Debt is one of the most stressful things a person can have going on in their life. Knowing that you owe a huge amount of money is a heavy burden to bear, and it can make us do crazy things!
When you’re in debt, you can’t think about anything else easily, knowing full well what’s lurking in the background. Certainly for me, when my debt was really out of control, I struggled to get through the month and had to work twice as hard to keep up with all the repayments.
The lowest point was when my flat was nearly at risk. It’s a horrible feeling, and if you’re going through it too, I want to help.
There are multiple ways to pay off debt, and they ALL involve being organised. If this is not something you’re used to being, then just this once, you need to go against the grain, because this is important to get sorted ASAP.
What To Do If You’re In Serious Debt
Before I go any further though, I want to make sure that the debt you owe is specifically what is known as consumer debt (so debt that comes credit/store cards, loans etc) NOT priority debt such as council tax, rent or TV license.
If you are struggling to pay these, then you need to seek URGENT help from a debt charity like Step Change, because your situation needs expert help straight away.
ANY of us could be in an extremis situation. Many people would not be able to cope with paying their bills if they lost their job.
Peter, his wife and two children lost their home in Kent after both partners were made redundant within months of each other. After struggling for over a year, their home was repossessed. Peter said: “We knew there was no hope. We looked for help from the council and even tried renting the house out, but things spiralled out of control right away. There were debts secured against the house and there was no money coming in. My mental state wasn’t good. It was inevitable that we lost our home.” – Shelter.org.uk
Debt From The GP Perspective
From my perspective, there are A LOT of worried people out there. And they come from all walks of life too. It doesn’t matter if you earn loads, or warn a little, if you are spending MORE than you are bringing in, then you already have a problem.
And I include myself in this category too.
I’ve been told that to other people, a doctor looks like they have their life “sorted”. I understand how intimidating it can be to tell your doctor that you’re struggling, especially when you think the person in front of you is doing so well.
As an insider, I can tell you that many doctors are not “sorted” and have just as many problems with their money!
I urge you to go to your doctor if you are struggling, because they will be sympathetic. There isn’t much they will be able to do about the debt except sign post you to citizen’s advice or another charity in your area to help.
They can help with emotional support though. If you’re struggling with your mental health, then absolutely get help for this. The doctor can assess you using a screening tool, then make the necessary arrangements for you to be seen for counselling. In some cases they can even prescribe antidepressants.
So don’t suffer in silence! Go and seek help.
What To Do To Get Out Of Debt
So now that we have the really serious stuff out the way, next we can tackle what to do about the consumer debt in your life.
To start with, you have to gather together all the information you have on who you owe money to (family members included), how much you owe (down to the penny), and what the minimum repayments are. Just to clarify, I’m talking about consumer debt specifically, not student loans or utility bills or mortgages. However, if you get to a stage when the only debt you have left is your mortgage, then absolutely go for paying this down too!
The next step is to pick a method that best suits you. Sometimes you’ll need to change between them, depending on where you are in your journey. You may need to find different additional information depending on which method you want to use, but I’ll go into that in more detail with each one.
This is a well known debt repayment method. It involves consolidating every piece of debt into one loan that you pay back in one monthly fee. It is exactly the method I ended up using when my salary dropped from full-time locum to full-time GP trainee (I lost half my salary literally overnight, so I had to do something to help quickly!).
Make sure you shop around and don’t be afraid to negotiate a smaller interest rate. Even a few points less will mean you end up paying more back overall. Once everything is consolidated with the loan, cut them all up and DON’T add to the debt!
0% credit cards
These are fantastic for paying down debt, but have limitations. Firstly, stop using cards to pay your way through life. This is the hardest bit. When I first dumped my credit cards it broke me out in a cold sweat because I had lost my “crutch”. I built up an emergency fund, and now I’m happier that if anything was to happen, at least I’d have that to help me instead of reaching for my card.
Do your research and look for 0% offers. The reason for picking 0% interest cards is because when you are paying back the debt, you are not giving the bank even more on top. Be aware of when the 0% offer ends and make sure you pay the debt off in that time (or move it to another 0% card). You could also lose the perks of the 0% if you fail to make a payment one month.
When you do a balance transfer, you will incur a fee (the bank has to make some money somewhere right?), so this adds to your debt. This needs to be factored in when using a credit card to help you. It’s not the method for everyone, and you have to have an iron clad will NOT to add to the debt. If you don’t think this is you, then pick another method.
The Snowball method
The snowball method is another way I used to pay off my debt before I reached consolidation stage. You start with your smallest debt (regardless of the interest rate) and pay that off first using additional money on top of the minimum repayment, while also paying the minimums on all your other debts.
Then once the first debt is done, you roll the payments onto the next smallest debt until that is also paid off. Then you’ll have even more money to throw at the next smallest debt, and the cycle continues until all the debt it paid off. The more you can add in to pay off debt the better. It’s fantastic for motivation, because you get lots of wins more frequently. To calculate the day you become “debt-free” why not try out this calculator for free.
You can also download an app to your phone to do this. “Debt pay off planner” is a US debt-payment version, but you can use it in the UK too. It has a step by step guide to paying off the debt after you plug in all the numbers, and represents it on a graph too. “Debt pay off assistant” is another app you could try that shows your balances in GBP. It’s not as pretty as the other one, but it does a similar job. Try both and see what you like!
Try the avalanche method
This is like the snowball, except rather than starting with the smallest debt, you tackle the one with the biggest interest rate first. This is what the mathematicians would prefer you did because it saves you the most money in overall interest payments.
The problem I have with it is that your biggest debt may well have the highest interest rate, and then it means you take longer to pay off the first one which is quite demotivating and demoralising, but hey, if it works for you, then go for it!
The nice thing about the apps I mentioned, is that they can toggle between paying off the smallest debt, or paying off the one with the most interest!
Save and Pay
Finally, the last thing you can do is to save money to throw at your debt in a lump sum. Some loans will not allow over payments, so you can’t put extra money into the debt as per the snowball or avalanche methods. In this situation, I would pay off all the debts you can pay off with extra money every month first, then save up money in a savings account with as high an interest rate as you can find to pay off those you can’t.
This should be kept away from your day to day current accounts so that the temptation is not there to dip into it. Think of this account as a “one way valve” – money goes in, but does not come out. To find such an account, a simple google search will do. I currently have a Marcus account from Goldman Sachs, but there are plenty of other options out there. Once the money in this account exceeds your debt, pay it all off in one go.
To pay off your debt, you’re likely to use a combination of the above, but as long as you are actively doing something about it then you will get it done far sooner than you think! Don’t neglect your life at the expense of debt though – make sure you are doing some fun things every month too (just spend less on it!).
The other thing to do while paying off debt is to start saving money, even if it’s a few pounds every month. To break free from debt forever, you must have the backing of a savings account. This is so hard to do when you are starting from scratch – trust me, I know! But it is worth the sacrifice and the struggle.
I have a £1000 emergency fund challenge that you could try if you would like to bring in more money to get your savings built up while you’re paying off debt. It is full of fab ideas, and there is bound to be something you can do to bring in more cash.
Keep up the good work – and to paraphrase Dave Ramsey: “in a world where debt is normal, be weird!”
Until next time,
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