Debt has reached epidemic status in the Western world.

Every day in the UK, a person is declared bankrupt approximately every 5 minutes.
Every day in the UK, 1800 County Court Judgements are issued with an average value of around £2200.
Every day in the UK, a property is reposessed every 20 minutes.
Every day in the UK, around 10 people are made redundant.

If these figures don’t frighten you, then you are either debt free or independently wealthy – in which case why are you reading this?

For the rest of us, the figures are all too real.

Most people I know have a mortgage.

Most people I know have credit card debt.

Most people I know have a loan (or three).

Most couples I know are both working.

Most people I know live to service their debt.

What would life be like with much smaller debts?

What would  life be without any debt?

Is that even possible?

For most of us, we manage from month to month – as long as something doesn’t upset our cash flow – like a major car breakdown, a boiler replacement, a major appliance death. Then we struggle to “find” the cash to fix these things or we just borrow (aka “find”) the money, increasing our debt.

Is there a better way?


Here’s how to start the process of making your debt go down instead of up.

1. Create an emergency fund containing enough money to smooth out any bumps in your cash flow. For the above scenarios, this means around £500. Never use this for anything other than an emergency, and when you use it, make it a priority to replace it.

2. Once the emergency fund is in place, rank your debts in order of size, then:

  • Starting with the smallest, add as much as possible each month to the minimum payment.
  • If this is a “revolving credit” arrangement like a credit card or a store card, DO NOT increase your debt on this card.
  • If you have recurring charges on this credit source, see if you can swap them for a direct debit or standing order payment from your current account (or other suitable account).
  • Your goal is to eliminate this smallest debt first. DO NOT “transfer” this debt to another card or take out a new loan – we are not refinancing here, we are eliminating!

3. Go to step 2.

Obviously, this is a long term strategy.

It is not easy. You will require self-discipline. You will require an iron will. You will require your partner to be on board.

How to start.

First, examine every purchase.

Do you need it, or just want it, or is it just a habit?

For example, if you are a Starbucks/Costa user, each coffee purchase averages around £2.50. One of those a day for five days is £12.50. In two months you have saved a £100 towards your emergency fund and it could be fully funded in less than a year. All from cutting out one coffe a day. If you also bought food with your coffee, the timescale will be shorter. If you think you can’t give up your coffee, then buy a caffetiere and some Starbucks House Blend (or Costa) ground coffee and use that – it works out much cheaper, but your emergency fund will take longer to put in place.

If you have a take-away once a week, you are probably spending around £10-15 on it. Same principle as above – cut out the take-away, put the money towards the emergency fund. I replaced my take-away with a load of sauteed vegetables and some sausages – average price per meal was around £3.50 and twenty minutes cooking time – quicker than the time for the take-away to arrive, and it’s healthier too!

If you have a store card you WILL use it, so cut it up. Instead of buying a new piece of clothing, look through your wardrobe for some older items that can be mixed and matched and wear those combinations. You might consider implementing Project 333. If your average item purchase was £25 per week your emergency fund will be up and running in 6 months or less.

If you are starting step 2, use the money you built your emergency fund with to add to the minimum payment for your chosen debt elimination target. When you have eliminated your smallest debt use the money you were paying to that debt to add to the payment for your next debt elimination target, and continue to do so until you are left with a mortgage only.

When you reach this stage, you will be far better off than most UK households – and all because you gave up a cup of coffee every day!

Some notes from my personal debt reduction journey:

Total time taken to reduce my debt to a mortgage only was 9 years
What did I use to start? I gave up smoking, and put the £22 per week to the emergency fund. (£22 per week was the cost of 200 smokes back then)
Number of times I had to use my emergency fund – 6 (car x 3, boiler, TV, Fence blew down). Each time it was replenished before I continued.
Number of credit cards eliminated – 4 ( I still have one, and use it ONLY for the things that I would use the emergency fund for – and it is paid off each time I use it by the emergency fund – Credit Cards provide some purchase safety features that cash doesn’t. )
Total amount of debt paid off was around £19000 (not including mortgage)
Number of times I was made redundant – 1
Number of times I faltered along the way – too many to list!

Why this works

This is the same principle as compound interest – small, regular savings grow exponentially the longer you save.
By applying the small amounts of the first few debt payments to the larger ones, you are compounding the amount of your debt reduction – the last Credit Card debt I had was very quickly reduced to nothing.

Will you be able to do it?

This process requires nothing more than self-discipline. If you cultivate the habit of questioning each purchase, then you will be able to say no to an impulse buy –  because you won’t be acting on impulse. Make deliberate purchases and you will be in control of your money.

What do you gain from the pain?

I got an almost stress-free life, a healthier bank balance, a savings habit, and far less arguing with the better half about money.

I hope you get as least as much.