By Steve M Williams
Are you sick of spending large portions of your monthly income on repaying loans, credit cards and hire purchases? Do you wish you had made better financial choices when you were younger? Or are you still feeling the financial pinch following a personal crisis?
Whatever it is that got you into debt, you're not alone. Literally millions of people are repaying money they wish they had never spent, or being penalized month after month for a time when they were forced to rely on credit.
There is hope. You can get out of debt and take control of your financial future.
These ten simple steps show how you can get started:
Work out where you are financially - it sounds obvious, but so many people begin to bury their heads in the sand when finances are hard. Be brave and confront your debt. Make a record of exactly how much you owe, to whom. Include the repayment period, the monthly installments, and the interest rates for each, as well as the dates each of these payments are required each month.
Budget yourself - now you know exactly where you are in terms of debt, you need to consider this in terms of your total income and other outgoings. Make a record of all sources of income you receive as a family, together with all outgoings. Are there some luxuries you can temporarily sacrifice to overpay your loans and get out of debt faster? By having one take-away less each month, how much can you overpay your mortgage or credit cards by? Be careful to examine your direct debits - these are often forgotten about instead of canceled. Do you need and make use of all of the services and products you are charged for? If you have a newspaper or magazine subscription, consider reading this free online instead - it's surprising how much daily newspapers especially add up to each month.
Using this information, create a sensible plan to overpay the debts with the highest interest rates. Include the whole family in this process so they understand why they are sacrificing the takeaway or newspaper - this is a great financial education for children and something the school won't teach them, so don't feel bad for involving them.
Be disciplined in your spending - when you feel the financial pinch, it's tempting to resort to getting further in debt. Previously, this has been an option for almost everyone, but as the economic climate changes, more and more people will be refused further debts. Get out of the habit of relying on additional credit right away. If you need additional money, firstly question whether you do really need it, and then brainstorm ways of raising that amount without going further into debt. Websites like eBay and CraigsList make it easy to sell anything you no longer use, and a pre-Christmas clear out can usually raise a surprising amount of money for Christmas gifts. (I mention Christmas as it is the most popular time for new applications for loans and credit cards - don't do it. Plan ahead.)
Track daily spending habits - often, when completing step two (budgeting), people will not understand how they spend all of their income. In other words, the numbers don't add up. To obtain a clear view of your finances, it's essential to track daily spending. Each family member should do this, and honesty is key. If you are spending £5 on lunch each day and your spouse is having a Starbucks coffee each day, you are spending a sizable chunk of money every single month on things that are not necessary. Using these examples, you're spending around £158 each month! What a difference that could make if it was used to overpay your highest-interest debts. To lower this spending, only take your debit and credit cards out when necessary (often we fool ourselves that we need them 'in case of an emergency') and take just as much cash as you will definitely need for vital outgoings like bus fairs, parking expenses, etc.
Bond with your bills - most service providers will offer you a discount for paying by direct debit. Give them a call today and arrange this, taking note of the amount saved each month. Use this extra cash to overpay your highest-interest debt.
Shop around - it's very likely that you are not being charged the lowest price possible for your utilities. Using a quick Google search you can find impartial comparison sites for everything from telephone to electricity and internet providers. Find one of these sites for your country and switch to a cheaper provider. You guessed it; use the amount you save by doing this to over-pay your highest-interest debt.
Transfer debt - repeat step 6 but in terms of your credit cards and loans. Shop around for ones that charge lower interest rates than your current ones, but don't get fooled into topping up loans or taking on extra sums and extending the period of the loan.
No more store credit cards - these usually charge by far the highest interest rates and see you paying well over the odds for the original items bought. Cut up any existing store cards and don't be tempted into getting new ones. Despite the great initial discounts they may offer, the danger of getting into more high-interest debt is too great. Get used to paying for things with cash, which forces you to recognize the amount you are spending and often makes you realize you don't want the item in question that badly!
Bye bye bank - repeat step 6 but this time, for your bank account. Look at online banks particularly, as these are often much more favorable than the larger high-street banks.
Review your mortgage - for most people, the mortgage is the biggest expense each month. Spend some time ensuring you are getting the best deal. Speak to an independent financial advisor to see whether you can save money by changing, but remember to take into account any transfer fees and other penalties.
Using just these ten steps you can monitor your outgoings, allowing you to overpay your debts. This will get you free from debt quicker and will also give you a sense of achievement from saving money, instead of the happiness many people get from spending it. As your highest-interest debt is repaid in full, you can then apply that complete sum to the next-highest, and so on.
With discipline, you can set your family free from financial debt.
Steve Williams is a renowned Wealth Coach, helping people around the world get out of debt and create wealth. He is currently offering a FREE special report entitled '15 Secrets of Wealth That Will Transform Your Finances & Lifestyle'
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