When you have lived through the experience of being in debt and come out of the other side, one thing is for sure: you never want to go back to that place again.
Being in debt is hard on your finances. Still, it is hard on your mental health too, It can feel hopeless and lonely when you have lots of debts that you are struggling to pay, so when you finally do get to a good point with your finances you need to focus on rebuilding your life and living well after debt.
11 Tips for Life After Debt
If you have recently worked hard to dig yourself out of debt, and you want to get back to normality and start living your best life, here are a few things you should do:
1. List your bad financial habits
It’s never easy to take a cold hard look at your life to see what your flaws are, but if you are serious about rebuilding your life after debt and you want to avoid falling into the same old traps that got you into trouble in the first place, then being honest about your bad financial habits is a must.
Maybe you spend lots of money you don’t need to on trying to keep up with the Joneses, or you’re bad at budgeting, so you use the credit card to get you through the end of the month. Write down anything you do that might not be ideal for your finances and pin that list on the fridge so you can look at it regularly and remind yourself of the traps you should avoid.
2. Draw up a budget
If you want to keep yourself on the straight and narrow, financially speaking, then you must draw up a family budget. List all of your incomings and outgoings, and try to find any areas where you can make savings.
Once you have a detailed budget that enables you to afford the essentials without getting into debt, and maybe a treat or two because you need something to look forward to, then you should do your best to stick to it as closely as you can. Use it as your guide map to staying debt-free, and chances are you will be absolutely fine.
If you find it hard to draw up a budget, numerous apps, many of which you can link to your bank account to make life easier, will do most of the work for you. Be honest, use the technology to your advantage and start living a stress-free, debt-free life as soon as possible.
3. Remember you have options
It’s really easy to feel like your past debts have ruined your life. Your credit score may have taken a nosedive, and you might not feel like you can do everything you dreamed of doing, but you really can.
If, for example, you want to get on the housing ladder, a bad credit mortgage might be a possibility, or if you want to go travelling, a good budget will help you to save up to do so, even if it takes a bit longer than it would have if you put it all on a credit card.
Debt can make life more difficult for a whole. But if you deal with your debts and overcome them, you can get things back on an even kee; and start really enjoying life again. Remember that when things seem tough and it will get you through.
4. Cut up your credit cards
If you still have credit cards, then you should think about cutting them up and not applying for more. It can be tempting to keep one card for emergencies, and if you do not have any savings at all, this might be sensible to do. Still, you should work on building up strong emergency funds as soon as possible so you do not have to rely on credit cards and loans ever again, and you can live more effectively within your means.
5. Find fun things to do free
If you want to stay out of debt, but you still want to have a great life, then focus on the free and cheap things you can do in life that are just as much fun as an expensive holiday or a costly cup of takeout coffee is imperative.
Most towns and cities have lots of free things to do, from craft lessons at the library to free museum and art gallery entry. There are also lots of parks, forests and beaches just waiting to be explored, and although not everything you do has to be free, not of your budget allows for some treats anyway, the more appreciation you can get out of free and low-cost activities, the better financial position you will be in, and the more fun you will have in life without having to worry about debts.
6. Check your credit report
It is always sensible to periodically check your credit report for errors. Chances are your report will not be in great shape if you have had trouble with debts in the past, but that does not mean you cannot improve your situation by reporting any errors to your report, which might show you in a poorer light than necessary, in a financial sense, at least.
Although you probably won’t be taking out any more credit cards or loans, your credit report is still important if you want to apply for a mortgage or rent a property, for example. So anything you can do to improve your score, including paying your bills on time in future, will help you to move on with life after debt.
7. Set goals
Setting strong financial goals is smart when you’ve just got out of a tricky money situation. It will give you something to aim for so that if you are tempted to go down the wrong road again, you will be more likely to find the strength to stop yourself and stay on the path to a debt-free life.
Goals can be anything you like, from saving for a big family holiday to ensuring you have a year’s income in your emergency fund. It doesn’t matter what your financial goals are as long as they are sensible motivational, and ultimately, with a bit of work, achievable, too.
8. Set up Direct Debits
If you want to avoid late payments and missing bills, then setting up as many direct debits for as many of your bills as you can is a really sensible move to make. Not only will it ensure that everything gets paid on time, so you don’t end up worsening your credit score or getting hit with late fees, but direct debt payments are often cheaper too, which means a little extra cash you can use to start saving.
9. Save
If you are serious about starting over, staying out of debt and having a great life, then you need savings. You should, as a minimum, aim to build up an emergency fund that is equivalent to 6 months’ salary. That way, if you end up out of work or something disastrous happens, you will have time and money to get you through without having to report debts like you might have done in the past. It will also give you a huge amount of peace of mind to know that you have the cash there should you ever need to use it.
10. Pay everything on time
If you can start paying all of your bills on time every month, something having direct debits set up will help, then this help you to start repairing your credit score very quickly. The more on-time payments that are recorded on your credit file, the more confident creditors, will have that you are sensible around your finances, so if you do need to apply for a mortgage or something similar, then you will be in a much better position to do so, with a much better rate of interest than you might otherwise be able to get.
11. Join a credit union
Joining a credit union is a great way to build your confidence back, save as much money as possible and get access to fair cheap credit if you do need it. They are wonderful places for people who may have struggled financially in the past, so do be sure to consider them.
Right now, it might feel like debt has ruined your life, and you are never going to get back on track again, but that is really not the case. You are far from the first person to ever have struggled with money, and you will certainly not be the last, and most people do bounce back, but you have to put the effort in to make that happen. Good luck!
