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10 steps to becoming debt free

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Spiralling debt is stressful and can significantly impact your financial future. Here is a step-by-step guide on getting debt-free and taking control of your finances.

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Debts can limit your lifestyle and wreak havoc on your mental health. Find out how to become debt-free for good with our 10 step guide.

1. Work out what you owe

Nobody likes facing up to their debts or checking their bank balance when they know they don’t have any money. However, if you think you may have a debt problem, it’s crucial to calculate precisely how much you owe.

Go through your paperwork and open up any bills and bank statements you have left to pile up and tot up what you owe.

It can be a daunting process but acknowledging a problem is the first step in tackling it. You can’t start on your road to financial recovery unless you are fully informed.

2. Write a budget

Next, you need to write a budget. This should show how much money you have coming in each month and list all your outgoings. 

Your budget needs to include all your expenditure from your rent or mortgage right down to your weekly takeaway. You can ensure you don’t miss anything by going through your online bank statements. Whether it’s your Netflix subscription or life insurance, it’s easy to overlook expenses unless you go through your past payments.

How to write a budget

3. Stop frittering away money

The process of writing a budget can be very revealing because it highlights areas where you may be overspending or frittering cash away. By reigning in this type of spending, you’ll free up more money to repay your debts, and you’ll also be less likely to borrow any more.

Easy cutbacks you may be able to make include:

  • Taking a packed lunch to work rather than buying food while you’re out each day

  • Ditching takeaways

  • Using public transport rather than taking a taxi or Uber ride

  • Going for a run or bike ride instead of shelling out for gym membership

  • Cancelling unnecessary TV subscriptions

How to write a budget

4. Cut the cost of essentials

Cutting your spending takes discipline when it affects your lifestyle. However, there are plenty of savings to be made on regular bills, which won’t have any impact on your standard of living.

You should consider:

  • Switching your energy supplier

  • Changing your landline, mobile and broadband packages

  • Ditching TV streaming services that you don’t watch

  • Shopping around when your car and home insurance come up for renewal

Compare insurance

5. Cut the cost of your debts

You may also be able to reduce the cost of your borrowing. If you can, this will make repaying your debts cheaper and free up more money to pay off what you owe.

Credit cards

You could also look at your credit card statement to see what you’re being charged in interest. Reducing the interest rate and amount owing on your credit cards will help bring down debt.

If your credit score is high enough, you can make significant savings by transferring your debt onto a balance transfer card with a 0% credit period. This will enable you to focus on repaying your debt without interest charges boosting it further. You may have to pay a fee, but the savings normally outweigh this cost.

If you’ve previously missed credit card payments or have a lower credit score, you may not be eligible for a 0% balance transfer card. However, you may still be able to find a card with a lower rate than your current one.

With any balance transfer card, it’s important to remember that its purpose is debt repayment - that means you need to be disciplined and not purchase anything with the new card.

You should also look at how long your interest-free or discount period lasts and ensure you repay your debt before it runs out. Otherwise, you’ll start paying interest again, and simply paying the card’s minimum repayment is unlikely to be enough to clear your debt.

How to save money with a 0% balance transfer credit

Compare 0% balance transfer credit cards


If you have a fixed rate secured or unsecured loan, you’ll probably have to pay to move to a cheaper option. However, it’s always worth checking.

Visit our loan comparison tables to compare your current loan rate with some of the best available deals.

Work out whether you could save money by moving your loan and then ask your lender how many monthly payments you have left and the outstanding balance.

You should also check whether there are any penalties if you repay the loan early.

Compare loans


A mortgage is likely to be your most considerable monthly expense, so if you can save money on your mortgage, it could make a big difference to the amount of money you have to tackle other debts.

If you’re currently on a standard variable rate mortgage, you could be paying more than you need, and remortgaging could be a simple way to reduce your monthly bills.

First of all, take a look at mortgage comparison tables to get a basic idea of the different types of deals available.

Then go back to your current lender and ask whether they can offer you a better rate. Remortgaging with your existing lender can be a good option because you don’t have all the costs of switching to another bank or building society. 

An independent mortgage adviser will be able to explain your options and help you work out the exact cost of moving your mortgage.

Remember, remortgaging is only worthwhile if it saves you money.

In all likelihood, you won’t be able to save money by remortgaging if you are on a fixed deal. This is because the penalty fees are likely to outweigh the benefits of a better rate.

However, you should still make a note in your diary so that you’re ready when your rate does run out. Then can switch straight away and start making savings.

Compare mortgages

6. Increase your debt repayments

Hopefully, once you’ve followed all these steps, you will be feeling more in control of your finances. You should know exactly how much you owe, how much money you have coming in and, with luck, your outgoings are lower.

That means you should be ready to start focusing on your debts and using the money you have freed up to repay them.  

Pay off as much as you can each month. Not only will this speed up your debt repayment, but it will also save you money in interest too. Whatever you do, don’t fall into the trap of rewarding yourself with a big spending spree.

Setting up debt repayments by direct debit can make sticking to your plan easier.

7. Prioritise your expenses

For your plan to be successful, you’ll need to prioritise your expenses. Payments that should be at the top of your list include:

  • Your rent or mortgage

  • Council tax

  • Secured loans

Keeping a roof over your head must be your number one priority.

Utility bills, food and unsecured loans should come next, with nice-to-have items, such as satellite TV, nights out, shopping sprees and home improvements at the bottom of the list.

8. Pay all your bills on time

It’s important to pay your bills on time.

Whenever you miss a payment, default completely or go over your credit card limit, you will likely be hit with a penalty charge, and you may find that your interest rate rises, too.

These fees quickly add up, so it’s essential to avoid them at all costs.

However, if you’re unable to make a payment for whatever reason, contact your lender and explain your situation. If you tell them in advance that you are struggling, they may be more lenient and may even offer you a payment holiday or the opportunity to reduce your monthly payments.

Top tip

Top tip Pay all your bills by direct debit the day after you are paid, so there’s always money in your account to pay them. This prevents you from missing payments and being charged by your bank.

9. Don’t borrow more

Despite what the glossy TV ads say, consolidation loans are not right for everyone, especially if you borrow more than you need to treat yourself. However, they can be appropriate in some circumstances, for example, when they reduce your overall borrowing costs. 

It’s also vital to avoid consolidating unsecured debts like credit cards, overdrafts or loans with a secured debt that will put your home at risk if you struggle with the repayments.

10. Stick with it - but seek help if you need it

You will need to keep on top of things to make sure that you reach your ultimate goal of becoming debt-free.

Once you have a plan in place and get into the habit of thinking before you spend, things will start to feel more manageable than they do right now.

If you’re still struggling with unmanageable debt, however, then it’s best to get help before it’s too late. Contact a charity that offers free debt advice, such as the Citizens Advice Bureau or Step Change.

About Hannah Maundrell

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