Summer is a time when most people are off on holiday, and attraction to buying new summer clothes and other items becomes somewhat of a necessity as soon as the sun starts shining. As moods begin to improve, wouldn’t it be nice to not have to worry about any debt over the summer? Find out how to solve your debt problems here in our step by step guide to a debt free summer.
Step 1: Analyse where your debt is coming from
A lot of debt tends to come from credit cards or insurance or through other boring bills that we all have to end up paying. This step isn’t about cutting down on all the nice, luxurious things, it’s about the basics. Have a look at who you’re paying, and how much you’re paying them. Guaranteed there is a much cheaper alternative option to the one you’re using. For example, credit cards. There are plenty of interest free credit cards out there, that might only be interest free for just a year or two, but switching over to these can make a huge difference.
Changing your insurer, whether it is for your car, home or pets, is another big way to cut down your debt. If you’ve been using the same insurer for years you could be missing out on some really good deals that are usually only available for new customers. Switching everything over might seem like a lot of hassle, but in the long run it could save you a huge pay packet and may end up helping you manage your finances better, resulting in you becoming debt free by the summer.
Step 2: Stop using debt!
This might seem like an obvious step, but you’ll be surprised at how many people are trying to clear their debt yet still using their credit cards and loading all of the money back on. If you want a debt free summer, then you need to stop digging the hole. This is a quick way of stopping your debts from growing.
Step 3: Prioritise your debt
Prioritising your debt can really help you to organise your payments and to help you get on top of things. Debts such as mortgages should be at the bottom of the list – let’s face it you’re more than likely not going to be able to pay off your mortgage before the summer unless you win the lottery, but there are other debts such as short-term loans from online lenders such as peachy.co.uk, car loans or credit cards that should be paid off quickly. These are the type of loans that will have high interest rates which you want to get rid of as quickly as possible.
Step 4: Cut your expenses and save save save
This is where cutting out the luxury items is important. This doesn’t have to be forever, so don’t panic. But excess funds that you were going to put towards your fiftieth pair of trainers, or on the latest Xbox or PlayStation, should be put towards getting rid of your debt as quickly as possible. If you want to enjoy a debt free summer, then this is an essential move towards that. Even little things such as walking to work instead of driving and paying the cost of parking and petrol (if this is possible), or taking a pack lunch to work instead of buying a meal deal are all easy ways to cut your expenses which could end up saving you hundreds of pounds a month. This is the same as in the evenings – switch your Waitrose weekly shop to Aldi or Lidl and see your shopping bill go down massively and cut out the takeaways to save even more. It’s okay to treat yourself now and then, but in the long run this is the way to get you out of a worrying amount of debt by the summer.
Step 5: Make a bit of cash on the side
This could potentially be a quick fix or a long term project depending on how much time you have spare, and how much debt you’re in. If you work full time during the week, consider getting an easy bartending or waiting job for the evenings and weekend. This will help you to get that little bit of extra cash saved up to either go towards your loans and debt, or to put away so you can splurge during the summer without having to put anything on your credit card. Other money-making ideas include renting out a spare room, mystery shopping, drive or garage, selling clothing and other personal items on sites such as eBay, or making money from your old mobile phone. There are plenty of ways you can make a bit of money in order to help pay off your debt.
Step 6: Make extra payments on your highest priority debts
Remember that money that you saved up by making a bit of cash on the side or by saving on lunches and driving to work? Try putting some of that towards overpaying on your highest priority debts. Doing this means you have now moved from debt-management to debt-reduction. Just make sure to continue to make minimum payments on all of the other debt you have, otherwise you will find that they build up quicker than you can imagine.
Step 7: Move onto the debt that is next on the priority list
Once you have paid off the first debt, you should try not to see the money that you are no longer putting towards debt #1 as spare money. You should put this money towards the debt that is next on the priority list. For example, if you are paying £50 monthly on debt #1 and £25 on debt #2, when debt #1 is paid off, the payment for debt #2 should be £75. This enables your debts to be paid off quicker without leaving you short at the end of the month.
Step 8: Celebrate
Have a small celebration every time you pay off a debt as a little reward to yourself will help boost motivation. Maybe not necessarily getting those £120 pair of trainers, but treating yourself to a pizza for dinner won’t hurt. Just remember, you don’t want to put yourself into more debt! So keep your celebrations small and relatively cheap.
BONUS: Continue to live debt free
Hopefully, you should be enjoying the summer debt free and will have cultivated some positive financial habits that will keep you on the path to financial freedom.