10 steps to get out of debt – how to save and make money in 2022
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While 2021 saw many Britons struggling to make ends meet as the COVID-19 pandemic played havoc with people’s finances, many will be hoping that 2022 is a better year. For those looking to become debt-free in 2022, here are 10 steps to getting out of debt.
First things first it’s important to face the debt head on and work out how much is owed to various lenders.
Once this first step is completed, many experts recommend drawing up a budget.
This could be an old fashioned spreadsheet or a free budgeting app like Mint.
Money Saving Expert Martin Lewis says this step is essential: “Once you know where you’re spending, you can start to alter and prioritise what you do with your money to enable you to stick within your means.”
Yasmine Camilla, a 35-year-old TikTok influencer from London said this simple tip has changed her life.
She explained: “Budgeting has been absolutely life changing for me.
“I think with having been in a long-term relationship with my children’s father, and with both of us working and having a reasonable income between us, it wasn’t something I ever had to think about.”
And, rather than just accept the debt, people should also speak to their lenders to see if there is any leeway, as they could end up knocking thousands off their final bill.
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Opinion is often divided when it comes to whether people should pay back the debt with the highest interest rate first or focus on smaller debts to start a snowball effect.
Martin Lewis says Britons should focus on clearing the debt that costs the most.
He said: “Put all your spare cash towards getting rid of that highest interest rate and pay minimum payments on the others.
“Don’t pay off the big one, pay off the highest interest one.”
10 steps to getting out of debt:
- Work out the debt, start a budget and draw up a plan. Be realistic when committing to how much you can pay back.
- Phone your creditors – they might agree to lower the interest rate or consolidate more than one debt into one lower payment.
- Pay off the loans with the highest APR first. Some people recommend starting with smaller debts, but the first option will save you more in the long run.
- Think of ways you can earn more money – look at ways to increase income. This could be a second job or renting out unused assets like a room, unused space or driveway.
- As well as coming up with a consolidation plan to pay off debt, people should consider transferring debt onto credit cards with zero percent interest.
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6. Do a direct debit detox – research from Digital TV shows that 2.5million Britons never use their digital TV subscription or use it less than once a month. January is the time to be strict.
7. Declutter and sell – people can make extra cash to put towards their debt by selling unwanted Christmas presents and other things around the home.
8. Turn clearing debt into an obsession – with the right mindset paying off debt can be fun.
9. Spend less. Try cutting down on takeaways, going out or buying new clothes. Some experts recommend taking on the challenge of a ‘no spend year’ meaning you can only buy the essentials.
10. Always ask for help: There’s lots of help out there whether that’s speaking to professionals at Citizens Advice or joining a forum for inspiration and accountability.
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