If you're serious about reducing and clearing your debts then you can do so, but you must put in a huge amount of effort. Here is what you must do.
Last month Fool writer Serena Cowdy produced ten tips to get out of debt. I'd like to complement that article today with a further seven ideas for those of you who have seriously decided that you're really, really going to make the effort to reduce and pay off your debts.
Why are you in debt?
Reasons vary of course but probably more than half of you, in a nutshell, are living above your means. All the following tips will help you to redress that balance, but it needs serious commitment. I assure you, it is worth it. The joyous comments from thousands of reformed former debtors on our Dealing with Debt (DWD) discussion board testify to that.
Before I get started, let me reiterate Serena's advice to make a first attempt at a Statement of Affairs (SOA), which is a simple list of every one of your bills and debts, as well as of your income. It means that in front of you will be all the costs that you can work on reducing.
Committed yet? Great! Here's how to attack those debts!
1. Use DWD and the new online financial calculator
I strongly recommend that you post your SOA on our Dealing with Debt board, which you can do anonymously using a `user name'. The many debt experts, debtors and former debtors who frequent that board can then analyse each item in your list and suggest where you can make savings. Don't be afraid!
A couple of our discussion-board users, Stooz and Clariman, have developed a new and greatly improved Statement of Affairs calculator here.
2. Prepare a realistic budget
Using your SOA, write a cautious budget. `Cautious' means don't be optimistic. Your car will need maintenance; no, you can't feed yourself with £30 per month and, yes, pets cost money too. You also need some money to entertain yourself. It's pointless pretending that over a long period you can live without having a few drinks with friends, going to the cinema or having a cheap meal out once a month. That never works.
3. Review your SOA
At the end of the month, take a look at your bank balance and debt balances and compare it to your SOA. Does your SOA need some adjustments? Did you stick to your SOA or over-spend? If the latter, what went wrong? It's possible that you're not entirely sure what went wrong, in which case you should...
...4. Track all your spending
If you're living beyond your means then you are likely spending money on a weekly basis that you can't account for. These are all your little purchases and treats. As Serena said in her article: `Little things soon add up'.
If you want to stop this from happening, the only effective way that our board users have found has been to keep a spending diary, which means that whenever you buy some extra food or a newspaper or whatever, you write it down. It sounds tedious, but for many debtors it has been the most effective step they've taken to understand how they can budget better and start living within their means.
You must track all your spending all the time. It requires discipline, but it is mandatory, not optional.
5. Discuss your finances with your partner, parents or friends
You would help your close ones if you could, so why can't they help you? Of course, circumstances are individual, but most people find that they receive tremendous support, perhaps after an initial period of shock if your debts are high enough!
The relief from stress reported by our readers after sharing their burden has been huge. Furthermore, you usually find that your partner or friends then admit to their own debts, too, and they're glad that you want to spend less on nights out by staying in to watch DVDs together.
6. Take a look at the Living Below Your Means board
Living Below Your Means is yet another excellent board with plenty of money-saving tips. It's also where people discuss attitudes and methods for living within your means. It's highly-recommended and addictive reading for people who have become serious about fixing their finances through better budgeting.
7. If you can't get your books to balance
Well, if you've taken my advice you will have got more advice from DWD. That is the number one best place to get quality advice and opinion. If your finances are unsustainable, they will have told you so, and what you should do now.
However, if you can't get over the geeky image of discussion boards then these resources can help you too:
Consumer Credit Counselling Service
From the huge amount of feedback I've read about these three resources, I believe that National Debtline would be my first choice. But they've all proved useful.
> Take a look at The Fool's own How To Get Out Of Debt guide.