For many people, an organised and well prioritised approach to reducing expensive personal debt can accelerate their wealth position much faster. All it takes is a little organising and regular behaviour as summarised by the following 7 simple steps that will improve your overall wealth by repaying debt.

1. Go through your last 3 months current account bank statements. Create a list for ‘Income’ (money coming into your current account) and a column for ‘Outgoings’ (money leaving your current account). For each month this shows how your monthly budget (income versus outgoings) is looking.
2. Highlight any financial products or relationships in your Outgoings column. This could include either loan, mortgage or credit card payments or regular savings transfers. Spend a little time, finding out more about and categorising each Outgoing.
3. Focussing firstly on the Outgoings you have identified as being ‘debts’, ask the following questions; what type of debt is it (e.g. Overdraft, store card, or mortgage)? What is the total amount outstanding? How long will these payments continue? What APR is being paid by you? Try and identify the most expensive form of debt.
4. Focus then on the regular Outgoings you have highlighted as being savings or investments and ensure you understand their key features. Are you earning some capital growth from these activities? Do you understand the risks of the investment? How quickly can you get your money out? Are you paying any tax on these activities?  Try and identify the least effective saving.
5. Now it is time to make your plan. You will need to maintain at least the minimum repayment on each of your debts, but can you find a way to accelerate the capital repayment? Even relatively modest increases in the monthly capital repaid to the lender, can have a significant impact on the total amount to be paid back overall. It is nearly always better to prioritise your debts, focussing on the debts that carry the highest APR.
6. Execute your plan. Having decided which debts to prioritise and how that will improve your wealth, you now need to make the arrangements. Contact your lender(s) and ask them to change the Direct Debit or standing order mandates. If you have decided on this course of action, transfer your least effective savings into your most expensive borrowing. Having all of the information gathered during steps 1 – 5 will help you to understand which savings to use and which debt(s) to consolidate.
7. Review regularly. Each month review your budget at the same time as checking your bank statements. Try to set yourself short achievable goals and have the commitment to see them through.

We’d love to hear your views on our approach and hopefully hear back from those who have implemented their own plan.