WEBVTT - How To Get Out Of Debt 0:00:00.840 --> 0:00:03.750 Hey, it's Kia here. We've discussed how to keep your 0:00:03.750 --> 0:00:06.420 credit healthy on the podcast, but today let's dive a 0:00:06.420 --> 0:00:09.299 little bit deeper on debt. I want to find out 0:00:09.300 --> 0:00:12.000 what you can do to manage it, strategies to reduce 0:00:12.000 --> 0:00:14.400 debt, and how we can lessen the shame around it. 0:00:14.790 --> 0:00:17.699 Welcome to another episode of A Little Bit Richer, brought 0:00:17.699 --> 0:00:20.850 to you by my friends at Legal & General. Here to 0:00:20.850 --> 0:00:22.349 help us tread the water is a friend of the 0:00:22.350 --> 0:00:26.040 show, Andy Webb, the man behind the award- winning Be 0:00:26.040 --> 0:00:28.440 Clever With Your Cash blog and host of the Cash 0:00:28.469 --> 0:00:30.420 Chats podcast. Welcome back. 0:00:30.450 --> 0:00:30.900 Hey Kia. 0:00:31.980 --> 0:00:35.250 So Andy, most of us have some debt and this 0:00:35.250 --> 0:00:37.080 could take a number of forms. It could be credit 0:00:37.080 --> 0:00:42.000 cards, personal car loans, overdrafts, mortgages, owing friends and family 0:00:42.000 --> 0:00:44.848 members. I could go on forever. So let's start with 0:00:44.848 --> 0:00:47.790 a common one. It's very easy to rack up debts 0:00:47.790 --> 0:00:50.370 on credit cards. So can you give us some tips 0:00:50.370 --> 0:00:50.790 to help? 0:00:51.240 --> 0:00:53.098 Yeah, I think with credit cards it's easy to assume 0:00:53.100 --> 0:00:55.500 that people know how they work, right? But when you 0:00:55.500 --> 0:00:57.180 are young, you're getting a credit card for the first 0:00:57.180 --> 0:01:01.320 time, you've just got this ability to spend money. So that's 0:01:01.320 --> 0:01:03.240 often where a lot of this kind of problems start. And 0:01:03.240 --> 0:01:05.490 it's only when you really fully understand it, you go, " Oh 0:01:05.490 --> 0:01:07.170 great. Actually I wish I hadn't done that when I 0:01:07.170 --> 0:01:09.569 was younger. I hadn't spent so much money." So the 0:01:09.569 --> 0:01:12.179 important things to remember here are do try and only 0:01:12.180 --> 0:01:14.550 use that credit card for your everyday spending, the things 0:01:14.550 --> 0:01:16.740 you can spend money on anyway. Don't get tempted to 0:01:16.740 --> 0:01:18.660 buy that extra thing. " Oh, I'll deal with it later 0:01:18.660 --> 0:01:20.818 on. I sort it out later," because if you don't 0:01:20.819 --> 0:01:24.120 sort it out when that statement comes through, then you're going 0:01:24.120 --> 0:01:26.130 to get charged interest and there might be fees as 0:01:26.130 --> 0:01:28.169 well if you miss payments, and that's where those debts 0:01:28.170 --> 0:01:30.180 start to rack up because not only are you getting 0:01:30.180 --> 0:01:33.450 charged interest on your purchase, then the next month if 0:01:33.450 --> 0:01:35.100 you don't clear it again, you'll get interest on that 0:01:35.100 --> 0:01:38.400 purchase, any new spending and interest on the interest. So 0:01:38.400 --> 0:01:40.499 it all really, really can add up. So try to 0:01:40.500 --> 0:01:43.799 avoid doing that. There is a simple thing you can 0:01:43.799 --> 0:01:45.569 do to make sure you don't forget to spend it 0:01:45.569 --> 0:01:47.400 and you do clear that full amount, and that's just setting 0:01:47.400 --> 0:01:50.100 up a direct debit from your current account to the 0:01:50.100 --> 0:01:52.680 credit card company, ideally for that full amount, and that 0:01:52.680 --> 0:01:56.130 means that it'll be cleared. But there is also a risk 0:01:56.160 --> 0:01:57.660 that comes with this a little bit and it's double 0:01:57.660 --> 0:01:59.700 spending. I don't know if you've had this before where 0:02:00.059 --> 0:02:01.469 so you've got something on a credit card, you know 0:02:01.469 --> 0:02:03.449 it's on there, but when you look at your current 0:02:03.450 --> 0:02:06.419 account balance, you see there's all this cash there and 0:02:06.420 --> 0:02:08.550 you don't really account for the fact that it has already been 0:02:08.550 --> 0:02:10.440 spent. So you spend it on other stuff and then the 0:02:10.440 --> 0:02:12.419 bill comes through, money's not there. 