The action plan to get your debts paid off sooner
Many Australians live for years with debt that was only meant to be ‘short term’, often costing them thousands of dollars more in the long run. Paying off debt can free up cash and save you heaps in interest charges – which makes it a worthwhile goal to aim for.
While not all debt is bad – your home loan for example is building equity and capital growth over time – bad debt is anything that won’t make you any money in the long run, like: credit card debt, personal loans, car loans or HECS / student loan debt.
So, if you have decided that you want to get your debts paid off, let’s look at some essential things you need to do to get them out of your life sooner.
Decide that paying off your debt is the top priority
We all know that making something your top priority means it is more likely to happen – including paying off your debt. There are lots of things you would likely rather be doing with your money, but knowing that this is a priority will keep you on track. Clear time in your diary to plan and brainstorm some ideas on how you could save a bit extra until your debt is paid off. You may need to eat at home more or skip an expensive dinner or two with friends. But if you decide this is what you want, it’ll all be worth it in the end.
Make a list of all your debts and what you owe
Being in control of your debts means knowing exactly what you owe. It might be a scary part of the process, but it’s essential. Write down a full list of your debts, how much you owe and the interest rate you’re paying. Prioritise the highest interest rate debts first (likely your credit card or personal loan) and figure out exactly how much you need to get it paid off. Make sure your debt list is visible and accessible to you (not hidden away in a drawer) so that you can cross off each debt as it’s paid.
Review your rates and see if you could save
Multiple debts will mean that you’re paying different interest rates on each, which can quickly increase your debt – especially with those higher interest ones. Review your rates on your own or with your financial adviser, to see which ones you could likely get a reduction on. Refinancing your car loan for example, could help you save money on repayments while you’re working to pay it off. Switching your credit card debt to a product with a zero interest period could give you some breathing room & a chance to get rid of it.
Review your life for spare cash
Sit down with your credit card & bank statement. Go through each to figure out where there might be some spare cash you can put toward paying off some smaller debts now.
Ask yourself some important questions:
Is there something you’re paying for that you don’t need? (like buying lunch everyday)
Do you have any subscriptions services you don’t use? (like Hello Fresh or Prime)
Can you decrease any of your regular bills? (like reducing your phone plan)
Is there something you could do without for 6 months? (like your gym membership or second car)
Is there anything you could sell? (like that couch in the spare bedroom)
Could you redirect any of your regular income to paying your debt off? (even if it’s only $20)
Make sure that the money you’re saving is going directly towards paying off debt, and you’re not just spending more on living. The most important thing here is to be honest with yourself and remember, this is your top priority! You will have more money in the long run, and less will be wasted on interest payments that don’t go towards paying down your debt anyway.
Let us help
The main point is that you don’t have to live with unnecessary debt. It is possible to become, and stay, debt-free. And with the backing of expert advice, it doesn’t have to be hard.
We’ll help you put together an action plan to pay off your debt faster and putting your money to work for you. Our team at Live Well Financial Planning will also give you the structure and support to keep you accountable to your set goals & help you make the right financial decisions in the long run.
We believe in the difference financial planning can make so much that we offer a complimentary first appointment with our financial adviser team. Contact Us today to book your own complimentary first appointment.