repayment plan with. In most cases the interest rates have been completely frozen and in some cases all charges have also been removed so it can be paid off easier an quicker.
Do remember if intentionally defaulting that your credit rating will end up in the toilet (if it’s not there already) and let the creditors know your intention and be aware that your account will be closed so only do this for accounts that you do not need to keep. We have done this will most of our credit card accounts so that we still have a couple that will remain live to rebuilt our credit rating.
Make More Money!
I know, i know easier said than done but hear me out. I am not necessarily talking about getting a second job or asking for a raise which is what a lot of people recommend to get out of debt. I am talking about you, your skills and your knowledge. Every single person has something that they are good at, you might be a kick arse organiser or really good at spotting a bargain that can resold for more, your sewing skills could be out of this world, or you may bake cakes that taste like heaven and don’t go straight to my backside (if only!). There is something that you are really good at that other people aren’t so good at. That is where your extra money is.
The value that you can provide to other people that either aren’t as good as you or simply don’t have the time. You can earn £1000 before you have to register as self employed and have the same tax free allowance as PAYE workers. Do what you are good at, reach out to people on facebook or at the school gates. Any where where people who might need your skills. I happen to be a rather kick arse facepainter (like the selfie?) and am hired for anything from kids parties to corporate events and festivals to get creative and add a bit of glam.
<– It’s me!
Make more money doing what you are good at.