0:02:12.419 --> 0:02:13.859 Yes, absolutely. 0:02:14.190 --> 0:02:16.110 So that's often where the problems start. So a little 0:02:16.110 --> 0:02:18.359 hack that I like to suggest to people is every 0:02:18.360 --> 0:02:21.449 time you spend on the credit card, or as soon 0:02:21.450 --> 0:02:22.829 as, maybe you might want to do it every week or 0:02:22.829 --> 0:02:25.020 something, but you transfer the money out of that current 0:02:25.020 --> 0:02:28.050 account into if you've got an account from Starling or 0:02:28.110 --> 0:02:30.450 Monzo, they have these pots and spaces, or maybe it 0:02:30.450 --> 0:02:33.630 can be a completely separate current account. You transfer the 0:02:33.630 --> 0:02:36.270 money over there so it's ring- fenced. You know when 0:02:36.270 --> 0:02:39.900 that bill comes through, you absolutely can afford it. And 0:02:39.900 --> 0:02:41.609 then you really understand actually what the balance on your 0:02:41.609 --> 0:02:43.800 current account is, that is actually what you've got. So those 0:02:43.800 --> 0:02:46.410 kind of things can help you stop it getting unmanageable 0:02:46.410 --> 0:02:47.220 and keeping on top of it. 0:02:47.700 --> 0:02:50.729 I like the fact that you said just use it for everyday 0:02:50.730 --> 0:02:51.990 spending because it reminds me of when I got my 0:02:51.990 --> 0:02:55.349 first ever credit card at 20. Arguably I knew better, 0:02:55.440 --> 0:02:58.139 didn't do better, and I applied for two credit cards, 0:02:58.139 --> 0:03:00.930 Andy, £ 1, 000 limit each. Can you imagine that? And 0:03:00.930 --> 0:03:02.940 even though I knew don't go crazy, it's not your 0:03:02.940 --> 0:03:05.399 money, you can guess what I did. I went, I racked 0:03:05.400 --> 0:03:08.220 up that money and I spent the whole 2000 on ... I 0:03:08.220 --> 0:03:10.169 couldn't even tell you what I spent it on. I don't have proof of 0:03:10.169 --> 0:03:11.400 what I spent it on. I don't have anything to 0:03:11.400 --> 0:03:14.788 show for it. But that was a very expensive lesson 0:03:15.089 --> 0:03:17.939 on how to actually use credit cards properly. So it's 0:03:18.240 --> 0:03:21.210 having a plan for paying it back. It is understanding 0:03:21.210 --> 0:03:24.389 the compounding of interest that can happen so you end 0:03:24.389 --> 0:03:26.250 up paying more than what you initially borrowed. So I'm 0:03:26.250 --> 0:03:28.230 glad that you covered that. But I also want to touch 0:03:28.230 --> 0:03:31.258 on another line of credit that is getting very popular 0:03:31.258 --> 0:03:33.540 now and that's Buy Now, Pay Later. I think that 0:03:33.540 --> 0:03:36.719 is something that's boomed in the last couple of years 0:03:37.139 --> 0:03:38.940 and is very much so accessible, and I see a 0:03:38.940 --> 0:03:41.730 lot of young people especially leaning into that. So can 0:03:41.730 --> 0:03:43.020 you give us a bit more insight into Buy Now, 0:03:43.020 --> 0:03:43.590 Pay Later as well? 0:03:43.650 --> 0:03:45.059 Yeah, I mean it's huge, isn't it? And every time 0:03:45.059 --> 0:03:47.340 you go to a checkout it's there and sometimes they 0:03:47.340 --> 0:03:49.799 push you towards it a little bit, use this one over 0:03:49.799 --> 0:03:51.959 some of the other options. And a lot of the big 0:03:51.960 --> 0:03:54.059 companies now, there's cards. So you can Buy Now, Pay 0:03:54.059 --> 0:03:57.300 Later everything. It doesn't just have to be online. And 0:03:57.300 --> 0:03:58.800 for those, I mean everyone knows this, but this is 0:03:58.800 --> 0:04:01.800 where you split your payment into. It varies by provider 0:04:02.040 --> 0:04:05.490 and a lot of the time the shorter ones are interest 0:04:05.490 --> 0:04:07.830 free, which is no bad thing if you need to 0:04:07.830 --> 0:04:09.599 spread the cost of something out of a short space 0:04:09.599 --> 0:04:12.269 of time, because it helps you with those bigger expenses. 