Analysing Your Debt and Cutting Down on Spending


Here’s a guest post written by Andreas Nicolaides, a personal finance author for the UK based

We are all faced with debt in our lives at one time or another, however, managing and controlling your debts is
an entirely different matter. Learning how to control your debts is a big learning curve, we all like to control our
finances in our own ways. My aim from this article is to detail what I believe is an effective way to getting started,
and hopefully I can help one or two of you as a result.

Face up to your debts

This first step of dealing with your debts is to acknowledge them, many people ignore the fact that they have a few maxed out credit cards, and they just let them sit in the background. Acknowledging your level of debt is the first step to learning how to effectively control it.

Analyse your debt

The first thing here is to analyse how much debt you actually have; I know this is a daunting prospect but knowing an approximate figure is the only way that you can set yourself a realistic long term goal. First grab yourself a pen and a piece of paper and note down all of your debts and how much you repay per month and per year. With this section try and be as thorough and as honest as possible.

Once you have a total debt figure you believe to be correct you can start by sorting your debts in order of importance. The debts you should be looking to pay off first should be the high interest ones; these should be attacked aggressively whenever you have some spare cash.

Cut down on your spending

Most people seem to enter the debt world by basically spending too much money, this section may be obvious for most of us but some people really struggle to spend less than they normally do, it’s more of a habit thing than anything else.

Cutting down on your spending should coincide with your financial plan; here are a few tips to get you started:

  • Compare credit cards – Using a credit card comparison site you could quickly and easily save some money, you could compare how much interest you are paying from month to month and find a cheaper alternative card for you to use. Compare your bills – Using a price comparison site you can compare how much you are paying on your bills compared to other providers, don’t be afraid to switch if you find a provider offering the same service for cheaper
  • Shop with a list – Taking a shopping list with you when you go shopping can help you save money by not buying unnecessary items, the key here though is to ensure you stick to the list, which can take a lot of will power
  • Savings Calculator – Using a savings interest calculator can help you if you have a savings account, or if you are planning to open one to help you pay your debt. If you have any spare cash, you can identify how much interest you could possibly gain by using a savings account, and then use it to pay off some debt at a later date. I would however only advise doing this if your debts are not severe.
  • Have a plan– Once you have analysed your debt and you have identified ways where you can save money, the next step is to set yourself an objective. It should be realistic and something that is measurable. You could for example aim to reduce your debt by $1000 over the next year; you need to set an aim that this realistic for you.

Remember that when trying to reduce your level of debt you will be hit by stumbling blocks, it’s all a big learning
curve and the main thing here is not to give up, in the long term you will see the benefits.

Y&’s Thoughts: These are great concrete suggestions to analyze your debt and cut down on spending.  I think it really helps to make a shopping list and stick to it.  I just came back from shopping last night and stuck to my list and was “over budget” by only $5.  I made sure I added up everything that was on sale in the flyer and ensured that I didn’t go over this time.  Also, facing up to your debts is huge, in my opinion.  The first step to ANY behaviour change is to acknowledge that the behaviour needs to be changed in the first place!

Readers, what do you think? Any other suggestions?


7 Responses to Analysing Your Debt and Cutting Down on Spending

  1. I swear you are talking to me this morning with Face Your Debts. This is something I hate doing, but know it is the only way back to freedom!!!

    The thing is I have been here before, mountain of debt, and wondering how to get out of it. But what my wife and I did the first time was simple. We got all our debts, wrote them down on a piece of paper and hung it in our bedroom.

    Each day we would look at it and make a decision to start working them off one by one. Eventually we did it, bought the house we wanted, and life was good.

    I lost my business and money has been tight lately, but now is the to get back on that path, set some goals, and start striving to reach them.

    Thanks for the kick in the pants! I think I needed that….I know I needed that.

    • @Freddie- That’s an excellent idea- hang your debt in your bedroom (or an even better place would be the bathroom mirror!). You’re welcome for the kick in the pants- good timing I suppose. Sorry to hear that you lost your business. I look it as a way for the universe to give you change, without you having to initiate the change. So perhaps losing your business might be a good thing as you have time to venture into other areas you are interested in pursuing now. Sorry to get all cryptically new age on you 😉

  2. I think being honest with how much debt a person has is the first and biggest step. I know that sometimes I don’t factor in my student debt or car loan, and then I think, “Oh, I’m debt free!” But then, I realize that’s not the case at all! I’m just compartmentalizing my debt instead of actually adding it ALL up.

    • @Little House- I completely know what you mean, Little House. Sometimes you don’t think of those things as debt, but it is (for example, a mortgage debt). It boils down to being completely honest with yourself.

  3. I think it is worth noting that comparing credit card interest rates is a worthwhile “second line of defense”. The first line still should be to spend within your means, so that you almost never have to pay credit card interest.

  4. Besides cutting corners, you can actually start saving money months out by cutting down on bills and just holding onto the savings you gain. I switched over to Tracfone prepaid earlier this year because of contract issues with AT&T and I really didn’t consider the savings in the long run – silly me. I’ve been able to put back about $700 since I started with TF over my old bill so the savings are not limited to just the holidays but even throughout the year. I even recommended it to my mom and she is starting the family on their $30 family plan so I guess my brother is getting a new phone for Christmas.

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