Finding yourself in debt can be a worrisome experience. Whether a crisis has taken a serious knock to your finances, or you’ve found yourself swayed into spending more money than you earn, debt is an unfortunate yet common part of life that can see you dealing hands with a debt collection agency on the Gold Coast, in Sydney, or around Australia.
The following tips can help you gain better control of your finances and get out of debt faster.
Take a break from your credit cards
Rather than continually adding to the mountain of debt building up in your bank account, do your best to eradicate the habit now. A good way to stop creating more debt is to put a pause on your credit cards, or even freeze your credit, therefore barring you from contributing to the existing debt.
Know what you owe
Once you’ve whittled down the temptation to keep adding to your debt, it’s a good idea to get a clear picture of where your finances stand. Review and make a list of all your current debts, including unpaid bills, fines, credit cards and loan repayments. Make sure you note down the amount of each debt, as well as the minimum monthly repayments. While it may be a confronting process, taking the time to sift through your finances can help you stay on top of things.
Prioritise your debts
A handy way to manage your debts is to work out which ones are a priority, and then strive to pay those off first. High-priority debts typically include rent or mortgage payments; electricity, gas and water bills; car repayments; and council rates. Conversely, debts that adopt a lower priority are things like credit cards and internet and phone bills.
Up your minimum payments
It’ll take some budgeting prep, but paying more than the minimum amount on your debts each month can help speed up the process. You’ll be able to celebrate a debt-free life sooner while allowing saving on interest rates in the long run.
Focus on one debt at a time
Often, people will try to tackle all their debts at once. While increasing minimum payments across the board may work for some, you’re likely to make noticeable progress if you contribute a big payment to one of your accounts each month. Adopting this kind of domino effect can provide the motivation and impetus to keep going until the debt is repaid.
Give the debt snowball method a go
Another way to make a dent in your debt is to organise and work through your debts from smallest to largest. Known as the ‘debt snowball method’, this approach allows you to chip away at your debts by using excess funds to pay off the smallest amounts you owe while still making minimum payments on those larger loans. You’ll score a psychological win each time you demolish a smaller debt, gradually working your way up until you’re finally debt-free.
Request financial hardship assistance
If keeping up with bills and paying off your debts is simply unmanageable right now, you can ask for support. Contact your lender or service provider – most companies hire hardship officers to assess clients’ financial situations and offer help where applicable.