7 Simple Steps to Debt Freedom
Freedom from debt isn’t just about not owing money anymore, it about being free from the worry it brings, free to make new life choices without needing to stress about how you will pay the credit card bills.
Mental freedom is closer than you think.
When you have a plan that you act on daily the noise of impending success is far louder than worry!
Debt can be very scary if you’re feeling lost and out of control, but when you get it organized and get the right help and support, it really isn’t all that bad, honestly! You might even be able to turn it around so that it MAKES money!!
Please don’t worry! There is always a solution and we are here to help you find the best one for you. Remember there is always something you can do about where you are right now, so just work through the steps and give yourself a huge high five for getting this far!
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Get Your Head In The Right Place
Get Your Money Organized
Move Your Debts – What Are Your Options?
The Action Plan (Part 1)
The Action Plan (Part 2)
Change Your Habits
Arrive at Debt Freedom!
Step 1: Get Your Head in The Right Place
I’m going to be brutally honest with you; if there was a quick, simple and free solution to your debt issues, you probably wouldn’t be here, anyone who tells you different is selling something.
That doesn’t mean that there isn’t an answer; a solution always exists, but it will either cost you money or you’ll need to apply some hard work and dedication to get there.
Making the decision to do what it takes to fix this is the first and hardest step to take, but believe me, it’s so worth it.
Right then; Are you ready to take hold of your financial reigns?
Step 2: Get Money Organized
List all your debts in the debt tracker and highlight those with the most expensive interest rates:
Completing the Debt tracker allows you to see at a glance where your most expensive debts are. It will also show you the lowest balance ones and if you have any promotional rates, when they are due to expire. The key to getting started is knowing WHERE to start!
When you are deciding HOW to pay your debts (switching / avalanche or snowball) this will be an invaluable resource.
See a more detailed instruction about how to use the debt tracker HERE and download your very own free copy of the excel sheet with all it’s lovely calculations, or a printable version if your prefer pen and paper.
See a more detailed instruction about how to use the budget planner HERE and download your very own free copy of the excel sheet with all it’s lovely calculations, or a printable version if your prefer pen and paper.
When you’ve download and filled in the budget planner and the debt tracker; be sure to complete ALL your expenses (monthly and annual) and be realistic about what you will spend. Don’t forget to make allowances for having a social life and the occasional treat.
Decide on how much of your income will be allocated to paying off debts – I recommend using a second account JUST for debts & have a think about what additional income will you be generating to pay them down even quicker. (see consolidation options HERE)
Check out the FREE downloads page for details on our ever increasing list of free organization tools including the debt checklist and the renewals reminder
Step 3: Move Debts & Evaluate Options
Just paying off debts as they stand could mean that you pay more in the long term through high interest rates. Take a good look at what you have to pay off using the Debt Tracker and let’s see if we can find a way to pay it down without you living like a pauper for the next 10 years.
If you have a reasonable credit rating, look for some 0% credit card transfers. These could be new applications or existing cards without a balance (call the providers and ask). Take care not to have too many hard searches on your credit report though, this isn’t good.
Maybe you could do a DIY Debt Consolidation by using a second bank account. This is a lot cheaper than a traditional consolidation but that too could be an option if you are struggling with monthly repayments.
- Track all your debts in one place and see at a glance which ones are costing you the most in interest.
- View your debt to asset ratio and your total monthly payments
- See how you can reduce costs by using your cash and assets that aren’t earning anything to pay down expensive debts.
Side Step: If Its All Just Too Much
If you are suffering from severe overwhelm and just can’t move forward, or your situation has escalated too far already;
please don’t worry, it’s only money!
Get legal advise if you are being pursued by creditors, they could be breaking the law!
If you feel like it’s gone too far for simple DIY measures, contact a debt charity, they might have some free assistance to offer you before you consider a debt relief order.
Please do exhaust all your alternatives before you decide, don’t just jump in to bankruptcy, expensive consolidations or remortgages, but know that these options are there for you should you need them.
Check out your options with bad debt if need a speedy solution.
Step 4: The Action Plan (Part 1)
When you have exhausted the cheaper debt options, it’s time to look at your action list
Check your credit reports monthly, make sure they’re on track. Cheaper debt could become an option for you as your score starts to improve.
Check that you’re getting the best deal for all your usual spend like your utilities, phones, insurances, broadband, food etc.
Make sure you are not paying for anything you don’t need. This is especially true with insurances. Life changes and you might be paying for cover that’s no longer relevant to you.
Print the reminder sheets so that you don’t forget to search for better deals on all your spend before your contracts auto renew.
Get extra back through Cashback sites when you buy or switch anything
Step 5: The Action Plan (Part 2)
Are you using the debt Avalanche (where you pay the highest interest debt first) or the Snowball where you pay the smallest balance?
The smallest balance payment method (Snowballs) gets rid of whole credit card balances faster meaning that you FEEL like you are making progress.
Avalanche payments throw every available bit of cash at the HIGHEST interest debts. This might not get rid of whole cards too quickly but it does mean that the ENTIRE debt mountain is reduced WAY faster as you are paying less in interest and charges!
Have a look at our case study to show you EXACTLY how much money the avalanche method could save you.
Step 6: Change Your Habbits
Debt juggling or being a rate junky for a few months or even years, paying down some debts and being frugal with your spend it a truly amazing feat – congratulate yourself! It will also improve your credit rating (as you are now paying things off and not missing any payments) and thus enable you to apply for better rate loans, cards and mortgages.
Be careful not to let this lull you into a false sense of security though, this is still debt (unless you have equivalent assets!); it’s just costing less. Use this to shift expensive debts and reduce your interest payments.
However, no amount of clever juggling is going to get you out of debt completely and keep you that way until you understand what got you here in the first place.
Follow the debt help tools actions plan and make the necessary life changes to ensure that all your hard work is not in vein.
Step 7: Arrive at Debt Freedom
Congratulations – you did it!
- You’ve sorted your emotions around money
- You’ve organized your money and have plans to keep it that way
- You’ve paid off everything you owe (or you at least have the equivalent long term assets to balance out your debts)
- And you’ve changed your habits to stay debt free
- Well done!
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