How to Deal With Debt When You Don't Know Where to Start

Let’s talk DEBT! Why is it that debt is such a big part of many people’s lives and yet NO ONE really speaks openly about it? 

People would rather read about it online, or read about other people’s success stories on blogs!

Too many people, living debt free is not something that they consider possible AT ALL. Debt has just become part of life.

Did you know that 80% of Americans are in credit card debt at least over $15,000?

And 8 million of UK adults owe at least £10,000 – yes per person!. Most of this being credit card debts. Can you imagine Living with this kind of debt? And this excludes any mortgages, secured loans, and Purchase Hire loans.

Many people are so comfortable with it yet but they don’t even notice it as being a problem.

Did you know that your debt as a parent can be passed on to your children?

Would you really want to burden your children with your bad financial management?

No. Nor would I. That’s why it’s important to try to live a ‘debt free’ life now…for the sake of your future, your children and your children’s children!.

Be an example to the coming generation!

The problem with our generation is that we’d like in financial education. And deem a debt free life to be for rich people. This is NOT the case. It is possible to live debt free when you give yourself a chance to learn how to manage your finances.

Here are a few steps to help you get out of the debt and help you work towards financial freedom.

Accept and Acknowledge Your Debt as A Problem Needing a Solution.

To successfully deal with your debt, it is important to accept and acknowledge your debt as a problem that needs a solution. You are more likely to succeed in making long-lasting changes when you acknowledge and accept your financial situation.

Part of the acceptance is being honest and transparent with yourself in your current situation. This means that you need to know the exact amount of debt that you are in. How much you earn and what you can and cannot afford.

Assess Your Current Financial Situation.

It is important that you are aware of your financial situation at present. You cannot try to resolve a debt that you are unaware of or its amount. Do not make estimations. Collate all your debt but you all every credit card come on a store card, loan, payday loan, any bills that you’re behind on, and any money you owe friends and family.

Write down everything and work out your total debt as a lump sum. This will give you an idea of how much money you need to raise to pay off your debt. Again, do not make estimations!

Don’t Panic – Breathe in and Out

Seeing how much you owe written down in black and white may come as a shock. Please don’t panic. Panicking may only lead to an adverse reaction to your debt.

Instead, think positively about that debt. Now you know EXACTLY how much you owe, you’re in a better position to start making changes and dealing with it. So breathe in and out and affirm you will work hard to bring that figure down to 0. Keep this figure in your head as a reminder whenever you’re moving away from your mission.

Arrange Your Debt into Order of PRIORITY.

This is a very crucial and important step. You need to arrange your debts in order of priority.

Not paying off some debts first may result in serious consequences such as your home being repossessed or being evicted if you rent your property.

Arrange your debts in these categories:

  • Priority Debts

    – Such as Mortgage and any loans secured against your home, Rent, Gas and Electric Bills, Tax (This can be Council Tax, Income Tax or Car Tax). These debts need to be dealt with to avoid further action being taken against you. Ignoring these debts can results in Court Summons, visit from the Bailiff, Eviction or Home repossession.


  • Non-Priority debts

    – Such as Store Cards, Payday loans, credit cards, overdrafts and Loans from friends and family. Not paying off these debts will not immediately result in financial emergencies. Therefore, they should also be considered but are to be secondary to Priority debts.

Honestly, Figure Out What Caused the Debt

Think back to what caused you to acquire the debt in the first place.

Was it because the bank made you aware of your eligibility for a credit card and you jumped at the chance of saying yes without really knowing how to properly use a credit card?

Or was it because of a financial emergency?

Or do you find it hard to budget and therefore always in finding yourself in deficit at the end of each month?

Whatever the reason I write this down and assess how you are going to deal with those situations in future.

Assess Your Net Income and Expenses.

Work out exactly how much money is coming in. All regular income should be considered.

So If you have a full-time job and care for your friend’s baby every Friday and have done so for the last 6 months, then this income should be considered.

Because technically, you can depend on it.

However, if you also sing in a band and payment from that is heavily dependent on securing a gig and satisfying the bar manager’s music taste, then you don’t count this money as an income stream.

BUT, any money you make from your gigs should be put into either an emergency fund or a savers fund. Just because you are not counting it as income, does not mean you must reckless with the ‘spare cash’.

To work out your expenses, collect every single receipt for any, and yes, I mean ANY purchases you’ve made in the past months (preferably 3). From that designer handbag to that pack of chewing gum!

Now I understand that most people throw away their receipts, if you are one of them, make it a habit to keep your receipts, it could be for a month or a year.

This might seem a bit much but trust me when you sit down at the end of the month and total up your receipts, not only will you see what you’re spending money on, but HOW MUCH you’re spending too.

If receipts are not available immediately, use your bank statements, go back at least a year seeing where your money is being spent. Make sure you cross T’s and dot the I’s. Leave nothing out.

Once that’s done, take the total amount of expenses away from the total amount of Income (Income – Expenses).

If you have money left over from that – then great, that’s a great place to start.

When you are breaking even, then you need to start making immediate changes and try to see where you can save money.

Unfortunately, if you are in deficit each month, then You need to work extra hard to cut down some expenses and need to tighten your Budget.

Start Your Payment Negotiation

With the information of your income assessment at hand, call you creditors using the priority list made earlier.

Deal with Priority Debts FIRST. The most common misconception people make about lending companies is that they’re all like ‘Loan sharks!’ No. They are not going to threaten you and/or your family for not paying their money back. Therefore, do not be afraid to call them.

Most times, they will be very helpful in trying to come up with a solution for you. For example, they may agree to an affordable payment plan to pay the debt off. Whatever you do, just talk to your lenders and negotiate a solution for your debt.

Moving Forward

  • Make sure you stick to your payment plan. When you set a payment plan in place, ask your lender how long the plan is in place and when it’s due for renewal.

Some lenders can only set up a plan for a limited time, this plan will expire without your knowledge and may result in you incurring higher interest charges. You don’t want that to happen.

  • Start Budgeting. Don’t allow your ‘low income’ be an excuse for not budgeting!
  • Review your reasons for getting into debt and steer clear of those habits. Start an emergency fund and a separate Savers account. Be honest with yourself and only put away what you can afford.

There are many places where you can find financial help in your area. Places such as The Citizens Advice Bureau, Free Money Advice Services.

Please do not Bury your head in the sand in the hope that your debt will disappear – It won’t!

You CAN have a DEBT FREE LIFE – Yes it is possible. You just need to put your mind to it and be intentional with your money. Many People are clearing their debt every day and you can too!

Imagine a life without any debt! How would that make you feel? 

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How to deal with your debt when you don't know where to start


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