While there’s a good case for borrowing money to buy growth assets like shares or property, borrowing money for everyday expenses is trouble. Sure, an out of the blue bill from the dentist could be a fair reason to bust out the credit card. But new stilettos or a six pack of beer? No deal.
If that’s you – a freewheeling spender of money you don’t have – here are four simple steps to sort yourself out.
1 Look back a month
Slashing debt starts with an honest assessment of what you’re doing with your money, so print out credit card and account statements for the last month and highlight every transaction you regret or don’t remember.
Then go through again and highlight every item you can do without for the next month.
2 Bring it all together
Odds are you’re getting absolutely robbed in interest charges, so find the lowest rate account and move all your debt there. Chop up all the other cards and close the accounts.
When it’s all in one place it’ll be much easier to figure out what needs doing and notice when you’re going backwards. Plus, it’ll cost less in interest. A lot of financial institutions offer interest free periods for balance transfers, so check these out too.
3 Buy some noodles
You’ll need these next month.
4 Ramp up repayments
You’ve herded all your debt together, identified everything you can do without and got some noodles. Now it’s time to turn the screws and start paying the debt off, and we’re not just talking about making the minimum repayment here.
Jump onto an online debt calculator and see what it’ll take to clear your debt in a set timeframe and commit to this.
The rest is up to self-control. So go on… Sort it out.
Image courtesy Bhumika Bhatia, via Flickr