What to do when you’re in debt

Being in debt is HARD. It can feel like there’s no way to escape from it. You live from paycheck to paycheck, borrowing from one lender to pay off another. It’s a vicious cycle that can quickly spiral out of control and ultimately take over your life.

Here are some handy tips on what you should (and shouldn’t) do when you’re in debt.

in debt woman bills calculator purse


Steps to take when you’re in debt

Speak to your spouse – You need to work together to get out of this hole. If one of you is trying to sort shit out while the other is still spending money on unnecessary things, you’ll get nowhere.

Work out what you owe – There are three steps to this part, and it’s important that you follow them all. Knowing how big a hole you’re in can seem pretty scary, but it is an essential part of becoming debt-free.

  • Gather up all your latest statements – bank accounts, credit cards, catalogues, HP agreements, personal loans, mortgage, student loans, household bills that are overdue, everything.
  • Write a list – creditors, the amount owed, minimum payment, interest rates (both as a percentage and the cash amount for the previous month).
  • Add in any money owed to friends and family members (even if they say they’re not bothered about if/when you pay them back – you’ll feel a lot better when you don’t owe them anything).

Track your spending – Write down every single penny that you spend for the next month. Once you know where your money is going, it’s easier to see where you can make adjustments.

Make some cutbacks – Look at your spending. Make a list of the essentials: rent/mortgage payments, council tax, child maintenance, electric, gas/oil, water, food and debt repayments. Everything else is a luxury, and you need to consider either cancelling them until you’re in a better financial position or at least switching to a less expensive option. We use **TopCashback** to swap utilities etc every year – giving us savings on renewals and cash back on top – what’s not to love about that?

Draw up a budget – This is important. You need to know exactly how much money is going in and out of your account on any given day. You don’t need any fancy software or apps for this; good old pen and paper will do the job perfectly well. Once you’ve listed all your income and outgoings, you’ll have an idea of how much money is leftover (or how much extra you need to find).

Start paying off your debts – Follow the debt snowball plan – throw everything you’ve got at the smallest debt for a quick win. Then take the money you were putting towards it and use it to start clearing the next one.

Start putting money aside for emergencies – when disaster strikes, it can be devastating for your budget. Unless you have a safety net in place. This can be as simple as transferring the random pennies in your bank account each day into a savings account. You don’t need thousands of pounds in there, but aim for around £300 to start with. That should be enough so that you don’t have to rely on using credit when your washing machine dies or your car needs fixing.

Check your credit score – there are a handful of companies that now let you see your credit score for free. The starting number might not be fun to look at, but as you start paying off your debts, it will be motivating to see your score rise. It’s also essential to check that the information they hold about you and your accounts is accurate. If you spot a mistake, phone them and take steps to get it rectified.

Getting help when things are out of control

Speak to your lenders – As unpleasant as this sounds, the majority of lenders are surprisingly helpful if you talk to them and let them know you’re struggling. You may be able to negotiate a reduction of interest rates, or a lower monthly repayment until you get back on your feet. However, they can’t help you if you aren’t completely honest with them.

Get free debt advice – if your situation is so bad that you can’t see a way out, then speak to a professional. Debt charity StepChange can help you work out your options and decide on the best way forward. You can contact them over the phone or via their website.

What not to do when you’re in debt

Ignore it – When you’re in debt, it is tempting to bury your head in the sand and try not to think about it. Don’t. You need to open the letters, answer the phone calls, make a plan and take action. Ignorance is most definitely NOT bliss!

Blame the lenders – It’s all too easy to deny responsibility for the mess you’re in. The first step to recovering from debt is to accept that you got yourself into it in the first place. You applied for credit; you spent the money, and now you need to pay it back. Stop blaming other people and take responsibility for your own actions.

Keep using credit – You need to cancel the cards. You’ll never get out of debt if you keep spending on them. Yes, it will suck, but if you’re reading this article, then I’m guessing life isn’t much fun right now anyway.

Carry on the way you are – If the way you’re handling your money isn’t working for you, you need to fix it. Making the same bad decisions over and over is not going to make the situation any better.

Final thoughts

Being in debt isn’t easy, but you can get yourself out of it. It might not be fun but you can do it. All the hard work you put in now will pay off in the end, if you stick with it. Remember that you are not alone. Help is available if you need it. Check out the resources below for further advice.

MoneyAware – A site run by StepChange to help you gain a better understanding of money and debt.

MoneySavingExpert – Run by Martin Lewis, this site is my go-to for all things money. The DebtFreeWannabe forum group is a fantastic community of people on their own journey to financial freedom.

SkintDad – A financial blog that I love reading.

4 thoughts on “What to do when you’re in debt

  1. Great article Mel. I think the #1 piece of advice is to have money in savings for the unexpected. I call it ‘Life happens” and my dad calls it “whoopsies”. But the fact is that life never pans out the way we planned. So there needs to be money on the side for just in case. And it’s critical to add to that account and to refill it monthly.

    • Hey Debbie! You’re so right. I know it kinda feels counter-intuitive to have savings when you’re in debt, but having that safety net can make all the difference when things go wrong. Glad you enjoyed the post.

      Mel x

  2. Thanks for sharing this Mel. Debt is so hard to get under control and takes a lot of self discipline. These are great steps to follow to help. Thanks again!

    • Thanks Dayna! It’s never easy being in debt, but hopefully reading this will help someone to take the steps needed to tackle the problem. Glad you enjoyed the post.

      Mel x

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