0:04:12.480 --> 0:04:14.040 But a lot of the time when they're longer than say 0:04:14.040 --> 0:04:17.070 three months, then interest gets charged on that. Not everyone's 0:04:17.070 --> 0:04:19.169 always aware of that. But I think the big danger 0:04:19.170 --> 0:04:21.809 with Buy Now, Pay Later is getting carried away, a 0:04:21.809 --> 0:04:23.309 bit like you talked about just now with those credit 0:04:23.309 --> 0:04:26.790 cards, originally you're spending here, you're spending there. One thing 0:04:26.790 --> 0:04:29.010 on Buy Now, Pay Later, it doesn't matter because I get paid in 0:04:29.010 --> 0:04:31.560 two weeks time and then I have enough to cover it. But 0:04:31.560 --> 0:04:33.089 then you put something else on Buy Now, Pay Later 0:04:33.089 --> 0:04:35.040 and something else on Buy Now, Pay Later. And you 0:04:35.040 --> 0:04:37.650 end up with this cycle of stuff that next time 0:04:37.650 --> 0:04:39.539 you want to buy something, you don't have the money 0:04:39.540 --> 0:04:41.368 to pay for it because you're still paying off the 0:04:41.370 --> 0:04:43.020 stuff on Buy Now, Pay Later from the previous month 0:04:43.049 --> 0:04:46.619 and you get caught in this kind of circle. And 0:04:46.619 --> 0:04:50.279 if your situation changes, you lose your job maybe potentially 0:04:50.279 --> 0:04:52.109 something like that or a big emergency kind of cost comes 0:04:52.110 --> 0:04:54.630 along so you don't have the cash even to cover 0:04:54.660 --> 0:04:57.300 the ones you thought you could cover, well you're committed 0:04:57.300 --> 0:04:59.880 to it and you're committed to 10, 20 of these. That's 0:04:59.880 --> 0:05:02.099 how prevalent they are, and you can get on anything. 0:05:02.428 --> 0:05:04.529 So again, it's coming back to what we said on 0:05:04.529 --> 0:05:06.510 credit cards, and this is true really for any kind 0:05:06.510 --> 0:05:08.850 of credit, it's only using it for stuff that you 0:05:08.850 --> 0:05:11.640 know if you can't afford it right now, you know 0:05:11.640 --> 0:05:13.950 that when you get paid next that you will have 0:05:13.950 --> 0:05:15.990 the money to cover that and it is for stuff 0:05:15.990 --> 0:05:18.779 that you need. It's not just luxuries and stuff. If 0:05:18.779 --> 0:05:21.210 you want a luxury, save up for it is the 0:05:21.210 --> 0:05:22.709 best way of doing it. I know in practice that 0:05:22.709 --> 0:05:24.540 doesn't always work but it's something to try and aim 0:05:24.540 --> 0:05:24.811 for at least. 0:05:24.811 --> 0:05:27.510 Absolutely. And I want to touch on something you just mentioned 0:05:27.510 --> 0:05:31.560 there, and it's talking about uncontrollable debt or out of 0:05:31.560 --> 0:05:34.710 control debt. So how would you define a debt that 0:05:34.710 --> 0:05:36.330 is unmanageable or out of control? 0:05:36.660 --> 0:05:38.789 Yeah. I think there are a few kind of warning 0:05:38.790 --> 0:05:40.618 signs out there that people should be keeping an eye 0:05:40.619 --> 0:05:44.520 for. And this is if you are regularly late with 0:05:44.520 --> 0:05:47.220 your bills, not because of mismanagement and forgetting to do 0:05:47.220 --> 0:05:49.529 it. It's because you don't have the money coming through 0:05:49.680 --> 0:05:51.630 until. I need to waiting up a couple of weeks, 0:05:51.630 --> 0:05:53.730 then I can pay it. Or the next stage of 0:05:53.730 --> 0:05:56.428 that is you're having to borrow money to cover other 0:05:56.428 --> 0:05:58.500 already borrowed money, so you get new debt to cover 0:05:58.500 --> 0:06:00.900 debt. Again, they're all kind of sign of things that, 0:06:00.930 --> 0:06:03.330 yes, you might be able to fix it just by 0:06:03.330 --> 0:06:05.490 changing how you budget, but it might be a sign 0:06:05.490 --> 0:06:08.070 of like these are going to get out of control. So 0:06:08.070 --> 0:06:10.529 they're kind of important things to look for there. Also 0:06:10.529 --> 0:06:13.349 things like paying for essentials with any kind of borrowing. 