Marie Kondo, a tidying expert, has been taking the world by storm through Netflix and YouTube. Fans of the show will know that she recommends a technique called the KonMari Method to help you declutter your surroundings by asking you to get rid of anything in your life that doesn't 'spark joy'.
For most of us, that includes getting rid of debt. Fortunately, by applying some of Kondo's rules to money management, you can spring clean your finances and get back in the black.
Cleaning guru Kondo says that her method requires time and effort, and this is also true of dealing with debts.
You need to set time aside to spring clean financially and be dedicated to improving your money situation.
The upside is that once you've done it you'll have less stress and more cash each month.
Imagine your ideal lifestyle
In the decluttering world, this is about working out what you want your home to look like when you finish. The principle works in debt management too, but you'll need to go a step further.
You need to think about all of your financial habits, evaluate your monthly spending and work out what you owe.
By using Cabot's Budget Planner, you are able to see how much money is left after outgoings are accounted for. From there, you are able to see how much you have each month and where you can make changes. This could be by shopping at a cheaper supermarket, switching energy supplier or cancelling that barely-used gym membership.
Tidy by priority
Kondo says that when tidying clothes, for instance, you need to pick up everything around the home and put it together so you can understand the scale of the problem.
This is equally true for money you owe. Before you begin your journey to financial recovery, you need to understand your current situation. Make a list of all your debts, whether that's a mortgage, loans, credit cards, store cards or even a phone contract.
Write down which debts are a priority and which are non-priority, the minimum repayments each month and how much interest you're being charged.
Do things in the right order
Paying off debts is great, but your strategy will be most effective if you get rid of them in the right order.
Priority debts are debts you should focus on as the result of non-payment will be more severe than non-payment of your other debts. Priority debts could include:
Mortgages or rent: non-payment could result in you losing your home.
Council tax: It's important you keep up-to-date with your council tax payments, or bailiffs may be appointed to remove goods from your property if you fall behind.
Gas and electricity bills: Gas and electricity are also classed as priority bills, as non-payment can result in your creditors cutting off your supply.
Water bills: Slightly different to the gas and electricity in that your water company cannot legally cut off your water supply. However, they can enforce a debt through the courts.
Car finance/lease: if you don't pay, the creditor might have the option to take your car away as ownership remains with the creditor until you pay off the balance (in the case of a lease, you are effectively hiring the car, so ownership always remains with the creditor).
Other priority debts: You should also consider other priority bills that might affect your future financial stability. Things such as:
- County Court judgments (CCJs)
- Magistrate or court fines
- Child maintenance
- TV licence
Does it make you feel financially stable?
Remember, sometimes debt is inevitable. For instance, a mortgage is often the best (and only) way to get on the property ladder. Before taking out any loans in the future, ask yourself the following questions.
- Will this decision leave me better off financially?
- Will it put me in a better position than if I'd saved up instead?
- Do I really need what I am buying, or do I just want it?
- Have I found the best possible interest rates and repayment terms?
If the answer to all four is yes, then it makes sense to go ahead, if not, it's probably a poor decision and you should avoid it.
If after covering these steps, you're still worried about your debts, speak to a debt charity, such as StepChange, or contact the Citizens Advice Bureau if you need more information on different types of debt.
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