If you’ve amassed a large amount of debt and you feel like you’ll never be free of it because you’re on a low income, then don’t worry because you can reduce it and even pay it off without getting a promotion or an amazing new job.
The trick is to work with what you have and to budget cleverly so that every penny is working towards freeing you. Visit the Creditfix website for tips and ideas, as well as advice on where you stand with creditors and the law; then, put your money to work.
Take a deep breath and look at the numbers
This is the painful part. If you’ve been burying your head in the sand then the amount you owe might come as a shock. It could also come as a (vaguely) pleasant surprise if it’s not as bad as you thought. Whichever way it swings, you need that information if you’re going to make a plan.
Prioritise the debt with the highest interest
If you’ve been making minimum payments all along then you’re essentially holding yourself back. With minimum payments, you’ll pretty much never pay your debts off, so identify the biggest debt, or the one with the most interest, and plough as much money into it as possible. Even if you can only afford an extra fiver a month over the minimum, you’re chipping away at the amount that keeps throwing interest at you each month.
This could be old sports equipment, old clothes, books, your juicer or even your car. If you can make some cash then you can pay down your priority debt and so reduce your subsequent monthly payments. If your car is an old beater then you might be better off selling it and using public transport for a year because you may find you’re spending loads on taxing, insuring and repairing it. Do the maths – you might be surprised.
Find a source of extra income
You don’t need to become a hard-nosed entrepreneur here. You could find a dog to walk in the evenings, or some cleaning work at the weekends. If you’re a dab hand with a sewing machine, you could make some Japanese knot bags and sell them at a craft fair. Alternatively, you could spend a few evenings filling out paid online surveys instead of worrying about your debts. Even if these survey sites only reward you with a £50 M&S voucher every couple of months, that’s something, right?
See if you can reduce your utility bills
Spend some time calling up your utility providers to see if they can knock off a couple of quid from your electricity, gas, mobile phone and insurance. If you manage to shave £10 off your monthly bills, that money can make a dent in your priority debt.
Whenever you get some extra money, use it on a debt
If you look at your receipt in the supermarket and you find you’ve saved £3 because of a BOGOF offer, transfer that £3 to a debt. If you get a bonus at work, or a refund, plough it right into your overdraft.
Make sure you stay on good terms with your creditors
If you’re scared of your creditors and you feel sick every time you have to speak to them, then you’re less likely to ask them for help or advice if you’re in trouble. By calling up to talk about your account every so often, you’ll realise that they’re only human.