Sunday Mirror

Don’t allow your debt to snowball

Follow my advice to stay out of the red… for good


With interest rates rising and the economy being so uncertain, it’s never been more important to be financiall­y secure.

Repaying debt won’t happen overnight, and we can easily “yo-yo” by paying a little bit off then putting it right back on.

When it comes to getting debt-free, I use a process that’s different to most others because it focuses on making you feel good as you go along your debt repayment journey.

It’s called the Snowball System because your little decisions will gradually build up to make a big difference.

Face facts

The first thing you must do is face reality. After all, we must plan from where we are today, not where we wish we were.

We can’t change the past, but we can make different decisions about our future. We have a choice.

With this in mind, get to know your numbers and make a spreadshee­t. For every credit card or loan you have, write down the amount you owe, the minimum monthly payment and the interest rate.

You will find a free spreadshee­t at WarrenShut­ to help you with this.

Next, try to get the best interest rate you can with each provider. Call them and see if they will reduce the rate you’re paying.

After that, you must find a way to have more coming into your account than going out: you need a surplus at the end of the month.

You may have to make some sacrifices but just remember the end goal, and those sacrifices will be more than worth it.

Keep your end goal in mind and all the sacrifices you make will be worth it

Don’t consolidat­e

I’m not a fan of debt consolidat­ion, where you load all your debts on to one credit card or loan, even if it’s an interest-free arrangemen­t. By keeping your debts separate, you will get a “win” when you pay each one off – a feeling of “Yes, I did it!”

After all, everyone enjoys praise, even if it comes from ourselves.

If you consolidat­e your debts, that win comes so much further down the line and emotionall­y, that’s a lot tougher to handle.

Be in it to win it

Once you’ve got your spreadshee­t, arrange your debts in order with the smallest balance first – NOT in order of the interest rate.

For each debt, set up a Direct Debit to pay off the minimum amount every month to make sure you’re not incurring any extra fees. To attack your debt, you pay your snowball – the surplus money you have left over each month – on to the smallest balance first.

Your aim is to rapidly and aggressive­ly do whatever it takes to pay that smallest debt off. Why? To get a quick win and a dopamine boost.

If you do this, you’ll start feeling good about the process and will be more likely to stay on the plan and not yo-yo.

Once your smallest balance has been cleared, congratula­te yourself – you’ve achieved something great.

Repeat this and you’ll get rid of your debts one by one, each time feeling that little bit freer.

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