Online shopping means spending money has never been easier. The convenience of never having to leave home to buy everything you need comes at a price though, as it’s just as easy to overspend and end up in debt. The good news is it is possible to break that cycle of overspending and be debt-free. We share a few simple steps to help get you started.
1. Just start saving
While it may sound counter intuitive trying to save while paying down your debt (surely reducing debt quickly should be your first priority?), breaking the cycle of relying on debt to get by and actively making an effort to save is just as important. Think of it this way, what would happen the next time your car broke down and you needed to pay for repairs? Instead of reaching for your credit card, you’d use the money you’ve saved in your emergency fund to pay for it without going into debt.
2. Scrutinise your spending
It’s easy to ignore your debt. It’s even easier to keep spending! After all, you’re in this far, what does it matter if you spend a little extra? To really tackle your debt, you need to know how much you’re spending. So gather all your bills together and go through them, writing down each of your debts, the balance you owe, the interest rate you’re being charged, and your monthly repayment. Then add it all up!
3. Snowball payments
If you have multiple credit cards and loans, using the snowball method to quickly and effectively pay down your debt could be an option. Here’s how it works: pay the minimum monthly repayment on all of your debts except one – usually the biggest loan or the one with the highest interest rate. On that one, you pay extra to clear it quicker. When you’ve paid off that debt, move on to next biggest one and so on so that your repayments snowball.
4. Schedule your repayments
Instead of waiting until the payment due date for credit cards or loans, schedule your debt repayments to come out automatically every pay day before you have a chance to spend anything. Paying before the due date could also help you clear your debt faster as you chip away at the interest. While you’re at it, set up an auto payment to your savings account too – that way you’re not spending first and then saving whatever is left over.
5. Spend cash only
The fact is: if you don’t have access to credit, you’re far less likely to get into debt. That’s not to say you need to cut up your credit cards and miss out on all of the bonus points and offers that go along with having a credit card. But you need to be disciplined: if you use your credit card, it should be on things you can afford to pay back straight away. If you find it too tempting to overspend on credit, then the perks are not worth it and it’s best to get rid of your credit cards and stick to paying cash only.
At this time of year, many people struggle with debt and having to juggle a number of extra expenses outside of the budget. If you find yourself in this position and you need help consolidating your debt into one simple loan, talk to our team of mortgage brokers about a finance solution to fit your needs.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.