Published On: Thu, Aug 22nd, 2019

How to pay off debts quickly: This simple lifestyle hack could save you money | Personal Finance | Finance

In the UK, the average debt per adult totals £31,000, according to debt statistics from Finder. The figures also suggest that almost £1,000 is being spent on interest alone by Brits each year. From paying off credit card debt to getting out of one’s overdraft, debt can occupy much of a person’s mind. So, how can one burst their debt bubble?

Digital financial advice service OpenMoney has shared some top tips on paying off debt.

And, one word of advice has seen them suggest that getting into a particular spending habit could help some people to keep track of their outgoings.

1. Don’t act on impulse

While it can be tempting to overspend when money is in one’s pocket, OpenMoney instead advise always trying to plan purchases, and compare prices online in order to make sure one gets the best deal – particularly when it comes to big ticket items such as appliances or furniture.

What’s more, opting for cash rather than card when it comes to paying may be a helpful money-saving hack, they suggested.

“Paying for everything on contactless has made those impulsive buys easier,” OpenMoney said.

“We were much more likely to think twice when we paid for items with cash because we were able to keep track of our spending.

“To stay in control try drawing out a set amount of money at the start of each week and see whether you can survive on that.”

2. Borrowing and bills.

Another top tip is to not borrow money if it means buying something that doesn’t last as long as it takes to pay for.

“So, borrowing to help build an extension or buy a car could be a good idea, but try not to take on debt to pay this month’s gas bill, which should usually be covered by your income,” OpenMoney said.

“Avoid paying monthly credit card bills late if you do borrow money.

“Set a reminder each month to sort all your bills at once, ideally just after you’ve received your monthly salary.

“The fees if you are late to make a payment are a gold mine for credit card companies and banks, so don’t slip up and forget.”

3. More than the minimum

OpenMoney also suggested paying back more than the minimum required amount, where possible.

“If you really are serious about getting out of debt, you should aim to pay more than just the minimum amount needed on your credit or store card every month, even if it’s just by small amount,” they said. “Always pay as much as you can realistically afford.

“Prioritising your debt is key. It can be easy to ignore the situation but that will just make the situation worse.

“You may get a tax refund you never expected or maybe you manage to save more than usual one month. If this does happen hold back from splurging on something you don’t really need and instead put that money straight towards reducing that debt.”

4. It’s best to budget

Setting a budget may also help borrowers to reduce the amount that they owe, OpenMoney said.

“Reducing your debt is going to take discipline. Set yourself a budget by analysing all your outgoings to make sure you are living within your means. If you are getting into debt because you’re spending more than you’re earning, it’s time to reduce your costs.

“Start small and make simple changes to every day habits. Take a packed lunch to work or use apps such as Depop to buy clothes second hand rather than brand new.

“Over time you should consider setting spending targets to limit how much you spend each week on anything from eating out to weekly food shops. There are a number of budgeting apps available which will help you track all your spending and set goals to cut down on these simple but expensive habits.”

5. Don’t ignore the future

While repaying debt will be important, there may be some situations where saving for the future will take priority, OpenMoney suggested.

“While it’s important to prioritise getting out of debt, especially if you’re paying interest, you may not want to abandon saving altogether.

“If you are paying high interest or charges on your debt, this should always be your priority. But if you have credit card debt you aren’t paying interest on, and you know you can comfortably pay it off before that interest kicks in, then you should absolutely be thinking about saving both for the short and long term.

OpenMoney said they recommend putting around three months of outgoings aside as a ‘cash buffer’, adding: “It’s so important to have something to fall back on if you receive an unexpected bill or your car breaks down.

“Beyond that, you can consider investing for the long term – whether it’s for a house deposit, a future family or for your retirement.”

READ MORE: Overdraft charges: Daily and monthly bank overdraft fees BANNED in major shake-up

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