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Goodbye 2020, you will not be missed.  Hello 2021, the year to tackle the financial damage of 2020.  If you’re carrying a debt hangover from that disastrous year, here are the basic steps to tackling debt reduction.

List out all your debts

You need to know the lender, the balance and the interest rate.  Put your debts in order from the most expensive to the least expensive.  If you have two or more debts with the same interest rate, put them in order of the remaining balance.  If you know you have taken out cash on your credit cards, then put a mark beside that entry.

You now have the order of priority in which to tackle your debts.  In short, you’re going to aim to remove any cash balances on credit cards first.  Then you’re going to tackle each debt in order from the most expensive to the least expensive.

Figure out your budget

The only way to pay down debt is to make more than the minimum payment on it.  The more you can pay on top of the minimum, the quicker you will pay off your debt (and the less interest you will pay overall).  This means that you have to find the money to make overpayments.  That starts with putting together a realistic budget.

First of all, list out all the bills you need to pay throughout the year.  Put a mark beside anything non-essential.  Go through all the non-essential expenses and see if there’s anything you can cancel immediately.  If there is, cancel it.  If there isn’t, make a note of when you can cancel and commit to doing so.  Then make a note of the renewal dates of essential contracts.

Secondly, make a list of any essential, one-off, purchases you will or may need to make over the course of the next year.  For example, will you need new clothes or shoes or glasses?  Will the kitchen appliances last another year?  Will your car need an MOT?

Thirdly, do your best to figure out how much (or how little) you really need for your day-to-day living expenses.  This is often the most difficult part of the exercise.  It often takes a bit of trial and error before you really hit your stride.

Look for ways to save money

The golden rule of saving money is to do as much as you can yourself, but always recognize when it’s best to use a professional.  A lot of the time this is a combination of common sense and being prepared to stretch your boundaries safely.

You may be able to save yourself a lot of money just by learning (or relearning) basic domestic skills like cooking and sewing.  If you were taught these as a child, you probably still know what to do.  You may just need a bit of practice to get back into the swing of them.  If you weren’t, then there is loads of help available for free online and you’ve really nothing to lose by trying.

Look for ways to increase your income

The key point to remember here is that any win is better than nothing.  Even something as small as doing surveys can bring in a bit of extra cash (or shopping vouchers you can use instead of cash).


If you have any skills at all, then you have a chance of making some kind of side income.  This may not be enough to live on (especially after tax), but it can make a real difference to your debt situation.  Just remember to register as self-employed as quickly as possible and to set aside money for income tax and national insurance.

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