0:06:13.349 --> 0:06:16.139 So whether that is your supermarket shopping on a credit 0:06:16.139 --> 0:06:18.119 card or even Buy Now, Pay Later, you can get 0:06:18.119 --> 0:06:20.490 your groceries on Buy Now, Pay Later if that is 0:06:20.490 --> 0:06:24.600 something which is a regular occurrence. And the reason for 0:06:24.600 --> 0:06:26.580 that is because your other debts are eating up all 0:06:26.580 --> 0:06:28.438 your money. Again, that's a sign, look, you need to 0:06:28.440 --> 0:06:31.350 do something about those other debts if you aren't already. 0:06:31.770 --> 0:06:34.349 And there's also not just money aspects you need to 0:06:34.350 --> 0:06:37.020 be aware of that debts could be a problem. There's a psychological aspect 0:06:37.020 --> 0:06:40.380 as well. If you are losing sleep because you're worried 0:06:40.380 --> 0:06:43.500 about the debts, if you are avoiding opening up the 0:06:43.500 --> 0:06:45.719 post or the email or whatever it might be, because 0:06:45.719 --> 0:06:49.770 you know what's in there isn't good, then again that's 0:06:49.770 --> 0:06:51.690 a sign that you need to do something because that's 0:06:51.690 --> 0:06:53.130 going to have an impact on your mental health. 0:06:53.279 --> 0:06:58.560 Absolutely. For anyone who has debt and they feel like 0:06:58.589 --> 0:07:02.310 it's starting to become a problem, where should they start? 0:07:02.520 --> 0:07:04.350 Because I know some people might have, I might have 0:07:04.380 --> 0:07:06.330 two credit cards, I might have an overdraft, I might have 0:07:06.330 --> 0:07:09.119 a loan. And it just feels like they are almost 0:07:09.210 --> 0:07:12.510 drowning in their debts. So where should they start and is there 0:07:13.140 --> 0:07:15.210 a way of prioritizing debts? Is there one that they should 0:07:15.210 --> 0:07:17.190 be focusing over another? What does that look like? 0:07:17.250 --> 0:07:18.990 Yeah, absolutely. I mean there's a few things here. So 0:07:18.990 --> 0:07:21.179 first of all there's the difference between good debt and 0:07:21.179 --> 0:07:23.190 bad debt. And it sounds weird to say there's good 0:07:23.190 --> 0:07:28.469 debt, right? But without credit, without borrowing, then who's going 0:07:28.469 --> 0:07:29.040 to buy a house? 0:07:29.100 --> 0:07:29.429 It's true. 0:07:29.459 --> 0:07:31.710 Right? Some people, there could be some people out there, 0:07:31.740 --> 0:07:33.450 but most of us, if we want a house, we 0:07:33.450 --> 0:07:35.400 need a mortgage which is debt, but that's good debt. 0:07:36.000 --> 0:07:37.380 But you could say the same about if you need a 0:07:37.380 --> 0:07:40.469 car to get to work and you need to have 0:07:40.469 --> 0:07:42.779 a car on finance, then again that can be seen 0:07:42.780 --> 0:07:44.940 as a good debt in that sense because by having 0:07:44.940 --> 0:07:47.159 that debt you are able to earn money. 0:07:47.159 --> 0:07:47.549 Exactly. 0:07:47.819 --> 0:07:48.210 Careful not to get upsold. 0:07:48.210 --> 0:07:48.270 Yes. 0:07:49.170 --> 0:07:50.970 And add the alloys and all the extra bits like that, but again that 0:07:52.050 --> 0:07:54.510 kind of thing can be a good debt. And then 0:07:54.510 --> 0:07:55.890 within the rest of the debts as well you're looking 0:07:55.890 --> 0:07:59.790 at, they're not all equal. You might find some are scarier. 