Take Control of your Debt
In the pursuit of financial well-being, one of the most critical steps is getting your debt under control. This journey is not just about eliminating debt but to also create sustainable habits for more success in the long-term.
Take a look below at Moneysmart’s simple yet effective steps to get out of debt and stay out of debt.
Know what you owe
The first step towards getting out of debt is understanding where you stand. Make a list of all your debts (credit cards, loan repayments, unpaid bills etc.), that includes how much each debt is, the minimum monthly repayment if applicable and when the payment is due. From here, you can add them up to see your total amount owed.
Get help if you need it
If your debt feels too overwhelming, you may be tempted by quick-fix solutions such as payday loans or increasing the limit on your credit card. Remember, your financial adviser is there to help. They can assist you with options you have available to you and create a plan to get you back on track.
Work out what you can afford to pay
Working out how much you can afford to pay towards your debts is the next step in getting things under control.
Start by making a budget where you include all the money you have coming in (salary, pension) and money going out (food, rent, mortgage). Add these up and compare the money in vs the money out.
Make savings or cuts
If you have more money going out than coming in, or your expenses are higher than you’d like, it’s time to decide what expenses you can cut. Pick things that are realistic and that you can stick to.
When you’ve made your spending cuts, subtract money going out from money coming in and the amount left over is how much you can pay towards your debt each month.
Prioritise your debt and bills
Work out the highest priority bills to pay first such as:
Rent or mortgage payments
Council rates and body corporate fees
Electricity, gas, water and phone
Car repayments
These high priority debts and bills should be paid first. If you’re having difficulty paying a big bill, contact your provider to see if they can offer an extension or pay in instalments.
Start small and snowball your payments
Now that you’ve prioritised your bills and your debt money is sorted, it’s time to get started on your repayments. The snowball method involves starting small and paying off your debts one by one following these steps:
List your debts – from smallest to largest.
Pay the minimum – pay the minimum amount due using your debt money.
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 to inspire you to keep going. Then move onto paying off the next smallest debt, and so on.
Get a savings mindset
When you’ve got your debt under control, keep the momentum going by saving regularly to help you avoid problems in the future. A great start is to create an emergency fund or open a savings account.
Taking control of your debt is a crucial step towards improving your financial well-being. The simple steps provided by Moneysmart, combined with the guidance and expertise of your financial adviser, can provide you with an effective roadmap to help you succeed.
Source: https://moneysmart.gov.au/managing-debt/get-debt-under-control
Have more questions? Reach out to our knowledgeable team today.
General Advice Warning
The information in this presentation contains general advice only, that is, advice which does not take into account your needs, objectives or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial advice that addresses your specific needs and situation before making investment decisions. While every care has been taken in the preparation of this information, Infocus Securities Australia Pty Ltd (Infocus) does not guarantee the accuracy or completeness of the information. Infocus does not guarantee any particular outcome or future performance. Infocus is a registered tax (financial) adviser. Any tax advice in this presentation is incidental to the financial advice in it. Taxation information is based on our interpretation of the relevant laws as at 1 July 2020. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. Any case studies included are hypothetical, for illustration purposes only and are not based on actual returns.