5 steps to help you get out of debt in 2025

If you made New Year’s resolutions for 2025, are they still going strong or did you ditch them in January? According to YouGov, 29% of people who made resolutions included at least one related to their finances, with the most common resolution being either to save more or spend less.

However, as we all realise, this is easier said than done. With the cost of living continuing to rise, there are constant demands on our finances, which means that our expenditure is often greater than our income. And in this case, it is all too easy to gradually get into debt and then find it difficult to get out again.

So in this article we take a look at five steps that will help you to get out of debt by the end of 2025. 

Step 1: Make a list of all your debts

As with any problem that needs to be sorted out, the first step is to understand exactly what you are dealing with. Many people are, understandably, frightened of debt. Because of this they would rather not know how much debt they are in. But unfortunately the problem won’t go away by itself.

So the first thing to do is to make a list of all your debts : loans, overdrafts and credit cards. You need to understand:

• The total amount you owe for each;
• The amount of interest you are being charged on the debt;
• If there is a deadline by which you need to repay the money.

You may be shocked by the total of your debt. But the point is that it exists, and the only way you are going to be able to tackle it is by understanding the scale of the problem and planning what to do about it.

Step 2: Plan how to tackle your debts

It’s really important to keep up regular debt repayments. At the very least you need to make the minimum monthly payment required into each of your debts. But you also need to look at ways to start reducing your level of debt faster. Here are three ideas as to how to do this:

• Decide which debt to pay off first

When starting to tackle debt, it can be a real boost to get a quick win. So it’s a good idea to decide which debt to pay off first and put all your efforts into paying off that one. It may be your smallest debt, to get it out of the way. Or you may prefer to start reducing the one that is charging you the highest rate of interest. But having one debt firmly at the top of your list can help you to focus.

• Use savings to pay off debts

If you have savings, it’s worth considering using some of them to pay off debts. Particularly if you are being charged more interest on debt than you are earning from savings, your money will work harder if you use it to reduce your debt. 

This can be a really hard decision to take, especially if you have been saving for something special. And it’s a good idea to keep some savings back in case of emergency. But bear in mind that once you are freed from having to make debt repayments every month, you will have more money available to start rebuilding your savings again. 

Similarly, if at any stage you get any unexpected money – for example gifts, wins, bonuses etc – pay at least some of it straight into your debts. This may be tough to do, but the sooner you clear your debts, the sooner you can stop always worrying about money, and start to enjoy life again.

• Take out a debt consolidation loan

If you have a large number of small debts another thing to consider is taking out a debt consolidation loan. It can seem illogical to take out a new loan when you are trying to get out of debt. And indeed, a loan is a big financial commitment that you need to weigh up carefully. But a debt consolidation loan could enable you to pay off all your current debts and be left with just one loan, ideally at a lower rate of interest than some of the other debts (e.g. credit cards) that you currently have. And it would mean that you would have just one monthly repayment to make and can focus all your efforts into clearing this one remaining debt.

Loans 2 Go offer a range of personal loans, including debt consolidation loans and loans for bad credit. We will consider lending to you even if you have bad credit, as long as the loan repayments are affordable for you. You can find out more about debt consolidation loans in our article Could taking on another loan help you get out of debt?

Step 3 : Create a realistic monthly budget

One of the main causes of people sliding into debt is not really knowing where their money is going each month, and having to rely increasingly on overdrafts and credit cards to get by. So an important step in getting out of debt is to create a realistic monthly budget to track all your expenditure.

To create a budget, start by making two lists:

• Expenditure

Expenditure is everything you spend in a typical month. It will include both fixed and variable amounts:

• Fixed amounts : regular bills such as mortgage/rent, household bills and debt repayments. It’s a good idea to set up direct debits for these so that you know they will be paid.; 
• Variable amounts : all other expenditure such as food, household goods, clothing, transport, childcare, personal care, socialising etc.

