10 Steps For getting Out Of
Step 1 –
Admit you’re in debt
Being in debt is a little like having an addiction – it controls your
Like any addiction, the first step to being free from it is to admit, fair
and square, that you’re in debt. While you call it a “short-term financial challenge”, a “little oops with the
money” or a “temporary glitch”, you have a problem – denial. While you’re pretending it’s something it’s not, you
won’t be able to release yourself from it.
So say, “I’m in debt. It’s controlling me and I want to get out of it.” A
good dose of honesty is a clear message to the universe that you’re open to being helped ... and you will
– Create a clear reason
Unless you have a good reason to get out of debt, you won’t. Good
reasons for staying in debt are that people feel sorry for you, you get peoples’ attention, and you don’t
have to make decisions and so on. If these reasons are stronger than the reasons for getting out, they’ll
hold you to where you are right now ... in debt.
So, to counteract the negative – the reasons for staying in debt –
find some positive reasons for being debt-free:
· You will be able to afford to see your children
· You will be able to start the business you’ve always
· You will feel proud of yourself for making a positive difference in your
· You’ll be able to help others.
· You’ll be able to get a better car, house or
Step 3 –
Work out your income and expenses
This can be a scary part but it can also be a relief – knowing the
Firstly, write down all your weekly
income from all sources – wages, salary, interest, welfare benefit and so on. Total them all up.
Now write down all your weekly expenses –
phone, power, rent, vehicle/travel, food, entertainment, loan repayments, credit card payments ...
everything! Once you have it all written down in front of you, you can see two thing:
1. Whether your spending more than
youre earning, and
2. Where you can cut back on spending
Step 4 – Calculate your net
Add up the value of all your assets – things you own. These are things like
bank accounts, savings accounts, vehicles, furniture, computers, property and so on.
add up your liabilities – things you owe. These are things like credit cards, loans, unpaid bills and hire purchase
The difference between them is your net worth. If it is a positive figure,
you own more than you owe. From now on, calculate that each month (or week) and you’ll see that what you focus on,
Step 5 – Share with a trusted friend
Over a third of people with debt problems hide it from their partners. Share
your debt situation with someone you trust. Three reasons:
1. A problem shared (even if it’s not theirs) is a problem halved.
2. Having someone on your side
helps to keep you going, especially when things get tough.
3. They can come up with ideas you never thought of.
Step 6 –
Contact the right people
Reputable organisations, such as Pay Plan or the
Bureau, or a
debt charity such as National Debtline will not only help you, free of charge, but can also
help reduce your level of debt. They negotiate with lenders on your behalf to work out a manageable budget
based on how much you can realistically afford to repay.
Step 7 – Make a priority list ... and act on
From your list of debts (above) decide which are the most urgent.
Those that carry the harshest penalties for default must be dealt with first. Mortgage arrears, for example, will
eventually result in losing a home. Council tax arrears carry the risk of a prison
Step 8 –
Speak to creditors
Front up to the people you owe money to and tell them the truth. They will be
impressed – disappointed but impressed.
The worst debtors just run and don’t face up to their debts. So, if you are
one of the brave ones, most creditors will appreciate your honesty, especially if you’ve worked out a repayment
plan in advance. They’ll be disappointed they’re not getting their money sooner but they’ll be happy that they’ll
get it at some time.
Step 9 –
Reduce your credit
Paying the minimum on credit cards is better than nothing. However, it would
take 15 years to pay off £3,000 on a 14.9% card if the minimum payment of £90 was made. You would nearly halve that
time if you paid an extra £60 a month.
Don’t borrow to pay off your debts –
you’ll only be worse off. Cut up your credit cards. Cancel accounts you have and pay cash. Find cheaper power
and phone suppliers.
Step 10 –
Move your focus from spending
Find (free) activities that you love and keep you from shopping. Stop living
Remember the reason(s) you want to be out of debt (Step 2) and stay