Nothing begins until debt dies

This would be a much better world if more married couples were as deeply in love as they are in debt.

— Earl Wilson

Debt is a right git. Once it’s got you in it’s filthy paws, it does everything to never let you go.

What is debt?

Debt is money you borrowed. An example is you take a loan to buy a product, such as a new shiny television. It cost £500, so you borrow £500 from a bank as a loan. You then have to repay that £500. Almost always, debt comes with interest. Interest is an amount of money, usually a percentage of the amount borrowed, that you pay to the money lender, such as a bank, as a reward for loaning you the money. Why else would they risk their money to you if they are not getting something in return?

For arguments sake, let’s say you borrow £500 with a 1% interest rate. You pay back £100 a month. After 5 months you will have repaid the £500, but the loan will still not be cleared as you also needed to pay the interest each month. So the loan of £500 actually cost you £501.25. Maybe that doesn’t sound too bad for the use of the money. But, remember, that’s only with a 1% rate. Try and find a loan for 1% and you’ll be looking for a needle in a haystack. Credit cards often charge 19% so in the same space of time you’ll have repaid £523.99. Store cards are around 29% so you’ll have repaid £536.82. And payday loans, which are only for the desperate and financially naive, can be 100%, so you’ll have repaid £631.66. Now you see the problems with taking debt.

Debt costs you money to repay. The deeper you drown in debt, the worst it becomes. People often end up so far in debt that they continue borrowing more hoping somehow this will help, but all it does is drag you further down. Debt can have a terrible impact on your financial life. If you begin to miss payments, default on a loan, then there can be serious implicates on you, such as you could go to court, you will ruin your credit score and not be able to get other forms of debt, such as a mortgage, resulting in you renting all your life, wasting money and having no home to pass onto your loved ones. Debt also causes stress. People often struggle to sleep at night, become unhappy, have friction between relationships, the list goes on and on.

So what’s the answer?

Level 1

The first thing you need to do is make a life long agreement with yourself to stop borrowing money. Write it down. Write it in anyway you want, but write something like, “I chose never to borrow again.” And then sign it. Yes. Sounds stupid, but sign it. No one will know.

The only thing that borrowing money has done for you is to get you into debt. You need to make tough decisions.

An example is you and your family have a summer holiday every year. You use debt to fund this. When next year comes you must sit down with your family and say you cannot go on holiday. You don’t have the money for it, and you are not willing to go into debt to fund it. Instead, have the holiday at home. Summer is a pleasant season in Britain. We often have hotter days than in Europe, so have the holiday at home. A day in the garden. A day in the woods. A day by the river or at the seaside. This home holiday will be so much cheaper, and if you put a lot of effort into it, everyone will have fun and won’t miss boiling, dusty Spain with tap water you can’t drink and uncomfortable beds and blistering sun-burnt skin.

Level 2

Once you’ve made an agreement to no longer go into debt, you now need to find out everything about the debts you have.

Who is the provider?
What is their email address and telephone number?
What is your account number with them?
How much debt do you owe them?
What is the interest rate on that debt per month?
What is the minimum payment you have to pay them?
How do you pay them? Direct debit, pay in a bank etc.

Once you have all that information, list each debt side by side and put them in order of the lowest amount of debt in the left hand column to the highest amount. Also when you’ve done this, add all the totals of the money you owe so you have one total debt figure.

Whatever the amount, small or ginormous, stay focused. Only someone poor with money would bury their head in the sand now and borrow more. That’s not you. You’ve made a pledge with yourself to never borrow again.

Level 3

Now make a life long agreement with yourself and choose to repay your debts in full, as fast as you can. Write it down. Write it however you want, but something along these lines, “I borrowed the money, so it’s my responsibility to repay it, in full.”

Now let’s look at how to repay it.

First of all we need to make some fake debt up for this example. Let’s pretend I’ve got the below debt.

Credit card A

Credit card B

Car Finance

Store card


In total I have £14,500.

Now I’ve made the pledge that I will never borrow again and I will repay my debt.

Option 1: Get help.

There are a number of organisations that help people with debt if they are struggling or can’t pay it. Best to discuss this with the Citizen’s Advice Bureau and they can offer help. I know nothing about these organisations so cannot comment.

Options 2: The Snowball Effect – highest interest rate.

