How to reduce your overall debt

In its simplest terms the best way to reduce your debt is to ensure that you have more money entering your bank account than leaves it. Simple to say: and of course very obvious. The first very obvious thing to do is look at your bank statements and credit card statements. It is really surprising how many people either ignore their bank and card statements or just give them a casual glance and move on to something less scary! So, now actually read your statements in detail, they will help you understand what needs to be done to reduce your debts. The remaining question is how can this actually be achieved?

Controlling your day to day spending is key. Reduced daily spending will have an almost immediate positive impact. Start with the little things. Reduce unnecessary spending. Even a cup of coffee bought from a high street café two or three times a week can add up to a surprising amount of cash. When you really look at your bank statement and start to question yourself on where the money really goes you’ll be surprised at how it all trickles away! Check every entry. If you see that you take cash regularly from the ATM but can’t work what you spent it on then there that is another area to focus on. Stop buying big lunches and take lunch to work with you. It is usually much more healthy anyway and saves you a ton of cash. Walk rather than drive when you can.

One method that I have found to reduce weekly spending that works (at least for me anyway!) is to give your self a weekly spending allowance. Start by calculating your monthly household budget. Then at the start of every week give yourself a realistic amount of money in cash to last the whole week. You can decide on how much and what it should and should not cover. It is important to pick a budget that you are comfortable with. Everyone’s situation will be different. It is the goal of reducing unnecessary spending that is important here. In my case I hold just enough cash to cover a few items for my week at work (mostly just snacks and drinks). I don’t include fuel or travel costs in this allowance as that comes out of my monthly budget. At the end of the week I just top up back to my weekly allowance. I don’t keep accumulating more and more cash as that just encourages spending. If I run out of money during the week – tough! In that case I have to be very disciplined with myself and re-assess my budget. If I can justify an increase then the next week I will adjust my budget accordingly. More likely I was just too extravagant and need to be more restrained!

Remember this is just one method that can be used, other methods my suite you better.

Now look at other regular larger bill payments. Think about changing suppliers for gas, electricity, tv, phoneline, broadband and other services. If you pay monthly you may also have built up credit with one or more of these. Call them up and find out if you’re in credit. If so you can get a double bonus. Firstly ask for them to refund you the credit amount. Secondly as you had built up a credit amount you therefore must be paying too much each month, they should agree to reducing your monthly payment so they don’t end up owing you money! Remember, utility suppliers are not banks or credit companies, they are not required (or encouraged) to hold customers money up front.

By just doing the simple things stated above you will feel far more empowered and in control of your finances. Having a plan helps your confidence and understanding your finances will allow you to continually improve your position from week to week.

The information above provides an overall guideline and logic to managing your money rather than specific advise. If your situation is rather more urgent or if things are so bad that you may loose you house or possessions please seek professional advice immediately. Please checkout our links section or contact your bank to seek help. It is also vitally important to realise is that your physical and mental health is more important than any debt you may have. You are no good to yourself or your family if your end up too ill to solve the problems. So, be positive and don’t let your situation get you down. Solve it now….please don’t hide from it.