Following on from our previous article on help with debt we look at the issue of spending and how to bring yours under control to manage your way out of debt.

Are you in debt?
If you are, and can’t answer the question ‘What are your debts from?’ There’s a problem. If you didn’t buy, for example, a car or a conservatory, but you’ve used cards or loans to fill gaps, an ear-piercing alarm should ring.

Debt is fine if it is planned, rational, budgeted for and as cheap as possible. But if you consistently need to use credit cards to supplement your monthly spending, you have a problem. Failing to tackle this can have life-destroying consequences.

Do a budget to work out where you’re WASTING cash
When the NCCF assess a person’s financial position to help decide if they are unable to fund the measures needed to alleviate their particular issues, we are effectively creating a budget. Our applicants come from across the social scale, some feel they are comfortably wealthy whilst others seem to be living hand to mouth. When we draw out all the key things they have to spend their money on and compare that to their incomes the real picture emerges.

It is probably not surprising that many of our elderly veteran couples and even more widows are living on the cusp of debt. Despite this, the Veteran generation rarely slides into real debt, they were mostly schooled during the war years so are well aware of living within their means. 

The situation makes an abrupt change when you get to members of the next generation, the ‘boomers’ as they are referred to nowadays. 

If you are under retirement age you have grown up in a relatively safe protected society which has seen an explosion in credit availability and hard marketing of ‘lifestyle essentials’, which has created a “want it, want it, must have it” culture. 

Many people look at the shiny new thing and think ‘why that’s only £30 a month and it can be all mine’.  This is how you start to spiral into debt! That £30 a month is, for however long it takes to pay off the purchase price plus the cost of borrowing. For many items by the time the credit is cleared that shiny thing is either in the back of a cupboard gathering dust or well over halfway through its planned service life.

Adding the next purchase to the £30 a month as it seems easy to buy is yet another step down the spiral. Before long you are putting a whole holiday on the card, ‘well you deserve a break don’t you?’.  Then comes the crunch and you start using credit for essentials; the tank of fuel, a weeks shopping…

The slide into debt is so subtle in the current climate, everything is delicately stacked so if something like a hike in the mortgage rate or fuel prices comes along that gentle slide becomes a hurtling plunge.

The only way to take control is to realise what you do and don’t have – make a budget!
Even if you think you are ok and don’t really have any worries, doing a budget is really as important as a health check from a Doctor. You can find if something is going wrong in the early stages, you may even find you are doing well and can stash some cash in a decent investment for a real treat or to help the kids out.

There are many budget tools on the web. Money Saving Expert has some great tools and information. At the end of the day a budget is just a list of everything you have coming in and everything you have going out. Compare the two over a period of time, usually a year, and see what you do or don’t have left. Doing a budget over a year allows you to see the impact of seasonal costs; Birthdays, Holidays, MOT and Servicing for the car and so on. 

The next an most important thing in doing a budget is be realistic and honest with yourself. This is painful and hard! All the advertising hype and the way society encourages you all run contrary to being self-honest. 

Self Honesty – The Most Important Tool to Get Out of Debt
As we have said society and advertising twist your perception and stops you being really honest with yourself: Do you need that new mobile? What’s wrong with driving around in the same car for another year if it’s working fine?

Pushing the facts to the back of your mind, however easy it seems, is not a solution. There is no magic ‘Debt Fairy’ that comes along and pays your bills at the end of the day. There is a burly court-appointed Bailiff who levies on your once shiny new things and wrings even more cash out of you.

Worst case you kiss goodbye to your home. We have seen people deep in debt with nice new cars and mobile phones all on credit while they are not paying their rent or mortgage. This is a desperate situation to have got yourself into! Yes, it is you that is responsible, if you are totally honest with yourself. Keeping a roof over your head is the most important thing you can do. People can help with food, clothes, transport and even holidays but they can’t put a roof over your head.

A few more home truths
Realise the true cost of credit, earlier we looked at the £30 a month purchase. When you are doing your budget or considering buying something look carefully at the actual cost including all the interest you will have to fork out. With a long period loan extend your budget to see how the repayment will impact across its life.

One of the best examples of this is used cars, currently in the UK the average three year old car is selling for around £14,000. Lots of people go with the dealers credit offer rather than raise their own finance. Dealer HP credit is around 10.9%. Personal loan rate for a £15k loan over five years is 4.9%.

Straight away you can see there is a great difference in the interest rate so let’s look at it in cash terms: £15k car over 5 years from a dealer is around £304 a month where a bank loan is £262. Doesn’t seem that much more but that is actually your cash you are paying out.

Taken over the five years of the loan and you would have repaid: £18,221 on HP or £15,699 on a personal loan. That’s a difference of £2,522 – Look at the car you want and put a basket of two hundred and fifty crisp new £10 notes on the front seat and that’s what you are buying using a personal loan.

The other good thing about using a personal loan is that your car is not tied to the finance package. This sounds great but after three years you will be tempted to buy another new car so it’s back to the bottom of the ladder you go again.

Wait one minute, have a good look at your old faithful motor, most of them will last in excess of 10 years now days. Spend a few quid on repairs and servicing and a boot full of one thousand eight hundred crispy new £10 notes could be yours. Now that’s a deal changing amount of money.

Credit Cards, Store Cards = Debt Cards
One of the best cons the financial industry has pulled off is the Credit Card. It should actually be called a Debt Card. The only time you should use one is if you are going to clear the balance in full every month.  You can get ones that give you cash back for this and you benefit from the purchase protection. Carrying debt over to the next month incurs interest and it quickly multiplies.

