Be determined to get debt free
It is important to make a firm decision to get debt free. Determination will help you in this quest. I decided that getting debt free was a big deal! I was determined to get free of my debt no matter what, pretty much. I wasn’t going to spend money on anything unnecessary until I got free of all debt.
Budget budget budget! And stick to your budget!
Write out exactly what your income is to the penny. Do you get paid weekly? Monthly? Write this down. My income was fortnightly at first. Then I got two sources of income – one fortnightly, another monthly.
Next, write exactly your outgoings are, as far as you can, to the penny. This may sound extreme but it is important if you want to have control over your finances. I had some monthly outgoings so I divided these by two to see how much would come out of each fortnight’s income. I could have written how much would come out of each income packet, e.g. I had one or two payments on the 1 st of each month and another one or two on the 15 th and they were different amounts hence I could have seen how much would come out of each fortnight’s pay. This might be better for some people.
Once I had done this, I had a good idea of how much I could afford each month for debt repayment.
Leave some money for emergencies/unexpected stuff
I budgeted for emergencies. You will need to decide how much you think you ought to leave aside for emergencies. I transferred most of my ‘emergency money’ to another account, usually the day before my next income came in. That way, I just spent money from my next lot of income during the next fortnight (knowing that if I really needed extra money then I could transfer back from second account into main account). This is good to do if you have another account where it’s easy and quick to transfer to and from. You can even open an ‘easy access’ savings account, which
pays interest, for this.
Savings
Should you save regularly when you have debts? I decided not to. However, as I have stated, I transferred most of my ‘excess’ money to another account the day before my next income was due to come into my main account. It might be better for you to save regularly even when you have debts to pay. Maybe you will reduce the amount you save each month during this time. You might do well in consulting a financial website like Money Saving Expert before you decide.
Paying off debts
Credit cards
If you have more than one credit card debt then it is generally advisable to pay the minimum amount on all the cards each month and as much as you can on the card with the lowest amount. This way, you get to pay one card off completely relatively quickly and it feels good when you have one less card with debt. However, things may not be so simple. For example, your lowest amount may be on a card which has zero % interest for the next 12 months but your second lowest amount might be on a card which has zero interest for only three more months. Which do you pay off first?
Can you afford to pay off this higher amount within the time frame? If not, then could you afford to pay off the lowest amount in three months? If yes, and if this company has given you another offer of zero % for a balance transfer then it might be a good idea to pay off the lowest amount first then do a balance transfer from the card where the zero % interest runs out to the card that you have paid off. You will need to do your sums.
You may also like Meditating on Bible verses
I had two credit cards to pay off. The one with the higher amount had less time with zero% interest than the one with the higher amount. So, I chose to pay the minimum amount on the one with the lower amount and as much as I could on the higher amount card. At the end of the zero % period I did a balance transfer to another card (which I had had nothing on), thus giving me 12 months of zero interest. From then, I paid the lowest amount on that card and as much as I could on the lower amount card until the latter was paid off. Then I paid off the remaining card as quickly as possible, finishing two months before the zero interest period ran out.
Loans
If you have loans then these usually require you to pay a fixed amount per month and sometimes the institution doesn’t like people to pay their loan off early. Then again, other institutions are very happy for you to do this.
Giving
As a Christian, I continued to tithe. As far as I was concerned, not tithing was not an option. I trusted God to be my source and to help me get debt free. I also gave as and when. Money flows if you don’t hold on to it tightly. If you allow money to flow from you it will also flow to you.
Free Information, Advice and Help
Money Saving Experts is a good site with all sorts of financial advice and tips. Christians against poverty are a great organisation if you need help and advice and they will help you if you feel overwhelmed.
