statistically one of the worst things in the world that can happen to human beings, in the UK as of October 2023 the charity “Mind” reported that 3 in 50 adults have contemplated suicide because of financial difficulties.

Whether it’s credit cards, personal loans or any other type of debt, having a clear plan on how you’re going to clear it reduces stress and boosts motivation.

Have a look at the steps below and we can walk through this step-by-step process together.

Before you can start on those debts, you have to gain a full understanding of your motivations and mindset. You cannot begin your debt paying journey unless you are in the correct headspace to do so.

Have a look at my “mental health” page, this gives you some tips and tools that you can use to keep your mind in the best place it can be. Then consider your “why”, this is what is going to keep you on track and will be the end goal on your roadmap.

Once you’ve checked in with yourself, it’s time to look at some of the boring details – we’ll call this getting your ducks (debts) in a row. 

When I was struggling, I had nearly around 20 different creditors I owed money to. So, I know how important it is to have a look at all of your letters, emails, and even make phone calls to the people you think you may owe money to.

Write down the following:

• The creditors name
• The total balance you owe
• The interest rate
• The minimum monthly payment
• The due date for the debt to be paid off

Having these things written down will allow you to see in full what you have left to do – getting it out of your head and onto paper/screen.

Please remember that if you are really struggling to get these debts under control you may be able to call your lender and ask for a payment holiday or to freeze the interest which will help for a period of time. You can also ask to pay “token payments” which may be less than your minimum monthly payment but shows you are willing to pay off these debts, which at the end  of the day is all that matters, these companies just want their money back.

Let’s look at what you earn and what you spend – this will help you understand exactly what goes in and what comes out each payday.

Once you’ve completed your regular budget, you can see what you have left over or where you can think about reducing your spending.

There are many different strategies that can help you pay off your debts. All you need to do is pick one that’s right for you.

Here’s a few examples:

1. The debt snowball method

Those debts that you wrote down earlier will now come in handy – sort them in order of smallest to largest in terms of money owed and start pumping your spare “payment money” into the smallest one.

Bear in mind whilst you’re paying this one, it is important to continue paying off the others with their minimum monthly payments. Once that smallest one is paid off, move onto the next one, and so on and so on.

You will eventually get to the stage where your biggest debt is your only debt and once that is paid off, voila! You are now debt free.

Of course, there’s pros to this – every debt you pay off is a little win keeping you motivated. 

However, remember with this method, it may take slightly longer, as your smallest debts may not be the ones with the highest interest rates.

2. The debt avalanche method

This time, with that list of debts you have, sort them by interest – highest to lowest. Now, pump your money into the highest interest debt first, whilst making minimum monthly payments to your other creditors.

Once this one is paid off, move on to the next one and so on. With this one you will actually save money in the long term, as the interest you will be paying will be less as time goes on. However, there may be a small debt that lingers until the end of this journey, as you may have a low interest debt on a low sum.

3. Debt consolidation

You have probably heard of this one, it can be hard to obtain through some places, but this includes getting a loan to cover all of your debts at a lower interest rate than you are currently paying.

It will make it easier to keep track of your debts – because those 20 lenders will fall to 1. 

4. Debt settlement

This requires you to pull out your negotiation skills.

A lot of the time if a creditor has been owed money for a while, or a debt collector has been involved, they are more open to looking at offers of repayment.

For example, you may owe £1200, but if you call them and explain you can afford to pay back £1000 much quicker, they might be ready to hear you out. Remember, whilst you have saved £200 on the debt, your credit file will show a “part settlement” rather than a “full settlement”.

One thing I did was send letters to all of my debt collectors with an income and expenditure form, explaining that I could only afford to pay back £5 a month – due to my circumstance, they all accepted this payment plan. This kept the minimum monthly payments down whilst I focused on one debt at a time.

Negotiating with creditors can make your payments more affordable and give you some breathing room while you work on getting out of debt.

Once you’ve picked one (or two if you can mash them together) and you’re happy that you can manage them, start applying your extra money from your budget into paying them off – it is important at this stage to prioritise paying off these debts.

I was always taught that if you owe money, you must pay it back – don’t worry about saving, as right now, the money you are saving is not yours. Make sure to allocate any extra cash you free up toward paying off your debt faster.

Make sure that your budget is leaving you enough money to live off – if you are in the red before you even start your debts, you may need to consider getting another stream of income.

Set up direct debits or standing order to avoid late fees and missed payments. If you’re anything like me, you would forget if you had to manually do it every month.

Automating your payments is another fantastic way to stay on track with your payments, giving you a monthly milestone to tick off on your plan towards getting debt free. 

Honestly, this is going to be the trickiest journey you’ve been on so far.

Getting into debt is easy, getting out of it… not so much. However, it is so doable and you will grow so much during it, understanding the value in what you spend and really appreciating your life not under the immense pressure owing money can cause.

Be sure though to check up on these creditors regularly – once I paid £120 over 5 months to an account, but the lender had no record on it, meaning that money was effectively lost. There is no harm in checking your payments have gone through, and that your balance is reducing monthly.

If visual aids work, draw yourself a good old fashioned thermometer!

Creating a debt repayment plan is the first step toward financial freedom.

By assessing your debts, choosing a repayment strategy, setting a realistic budget, and staying disciplined, you can make significant progress toward eliminating your debt – the journey may take time, but with persistence and dedication, you can achieve a debt free future.

Take it one day at a time, and don’t hesitate to seek professional help if you need it. You must keep track of every penny you pay towards clearing these debts, as it’s one more penny closer to being at the best place you’ve been in a long time.

Remember your “why” – it’s getting closer and you will be so proud of yourself once it’s done.

So, let’s get started paying off these debts.