Taking Control of Debt

Taking Control of Your Debt

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Debt hanging over our heads can be overwhelming. When it comes to getting on top of debt, the most important thing is to get started. Here are a few tips from moneysmart.gov.au to get you started.

Find out what you owe

First step is to get an idea of what money you owe. Start by tallying up:

  • how much the debt is
  • what the minimum repayments are (if there is any)
  • when the payment is due
  • interest rate for which you’re being charged for this debt

Try and consider debt from credit cards, car and/or home loans, personal loans, unpaid bills, fines, buy not and pay later schemes.

 

Get help if you need it

Before you jump into anything, talk to a financial counsellor. They can explain your options and help you make a plan to get your finances back on track. This is a free service.

To get free, confidential help, call the National Debt Helpline on 1800 007 007. The helpline is open Monday to Friday, 9:30am to 4:30pm.

 

Work out a payment plan

Next step is to put together a budget that compares what money is coming in vs the money that is going out for expenses.

Income: might include; wages/salary, pension, benefit payments, investment income.

Expenses: might include; food, rent/mortgage, electricity, phone, internet, transport, credit cards, insurances, subscription services. As you go through these expenses it’s worth considering what you can’t do without vs what you can do without or make a cost savings with.

Whether it’s weekly, fortnightly or monthly it’s working out what you have coming in for that period vs the expenses going out. The difference between what you have coming in vs what you have going out is what you can feasibly put towards paying off your debt.

 

Priortise debts and bills

Now that you’ve worked out what you can pay off. Determine what order in which you’ll want to start paying off your debts.

This might be in terms of urgency, interest rate charged or time sensitive from risk of closure.

 

Start small and snowball your payments

Money Smart suggests that the quickest — and most motivating — way to get out of debt is the snowball method. You start small, and pay off your debts one by one. This is great for paying off credit card or personal loan debt.

Here’s how it works:

  • List your debts — in order from smallest to largest.
  • Pay the minimum — using your debt money, pay the minimum amount due on all debts each month.
  • Pay off the smallest debt first — use the rest of your debt money to pay off the smallest debt. Pay as much as you can each month, until you clear it.
  • Celebrate and repeat — when you’ve paid off that debt, reward yourself by doing something you enjoy. This will inspire you to keep going. Then move onto paying off the next smallest debt, and so on

Once your debts are paid, get into a savings mindset

When you’ve got your debt under control, keep the momentum going. Saving regularly will help you avoid money problems in future.

Open a high interest savings account to pop some money aside to save for a rainy day or even for a savings goal.