Many of us will find ourselves having to borrow money at some point in our lives, and paying back these loans can sometimes become quite stressful. However, here are steps you can take to ensure that you pay off debts efficiently, potentially helping you avoid taking out more loans in the future.
Start by reviewing your monthly income and expenses. For a couple of months, track every pound that comes into the household, and every pound that leaves it. This will give you a fairly detailed picture of what you spend the most money on, and will also make it easier to see where you could save money.
Begin by paying off smaller debts like credit card loans, or perhaps a TV set you’ve been paying for in monthly installments. Doing this will mean less things to worry about, and will motivate you to carry on. If you have more serious debts, you might consider ways to increase your income. Similarly, after clearing one debt, continue to set aside the amount of money set for repaying it, and direct it to another loan. Most importantly, make sure that at least 10% of your monthly income is saved for a ‘rainy day.’ If you can, accumulate enough funds to live off for three to six months. Doing this will ensure that you can cope financially if any unforeseen circumstances were to come your way, such as losing your job. You can start by saving a small amount at the start, and then increase this figure as your smaller debts are paid off. With regard to savings accounts, you should make your access as limited as possible, as this will prevent you from dipping into it unnecessarily.