Be Debt Free

Debt Reduction | Debt Management | Debt Ratio | Debt Consolidation

This site is all about finding ways to pay off debt so that you can maintain a stress free lifestyle without the worry of debt collectors sending you letters, ringing your phone or worse, knocking on your door. A surefire way to throw a huge spanner in the works and derail your debt reduction plan is to spend more than you earn. If you do spend more than you earn, you run the risk of getting caught up in a debt spiral.

The Debt Spiral

What is the debt spiral? It is the place where debt becomes the overwhelming aspect around which your life seems to focus. How you you end up in a debt spiral? Think about how debt comes into your life. You spend more than you earn, you borrow to fill the gap between what you earn and what you spend. It could be that you use your bank overdraft each month to top up your earnings, or you could put purchases on credit cards, hoping to get through by paying the minimum amount each month. Perhaps you take out loans to manage some unexpected expense or emergency. The result, is that more of your monthly earnings go to service the increasing debt each month, leaving you with less and less money to live on. The solution you have to this problem… yes you borrow more again to fill the increasing gap. Now can you see how you get caught up in the debt spiral?

How To Break The Debt Spiral

One debt reduction strategy that you can use to break out of the debt spiral is to stop spending more than you earn.

This may seem like a blanket statement, to which perhaps you asking the question, yeah but how!!!

Well one tip we can offer today is to look at all the non essentials and see where you can make savings, thus reducing the amount you spend each month.

Sometimes, seeing the figures in black and white can help to motivate you towards reducing your debt. On a positive, working out how much you spend on non-essentials can help you to realise, just how much money is leaking out of your pocket.

Now, don’t get me wrong, I’m not trying to tell you to stop buying stuff all together. If you can afford the things that you buy, then why shouldn’t you spend your hard earned cash on something that you want. Perhaps that non-essential is a perk that you give yourself for achieving some goal. You wotk hard for your cash, why shouldn’t you spend it how you like?

Well, as I said, if you can afford it, then you should. However, if you in a situation where you cannot afford the things that you buy regularly, if you are caught in the debt spiral and seeing your disposable income dwindling each month, as the interest balance on your credit card statement goes up and up, then perhaps it’s time to look closely at when, where and what you spend your money on, and see where savings can be made.

Be Motivated To Spend Less

Right, here is something you can do to work out where you can save on all those non essential things that you buy.

Get a paper and a pen and write down the cost of something that you consider a non essential and the number of times per week that you buy that item.

I will work through an example with you using Cigarettes. (I am trying to quit smoking).

So the steps are this

1. Write down the name of the non essential item, how much it costs and how often you buy the item in a month. Be specific.
   • ITEM: 1 packet of 20 Cigarettes
   • FREQUENCY: 15 times per month
   • COST: £5.00 per packet
2. Multiply the item by the frequency and the cost
   • MONTHLY COST: 1 x 15 x 5 = £75
3. No multiply this monthly figure by 12 to see how much you spend on this item in a year
   • YEARLY COST: £900

So that is £900 per year that I could be using to reduce debts. How much was yours? Now that you have identified one item, try to identify other non essential items that you buy regularly and add them to the list. Do the same calculations and keep them in a spreadsheet or in a notebook.

If you have 10 items similar to your first, you can see how your spending adds up. If I have 10 items similar to my example, I would be spending £9000 each year on non essential items that I could do without. £9000 burned each year. That is money that could be used to pay of credit card debt, or mortgage/rent or loans.

Become Debt Free By Spending Less

I’ve described how we can become caught in a debt spiral by spending more than we earn. It is difficult to resist the urge to spend money on things that we think that we need, however we must take responsibility for our spending if we are to achieve the goal of becoming debt free. Use the tips in this article to find the areas of spending on non essential items that you can do without.

Use this debt reduction strategy to leave more money in your pocket, money that can be used to reduce your debt. It is one more tool that can help you achieve your goal and so live a less stressful and debt free life.

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