Paying off debt: The Rules

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The problem with paying off debt, is that most of us believe we can’t afford to. This was us, not all that long ago.

Where the debt came from doesn’t really matter, but I’ll tell you anyway. There were two regularly upgraded cars, a foreign holiday each year and about, uhmm….10 years of living well beyond our means. We kept up with the repayments, mostly. Sometimes we didn’t and had to juggle things, but on the whole, things were fine.

Except they weren’t. The truth is that we were sinking. The debts we were accumulating was killing us and we really, really needed it gone. We weren’t even paying the mortgage off then never mind paying off debt, having opted for an interest only loan in the misguided belief that we’d somehow have more money…later, as if later was ever going to come!

So that’s why and how we got into debt. The real question was how on earth we were going to get out of it.

It’s a multi pronged attack. And this is it…

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Rule One – Saving money by spending less

This is the rule you need to get started on TODAY. It cannot wait a second longer if you’re looking to start living debt free and paying off debt.

There are so many ways you can cut your expenses each month. We have ways here to cut your bills and the things you have to pay each month. But there are so many other things you can do. Think along these lines:

  • Taking packed lunches to work and leaving your purse at home
  • Walking to the shops. This was huge for me. I drove everywhere and it took some getting used to to walk where I used to drive, but I changed my habits and saved a packet.
  • I still bought 2-4-1 supermarket offers, but froze the second item straight away. Simple, yet I didn’t do it before. We wasted a lot of food. Now we don’t!
  • We stopped eating out. Not on a permanent basis, but until we’d hit the milestones we’d made.

I really wouldn’t say we lived ‘frugally’. Planning the month took more organization yes, but we didn’t go without. We just lived below our means and learned to adapt. We’d spent quite a few years living so above our means that having to stick within them was always going to be an adjustment.

We did, it, it didn’t kill us and we learned to live well whilst sticking to a budget. I believe that one of the main reasons it worked, was because we didn’t have to give up on the things we enjoyed doing. When I talk to people about living debt free now, I always emphasize how much your life changes for the better, and how much you gain, rather than how much you lose.

Rule Two – Getting extra money by earning more

Many people focus on saving money each month, and for my own family this was a big part of allowing us to find extra cash to throw at our debts. But the game changer here is this rule: get extra money by earning more.

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With hindsight though, when paying off debt, I recommend you start with Rule 1. Even though Rule 2 will be your driver and determine how fast you get debt free. Saving money where you can is very motivating. Making money though, is what keeps the motivation up, or at least it was for us.

It took me quite sometime to realise that there are so many ways you can bring in extra income, other than your traditional job. Asking for a raise at work is great if it’s appropriate. It’s often not. In my own job, I work to a pay structure within the company. It’s based on length of service. There are about 2500 of us and you know what someone earns as to the contract offered when they joined. So for me, I couldn’t just ask for a raise, so I started looking for other ways to earn money.

To start paying off debt, I’ve talked a lot about some of the ways I made extra money, and some of them are here:

Some of the ways I tried to make money on the side of my ‘real’ job, simply were not worth it. You need to try them out and see what works for you. A HUGE amount of my second income in that first year was from matched betting. I wrote about my journey into it here, but it sounds so spammy that I’d urge you to look into it for yourself and not take my word for it.

For us, £10, 000 was not anywhere near enough to clear all that we owed, but it was a massive start, shoved the numbers firmly in the right direction (down!) and motivated us to keep moving forward.

Rule Three – BUDGET!

Can you talk about budgeting and how totally amazing it is too much? I doubt it! The power of budgeting is massive and without it, I genuinely don’t think we would have been able to make paying off debt as easy and pain-free as it was.

Before we started our ‘paying off debt’ journey, neither of us had a clue about budgeting. We really didn’t. I believed we already didn’t have enough coming in each month and that was the end of it. I told myself that a budget couldn’t possible help since we didn’t have enough to start with. End of.

What I discovered is that budgeting allowed us to have enough each month. Instead of our hard earned cash ‘vanishing’ each month and us not being bale to say where it’d gone, a budget allowed us to tell our money where to go. I cannot talk highly enough about the great things that happened when we started budgeting.

Here are some places you can read about budgeting to get you started. I’d urge you to give it a go.

  • Make a budget that fits your family – Every families different with different goals and priorities. Create a budget that allows your family to thrive and paying off debt becomes easier.
  • Budgeting allows you to create a buffer so unexpected bills or repairs don’t wreck your money plans
  • App MoneyDashboard has been voted the UK’s best budgeting app in the UK for 2 years in a row for good reason. MoneyDashboard gives you all the information you need to make good financial decisions with a clear view of how, when and where you’re spending your money.

Rule Four – Reframe your concerns

Once you’ve decided that you need to pay off your debts, it’s usually full steam ahead. But that doesn’t come without concerns. Is your life going to change? YES! But that’s why you’re doing this, right? If you didn’t want your life to change you’d just keep plodding on, wouldn’t you?

It’s a strange thing. We’d decided that we simply couldn’t afford to stay in debt. It sounds like a cliche doesn’t it, but that’s the situation we were in. If we stayed in debt, it would eventually drown us. We knew we needed to change and yet, our number one concern was ‘Will our lives change?’.

I look back now and want to shake myself because YES of course life will change, and it’ll be the best thing that ever happened to you. But I’m a creatures of habit and generally hate change of any sort and that kept me in a situation I really didn’t like and wasn’t comfortable with for far to long.

Try to take the concerns about paying off debt and the impact it’ll have on your life and turn them into the huge positives they are.

These are some of the positives that happened in our life when we started down the debt free road:

  • We started eating MUCH better. I believed that we were already eating quite well. But I’d mistaken ‘expensive’ for ‘well’. In order to cut our food bill as much as we could, I started cooking nearly everything from scratch. These days, given unlimited money, I’d still cook everything from scratch.
  • We met new friends. I swopped a lot of the kids classes and activities for FREE or much cheaper versions. Not only did I save masses of money, we met people we might not have done otherwise. Bonus :)
  • Less anxiety. For me, there’s anxiety in owing money. Knowing that with one job loss or redundancy our world could come crashing down worried me.
  • More security. Whatever life throws at us, we’re going to be able to deal with it.

So there you have it. Following these rules got us out of debt and living the debt free life in way less time than I’d imagined. If you’ve been successful at clearing your debts and would like to share your story of how you did it, get in touch! We’d love to hear from you.

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