5 Ways to Save Money and Pay Off Debt

Wednesday, April 20, 2011

Most of us would like to be able to pay our debts off more quickly, but that's often easier said than done. However, with a few changes to the way you manage your finances, you may find it easier than you think to free up money for paying off debt.

A quick note: these are tips for people who are financially comfortable, but want to focus more on reducing their debts. If you're struggling, you may be better off discussing debt solutions with an expert debt adviser.

Get rid of things you don't needHow much do you spend every month on things you don't need? Be honest with yourself - it's probably more than you'd like to admit. Life would be boring without a few luxuries, but if you're focused on repaying debt then you should be able to make a few sacrifices.

Take a look at the things you spend a lot of money on - whether it's clothes, coffees, CDs or anything else. By cutting back, you could free up a good amount of money to pay towards your debts.

On top of that, why not get rid of a few things you already have but don't need? It's easier than ever to sell things online, so you could take advantage and earn yourself some money to help with your debts.

Use savingsUsing savings to repay your debts could take some of the pressure off your monthly budget. Alternatively, it could help you repay your debts more quickly - and the faster you repay your debts, the less interest you're likely to pay in the long run.

However, don't spend all your savings doing this, unless you're really struggling financially, because you might need them in an emergency - and find you're unable to borrow any money at a decent rate of interest.

Think about getting a 0% interest credit cardYou might think of a credit card as a way to spend money, but certain cards can actually make repaying debt easier. 0% balance transfer credit cards enable you to transfer debts from other cards and then repay them without interest, reducing the amount you pay overall by a potentially significant amount.

A few things to keep in mind, though: the interest-free period doesn't last forever (usually up to around 16 months) and you'll only normally be able to transfer debts from other credit cards - so it probably won't help with loans and overdrafts.

Finally, it's not a suitable solution for people with problem debts, because it doesn't address any underlying problems with your finances.

Switch providersSwitching supplier on things like gas, electricity and broadband could save you a lot of money. There is often a significant difference between the cheapest and the most expensive deals.

However, be careful. The very cheapest deals might not fully meet your needs, so make sure you're searching for the cheapest suitable deals rather than the cheapest altogether.

Walk/cycle instead of drivingA car is a necessity for some journeys, but if there's a shorter journey you think you could walk or cycle instead, you could save yourself money - and get fitter at the same time!

With the cost of fuel on the rise, finding alternative methods of transport could become increasingly important over the next few years. Get a head-start and get those walking boots on!

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