Ten steps to being debt-free

1. Draw up a budget
   
   Budgeting is the most effective tool for keeping your finances under control. A budget will give you an idea about where, when and how much you’re spending. It will show where you can trim spending, freeing up some cash to pay back your debts faster.
   
   
2. Work out your financial position
   
   Sometimes it’s easy to feel overwhelmed by your debts. But a person’s overall financial health might not be so grim. To get a clear picture, make a list of your assets (everything you own), and compare their value to your liabilities (everything you owe).
   
   
3. Prioritise your debts
   
   List all the amounts you owe by interest rate rather than the balance. Put high-interest loans at the top of the list. Now concentrate on paying off the debts at the top first. You’ll save more by paying off these expensive loans first, while keeping up the required repayments on the others.
   
   
4. Pay more than the minimum
   
   While it’s tempting to build only the minimum debt repayments into your budget, it is a recipe for disaster. The minimum normally just covers the interest, making very little impact on the principal.
   
   
5. Use up savings, if necessary
   
   It is always a good idea to have a buffer of cash, but it doesn’t make financial sense to save money on one hand, when you are carrying big debts in the other.
   
   
6. Talk to your lenders
   
   Lenders are in the business of receiving payment, and faced with the prospect of losing a debt altogether (if you go bankrupt), most creditors will accept a compromise. Talk to your creditors and tell them you’re having financial difficulties – you will probably find they are open to revising your repayments and/or extending the time you have to pay. But don’t stop making repayments without warning – this will immediately get them offside.
   
   
7. Consider consolidating your debts
   
   Debt consolidation involves combining higher-interest debts into one, lower-interest loan – in most cases this means folding them into your mortgage. Consolidating high interest personal loans and credit cards can be a sensible strategy, reducing your interest repayments significantly. But remember, you generally extend the term of the debt, and this may mean paying more interest long term.
   
   
8. Cut up the cards
   
   Taking the scissors to the plastic card is a great way to stop the rot. If you insist on keeping a card, limit it to just one or better still use a debit card, which only draws cash from your bank account.
   
   
9. Protect your income
   
   Paying for our homes, family and lifestyles doesn’t leave us with a lot of spare cash. But when you are carrying a lot of debt, income protection insurance is a must.
   
   
10. Seek professional help
    
    Debt can put pressure on family finances and the family itself. Getting professional assistance from a financial counsellor can help.

• Find a personal loan
• Find a credit card
• Find a home loan
• Find a savings account