First, get clear on the numbers

Before you can start digging out, you need to know exactly what you’re facing. Get your statements together and use a simple spreadsheet or a piece of paper to list every debt you have.

For each one, note three things:

  1. The total amount owed.
  2. The interest rate (%) – this is the most crucial number.
  3. The minimum monthly payment.

Once you see the whole picture, you’ll feel less anxious. You’ve brought the problem out into the open, and that’s a huge, empowering step.

 

Two smart strategies

There are two main strategies for tackling debt. Choose the one that feels right for you.

  1. The avalanche method (pay off highest interest first): This is the mathematically smartest way to pay the least amount of interest over time. You focus every extra pound on the debt with the highest interest rate. You still pay the minimum on all other debts, but you attack the expensive one first. Once that’s clear, you roll that extra payment into the next highest rate, and so on.
  2. The snowball method (pay off smallest balance first): This method is all about psychology and motivation. You focus all your extra payments on clearing the smallest debt first. Once it’s gone, you get a rush of satisfaction. You then roll that money into the next smallest debt. It builds momentum and keeps you going.

What might be a good idea before tackling your debt, is trying to get a bit of money put into a savings account if you haven’t already. Having even a small emergency fund prevents you from running up more debt if an unexpected expense crops up.

Building some savings first will also mean that you’ve proven to yourself that you are capable of saving and putting money aside – which can be a great mental boost.

 

Simplify and save

If you have multiple high-interest debts, consider consolidating them. This means moving them onto a single loan or credit card with a lower overall interest rate. Getting everything into one place can make managing your payments simpler and save you significant money on interest.

 

We do not offer personal financial advice or make specific recommendations based on your individual circumstances. If needed, seek independent financial advice before making decisions regarding your financial goals.