In our modern society it seems that it is all too easy to take on debt as a way of getting what we want sooner. When used properly, debt can be a valuable tool for lifestyle and financial planning, but if you feel it is getting out of control here are some tips to help get you back on track.
Plan your budget
Becoming debt free starts with better budgeting. Track your spending to better understand where your money is going and how much you can reasonably redirect toward attacking your debt.
If you are currently only paying the minimum off your debts, you are probably only paying off the interest and not making any headway. By budgeting for regular higher repayments you can start making some real inroads.
Get smart on interest rates
Make sure you are prioritising higher interest, non-tax deductible debts to be paid first, so that you are getting maximum value from your repayment dollars. Once higher rate debts are cleared, you can then focus on lower rate debts.
An even smarter step is to look at consolidating all your higher interest debts into one lower interest debt, such as a low interest rate credit card or a personal loan. That way you will be paying less interest and more of the principal.
Make the most of 0% offers
The fierce competition in the credit card market has resulted in many lenders offering much lower interest rates and sometimes zero rates on balance transfers. While these offers can be worth taking advantage of, avoid getting caught out by making sure you know how long the reduced rate offer applies and what the rate will revert to once the offer period expires.
If you take up such offers, don’t ruin the benefits by using the new card for new spending – it will normally attract a much higher rate than the balance transfer. Pay off the initial transfer first and if you want to eliminate the temptation, don’t be afraid to cut up your card up and throw it away!
Don’t fight the battle alone
If you’re having difficulties repaying your debt, don’t hesitate to speak to your lender. If you’re open and honest with them you will probably find they are willing to review your repayments and look at other solutions to help you manage your debt. You can also speak to your adviser about the best debt reduction strategy to suit your situation.