A quarter of Brits admit to having no savings with over 8 million declaring that they are tackling debt. With the cost of living rising and the quest step on to the career ladder forever competitive, the prospect of becoming debt free can seem like a pipe dream.
Recent figures show that the average Millennials credit score has risen by 4 points since the 2016. This is more than any previous generation within the same time frame. However, this year the UK sees its population owing a total of £207.1 billion in consumer debt with the average household owing £7,616 in credit debt.
Repaying debt and securing a bank balance that sees you feel secure and not afraid to log in to your online banking can be tricky. Here, we teamed up with the debt advisory service Scottish Trust Deed to present 10 tips to help you not only attack debt but pave the way for a financially secure future.
I am overdrawn…but that’s not debt
This is a big misconception. To get on the road to being debt free, it is important to be honest with yourself and not bend the truth. Your overdraft is a debt in the eyes of the lender and must be paid.
If your overdraft sits within your main current account, it can seem near impossible to clear it. Open a separate account and create a standing order to transfer a fair amount every month. Once the amount accumulated equates to the sum needed to clear your overdraft, transfer it back to the current account.
It is worth remembering that exceeding your overdraft limit leads lenders to believe that you are anxious about gaining more credit and cannot manage your existing borrowing.
If you are now debt free but worried about how previous debt has affected your credit score, apply a solid strategy. David Baddeley at Scottish Trust Deed tells YCB, ‘Gaining 2-3 credit cards and using them once every month whilst ensuring that the balance is paid in full can be a very effective method in increasing your credit score. Every 3 months lenders tend to review their customers file. Working in this way can see that they increase your limit at each review. The aim is to set a limit and then stop once you hit that credit limit.’
‘Sorry I am busy’
Many of us feel obliged to attend social events that we would not only rather miss but lead us to unnecessary expenditures. Before you know it, you have attended more unnecessary events that you would like to admit whilst your debt has continued to rise.
Do not be afraid to make your excuses and give events a miss. Pencil in your diary events that you know you will have to attend and adopt a plan to accumulate the funds for them. Do not feel that you must attend anything that you do not want to and for events such as birthdays, suggest a cheaper alternative that you can do on a separate date.
Make a statement
Ever wonder where your money goes? It is easy to ‘bin’ your statements and ignore all online banking unless you must transfer money.
To tackle your debt head on, print 2 months’ worth of statements. Ensure that the 2 months chosen is a fair representation of the average month you live and do not include holidays etc. Highlight any expenditures that could be deemed unnecessary. For instance, takeaways, lunches that have been bought outside of the office, coffees on the way to work and spontaneous after work drinks. Once highlighted, calculate the overall sum. This can shock even the super money conscious. Aim to at least half this sum in the upcoming month and put it towards either paying debt or place it into savings.
Don’t be vague
Many of us aim to be more mindful of our spending and clear our debts however, after a couple of weeks old habits begin to resurface. This can be because clear objectives are not set in place and therefore, we do not acknowledge the great progress our new habits are making.
Make a clear target at the beginning of each month. Once you begin to meet each target, the sense of achievement will encourage you to implement new aggressive targets.
Don’t be a brand snob
It is a common belief that premium brands often mean premium quality. However, buying a stores own brand can not only half the cost of a product but provide a quality alternative. Look to alternatives when it comes to buying products and do not be fooled by the label.
Look at your subscriptions
Mindlessly downloading app after app can amount to a hefty sum. A 50p subscription here and there can seem like a trivial amount however, over the course of 12 months, small amounts can pave the way to a small fortune. Take note of the apps that you use on a regular basis, everything else – hit unsubscribe.
I am loyal
Collect loyalty cards and use them! It is wise to be mindful of where you redeem your vouchers. Instead of using them here and there, save them for something that you need or gifts for birthdays, Christmas etc.
I embrace change
Collect all loose change. Instead of throwing it in your bag or forgetting about it in your pockets, allocate a jar to fill with all lose change. Once full, whatever the sum, use it to put towards your debts.