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How to budget to clear your debts quickly

When you’re in debt, the process of paying back what you owe can be painfully slow. Understandably, you want to be out of debt as soon as possible, but scrimping and saving to chip away at that debt can feel like it’s taking an age.


If this frustrating situation sounds familiar, the following advice could be very useful. So, if you’ve been lucky enough to find a situation in which you’re not penalised for repaying early, then here’s how to budget carefully in order to take full advantage of it.

Eliminate all non-essentials

It may be painful, but if you can cut out or cut down on the luxury purchases for just a few months, it could make a big, satisfying dent in your debt. By luxuries, we’re talking about alcohol, cigarettes, clothing, top brand goods, nights out, holidays and basically anything that isn’t food, rent and bills. You don’t have to cut these out completely (everyone needs a night out occasionally, after all) nor is it going to last forever, but if you can make these sacrifices even for a short while, you could get out of debt much faster.

Stop subscriptions

Think you can’t live without Netflix or your gym membership? You definitely can – simply watch Freeview and go running in the park instead. These monthly costs, along with expensive smartphone deals, all stack up and conspire to keep you in debt. Every penny you save on these non-essentials can be put towards repayments.

Make a budget and a list for everything

You need to know exactly how much you have coming in and going out, practically down to the day. A detailed list of expenses and income will help to give you a clearer budget, and you can use this to create a budget for all your daily expenses. Basically, once expenses are covered, your remaining income should be placed into a budget with some left over to repay your debts. Only by having this amount left over can you start to make a dent in what you owe. The golden rule to remember is -don’t buy a thing unless it’s in your household budget, and never go to the supermarket without a shopping list to hand.

Other useful tips for clearing debt quickly include:

  • Balance transfers – if you’re paying enormous amounts of interest on your credit card, it may be possible to transfer the debt to a 0% balance transfer card to give yourself some breathing room to pay off what you owe.
  • Reduce your bills – switching supplier, being more energy efficient around the house and turning that thermostat down just 1 degree can all make a difference to the amount you spend on energy each month.
  • Make substitutions – by buying a supermarket’s own brand item rather than splashing the cash on a top brand, or by having a coffee at home rather than buying a cappuccino from a coffee shop on your way to work, you can make small savings that really start to add up over the long term.

Remember, if you can afford to make extra repayments on a loan and there’s no penalty for doing so, you should definitely do it. Here’s where to look for more information on making early repayments without charge on logbook or V5 loans.