0:07:59.849 --> 0:08:02.339 You might get some scarier letters from the people saying 0:08:02.340 --> 0:08:03.900 you owe us this amount of money and things, but 0:08:04.350 --> 0:08:06.929 ultimately there are some which if you don't act on 0:08:06.959 --> 0:08:10.980 them, their consequences could be pretty dramatic. And these are 0:08:10.980 --> 0:08:14.340 known as priority debts. There are a few of them, 0:08:14.340 --> 0:08:16.410 but the key ones here are your mortgage or your 0:08:16.410 --> 0:08:19.469 rent. So if you don't pay your mortgage, you don't 0:08:19.469 --> 0:08:21.420 pay your rent, ultimately you could lose your home, you could 0:08:21.420 --> 0:08:22.979 be out in the streets. So you have to make 0:08:22.980 --> 0:08:25.259 sure that is covered before a credit card, before a 0:08:25.260 --> 0:08:28.200 loan, anything like that. Your gas and electricity, you could 0:08:28.200 --> 0:08:30.090 be cut off if you don't pay that. So again, 0:08:30.090 --> 0:08:32.400 you need to make sure, even if it's not making 0:08:32.400 --> 0:08:33.809 their payment every single month, it's at least having a 0:08:33.809 --> 0:08:35.879 conversation with them because they might be able to help 0:08:35.880 --> 0:08:37.799 you with other repayments, but again, you can't just ignore 0:08:37.799 --> 0:08:41.100 that because the consequences, you could absolutely argue now that 0:08:41.100 --> 0:08:43.980 mobile and broadband are a priority debts because how many 0:08:43.980 --> 0:08:45.000 of us are working at home, right? 0:08:45.000 --> 0:08:45.420 Exactly. 0:08:45.660 --> 0:08:47.910 You lose your internet, you can't work. Again, you can lose 0:08:47.910 --> 0:08:49.590 your job if you can't do that. So again, you 0:08:49.590 --> 0:08:51.990 want to make sure that these things are covered. And 0:08:52.349 --> 0:08:54.000 there are others, but a couple of important ones to 0:08:54.000 --> 0:08:57.089 mention here are council tax and TV license. These ones 0:08:57.089 --> 0:09:00.149 might not feel so important, but if you don't pay 0:09:00.150 --> 0:09:03.870 them and you haven't spoken to the council about the 0:09:03.870 --> 0:09:07.230 situation, then you could be taken to court. And then 0:09:07.230 --> 0:09:08.970 you get a fine. Now if you can't pay your 0:09:08.970 --> 0:09:11.399 council tax bill because you haven't got any money, how are 0:09:11.400 --> 0:09:12.150 you going to pay the fine? 0:09:12.150 --> 0:09:12.540 Exactly. 0:09:12.780 --> 0:09:15.780 And ultimately the consequence down the line is you could 0:09:15.780 --> 0:09:18.540 go to jail for that. So obviously that's a priority 0:09:18.540 --> 0:09:20.640 again with the others. So they're the ones to really 0:09:20.640 --> 0:09:23.970 focus on first of all before the other debts. And 0:09:23.970 --> 0:09:27.929 the other ones, you can have conversations with those creditors, 0:09:27.929 --> 0:09:31.139 creditors basically with people that you owe money to, and they might 0:09:31.139 --> 0:09:32.820 come up with a plan or some kind of way 0:09:32.820 --> 0:09:34.740 of you kind of like, " Okay, look, we'll give you 0:09:34.740 --> 0:09:36.599 a breathing space maybe," which is where you have a 0:09:36.600 --> 0:09:39.720 space of time where no interest is added on, or 0:09:39.720 --> 0:09:41.730 you might be able to just pay the minimum on them. I guess 0:09:41.730 --> 0:09:43.559 it can be quite expensive and that can be quite scary 0:09:43.559 --> 0:09:46.139 because it's getting more and more expensive. They're the ones with a high 0:09:46.139 --> 0:09:48.750 interest. But that's the worst that's going to happen. Right? 0:09:48.990 --> 0:09:52.440 At least you'll still have a warm home if you 0:09:52.440 --> 0:09:53.189 focus on the others. 