Many Australians will face debt at some time. Many of us will need to borrow money to pay for large purchases such as a house, car, holiday or credit card. It is not uncommon to find yourself in this situation, but often people will find it very difficult to manage and service these debts and could see their debts accumulating. Debt can be extremely stressful, but there are ways you can effectively manage and reduce your debt and this article will outline five easy ways to relieve your financial burden.
It can sometimes be hard to keep track of spending. Many people don’t realise how much they actually spend and where they spend it. Keeping a budget is the best tool to manage spending. It will help to determine where your money is going and indicate where it should be going. Once you have done this, you can eliminate any unnecessary purchases or find areas to cut back. You will also need to allocate funds toward incidentals or for special occasions such as Christmas or birthdays. You should not borrow to pay for such expenses. The most important thing to remember is you need to spend less than you earn to completely eliminate debt. This will require a lot of self-control.
You may not recognise the amount of debt you have until you calculate your debt as a lump sum. Owing $5,000 on one credit card may seem like a low debt level until you calculate how many other debts you need to pay on top of that. For example, if you have two credit cards with a balance of $5,000 and a bank loan with a balance of $6,000, then your total debt will come to $16,000.
Once you have prepared a suitable budget, you will know exactly how much disposable income you have. This should be put toward paying off your debts. Give yourself a realistic time frame to pay by. Figure out how long it will take you to pay off your debt as a lump sum based on this amount and set yourself a goal date to completely eradicate your debt.
Many people will wait until the due date or after to pay their bills. This is a bad and expensive habit as most companies will charge a late fee which will increase your debt. You may also earn yourself a bad credit rating by not paying your bills within the allocated time frame. By paying your bills immediately, you are saving money on late fees and relieving the stress of having one more bill to pay.
The minimum payment for your credit card or loan may only pay off the new monthly interest charges. By making a higher payment than the recommended minimum, you will gradually reduce the balance and pay it off significantly faster and relieve some of the financial pressure.
It is not uncommon to acquire debt from time to time. Fortunately, there are ways to effectively manage your money in order to overcome financial burdens. Before seeking help with debt, you could help yourself. By exercising some self-control and utilizing these five easy tips to help with debt, you will see a significant decrease in your debts and you can begin to save money while remaining debt-free.