Oct 27, 2019  | Tags: debt

Our Insights

Are you struggling with crushing financial debt that just won’t go away? Debt can weigh you down with anxiety and hold you back from reaching your wealth goals.

These tips will help you stay on top of your debts and get back to focusing on your financial goals.

Avoid New Debt - At All Costs!

The very first step you need to take when tackling your debt is to stop accumulating more debt.

Pay the monthly minimum payment due on your debts to avoid late fees. Even better, try to pay off even more than the minimum so that you don’t end up losing money to interest charges. If you fall behind on your payments, you’ll only fall deeper into debt.

Stop using any lines of credit you may currently have open. You’ll never eliminate your debt if you don’t curb a habit of frequent spending on credit. Freeze your credit cards or pack them somewhere well out of sight so that you can save them for a true emergency.

Once you pay off a credit card, cut it up and remember to close the account so that you don’t incur fees for inactivity.

Pay Off Your Smaller Debts

Tackle your debt by first paying off that collection of small debts. You’ll feel like you’ve accomplished something and this can give you the motivation to keep chipping away at your debt.

Prioritise Paying Off High-Interest Debt

If you feel that you could easily pay off your smaller debts, then you might save those for later in favour of hammering chunks out of your high-interest debts. High-interest debts are dangerous to have hanging around for too long because you can lose a lot of money in interest.

Focus your debt repayment efforts on eliminating high-interest loans and credit cards and then you can afford to make more leisurely payments on your other debts later on.

Consolidate Your Debts

Are you overwhelmed by the sheer number of debts to your name?

It can be difficult to pay off debts when they’re due at different times. You might easily forget which payment is due when and mix up repayment policies.

Debt consolidation is a good way to organise your debts into convenient, consistent and simple payments that you can work into your budget. Consolidating your debts could also result in paying less interest.  

A word of caution, however, debt consolidation can bring a whole slew of hidden fees so only pursue this solution on advice and if the benefits outweigh the costs.

Live on a Budget

A budget is extremely important when you’re trying to pay off debt quickly. A budget will limit your loose spending and ensure that you always have enough cash each month to pay towards your debts.

Without the structure of a budget, you can lose track of your cash flow and end up making debt repayments with the funds you have leftover at the end of the month. This is a poor strategy. Instead, budget out of your monthly income a concrete and realistic amount that you can pay towards minimising your debts. This way, you can pay off your debt so predictably that you may be able to count down to the day when you’ll be debt-free.

Downsize

It doesn’t have to be forever! Downsizing your lifestyle temporarily will reduce your monthly expenses and allow you to prioritise paying off your debt. Some ways to downsize that you should consider include:

- Renting a smaller place

- Moving in with family

- Getting a roommate or renting out a room

- Reducing your cable and internet packages

- Canceling unnecessary subscriptions

- Eating out less

- Cutting back on your transportation 

If you’re serious about getting on top of your debt and staying there, then downsizing will be an immense help.

Get expert help

If you want to get on top of debt and get set up for success, it pays to work with an experienced financial adviser. 

Calder Wealth Management will take the weight off your shoulders, setting you up with a debt management plan to not only get your cash flow in order, but also put you on the pathway to achieve your financial goals.

Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder at Calder Wealth Management.