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9 Steps to Become Debt Free

By Kirthana Devaser

Keep track of Your Finances

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Spreadsheets. Spreadsheets will be your best friend through your journey of finance. A spreadsheet gives you autonomy to customise it to your needs and goals. It is simple and it works.

However, if you are not a fan of spreadsheets and cannot bring yourself to compute the numbers, you should download Cash Coach! It’s the first gamified financial app in the UK catered to help millennials keep track of their finances whilst having fun. They crunch the numbers for you whilst you build wealth and kill debt in real life! It is simple and it works.

Financial Education

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It is never too late to educate yourself! You don’t need to go to university to educate yourself on the financial world — we live in the era of technology. Answers can be found in mere seconds over the internet from almost any device. For example, don’t know the difference between credit and debit cards? Ask someone or ask your best friend, Google.

Money Mindset


Finance is not complicated, do not let the numbers intimidate you. Do not let adulting scare you. It is important to have an open mind and a clean slate.

Finance is very logical. If steps are followed, most routine problems can be solved. For example, which car insurance is best? First step, check the quote of your current provider and crosscheck it to the others. Make sure you are aware of what you are looking for and choose the most ideal. The most important thing about your finances is, it is YOUR finances - is it is personal. It is not about image and what looks best to the world. It is what fits best for you that matters.

Understand Utilisation and Prioritisation

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Recognise that you are held accountable for your finances. You are in charge of being financially responsible.

Golden Rule: Utilisation is set. Prioritisation is maintaining your utilisation.

Utilisation is how effectively something is used. In finance, utilisation can be seen as apportioning income. It should be seen as a target to be hit. Your task is to prioritise your utilisation. You have fixed and variable costs. For example, rent and loan payments are fixed and mobile plans or cable packages are classed as variable costs.

You need to figure out how much of your income goes towards fixed costs and how much you would like to put aside for variable costs. Remember, a portion should also be placed aside for emergency and savings.

For example, you could proportion 30% for fixed costs, 20% for variable and 10% for emergency funds. Then you can invest a portion of the balance and save the rest. Remember, you are allowed to indulge occasionally. Maybe utilise 5% for leisure. It is up to you. It is all a part of being financially responsible.

The proportions are up to you. This is a guide. The name of the game is to prioritise your utilisation.

Recognise Your Assets & Liabilities

current assets

Often talked about by accountants, what are assets and liabilities on a personal level? Simple, assets represent what you own and liabilities are the amount you owe. For example, if you choose to buy a car and pay for it in full, this is an asset. If you take a loan to buy the car, it is seen as a liability. A loan shows you borrowed money to acquire the car, thus a liability.

Understand The Time Value of Money

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Time value of money is simply defined as this: the value of an amount of money today is worth more than the identical amount at any future point in time. Why is that? This is because a person willing to receive the same amount at a later time rather than the present wastes the opportunity to invest the money. For example, Sally receives $100 today in cash and chooses to invest it at an annual interest rate of 5%. Her present $100 would be worth $105 in a year. If she chose not to invest, her present $100 would only be worth $95 in a year, due to the loss in value of money over the year.

Create Passive Income

passive income

Sit back, relax and let money work for you. Your monthly paycheque is known as active income - money made from providing or performing a service. Passive income is money made from doing little to nothing to keep it coming. Investing in the stock market, real estate or even the bond market are some ways to generate passive income.

Avoid Credit Card Debt
credit card debt

This is a real phenomenon that affects more people than we think. According to the Money Statistics May 2019 report, the average UK household has a credit debt of approximately £2,655. The median salary of a fresh graduate in 2020 is said to be £2,500. The household credit debt is £155 more than a fresh grad’s income! Isn’t that alarming? Very. Remember, do not spend more than you can afford. A credit card is meant for cash flow, not as a money provider that provides money you do not have. You will fall into this trap and it can spiral.

Keep Going
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Shit hits the fan, mistakes happen. What’s important is learning from mistakes and moving on. Don’t let one malfunction deter you from venturing further on your journey of personal finance. It is a never-ending lesson and with experience, comes ease. Remember, this is your journey and never fear asking. No one will care about your personal finance the way you do. So if you don’t care, who will?

Start today, it’s never too late.


Nova Money

This is who we are

Financial freedom can mean different things to different people: being able to afford a house, retire early, being debt-free, feeling financially secure... Whatever your plans, we want to empower you to make the right decisions with your money.

So we created Nova Money to spread all the financial wisdom you need to know.

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Nova Money (former Cash Coach)