How To Manage Debt Wisely

12th July 2017
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In the UK in 2017 personal or consumer debts are accumulating at 27% of income.

The average total debt is nearly £13000 per household with the whole of the UK owing £349bn in unsecured debt.The biggest drivers for lending are cars and credit cards.

debt management problems

There is a new worrying trend of people using credit cards to buy essentials such as groceries.

To get out of the debt cycle the first step is to acknowledge that you owe more than you need to.

If you are not reducing your debt and just paying for the interest accrued or just over then you need to act now and not tomorrow.

Here are steps to managing your debt:

1. Know How Much You Owe.

Sit down, take all the bills and add them all up including those owed to family and friends and the loan shark.

Don’t forget the student loan. Students who started from 2012 onwards are expected on average to owe £40 000 to £57 000.

Knowing how much you owe will help you see the enormity of the debt and the effort required to clear or cut the debt.

2. See The Trends On What You Are Buying.

Knowing what you are spending money on, can help you find out what you can cut on.

If you realise that you are withdrawing money on night outs, then take cash when you go out and leave the credit cards at home.

If you are using your credit cards to buy coffee every working day, why not use top up cards or loyalty cards from your favorite coffee house.

Have a budget.

Budgeting helps you to spend within your income range or means. A budget is all about knowing how much you earn and putting a sensible spending plan with priorities.

A budget is not shopping list, it has to balance and minimises or eliminates borrowing.

Read More: 8 Reasons Why You Need A Budget

3. Prioritise Your Spending

Pay the essentials first like rent, transport food and other bills and then move to the non-essentials like entertainment.

If the budget runs out you can skip the non-essentials.

If you spend most of your income on non-essentials and then you have to use debt to pay for essentials then the cycle becomes vicious.

Read More How To Live Within Your Means

4. Cut Your Spending Or Increase Income.

Having seen how much you owe, seen your spending habits, prioritised the essentials in your budget and then you realise that you do not have enough income to cover everything then there have two options a) get more income and b) cut the non-essentials.

Most people will find that increasing income is not a readily available option so cutting the only way.

We are not talking about frugal living or severe austerity, but tightening the belt.

Making sure you can live comfortably whilst not overspending.

Read more: 16 Ways To Reduce Your Expenses

Read more: 10 Ways To Make Extra Income

5. Have A Clear Plan Of Recovery

This means give yourself a SMART goal.

SMART as in S: specific i.e cut or reduce debts.

M is for measurable i.e reduce debts by 80% in 3 years.

A is for actionable meaning you can do something like cutting non-essentials.

R is for Realistic, reducing debts by a small manageable rate until the target is reached is the best way. Going cold turkey is unrealistic.

T is for Timed, e.g reduce in 3 years.


There are many things in life that will make debt that appear to be manageable and then suddenly a person is overwhelmed.

A job loss or illness can happen in this world full of ever-changing fortunes.

To live a life with little or no debt is the best way.

Relationships can flounder or death can rob partners and then suddenly you find yourself having to pay for all the bills you used to share with someone.

Or it can be the other way round, lack of financial discipline can lead to relationship breakdown.

A famous singer was dumped by a billionaire for overspending. Manage your finances well and you will live a better and healthier lifestyle.

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