Don’t let your lingering debt hold you back. Find out how you can wave goodbye to a stubborn credit balance with these simple lifestyle changes.
Having an overwhelming credit balance can often mean you’re paying over the odds in interest fees. Not only that, but it can limit your day-to-day life and scupper your plans to save for important goals and milestones.
That’s why we’re bringing you 10 easy tips to become (and stay) totally debt-free:
Getting out of debt
Becoming debt-free can take time, but there are a few hacks to help you get there quicker. Work out how much debt you can repay each month and use these tips to help you stick to your goal:
Say no to pointless subscriptions
Take a good long look at your bank statement. Are there any outgoing Direct Debits that you could cancel?
Whether it’s your monthly makeup samples or a costly gym membership, the chances are, you can manage without it for a while. The money you’ll save by cancelling these recurring costs can be put towards paying off your balance, helping you reach your debt-free goal sooner.
Round up your purchases
With many bank accounts, you can now choose to ‘round-up’ your purchases to the nearest pound. The bank will automatically stash away the difference into a selected savings pot for you.
It might not sound like much, but after a few weeks of regular spending, you could be surprised at how much you’ve saved without trying at all. Once you’ve reached a decent amount, you could use the money to reduce your debts.
Create a ‘fun’ allowance
Vowing to stay in and do nothing is all well and good, but there’s always going to be those costs you just can’t avoid. Whether it’s going out with your colleagues or chipping in for a friend’s birthday gift, it’s tricky to avoid spontaneous spending.
Instead, you could create a budget specifically designed for this kind of ad-hoc spending. Not only will this mean you won’t feel guilty for spending, but it’ll actually help you stick to your budget, as you won’t get caught out by those unplanned costs.
…and move it into a separate bank account
To keep a close eye on your spending, it’s well worth moving your ‘fun’ spending into a different bank account. This will mean your day-to-day spending won’t eat away at your debt repayments.
Work out the maximum you can afford to put towards your debts and leave that in your main account (and money for necessary bills). Then, anything leftover can be moved across into your ‘fun’ spending account – simple!
For any day-to-day spending, it’s important to only use this account. Your original account should then only be there to pay off your debts each month.
Shift and consolidate your finances
Less of a lifestyle tip, but it’s worth looking into nevertheless. If you’re paying off debts to different banks, you could make life simple by merging these payments into one lump sum.
How? With a debt consolidation loan, you’ll be able to repay of your different debts in one go. Then, you’ll only have to make repayments to that one lender. This could help you reduce your monthly payments and could even lower the interest rate!*
Or, you could use a transfer credit card to pay off your debts. Like with a loan, you could pay off all of your different debts with one payment. And if you have a good credit score, you could bag a 0% transfer card which means your repayments could be interest-free, too.
Staying out of debt
Out of the red and back into the black? Find out how you can stay there for good with these top tips:
Only spend what you can repay in full
Once you’ve become debt-free, it’s important to only make payments you can realistically afford to pay back in full next month. For example, why not put your monthly takeaway or trip to the cinema on your plastic?
Not only will this help you avoid getting into debt again, but clearing your balance every month can boost your credit score too!
Enjoy the free things in life
Instead of meeting up with your friends at the newest café in town, why not just pop the kettle on and invite them over?
There are lots of social activities that you can arrange that don’t come with a hefty price tag. For example, you could:
go for a walk at a nature park
enjoy a film night at home
host a book club or games evening
make homemade cocktails and stay in
Cut down on everyday habits
Nip those day-to-day habits in the bud and you could be surprised at how much more you have left in the bank every month.
Your morning coffee could be setting you back a huge £60 a month. And buying that daily meal-deal could easily tot up to another £70 every month. Why not take five minutes before work to make a flask of coffee and a nice homemade sandwich?
The money you save can help you stick to your new debt-free lifestyle or could even be put towards something worthwhile, like saving for that holiday.
Keep your finances separated
Like we mentioned before, moving your non-essential spending to a different account can help you budget better and avoid falling back into debt.
Once you’ve been paid, figure out how much you can afford to spend on activities each month and shift this to your ‘fun’ account. This way, you can be sure you won’t accidentally slip back into the red.
FOMO (fear of missing out) can be one of the biggest drains on our bank balance. If your friends are going to a new nightclub or heading away for the weekend, it can almost feel impossible to say no.
Instead of FOMO, think JOMO (joy of missing out). If you can’t afford to join in without risking your finances, be happy that you’re being financially savvy instead. In the long run, you’ll feel much happier and more relaxed if put your financial health first!
*spreading the payments over a longer term could mean you’ll pay more interest overall.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.