0:09:53.309 --> 0:09:56.670 Yes. I think the thing I love most about what you've said there 0:09:56.940 --> 0:10:00.088 is just having that conversation. I think it can get 0:10:00.090 --> 0:10:02.580 very overwhelming very quickly if you have a lot of 0:10:02.580 --> 0:10:04.890 debts. And like you said, those letters when they come through 0:10:04.890 --> 0:10:07.889 the door, it can feel like, " Oh my gosh, everything's 0:10:07.889 --> 0:10:10.320 falling on top of me." But if you are struggling 0:10:10.320 --> 0:10:12.118 and you haven't told your creditors, they're not going to 0:10:12.119 --> 0:10:13.828 know, they're not mind readers. They can't just say, " Oh 0:10:14.070 --> 0:10:15.510 this person's struggling, I'm going to put them on payment 0:10:15.510 --> 0:10:18.090 plan," if you haven't asked for that. So it is making 0:10:18.090 --> 0:10:20.190 that priority, which I really love that you touched on. 0:10:20.820 --> 0:10:24.120 When debt becomes unmanageable, what are some strategies that you'd 0:10:24.120 --> 0:10:25.740 recommend to clear debt? 0:10:26.309 --> 0:10:29.069 First of all, have you got any savings? Because this 0:10:29.069 --> 0:10:31.230 is the kind of thing, a weird thing. If I've got debt, why 0:10:31.230 --> 0:10:32.880 would I have savings? But it's actually quite common that 0:10:32.880 --> 0:10:35.760 people build up an emergency fund because they feel comfortable 0:10:36.240 --> 0:10:38.550 having that pot of cash there if an emergency happens. 0:10:38.550 --> 0:10:41.429 But the problem is, if you're getting any interest on 0:10:41.429 --> 0:10:43.889 that savings account, the rate is going to be way, 0:10:43.889 --> 0:10:46.740 way, way lower than what you be paying on those 0:10:46.740 --> 0:10:50.010 debts. So you're much better off using those savings to 0:10:50.010 --> 0:10:52.078 wipe out as much of those debts as you possibly can. 0:10:52.559 --> 0:10:54.900 If an emergency comes along later on and that's a 0:10:54.900 --> 0:10:57.030 big if, but if it does, you might have to 0:10:57.030 --> 0:10:59.429 borrow it for that. But we can deal with that later 0:10:59.429 --> 0:11:01.109 on, and it's not going to be any more expensive 0:11:01.110 --> 0:11:02.670 of what you're paying right now. So that's the first 0:11:02.670 --> 0:11:05.399 thing to do. I mean obvious things about if you 0:11:05.400 --> 0:11:08.130 haven't already, just trying to find that budgeting, that extra 0:11:08.130 --> 0:11:10.140 bit of money that you've got anywhere that can go 0:11:10.140 --> 0:11:12.900 towards those debts rather than other things or potentially trying 0:11:12.900 --> 0:11:15.870 to make a bit more cash. It's extra shifts, second 0:11:15.870 --> 0:11:19.259 job, selling things, anything to get some more money in 0:11:19.259 --> 0:11:20.790 that you can do. I mean that's all quite obvious 0:11:20.790 --> 0:11:23.609 stuff but it's worth just mentioning it again. You can 0:11:23.609 --> 0:11:26.640 also try getting as much of those debts to 0% as 0:11:26.640 --> 0:11:29.280 you can. Credit cards are the big one here, 0% finance, 0:11:29.280 --> 0:11:32.070 but there are also 0% overdrafts. That just means that you aren't 0:11:32.070 --> 0:11:34.500 getting charged any interest on that debt or at least some of 0:11:34.500 --> 0:11:36.630 that debt, which means you can put more money into 0:11:36.630 --> 0:11:40.499 clearing down faster. Even looking at getting a lower APR, 0:11:40.500 --> 0:11:43.620 which is like the interest rates potentially a better way of 0:11:43.620 --> 0:11:45.450 reducing the rates not to zero, but at least it's 0:11:45.450 --> 0:11:47.610 going to be lower cost. But do look into that, particularly with things 0:11:47.610 --> 0:11:50.400 like consolidation loans, they're not always great. So just research 0:11:50.400 --> 0:11:52.979 those a little bit. Let's assume you've done all of 0:11:52.980 --> 0:11:55.109 that but you've still got some debts left over, multiple 0:11:55.110 --> 0:11:57.809 debts. There are a couple of strategies that are pretty 0:11:57.809 --> 0:12:00.270 popular that are worth thinking about and they've got weird 0:12:00.300 --> 0:12:06.390 names. So there's avalanche and there's snowballing. So avalanching is technically, 0:12:06.390 --> 0:12:09.210 mathematically is the best approach to go for because it 0:12:09.210 --> 0:12:11.968 means ultimately you are going to pay less