The specifics of your situation are very important, for example if you have a lot of high interest debt that you’re struggling to service you would have different options if you have a small amount of low interest debt. There are some fantastic resources available to you regardless of where you stand, StepChange is a charity that will talk to you to learn about your situation and then help you explore your options if you don’t want to talk about it on a public forum!
An Emergency Fund (“some for a rainy day”) is something very personal to you, if you are in a position where you have the support of your family and you’re able to live rent free it’s very possible that you do not need much of an emergency fund at all, and you can use that money to reduce the long term costs of your debts by repaying them sooner. The question I’d ask myself is “how much cash do I need available to ensure that if something unexpected does happen that I don’t find myself falling back into old habits?”. If you don’t have rent, don’t have a car, and have the support of your family, I imagine that amount is very low and therefore you can safely focus on servicing your debts once you have a few hundred pounds saved.
There are options like debt consolidation loans, or taking out a balance transfer credit card that has a 0% introductory period, and they can be a very good option to minimise the costs incurred by carrying your debts however it’s very very easy to consolidate your debts and then unintentionally use that as an opportunity to slip back into bad habits. Essentially, you have to ask yourself whether or not you truly feel that you would be able to control your impulsive spending and whether or not the interest you’re paying now is “worth” paying because of the metaphorical fire it lights under you.
Another big risk you face is falling back into old habits once your debt is paid off, you may spend months or years cutting back and then the moment your debt is paid off you feel that you have finally earned the right to treat yourself… and that can be a very slippery slope back into the same situation, that is very common. The best way to avoid this is to focus not just on paying off your loans, but building a positive attitude towards money and do not punish yourself: you don’t need to live off of bread and water while you’re clearing your debts. The goal should be something like, “on the day my debt is paid off I should feel relieved and proud but it should not change how I feel about my spending, I will continue with the responsible money management I’ve learned over the last months/years and my day to day life will be unchanged”.
For me personally, the biggest change in my understanding of money was when I learned that (bold because of how important this is) budgeting is for everybody, whether you have a lot of money or a little. Many people find themselves in financial crisis and implement a budget and manage to solve their crisis and reward themselves by abandoning their budget (“I’m fine now, I don’t need a budget!”) and then before they know it they’re in crisis again.
I think a lot of people find budgeting stressful and think of it as a punishment because budgeting has been mischaracterised. My recommended method of budgeting is the Envelope method, which you can implement using physical envelopes, Monzo pots, using a spreadsheet or (my personal recommendation) the You Need A Budget app. The Envelope method means when income arrives (e.g: salary) you immediately allocate all of it to categories, e.g: bills, food, fun, debt, savings. During the month if things change (e.g: bills are higher than usual) you move money from another envelope (e.g: fun) to the envelope that needs it, which means you have the flexibility to deal with life – life is full of curveballs. Even if you don’t want to use YNAB, their website has some really helpful information about the method and they do online classes too.
A fantastic resource for personal finance is Money Saving Expert, Martin Lewis is a saint. There’s so much information available on their site covering every aspect of personal finance, including Debt Solutions.
Also it’s worth remembering that you’re not alone, so many people are drowning in debt but you’d never know. The difference is you’ve taken the difficult first step towards addressing it, and that’s something to be very proud of. Don’t think of this as just the start of getting debt free, think of this as the start of setting yourself up for a successful financial future: the habits you build now will pay dividends for the rest of your life. You’ll look back in a decade and have so much pride in what you’ve achieved.
Edit: this comment evolved into more than just saving tips, but it’s all interlinked, forgive me.
