In the busy nature of everyday life, it’s not uncommon for us to neglect our financial well-being. Unfortunately, if prolonged, this behaviour could lead to mismanaged finances and even debt.
Just like our bodies occasionally need a detox to cleanse and rejuvenate, our finances too occasionally need a re-evaluation and reset.
Enter the concept of a ‘debt detox’ – a method that aims to empower you with the tools and skills to reduce debt and achieve financial wellness and freedom.
If you want to break free from the cycle of debt, you will need a clear plan of attack. In this case, a financial detox can help reduce your current debts while also setting you up for future success by addressing issues at their source. A lot of thought and planning goes into it.
Feeling intrigued by the idea of taking on a debt detox, but don’t know where to start? No worries, we’re here to help you out.
In this article, we will cover five important strategies that you can implement into your financial detox strategy to reduce debt, get results and work towards a healthy financial future.
1) Identify and Organise Your Debts
If your financial detox aims to reduce current debt, there are a few methods you could use. However, the method that will save you maximum value in the long run is to target your highest interest-based debt first.
To do this, you will first need to list down all the debt balances you currently owe alongside their interest rates. Next, you will need to order the list from highest to lowest interest rates. The debt at the top of your list would become your first target.
Now, after you make minimum monthly payments on each of the other debts, you would have to put all the remaining funds towards the debt at the top of your list. After this debt is paid off, you can then move on to the next one on your list and so on until you finally become debt-free.
2) Track Your Money
Ideally, the main goal of a debt detox is to beat debt for good. As such, you will have to start by setting aside time to create a monthly budget. You could do this either by using budgeting apps or a spreadsheet.
In this budget, you will have to track and monitor your income and expenses for one month. Based on these numbers, you will be able to identify where you’re spending too much as well as any unused funds that you could use to pay off your debts more quickly.
After doing this, you will be able to create an accurate budget and debt repayment plan to keep your future spending on track. Not only will budgeting help you avoid overspending, but it also allows you to identify just how much extra money is left over every month that you could instead put towards debt repayment.
As such, in a financial detox, your budget becomes a lifelong tool that will help you work towards financial stability and achieving your goals.
3) Embrace Lifestyle Changes
Taking on a debt detox means evaluating every aspect of your life, including your daily lifestyle. This means creating a new lifestyle wherein you can live comfortably, without needing to constantly reach for your credit card.
Begin by looking for creative ways to cut back on your expenses and adopt frugal living habits. The more serious you are at this stage, the sooner you will be able to get your finances back on track.
For example, if you’re a problem purchaser who has a penchant for retail therapy, you need to understand that it is nothing but binge buying. While on a financial detox, you have to avoid it at all costs.
Moreover, even simple steps like cancelling a streaming subscription you don’t use often or trading your gym membership for a set of second-hand weights and home workout videos have a very big impact. With these simple lifestyle changes, you will be taking an important step in the right direction.
4) Negotiate with Creditors
If you feel your debt is too overwhelming, another way to make the best of your financial detox is by reaching out to your creditors. By doing this, you can attempt to negotiate more favourable loan repayment terms. For example, lower interest rates, extended payment periods etc.
In fact, many creditors are often willing to work with borrowers like yourself who are facing financial difficulties to find mutually beneficial solutions. By negotiating with your creditors, you may be able to reduce your debt and get a step closer towards becoming debt-free.
5) Start An Emergency Fund
A big reason many get trapped in the toxic spiral of debt is due to unexpected expenses. To keep your finances stable and healthy in the long term, it’s a good idea to start saving and setting up an emergency fund.
Aim to set aside a little every month, even if it’s just £50 here and there. Once you have your debts under control, continue adding to your emergency fund until you have around three to six month’s worth of living expenses stashed away.
As such, if you run into any unexpected expenses like sudden car trouble or your hours at work getting cut, you will have a safety net to fall back on and are less likely to rely on credit to get by.
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Now that you have an idea of what strategies you could implement, why not give them a try yourself? However, remember that if you do find yourself in any trouble along the way, we’re here for you.
As one of the leading online lenders in the UK, Salad Money is ever ready to lend a helping hand if you require urgent financial aid.
With our open-banking system and More Than Your Score loans, you can put your credit-score-related worries aside and rest assured that you will be judged fairly. With our unique affordability assessment system, we offer a completely different way of accessing credit. Helping you to apply for credit without ever using your credit score.
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