A Store Card is simply a Credit Card fixed to one particular retailer so they are an even worse option. Stop spending on the card. Pay as much as you can back and get a personal loan to clear the balance. Once you have done that shred the card. Pay off the loan as quickly as you can.

Ways to Save Cash
It’s not going to be easy but using your budget identify all the areas you can reduce spending, increase paying off debt and keep things manageable as you work toward solvency.

Money Saving Expert has published the following top tips to save cash:

Check if you’re leaking money via unused subscriptions & payments
Many have costly subscriptions for gyms, streaming services, magazines, packaged bank accounts and more, yet rarely or never use them – or with time and home moves, forget about them altogether.

First, check for regular payments going out of your bank account for services you no longer use – then CANCEL them. You may even be able to get a refund. 

Then take it up a notch and ask yourself if you REALLY need it – Even if you DO occasionally use that pricey gym/Spotify/Netflix subscription, if you’re overspending right now, it may be a luxury you can’t afford. Look for cheap alternatives – see Free Gym Passes, Free Music Streaming and Free Movies & Box Sets.

Block phone notifications and unsubscribe emails from shops, takeaway services and more
You can stop notifications in your phones settings and unsubscribe using the link at the bottom of most emails. It’s also worth unsubscribing from marketing emails, if you find yourself tempted by sales and discounts. It’s worth noting this may mean you miss out on the odd exclusive discount code for a planned purchase. An alternative is to set up a separate email account, just for marketing emails… provided you have the self-control to avoid scrolling through these until you need them.

Stop spending so much on food – plan, plan, plan
Set a budget, write a food plan and take a calculator with you when you go food shopping. And never go when hungry – it’s too tempting to overbuy. By going just once a month you’ll be less likely to buy on impulse and for convenience. Top up with milk and bread in between.

Leave debit/credit cards at home
Only take the cash you absolutely need with you and don’t have a cash card with you to take extra out of the hole in the wall. That way, however tempted you are, you have to walk away in the end.

Work out what it costs in work time
If you’re tempted by an impulse buy, work out how long it would take you to earn that money in hours worked, so if you get paid £10 an hour and it costs £150, that’s an extra 20 hours you’ll need to work to fund it, taking into account taxes.

Focus on your debt/savings
Work out how much longer it will take you to pay off your debt or increase your savings if you give in. To put it into perspective, if you’re saving for a holiday, think “that costs one day in Miami”…

Sleep on it
If you really want something, sleep on it for a night. You may find it doesn’t seem as attractive the next day.

Avoid temptation – don’t go shopping
If you don’t go to the shops, you can’t be lured by nice things. Stay at home – simple as that. Of course, you may also need to stay off your phone, laptop or computer so you aren’t tempted to shop online. If you like to while away your leisure time by going shopping, do something else instead. Keep busy and you won’t be tempted to get out your wallet.

For every new thing you buy, try to get rid of an old thing
If you really want to buy something new, see if you can sell something you don’t use any more to cover the cost.

Make a list and stick to it
Always make a shopping list before you go to the stores and see tempting goodies. Then once you’re out – don’t stray from it.

Try online grocery shopping
If you can’t stick to a shopping list, try ordering your shopping online. It’s easier to stick to a budget as you get a running total, plus you won’t be tempted by the sights and sounds in the shop.

Keep a list of your debts/savings targets in your wallet
Every time you open your wallet for a potential purchase you’ll be reminded of why you shouldn’t be spending money.

Get free sofas, coffee machines, baby clothes & more on Freecycle
If you really need to replace something, try giveaway sites Freecycle or Facebook Marketplace, or take up offers of hand-me-downs from friends and family.

Challenge yourself
Make it a challenge to come up with creative nights out or in on a budget. It could be a picnic in the park or a movie night at home. Or if there’s something particular you want to buy, see how quickly you can raise the funds through extra means.

Take a packed lunch to work – keeps you out of harm’s way
It’s an old one but a good one. Making a packed lunch doesn’t just stop you being tempted by expensive sandwich shops, it also keeps you from the pub or easy trips out with friends where money flows out.

Start a new hobby
Spend time on a new (free) activity like running or do some volunteer work. This leaves less time for spending, you can learn something for free, such as a language, Open University courses, history through virtual museum tours and more.

Create magical holiday memories with the kids for FREE
You don’t need to shell out a load of cash to give your kids the perfect summer hols or Christmas experience. Money Saving Expert has plenty of tips and tricks to help you create magical family memories for free:

Pay yourself pocket money
Set up another account for bills and use this to make sure all your bills are paid. With the money left over you can pay yourself a set amount which is yours to spend as you like.

Stash your shrapnel to save
Stick loose change in a savings jar. You’ll be less likely to break a note to spend and once the change has built up, pay it into your account or off a credit card.

Keep a debt diary
Write a note of when you’re likely to overspend. If you can identify trends that lead to overspending you might be able to prevent them or vent in some other way.

Make your own at home
Whatever your vice is, whether it’s pizza, beer or frothy cappuccinos, try making it at home for a fraction of the cost.

Take the ‘No-Spend Day’ challenge
Once or twice a week have a day where you spend nothing other than budgeted-for things. Quite often just spending once can break the cycle for the rest of the day.

Stop wasting food
Are you always throwing out food that’s gone off? Plan the weeks meals, only buy what you need and store any surplus properly.

Take the Next Step

If you have got this far then you are well on the road to clearing your debts and enjoying a life without worrying about money. Getting here means you have been brutally honest with yourself and started to develop habits to avoid the wrong sort of debt.

Congratulations! Now you really have nothing to lose so go see a debt advisor.

This article is abstracted from an original article by Sarah Monro and Jenny Keefe published 18/03/22 on