Welcome to this week’s money makeover which is all about dealing with your debt. In case you missed the first few money makeover posts, I’m going to be doing a post every Monday with ways to save money. I’m going to leave you each week with a little task or a change to make and although you don’t have to do everything, please do join in where you can and hopefully, you’ll start saving. Also, I’ll leave the links to the previous posts at the bottom each week so you can go back to the start if you want to.
How did you get on with last week’s post? I hope you did your homework and had a try of meal planning and going down a brand at the Supermarket but if you didn’t get around to doing it last week, it really is worth trying.
This week is about dealing with any debt you might have and if you’re lucky enough to have no debt at all the I’ll let you have a week off this week. However, if you do have any debt at all (and I’m including your mortgage here) then you might find it helpful to read on.
If you can’t afford to pay your monthly repayments then you need to do something about it NOW. The problem won’t go away and the chances of you winning the lottery are very slim so you might as well face things sooner rather than later! I wrote a post here about what to do if you can’t afford to pay. There’s even a template letter you could send to companies you owe money to. Just be aware that setting up reduced repayment plans with companies will more than likely be reflected on your credit rating but in most cases, that’s probably better than the alternative!
So, what about if you have credit card or other similar debt? Even if you can afford to pay it each month, you should still be aiming to pay it off as soon as possible. Easier said that done I know if the majority of your payments are hardly reducing your balance due to the interest charges.
First things first, can you shuffle your debts by doing any balance transfers at reduced rates of interest. If you can’t, can you apply for a new card with a 0% offer on to transfer some or all of your debts to? You may not be able to do either of these but it’s worth thinking about as it could save you lots each month.
When you have your debts on the best interest rate possible, you can work out the best order in which to repay them. To do this, have a read of my post here about snowballing which will help you work out the most efficient order to pay things back to get them repaid as quickly as possible.
If you want something visual to help motivate you (this always helps me with targets) then you could always adapt one of the trackers I shared in last week’s teaching children about money post.
For those of you who have a mortgage, have a look at my post about over paying your mortgage repayments each month. You’ll be surprised at just how much you can save and how many years early you can pay your mortgage off by doing this. I *think* it works our better to repay debts like credit cards and loans before mortgages so I’d focus on those rather than the mortgage personally.
For this week’s homework, work out an amount that you can afford to overpay one of your debts by each month and then decide which debt is the best one to pay off first. Then do something about it and start paying the extra!
Previous week’s Money Makeover posts
Week One – Money Makeover Introduction
Week Two – Sort our your spending