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10 steps to becoming debt free

Accumulating debt can become a real stress and have a major impact on your financial future. Here is a step-by-step guide on how to get debt free and take control of your finances.

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Meet the problem head on

Leaving bills and bank statements unopened only makes the situation worse.

Facing the problem head on is the only way to stop your debts getting worse. This may seem intimidating, but it has to be done if you want to become debt free.

Cut back on spending

The first part to becoming debt free is to simply spend less to begin with. Keep a spending diary or write a budget to really open your eyes as to where you are splashing out unnecessarily.

Try a few small changes like:

  • Taking a packed lunch to work rather than buying food every day

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

  • Going for a run or bike ride rather than shelling out for an expensive gym membership

Cutting back on the non-essentials will free up more money to put towards clearing your debts. More importantly, you it'll keep you from taking on more debt.

How to write a budget

Make a debt escape plan

Making a plan gives you focus and helps you understand exactly where you are financially. You will need to:

  • Work out how much money you have coming in each month. Include your regular wages as well as any benefits, child maintenance or any other income you receive.

  • Work out all of your outgoings, including 'essentials' such as your mortgage, outstanding debts and food as well as more 'luxury' spending.

  • Be realistic about these figures. Work to a 'worst case scenario' where you balance the lowest possible amount of income you're likely to have coming in against the largest outgoing you are likely to have.

  • Identify how much money you have available to pay off your debts and where you can cut back and make savings on your current spending.

The point of this exercise is to get a realistic view of your finances and identify what needs to change. Good or bad, once you know where you stand, you are in a position to do something about it and reach your goal of being debt free.

Prioritise your expenses

Give precedence to essential payments such as:

  • Your mortgage

  • Council tax

  • Secured loans

Keeping a roof over your head is your number one priority.

Utility bills, food and unsecured loans should come next in line, with 'luxury' items such as satellite TV, nights out, shopping sprees and home improvements sitting at the bottom of the list.

Pay your bills on time

Whenever you miss a payment, default completely or go over your credit card or overdraft limit, you are usually charged a higher interest rate and a penalty.

These fees quickly add up so it's important to try to avoid them at all costs.

However, if you will be unable to make a payment for whatever reason, it is important to contact your lender and explain your situation.

If you are up front and tell them that you are struggling, they may be more lenient and willing to negotiate a payment holiday or the opportunity to reduce your monthly payments.

Top tip

Arrange to make payments by direct debit just after you get paid to prevent unnecessary fees by ensuring that the money is available to go out of your account on time.

Re-jig your debts

By reducing the interest you pay on your debts, you will make your commitments cheaper and have more spare cash to re-direct back towards clearing your outstanding balances.

Credit cards

Take a look at your credit card statement; it should tell you the rate of interest you are currently paying.

Your aim should be to reduce the amount of interest accumulating on your credit cards, and thankfully balance transfer credit cards could help with this.

When it comes to making your credit card debt cheaper you really have two options:

  • Move the outstanding debt to a credit card that offers an interest free balance transfer. Weigh up the cost of balance transfer fees and the likelihood that you will need to switch again after the initial offer expires.

  • Transfer your debt to a card that charges a discounted rate until your balance is paid off. While you will still be paying interest, it will be at a reduced rate and you are unlikely to incur any fees or charges when you move.

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, it is unlikely that you will be able to move to a cheaper option without a cost. However, this is still worth considering.

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

Work out whether you could save money by moving your loan by contacting your loan provider to find out how many monthly payments and how much of your debt you still have outstanding.

It is also essential that you find out what the penalties are for early repayments.

Compare loans


This is likely to be your biggest expense so if you can save money on your mortgage it could make a big difference to the amount of money you have available to tackle other debts.

If you currently pay the standard variable rate, you could be shelling out unnecessarily, and looking to remortgage could be well worth your while.

First of all, it pays to take a look at mortgage comparison tables so that you have at least a basic idea of the different types of deals available.

It then pays to go back to your current lender and ask whether they are able to offer you a better rate. This can be a good option as you can avoid paying out for any of the repayment, application or legal fees associated with remortgaging.

It can be a good idea to speak with an independent mortgage adviser who will be able to explain your options and help you to work out the cost of moving your mortgage.

Remember this is only worth doing if you can save money. Read our remortgaging guide for more information.

If you are tied into a fixed deal it is unlikely that you will be able to save money by moving your mortgage as the penalty fees are likely to outweigh the benefits of switching to a better rate.

However, making a note in your diary of when your current deal ends is essential.

Compare mortgages

5 things you need to know before you remortgage

Don't borrow more

Despite what the glossy TV ads say, consolidation loans are not always the best solution, especially if you borrow more to 'treat' yourself. However, they can be appropriate in some circumstances.

Avoid consolidating unsecured debts like credit cards, overdrafts or loans into a secured debt. This puts your property on the line if you miss the repayments.

Cut the cost of essentials

The cost of running a household is significant and you could make substantial savings by making only small changes.

You should consider:

Insurance is another area where you can make big savings for relatively little effort, so shopping around and comparing quotes is well worth doing.

How to switch energy supplier

Compare insurance

Put your savings towards your debts

After giving yourself a 'financial detox' by switching to cheaper financial products and cutting your spending, you should have freed up a little extra cash.

Rather than treating yourself for being good, plough this right back into your debt.

Put as much money as possible towards paying off your debts each month. You can then clear your debts much sooner than was previously possible.

Stick with it

You will need to keep on top of things to make sure that you reach your ultimate goal of clearing what you owe completely.

Once you have a plan in place and get into the practice of thinking before you spend, things can seem a lot more manageable than they feel right now.

Having said that if you feel you are struggling with unmanageable debt and you really can't see a way out it's important that you contact a free advice agency such as the Citizens Advice Bureau who will be able to suggest alternate means by which you can address your debt.