Cash ER: How to get out of debt

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Seven easy steps to get out of debt. Simple as that.

Piggy Bank
Unfortunately, it's all too easy to get into debt.

Credit cards and student loans mean it's easy to despair and think you'll never see the end of the tunnel.

But fear not, follow these easy steps by Mary Waring, an independent financial advisor and author of the book The Wealthy Woman, and you'll find it much easier to get out of debt. Though remember to be patient as it won't happen overnight.

Step 1: Work out where you are now

Unless you know a starting point you have no way of determining whether your wealth is improving. Write down the total value of everything you own (your house, car, savings, pensions, investments etc.).

Write down the total amount you owe (your mortgage, credit card balances, bank loans, HP etc.). The difference between the two represents your net worth.

Step 2: Get your debt under control

It's very easy to spend money on credit cards that you can't really afford. But did you know that if you only repay the minimum balance each month it could take up to 47 years to get the balance repaid and cost 3-4 times the initial balance?

The important thing to look at with any debt is how much you are paying back in total, rather than how much you pay back each month.

Step 3: Save before you spend…not the other way around
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Quite often we have good intentions to save whatever balance we have left at the end of the month.

However, what frequently happens is that there isn't anything left at the end of the month, since spending often expands to match your income.

To avoid this, have a standing order which leaves your account on a regular basis before you start spending.

Step 4: Don't think it's not worth saving a small amount

It's very easy to think it's not worth saving just a small amount each month. But over time, that small amount will really add up.

If you invested your child benefit from the day your child is born and get a 10% return, at the age of 18 that would be worth over £53,000.

If you left this money invested continuing to earn 10% return each year it would be worth over £4.6 Million when they are aged 65. That's based on investing £20.30 per week- or £2.90 a day. A similar price to an upmarket cup of coffee!

Step 5: Monitor what you are sending
Nicki Minaj at the Christmas Extravaganza in New York City

© Getty - Handbag

If you really want to start reducing your spending, keep a detailed record of all you spend over a three month period, including everything you spend by cash.

Carry a notebook in your bag or get an app on your phone to monitor it. Look at every item on the list and ask yourself "how can I reduce this?"

So consider not eating out so often, or maybe eating at less expensive venues.

Step 6: Don't fall into bad habits

The steps should be done on a regular basis. If you feel yourself slipping into bad habits and overspending go back through each step in detail. It's not a one-off exercise; it needs to be done on a regular basis.

Step 7: Make sure you enjoy your money

If you enjoy doing all these exercises it will be much easier to get on top of your finances. Take small steps each day to move you towards your goal.

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