A debt-free man: how to do it

Understand your situation

Get it all together. Your credit cards, loans, bank and store cards. Find out how much is it that you owe to each and what are the repayments for each month. See if you know how much interest you're paying. Make some calculations and find out the total sum that you have to pay. Many people don't know their total debt and their situation can get worse. We know it can be depressing, but it's the first step on your way out of debt. If you find this whole situation overwhelming, a Debt Advisory Service always comes in handy.

Do a spending plan, a budget and then try to stick to it

Make a list of all the sources of income, such as salary, pension, and interest on savings, investments and benefits. Put all of them in one column. Then make a list of your bills, such as mortgage or rent, energy bills, council tax, food and work. Put them in one column, too. Then make a third list with another payment, such as the insurance of the car, the phone bills, the tv package, clothes, birthdays and gym membership. Then review these 3 columns and see if you can cut out some of them. Or try to look for better deals. After you've paid the bills, see what's left so you can start paying the debt. If you can, look for ways to make some extra cash.

Don't try to pay them all at once

Your attention should be on the one debt with the highest interest rate because that's where a big part of your money is going. After you're done with that, you can focus on paying the others. Make some direct debits for the other debts to make sure that you pay the minimum every month, and all of this on time. Don't let time to pass by and forget about fees, because the interest is already high.

Switch the expensive debt

If your credit card balance is of £2,000 and the market average rate is of 18.9% APR, the minimum would be 2.5% for every month. So according to math, it will take about 26 years to get rid of the payments and would cost you about £2,976 in interest. However, if you switch that balance to 0%, and then pay £48 each month, you should be all cleared out in 43 months. You're going to pay 3.29% of fees of £65.80, however, they're giving you £20 off in case you switch your balance in 60 days. In conclusion, you'll pay only £45.80 and save £2,930.20 in interest.

Overpay the bills

Your credit rating should be good. If not, it will prevent you from getting accepted for a 0% balance on your credit card. But you could cut the time that it might take to pay the debt (and the amount of interest, as a matter of fact) if you pay more than minimum every month.