Financially beneficial to your wallet. The debt to tackle first is the store card at 29%. The interest this creates is killing your financial self. You should pay the minimum payment on all of your other debts apart from the store card. On the store card you throw every penny at it until it is repaid. Once that’s done you move onto the next highest interest rate which is credit card A. Again, you pay the minimum on all other debts and throw as much as you can at credit card A. The plus point here is you are no longer paying off the store card, so whatever money you threw at that, plus the minimum payment you were paying on credit card A, now accumulates and you are hitting the debt with two loads of payments. Once you pay off credit card A, you move onto credit card B and throw all your money at that. And this snowball of paying off debt continues to roll picking up more and more money as you pay off another debt. You do this until you are debt free!

Option 3: The snowball effect – lowest owed amount first.

Option 2 is by far the best for your wallet. Option 3 however has great psychological power. Option 3 says forget about the interest rate, you’re already in bad shape. Go and pay off the smallest loan first. So rather than focusing on the 29% store card, you focus on credit card B at £500. For all other debts you pay the minimum payments, and you throw everything you have at credit card B. You will get this debt repaid quicker making you feel like you’re getting somewhere faster. It’s one less debt to worry about. And it’s one less debt generating interest. Once you’ve repaid the lowest amount, go for the next lowest, which is the loan of £1,500. You’ll be throwing all the money you were giving to credit card B to the loan, plus the minimum payment you were paying to the loan, so again, you’re hitting the loan twice as hard. Once that’s repaid go to credit card A at £2,500. And on and on until you’re debt free!

My favourite option is option 3. But it’s down to the individual. There are other things you can do to help repaying your debt.

The first is get an emergency fund.
The second is create, use and stick to a spending planner.
The third is call your providers and haggle, which is an additional option called option 4.

Option 4 – The haggle

Now you’re not a pushy person, you don’t like conflict, you’re easily sold to and couldn’t sell water to a thirsty millionaire. Don’t worry. The haggle isn’t like a stock market film from the 1980s. The haggle is this.

You call your provider, credit card company, loan company whoever, and, ever so politely, you tell them you want to review your terms with them. You tell a little white lie and say you’ve spoken to their competitor and they’ve offered you better terms. You say you’d love to stay with them because the customer service is so excellent. This will please the person answering your call. Life in a call centre can be pretty tough and they don’t often get compliments on all the amazing work they do. You say you’d like to stay, but you need a better offer. Before they can agree or disagree you state what you want. You want your interest rate to be 0% for X number of months. Go high. Don’t say for the next 3 months. I had a credit card with 39 months at 0%, just because I asked for it. And what’s the worst they can say? “No.” But what if they say yes? If they do you get 0% interest for many months meaning everything you pay to that provider goes off your principle debt and not as interest. If they do say no then ask them what they can do for you? If they provide a lower interest rate than you have now then take it. Anything lower is good. Of course read all the terms and conditions to this deal. But if it sounds good, then take it. Every little helps. If they say no and ask you if you want to cancel, you can tell them you have to pop out for a while and will ring back later. That way they don’t cut you off. Then you have a choice, you can go and try and find one of their competitors, tell them you have a debt with your current provider and want to transfer it to them, but only at 0% and for a long time. If they accept this offer, move your debt. If they don’t, can they improve what you have with your current provider? If so, take it, but read the terms and conditions. Even if you got 1 of your debts like this, it will be a benefit to you. If you got them all, that would be amazing.

And don’t forget, these providers want to keep you. It costs them lots of their money to acquire a new customer. You’re in debt for a reason, because previously you were poor with money. The provider doesn’t realise you’re becoming financially aware. You’re playing the game by their rules and you’re going to win.


Whatever option you choose, it needs to be right for you. The aim is to repay the debt and become debt free as fast as you can. You need to stay focused and disciplined. You need to constantly revisit the pledges you made of never going into debt again and repaying the debt if full.

On a side note, here are some great resources I’d recommend about debt:

Author: The Pound Pence Team

We're Garry and Dave, and we're addicted to talking about money. We want to help as many people as possible become financially free by setting financial goals, getting out of debt, building an emergency fund, saving into their pension, buying their own property and investing for the long term over many decades. We don't do get rich quick, but we do get rich.

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