Overwhelmed by Debt?

If you're feeling the weight of debt, you're not alone.

“6.8 million (13 percent) of UK adults are struggling to pay for their essential costs, such as rent and council tax”

— Money Advice Trust

The good news? There’s a clear way forward. Here’s how to take control and start paying off your debt today.

Step 1: Face Your Debt Head-On

The first step to getting out of debt is acknowledging it - avoiding it won’t make it disappear. It might feel overwhelming, but taking control starts with getting everything down on paper.

A great way to do this is by creating a Debt Inventory. This means listing out every debt you owe, so you can see the full picture clearly. Include:

• Creditor Name

• Balance & credit limit

• Interest rate

• Minimum payment

Once you’ve done this, it’s time to calculate your Debt-to-Income Ratio. This helps you understand how much of your income goes towards debt each month.

Simply add up your total monthly debt payments and divide by your gross monthly income.

Here’s what your Debt-to-Income Ratio means:

• Over 40% - Danger Zone: Debt is controlling your finances

• 30-40% - High Risk: Strain on your budget, action needed.

• 20-30% - Manageable: But there’s room for improvement. 

• Below 20% - Ideal: Debt is under control

This step can be uncomfortable, but powerful. The clearer you are about your situation, the easier it is to create a plan. After all, a problem well-defined is a problem half solved

Step 2: Choose Your Debt Payoff Strategy

Now that you have a clear picture of your debt, it’s time to decide how you’ll tackle it.

There are two popular approaches - both effective in their own way.

✔ Debt Snowball - Start with your smallest debt first. Pay as much as you can toward it while making minimum payments on the rest. Once it’s cleared, roll that payment into the next smallest debt.

This builds momentum and motivation as you see quick wins.

✔ Debt Avalanche - Focus on the debt with the highest interest rate first. Once that’s paid off, move to the next highest.

This method saves you the most money in the long run.

Neither approach is right or wrong - it depends on what keeps you disciplined and motivated. If seeing quick progress helps you stay on track, go for the Snowball method. If cutting down interest costs is your priority, the Avalanche is your best bet.

What matters most is committing to a plan - and sticking with it.

Step 3: Reduce Interest Costs

Before diving into repayments, see if you can lower the cost of your debt. The less interest you pay, the faster you’ll be debt-free.

Consider the following:

✔ Personal Loans - Reduce interest and combine multiple debts into one payment.

✔ Balance Transfers - 0% APR for up to 24 months (watch for 3-5% fees).

✔ Remortgaging - If you’re a homeowner, you might be able to refinance your mortgage to release equity and consolidate debt at a lower rate.

If you go down this route, be disciplined - don’t rack up more debt once you consolidate. The goal is to make repayments easier, not create more financial strain.

Step 4: Increase Payments

Paying just the minimum on your debts means staying in debt for years, if not decades. To break free faster, you’ll need to increase your monthly payments.

Here’s how to free up extra cash:

✔ Cut back on non-essentials - Streaming subscriptions, dining out, impulse purchases - every little cutback adds up.

✔ Use windfalls wisely - Got a tax refund, work bonus, or birthday cash? Put it toward your debt instead of spending it.

✔ Adjust your budget - Even small tweaks can free up extra money for payments.

For example, if you owe £15,000 at 5% interest and only pay £300/month, it’ll take 4.5 years to clear. Increase it to £500/month, and you’ll be debt-free in just 2.7 years.

It’s not about making huge sacrifices overnight - just finding extra money where you can and putting it to work.

Step 5: Earn More Money

Cutting expenses can help, but earning more money will accelerate your debt payoff even faster. The more you make, the more you can throw at your debt.

Here are some ways to increase your income:

✔ Sell stuff - Declutter your home and sell unwanted items on eBay, Facebook Marketplace, or Vinted.

✔ Take on extra work - A part-time job, freelancing, or overtime shifts can bring in extra cash.

✔ Find a better-paying job - If your current job isn’t paying enough, consider switching careers, asking for a raise, or learning new skills to boost your earning potential.

Many people use a combination of these strategies to speed up their debt repayment. The faster you increase your income, the faster you’ll be free from debt.

Pouch's Final Thoughts

Debt can feel overwhelming, but you can take back control. Start by facing it head-on, choosing a repayment strategy, and reducing interest through consolidation or refinancing. Stop borrowing, budget for extra payments, and find ways to boost your income -whether by selling items, taking on extra work, or securing a better-paying job.

If you’re struggling, seek help through credit counselling or debt management plans, but beware of quick-fix schemes and high upfront fees.

Becoming debt-free isn’t easy, but every step counts.

Start today - the sooner you do, the sooner you’ll be free.

You got this.

Credit & Acknowledgement

This article has been adapted and condensed from an original piece by David Weliver, published on November 2, 2023. The insights and strategies provided are inspired by his work, restructured for clarity and conciseness.

For the full original article, please visit https://www.moneyunder30.com/get-out-of-debt-on-your-own/