Getting rid of unwanted debt
When you are staring at a mountain of debt it can feel like you are at the starting line of a marathon and the finish line looks impossibly far away.
But, just like when you embark on a marathon, you take one step at a time. The first step is always the hardest. But once you take that first step, then the second step and so forth you will start to get into the routine, and you will be well on your path to getting rid of that unwanted debt.
And boy will you love what comes when you finally free yourself of that debt. You’ll have less stress, more cash flow, better control of your money, you’ll feel more in control of how you’re managing your money day to day, and, you’ll also free up your borrowing capacity.
It will set you up to really achieve some of your big, life goals.
Here we share five tips to help you get rid of unwanted debt.
Tip # 1 – Make a list
List all your debt in order of the highest interest rates to the lowest interest rates. Choose the debt that has the highest interest rate and eliminate that one as soon as possible. This means that with all your other debts, you are going to pay the minimum repayments and transfer all your extra money onto the one that you’re focusing on.
Tip #2 – Consolidate all your bad debts
If you can, speak to your mortgage broker, look at your credit cards and your personal loans, and see if you’re able to consolidate them into one facility at a much cheaper interest rate. This is going to help you get on top of that debt faster, and make sure that you can get rid of it as soon as possible. In terms of looking at this, also call your creditors, and ask them if they are willing to accept a reduced pay-out, if you can pay them out quickly. Often, they’re willing to do this, and this can also help you get rid of your unwanted debt quicker.
There are almost 16 million credit cards in Australia and according to the Australian Securities and Investment Commission, 15% of Australian adults have problematic credit card debt. So how can you make credit cards work for you so that they don’t cause you unnecessary stress? Learn how here!
Tip #3 – Implement the 50/50 rule
The 50/50 rule is where 50% of your income is going towards your living expenses, the other 50% of your income is going towards all your debt repayments, and making sure that you’re transferring most of that income to the debt that you’re trying to eliminate. Also, look for ways to increase your regular contributions to your debt. For example, you might have some lump sum bonuses through work that you can put into there, or tax refunds. Try and get it down as quickly as you can.
Tip #4 – Identify the cause
This is about reducing unnecessary spending. It’s important that if you’re going through this process of reducing and getting rid of unwanted debt, that you’re changing the habits that got you to this position in the first place. Once you actually start to see your debts reducing, and you start to see your money habits changing, you’ll be so excited and you’ll want to keep doing it, and keep improving your money habits, and it will definitely be worth it in the end.
Tip #5 – Celebrate your success
It can be a long journey when you start paying down your debt and getting rid of some of that unwanted debt. So, make sure you reward yourself, and know how you’re going to reward yourself. It’s a big deal and you should be proud of yourself. As you start to eliminate those unwanted debts one-by-one, start reallocating that money that you’ve been putting to that first unwanted debt on your list, to the second unwanted debt until eventually, they’re all gone.
Getting rid of unwanted debt can take time but it is worth it in the end and puts you on the path to achieving your financial dreams and goals.