• Income

Income is all the money you have coming into the household each month, for example salary or wages, tips, bonuses, and benefits.

Once you have created your budget, you will be able to see whether you have enough money to manage each month, or whether you are likely to continue building up debt. We will look at how to balance your budget in more detail next.

It’s also important to check that your budget is accurate, as it can be very easy to underestimate the amount you are spending in one or more categories. So take the time to track your spending for at least a couple of months by recording everything you spend either in a notebook or on your phone. You may be surprised or shocked to see where your money is going, but the more accurate your information, the better placed you will be to get things sorted out.

Step 4 : Balance your budget

If your budget efforts clearly show that you are spending more than your income, something needs to change. And fast. Otherwise you will keep sliding further into debt and things will only get worse.

The very simple truth about how to balance your budget is that either your income needs to increase or your expenditure needs to decrease. Ideally both.

Easier said than done! But here are a few ideas that may help:

• Increase your income

Find any and every way to make more money. As long as it’s legal! Make this your top priority for the rest of 2025. It will feel tough but a short term blitz can make a big difference in helping you get you back on your feet financially.

Here are a few ideas on ways to increase your income:

• Look for a new job that pays more;
• Take on a second job as well as the day job; 
• Do some temporary or seasonal work at weekends;
• Set up a small business as a side hustle;
• Check whether you are entitled to any benefits. Find out more at Gov UK.
• Sell unwanted goods;
• Sell your car and use public transport instead;
• Take in a lodger;
• Rent out your home and move temporarily back in with your family.

Some of the above are more radical than others, but if you are in serious debt they may be worth considering. A brave decision taken now could make a huge difference to your finances in the future.

• Reduce your expenditure

In parallel with increasing your income, start finding ways to reduce your expenditure. Do everything you can to spend less money. Start by checking every payment going out of your bank account to make sure that you are still using what you are paying for. In 2024, Citizens Advice estimated that unused subscriptions cost UK consumers £688 million in the previous year! So make sure you are not paying for anything you don’t need and cancel anything you no longer use. 

It’s also worth taking time and effort to try and get better deals on all essential bills such as energy, TV/broadband, or phone. Comparison websites such as Money Supermarket can help you do this.

Then look at all your variable expenditure to try and reduce anything you can. Our recent article How to feed your family for less this spring contains some useful ideas on how to save money on food shopping. Make it your mission to apply the same kind of principles to any area of spending to see how you can get more for less.

Another popular trend is to do regular non-spend challenges. For example each month you could decide not to spend money on one particular category of non-essential items. Just sacrificing one little luxury per month can make a big difference. To find out more, check out our article Are you ready for a no spend challenge in 2025?

And why not buddy up with any friends that are also trying to economise. There may be ways you can trade favours. For example, in your friendship group you may have people who are able and willing to do things like DIY, decorating, gardening, car maintenance, haircutting, nails, baby sitting, or dog walking so you could set up a fair system that enables you to help each other out instead of having to spend money elsewhere.

Step 5: Know when to seek professional help

If you are feeling totally overwhelmed by your debts, another option is to seek professional help. A good place to start is Money Helper – a free and impartial money advice service set up by the government – which has a helpful section on Money Troubles. 

Other debt advisory services include:

• Citizens Advice
• StepChange
• Debt Advice Foundation
• National Debtline

A debt professional can not only talk through your situation and suggest options, but can also advise you how to make arrangements with your creditors. For example you may be able to delay, reduce or even cancel some of your debts, through a debt management plan or Individual Voluntary Arrangement (IVA). 

We hope that the information in this article helps you to start tackling your debt and that once you have done so, you can stay out of debt and begin a new phase of life with healthier finances.

If at any stage you are considering a debt consolidation loan, remember that Loans 2 Go offer a range of personal loans – including loans for bad credit – which may be able to help.

For more helpful financial and lifestyle tips, visit us here again soon at Loans 2 Go.