interest, it's 0:12:11.969 --> 0:12:14.009 going to cost you less money. And this is where 0:12:14.009 --> 0:12:16.469 you target as much of your money as you possibly 0:12:16.469 --> 0:12:18.960 can on the most expensive debt, the one that has 0:12:18.960 --> 0:12:21.420 the highest rate of interest and all the others, you 0:12:21.420 --> 0:12:23.400 just go down to the minimum. And the idea is 0:12:23.400 --> 0:12:25.410 you clear that one as fast as you can and then move 0:12:25.410 --> 0:12:27.300 to the next one with the next highest rate of 0:12:27.300 --> 0:12:29.790 interest. Okay, so mathematically you do that, you'll be charged 0:12:29.790 --> 0:12:33.719 as interest. But what a lot of people find more 0:12:33.719 --> 0:12:37.559 motivating is snowballing, and this is where you focus on 0:12:37.559 --> 0:12:41.940 the smallest debt first of all because that's more achievable, right? 0:12:42.000 --> 0:12:42.179 Mm- hmm. 0:12:42.240 --> 0:12:44.909 So you've got six debts say. You get rid of 0:12:44.910 --> 0:12:47.189 one, then you've only got five. And that's for a lot 0:12:47.190 --> 0:12:48.059 of people that makes them think, " Right- 0:12:48.059 --> 0:12:49.170 Keeps you motivation to keep going. 0:12:49.200 --> 0:12:51.839 Yeah. And it's called snowballing because basically you've got rid 0:12:51.839 --> 0:12:53.189 of one and the next time you move on, the next 0:12:53.190 --> 0:12:55.380 one's big one, and end up with just basically one 0:12:55.380 --> 0:12:58.170 debt at the end and hopefully you get rid of 0:12:58.170 --> 0:12:59.880 that and then you're debt free. So they're both two 0:12:59.880 --> 0:13:02.670 things to consider if you're doing this yourself. 0:13:02.670 --> 0:13:06.150 So if someone is struggling, where can they go and 0:13:06.150 --> 0:13:06.869 what can they do? 0:13:07.770 --> 0:13:10.019 Okay. So if you are struggling and you don't think 0:13:10.020 --> 0:13:12.450 you can do this on your own, because a lot 0:13:12.450 --> 0:13:14.640 of this stuff might come down to some intense budgeting. 0:13:14.640 --> 0:13:17.340 We're just looking about where your money could be better 0:13:17.340 --> 0:13:19.410 spent. I'm sure a lot of people in this situation, they've 0:13:19.410 --> 0:13:21.120 already done that, but it's worth having a look again. 0:13:21.540 --> 0:13:24.480 Then there are some places you can go to who 0:13:24.509 --> 0:13:27.030 will either guide you through that or take you through 0:13:27.030 --> 0:13:29.760 some of the next steps. And we won't go into detail 0:13:29.760 --> 0:13:31.468 on the next steps here because there's too much to 0:13:31.500 --> 0:13:34.319 talk about, but there's things like debt relief orders, potentially 0:13:34.320 --> 0:13:39.270 bankruptcy, IVOs, which is individual voluntary agreement, these kind of 0:13:39.270 --> 0:13:41.549 things. They can take you through them and help you 0:13:41.550 --> 0:13:44.189 know what's going to be the best for you. Now it's 0:13:44.190 --> 0:13:45.960 very easy to think, " I'll just go on google," right? 0:13:45.990 --> 0:13:46.081 Mm- hmm. 0:13:46.081 --> 0:13:49.590 " I'll type in debt support or debt help." And 0:13:49.590 --> 0:13:51.030 that is one of the worst things you can do 0:13:51.300 --> 0:13:54.540 because the people right at the top, they've paid for 0:13:54.540 --> 0:13:57.059 their result to be the top of the results, and 0:13:57.270 --> 0:13:59.969 often they're really cheeky and they'll have their names really 0:13:59.969 --> 0:14:01.649 similar to some of the good guys, which we'll come 0:14:01.650 --> 0:14:03.570 to in a minute. But what they're going to do, 0:14:03.570 --> 0:14:06.000 these companies, is they are doing this for profit. And 0:14:06.000 --> 0:14:07.290 I'm sure not all of them, but a lot of 0:14:07.290 --> 0:14:11.730 them will steer you towards a solution which makes them 0:14:11.730 --> 0:14:14.578 money, not necessarily what's best for you. So don't do 