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Brand new Mouthy Blogger Tolu Frimpong talks about five practical ways to beat debt and where to start chipping away starting from right now. Find out more about Tolu, including how she paid down £36,000 of debt, on her website.
A recent report by the Money Charity revealed that people in the UK owed £1,749.9 billion at the end of October 2021, up by £60.1 billion in October 2020.
That’s an average total of £3,713 unsecured debt per UK adult.
It’s clear we have a debt problem in the UK, and it’s quite possible that these numbers will rise in 2022 as the pandemic continues to impact the UK’s economy.
If you want to avoid being one of these statistics this year, this blog post will help you. Here are five practical ways to beat debt in 2022.
Four Walls budget
The one really practical thing you can do today in order to beat debt in 2022, is to create yourself a budget. Put simply, a budget is a conscious spending plan for your money.
On payday, before spending a penny, decide exactly how much money you will put towards your various spending categories.
Allocate a portion of your income to debt repayments and prioritise making these payments once you’ve budgeted for your “four walls.”
Your four walls include shelter, utilities, food and transport. After this, your next consideration should be paying down debts.
Reduce your expenses
If you really want to accelerate your debt repayments, be strict with your budget categories. Write a list of essential expenses and non-essential expenses and decide which of your non-essential expenses you can reduce, or even better, cut out completely.
For example, you may have takeaways as a non-essential expense. If you usually have weekly takeaways, reduce it to fortnightly and put the difference towards debt repayments.
Look at your subscriptions closely and decide the ones you can sacrifice during your debt repayment season. The more sacrifices you’re willing to make this year, the faster you will reach your debt-free goal.
Increase your income
There’s a limit to the amount you can reduce your expenses, but your earning potential is theoretically endless. If you start to believe this and begin to look for different ways to increase your income, you’ll be surprised at how much additional money you’ll be able to generate in 2022.
For example, you could upskill by doing online courses and training in order to apply for a promotion at work.
If a work promotion isn’t possible, take your newly acquired skills to another company. Remember, these employers aren’t loyal. Your financial future is in your hands so do what’s best for you.
If you have extra time in the evenings, you could start a side hustle or two. From reselling items from around your home online, to creating and selling digital products, there are so many side hustles to choose from.
Stop making minimum payments
One thing you want to do to ensure you beat debt in 2022 is to stop only making minimum payments.
Paying the bare minimum on your debt each month can make you believe you have the debt under control when in reality, the debt is controlling you.
The longer you remain in debt, the longer your money belongs to someone else.
As tempting as making just the minimum payments may be, it will cost you a lot more in the long run as the total interest you’ll have to pay will be significantly higher, and the time it takes to pay off that debt will be much longer.
If paying the more than the minimum isn’t feasible, look to see whether you can transfer the debt onto a cheaper or zero interest rate through a balance transfer credit card. Just be sure to do a soft credit check before applying for a card.
Learn to say “no”
Saying no to a friend or loved one is easier said than done. But the more you do it, the easier it becomes. And more importantly, the more money you’ll save.
Don’t allow peer pressure or the fear of missing out to keep you in debt any longer than necessary.
If whatever is being requested of you is outside of the budget you’ve already allocated for the month, don’t feel bad for saying no.
Learn to say no without explaining yourself and see how much money you’ll save in 2022.
Tolu is a Money Coach and Content Creator, passionate about helping others break the payday-to-payday cycle and achieve their financial goals, through the power of intentional budgeting, saving and investing. When she’s not talking about money you can find her spending time with her 3 boisterous boys.