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If you’ve got a few debts piling up – perhaps a credit card bill here and some loan repayments there – it’s very tempting to make like an ostrich and bury your head in the sand. We’ve all been there – thinking (or telling ourselves) that making the minimum payments on your credit cards and making your repayments on time (or, mostly, on time) is doing enough managing your debt. But, deehttps://www.bambooloans.com/blog/dont-ignore-your-debt/?preview=truep down, you know that isn’t the case. You know that you’re just getting by. And we don’t blame you. Debt can be scary. Don’t ignore your debt, taking the time to total up how much you owe every month (or in total) can often mean staring down a rather large and scary number. Which, again, makes that ostrich instinct kick in.
The thing is, managing debt is a little bit like cleaning the house. If you clean the house a little bit at a time, as and when it needs it, you’ll always have a clean house. (Unless you’ve got kids, then you’ve got no hope of keeping your house clean until they’ve left home, sorry.)But if you do the bare minimum – perhaps just the washing up, but not wiping the sides down – then eventually you’re going to end up needing to do a deep clean.
It’s the same with saving. Taking little steps to stay on top of your debt is much better than doing the minimum and letting it all build up.
The trick is: don’t ignore your debt. (And take lots of small steps towards clearing it.)
Our three-step guide to getting on top of your debt
Step One: Don’t ignore your debt
This sounds obvious but it’s worth stating again: having a proper look at your debt can make a huge difference in a number of surprising ways.
Firstly, it can make the whole thing less scary. Have you ever had an email, a letter or a text that you can’t bring yourself to open because you’re sure that it says something bad? But after you open it, even if the news is bad, it was nowhere near as bad as you thought. Your debt is a little bit like that. Even if you look and see a scary number, it’s never as scary as you expect it to be.
Plus, just looking at your debt can actually help you pay it off. Subconsciously, you’ll begin to pinch the pennies and act a little differently. Trust us, it sounds like woo-woo hoodoo, but it works.
Step 2: Make lots of small changes
OK, so you’ve taken our don’t ignore your debt advice on-board, now what? Well, the next step will probably actually be lots of smaller steps, depending on your situation.
Smaller changes are more likely to become long-term habits, after all. If you’ve got lots of credit card debt: look for a 0% card. If you’ve built up a lot of credit card debt, look to see if you’re eligible for a 0% interest balance transfer card. These cards are regular credit cards, but they don’t charge interest for an introductory period, which means that everything you pay can work towards eradicating that pesky debt, rather than just paying off the interest. However, be careful. The introductory period of 0% interest doesn’t last forever, and can jump up to pretty hefty rates; if you’re going to use one, make sure you can pay everything you owe during the 0% window.
Consider a consolidation loan, if you’ve got lots of debt that you struggle to manage.
If your debt has made your life a little chaotic, you’ve probably missed a payment or two here and there. Who hasn’t, right? The only problem is, missing payments is really bad for your credit score. You’ll end up paying lots more in late fees. In situations like this, it’s sometimes best to do something counterintuitive: take out another loan. Debt consolidation loans can help you pay off all of your debts so that you have just one payment to make on the same date every month. (Plus, because of the high-interest rates on some overdrafts, credit cards and loans, you can even end up saving money in the long run.) Find out more about debt consolidation loans.
If you think you can pinch some pennies: make a budget with a budget planner.
We’ve never tried to hide the fact that we love budgets here at Bamboo. And if you want to take our don’t hide from debt advice seriously, you need to budget. It doesn’t have to even be anything in detail, just enough to give you a rough idea of what’s coming in and what’s going out every month. Knowing what it’s being spent on is pretty handy too. From there, you can start to see how much you spend on everything each month and if there are ways to cut down.
But never fear – there are easier ways to budget than to sit down with a pen and paper. It’s 2018 after all, so of course, there are tonnes of apps that can do it for you. Last year, we sat down and reviewed the best ones – why not take a look to see if any are right for you?
If you like to do one thing at a time: snowball your debt.
If you’ve never heard the term ‘snowballing’ before, it basically means to pick one source of debt and to concentrate on eradicating it before moving onto the next one. Of course, don’t ignore your debts in other places, you just pay the minimum payments on them.
Although it might not be the best move financially (minimum repayments are costly) it can be psychologically rewarding – there’s nothing more satisfying than seeing a debt disappear forever.
This psychological boost can be the push you need to clear your debts and start your debt-free life.
Step 3: Start saving and form new habits
Once you’ve cleared your debts, it’s always a good idea to put measures in place to stop yourself getting into debt again, and savings are a good start. Of course, we’re not suggesting that you continue to live as frugally as possible (you’ve got to celebrate being debt-free, right?) but something as small as putting some of the money you dedicated to clearing your debts into a savings account or continuing to make that small sacrifice that was a part of your budget before you became debt free, can make a huge difference.That way, if you end up in a sticky situation again, you’ll have a safety net to fall back on, rather than having to resort to loans or credit cards.Once you’ve built up a nice little nest egg, it might be a good idea to start changing your relationship with money.
If you’ve got a chance, check out The Financial Diet by Chelsea Fagan and Lauren Ver Hage. Their book is full of great advice on how to get out of debt, change your relationship with money and start to live a life of financial freedom. They also have a blog with tonnes of great content on it too.
So there you have it, don’t ignore your debt and follow our Bamboo 3 Step Plan to a Debt-Free Life. Of course, it’s not as easy as it sounds on paper (nothing ever is) but as long as you remember the three steps – don’t ignore your debt, make little changes and then change your habits – we’re sure that you’ll start taking big steps towards a debt-free life. If you need any pointers on how to budget, cut down your spending or live life a little more frugally, there’s lots of great advice on our blog. Be sure to check them out! And from all at Bamboo, best of luck on your journey to a debt-free life.
A note from the Bamboo Team: This advice is based on general best practices, rather than advice tailored to your situation. If you’re struggling with debt, it’s important to get professional advice immediately. The Citizens Advice Bureau and National Debtline offer free guidance for people who are struggling with financial difficulties. If you are struggling to meet your financial commitments, it is also worth speaking your creditors to explain the situation and discuss a different repayment plan.
- Author The Bamboo Team
- Posted 26 March 2018