0:14:14.580 --> 0:14:18.270 that. Instead, I would go to Money Helper, which is 0:14:18.270 --> 0:14:20.640 the government's kind of finance website. And they've got a 0:14:20.700 --> 0:14:23.699 debt location tool they call it, right? Snappily title, but 0:14:23.699 --> 0:14:25.890 anyway, that's what it's called. And you put your postcode 0:14:25.890 --> 0:14:28.050 in and they will come up with a list of 0:14:28.380 --> 0:14:30.090 either face- to- face place if you want to go 0:14:30.090 --> 0:14:31.650 and chat to someone face- to- face or if you 0:14:31.650 --> 0:14:33.480 want to get on the phone or do a web chat, 0:14:33.870 --> 0:14:35.130 a list of people you can talk to where it's 0:14:35.130 --> 0:14:39.900 free, independent and impartial advice. So they won't judge you, 0:14:40.020 --> 0:14:42.090 they'll just take you through the steps. Some of the 0:14:42.090 --> 0:14:46.680 big names there, Citizens Advice, National Debt Line, Step Change, 0:14:46.680 --> 0:14:49.380 Christians Against Poverty, there are a number out there who 0:14:49.380 --> 0:14:51.000 will help you, but I would go to that Money Helper website 0:14:51.000 --> 0:14:53.610 first of all, and they will direct you into the 0:14:53.610 --> 0:14:56.671 places for more advanced help if you feel you need it. 0:14:56.671 --> 0:14:59.099 Absolutely, and I'm glad you said that because I've seen, especially 0:14:59.100 --> 0:15:01.860 on social media, I've seen a lot of ads where they say, " Come 0:15:01.860 --> 0:15:04.620 and we can help you resolve all your debts." So it 0:15:04.620 --> 0:15:06.570 is having your wits about you and make sure you 0:15:06.570 --> 0:15:09.029 go into the right places. But you've shared where people 0:15:09.030 --> 0:15:11.190 can go. However, we know, you and I know, we 0:15:11.190 --> 0:15:14.430 do this as our jobs, that money is a taboo 0:15:14.490 --> 0:15:16.949 and debt even more so, is something that people really 0:15:16.949 --> 0:15:21.060 do feel ashamed about. So what can people do? Do you 0:15:21.240 --> 0:15:24.600 have some suggestions to make it easier for yourself or 0:15:24.600 --> 0:15:26.639 someone who has a friend or family member who is 0:15:26.639 --> 0:15:29.339 struggling to open that communication around debt? 0:15:29.849 --> 0:15:31.830 Yeah, it's really hard, isn't it? Like you said, money 0:15:31.830 --> 0:15:34.709 is taboo and often people won't talk about any of 0:15:34.709 --> 0:15:36.780 it, but particularly when it comes to debt, that kind 0:15:36.780 --> 0:15:41.340 of element of shame can come into play. I think 0:15:41.790 --> 0:15:44.670 just sitting there on your own suffering in silence is 0:15:44.820 --> 0:15:47.070 not going to help you. So really if you can, 0:15:47.099 --> 0:15:51.599 finding that trusted friend or family member who you feel 0:15:51.599 --> 0:15:54.720 will let you talk about it. I'm like this often. 0:15:54.870 --> 0:15:56.190 Someone comes to me a problem, I'll try and help 0:15:56.190 --> 0:15:58.140 them and things like that. If that doesn't work for 0:15:58.140 --> 0:16:00.180 you, then they just need to talk about it. Because sometimes this 0:16:00.180 --> 0:16:01.800 is about just talking about it, getting it out in 0:16:01.800 --> 0:16:04.649 the open. Or maybe you have got that person who 0:16:04.650 --> 0:16:06.840 you know is pretty good on these things and they 0:16:06.840 --> 0:16:08.670 can give you the more practical tips as well, but 0:16:08.700 --> 0:16:11.250 find the person that works for you just so it's 0:16:11.250 --> 0:16:13.260 out there and you start to talk about it. And 0:16:13.260 --> 0:16:15.930 I guess I wouldn't say owning it isn't quite right, 0:16:15.930 --> 0:16:19.229 but it just stops becoming this thing you're trying to 0:16:19.560 --> 0:16:21.870 get rid of and hide away you from. It's something 0:16:21.870 --> 0:16:23.790 that you can actually, right, " I need to do something 0:16:24.179 --> 0:16:25.769