3 steps to controlling debt in 2022

Credit cards, debt and general finance was something of a myth at school.

I knew it was important to build up a credit score – so much so that I had a £10,000 credit limit by the time I was 25. But the ramifications of getting a credit card at 18 lasted me well into my late twenties.

I decided after graduating that I would go on to do a masters and thankfully, my postgraduate loan covered most of the fees. But despite living at home, the cost of fuel, food, books, and general monthly expenses meant I was using my credit card to fund my year of study.

It wasn’t until it came to paying it back that disaster struck. My spending meant I was left with a £1,000 a month minimum repayment (thanks to extortionately high interest). This of course then resulted in sleepless nights and the fear that I’ll never break the cycle.

I eventually did though – and here’s what I learned along the way.

This article is not personal advice. It can provide you with helpful tips to control your debt. But if you’re concerned about debt, you should speak to a debt charity like Stepchange.

1. Face your debt demons

It might be one of the hardest elements of getting out of debt, but sitting down and facing your debt demons is key.

Having a lot of little debts dotted around – like phone contracts or any ‘Buy Now Pay Later’ accounts, can start to add up. So, making sure you know what you owe can help make debt more manageable.

Once you’ve made a list of all of them, make sure you can afford to stay up to date on secured loans against your property or debts that are outstanding that could affect your utilities and council tax. Once that’s in hand it could be a good idea to prioritise the most expensive debts first.

If you’re unable to keep up with repayments for any debt you have, speak to the creditors directly. They’ll be able to help you make a plan for repayments going forward.

For debts like overdrafts and credit cards, you could consider switching to another credit card or account that has a lower interest rate. Using a comparison website to shop around can be helpful.

Or you could weigh up the pros and cons of consolidating your debt into one account and pay this off at a lower interest rate over a longer period of time.

It might sound counterproductive to take out more debt to clear the debt you have. But sometimes switching could help you to start to get a grip on your debt. However, make sure you’re aware of the pros and cons of this extra credit and make sure you can manage it responsibly.

2. Change the way you think about debt

Getting out of debt is harder than getting into it – anyone who has taken out any type of loan or credit agreement can probably attest to this.

But behavioural psychology plays a major role in debt, as does socio-economics.

It’s a myth that the households that take out the most debt are low-income. In fact, most consumer-credit agreements are taken out by those with higher incomes.

Borrowing can also feel good.

When we borrow, some people don’t see it as money leaving their accounts. Their brain can almost trick them into thinking whatever they’ve bought is almost ‘free’, which isn’t true.

The long-term impacts of building up debt this way though can be costly down the line, and not just financially – it can have a detrimental effect on mental health and physical wellbeing.

Changing my approach to debt has been vital in building my financial security.

Since clearing debt, I’ve built up an emergency cash buffer – we usually suggest having three to six months built up if you’re working, or one to three years if you don’t have a regular income. I also have a ‘pot for fun’ where I almost act as my own debtor. I have to repay myself the amount I ‘borrow’ from my savings.

It now means that if I ever do buy something through consumer credit, like a new phone I’ll only do it if I could afford to buy it outright.

Debt then becomes my choice, and not my necessity.

3. Don’t be afraid to ask for help

One of the biggest mistakes I made in my journey with debt was not talking about what was happening sooner.

The first person I opened up to about my debt was a financial adviser who’d recommended I get in touch with one of the free debt charities available in the UK.

The charity helped me to make a plan that looked at all my debts together and all the options I had available to me.

It was only then that I felt like I had some control in a time when I felt very worried about what the fate of my finances would look like.

I’m now in a position where I save every month and use the money I was paying off debt with into investments. I look back now, enormously grateful that I found a solution to my debt.

But I couldn’t have done it alone.

Getting in control of debt

For more tips and help with debt, visit our 5 to Thrive article on managing debt.

If you’re feeling overwhelmed by debt, you could use the government’s Breathing Space.

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