Get on the road to debt freedom

Follow my six-step plan to return to the black Life is never a straight line and we all have highs and lows. Our spending is no different.

This week, I had to explain to my children that when you have an expensive month – like we all did in December – you need to rein in your spending in January to offset it.

That’s coming into sharp focus now as December credit card statements arrive in inboxes and on doormats.

For some, their statements will reflect Christmas extravagance – and some balances will even include purchases from 2022.

When you pay in cash, you see the money leave your hand and physically experience the transaction.

But online, there is no emotion involved. You simply click, the payment is made and then your product arrives.

This non-attachment behaviour can get us into serious financial trouble and it’s part of the reason I believe credit card debt in much of the developed world is out of control.

According to the Office for Budget Responsibility’s

October 2021 forecast, household debt of all types is forecast to rise from £2.2billion in 2023 to £2.4billion in 2025.

In November, the average UK credit card interest rate was estimated to be a whopping 23.89% – the highest since recording averages began in 1995. And trust me when I say that nobody can afford to carry a liability like that.

If you’ve had enough of this financial burden, follow my six-step plan on the right to repay your unsecured debt. This includes credit cards, overdrafts, loans and car finance. 1

Firstly, stop making things worse and avoid credit. Change your spending habits and set up my Bank Account System, which automates your finances and allows you to set boundaries on your discretionary spending.

2

Keep your credit card debts separate – don’t consolidate them – but ensure you’ve got the lowest interest rates possible, especially on your larger balances.

3

Sort your balances in order from smallest to largest. 4

Ensure you always make the minimum payment on each debt and strive to maintain it.

5

Take at least 12.5% of your net income – representing the first working hour of a 9-5 day – and use it to repay the smallest balance. Do this each month until it’s repaid, then congratulate yourself and move on to the next smallest balance.

6

Speed up the process by selling unwanted items online, or looking for a side hustle to bring in more cash.

For more, go to Warrenshute.com or search for The Money Plan book online

‘‘ Online shopping can get us into serious financial trouble