Staying debt free in this day and age is almost impossible especially for younger people. Between continuous ads for pay day loans, new ‘must have’ gadgets and gizmos all available on credit and every clothes shop asking if we’d like to open an account with then to save x% on our purchases, it’s not surprising so many women in their twenties are finding it hard. It’s true that no one is making us spend beyond our means but we grew up watching shows like Sex in the City and Friends, where everyone has amazing lifestyles, wears beautiful clothes and goes out to nice bars and on top of that we’re bombarded with magazines showing us images of our favorite celebs in the latest fashions always look immaculate. No, no one is forcing anyone to spend money they don’t have, but they’re not exactly making it hard not to do either.
If you’re worried about the amount of money you’re spending or the debt you’re racking up it’s important you take action. Don’t put it off until pay day, you can’t ignore it until it goes away and you can’t think it will never catch up to you because it will.
Own Up To It
The first thing you need to do is face everything head on. Pick a night when you have no distractions and turn the TV off, close your door and go through everything. Open every discarded bank statement, every ignored store card or credit card bill and every neglected finance repayment letter. If you own someone, somewhere money, get it out and spread everything out in front of you.
This is going to be the hardest part, the moment you realize exactly how much you owe but once you’ve got a fixed figure you can start to fit it.
The next part isn’t much easier but now it’s time to look at how much money you have coming in, how much you have going out (in a typical month) and how much money you owe. The chances are this isn’t going to make very pleasant maths, if you’ve got yourself in this situation the chances are the money going out is going to be outweighing the money coming in and now you have your debt that needs to go in the outgoing column now. Look at your outgoing and make a list of everything that’s essential, rent, utility bills, petrol etc. Next you need to look at the things you don’t need but make your life more convenient like your mobile phone, satellite television and look at the things you really don’t need like gym memberships, magazine subscriptions. The chances are food will fall into all three lists.
Cut Back Time
Now you’ve got everything in front of you in black and white it’s time to tighten that belt. How often do you go shopping for non-food items? How often do you get your nails done? How often do you go out with the girls? How much of your supermarket shopping is really essential or just expensive brand names? Anything that isn’t essential needs to be cut or at least drastically revised, a night out with the girls is fine so long as you’re drinking soft drinks or water all night, a brand name pint of ice cream is fine so long as everything else on the shopping list is supermarket brand name, get your nails/hair/waxing done at the local college to save cash. Unless you can magically produce more cash each month, the only way you’ll clear your debt is by making cutbacks.
Stick It Out
Once you’ve worked out what you can actually live without you can start planning a budget. Take your monthly income after all your essential bills have come away, next make a list of all the things you need to spend money on in a month, only count essential good, fuel or travel for essential journeys and basic phone usage. Subtract this money from your overall income and what you’ve got left needs to be split in half. Half goes towards your debts and the other half is emergency buffer money just in case something goes wrong. If anything is still left in the emergency pot at the end of the month it goes into a saving account. Plan ahead as much as possible, take a pack lunch to work so you’re not tempted to buy a sandwich from the deli and avoid the magazine stand if you’re tempted to indulge. Whilst you get used to your new lifestyle try leaving your bank cards at home and just take some cash. This will stop you being tempted to go out for drinks after work on an impulse.
You’re Not Alone
No one is going to judge you and if you feel you’re in more trouble than you can deal with so talk to someone, whether it’s one of the charity or government services designed to help in these situations or a close friend or family member. They probably won’t be able to make your debt magically disappear but they might be able to offer some perspective or even help you stick to your new budget. Telling a few friends you need to cut back might actually be a huge relief, everyone would like to save a little cash here and there and might be grateful for an excuse to have a clothes swap party instead of going shopping or have a night in with a bottle of wine and a film rather than going out.
About the Author
Jess is self-taught finance expert working for www.businesselectricityprices.org.uk who help businesses ensure they’re never paying more than they have to for their business electric.