Debt can be really scary, but there are ways of getting out of it. Here is your step-by-step guide on how to bust your debt!
Watch this video by a financial advisor to get started.
Meet with a financial advisor
There are many free services available to help you understand your financial situation and how to best pay off your debts. Use and abuse these facilities to your advantage!
- Financial Counselling Australia offers free advice to help you manage your money, they will help you talk to whoever you owe money to and work out the best solution for everyone.
- The National Debt Helpline, which you can call on 1800 007 007, has resources on how to prioritise your debt payments.
- Aboriginal and Torres Strait Islander people can call Mob Strong Debt Helpline on 1800 808 488. Monday to Friday, 9.30am to 4.30pm.
- Call Way Forward on 1300 045 502. Monday to Friday, 9:00am to 7:00pm. If you’re in financial hardship, they can arrange a debt repayment plan on your behalf. This is a free service.
- If you are in debt you may need some legal advice, you can find a list of free legal advice on MoneySmart’s website.
Get organised
Make a list of all of the debts that you need to pay off. Be specific note how much you owe and to who including:
- the interest rate
- minimum monthly payments (if any)
- When the payment is due due dates
This will help you be aware of what are the most pressing debts to pay off.
Make a plan
- Work out what you can afford to pay by looking at the money coming in (income) and out (rent, food, transport) of your account
- Make some cuts – what can you live without?
- You can make a priorities list of all the things you spend money on – what can you go without to make room for debt payments?
- Subtract what you can go without from what’s left of your income and there is your debt money!
- These are short-term sacrifices to make sure that you get out of debt as quickly as possible
Talk to your providers
You might be struggling to pay off your debts and bills at the same time – you can always talk to your providers and figure out a payment plan that works for you.
This means instead of paying the full bill in one go every few months, you can pay smaller amounts each week or fortnight until it is paid off. Money Smart has some great info on how to negotiate a payment plan.
This is great at stopping your debt payments creating more debt! Its all about being honest about your situation.
Tips to best pay your debt!
- Make sure you’re making the minimum payments on time. You can do this by setting up an automatic payment so you don’t miss the date. However, make sure you always have money in your account because if an automatic payment fails you may accrue more fees.
- Set yourself payment goals – you save a lot of money in the long run if you pay above the minimum payment!
- A well-known goal is to pay double the minimum payment, eventually saving you thousands
- This may not work for you but when you have the extra cash even paying $10, $20, or $50 more than the minimum can save you lots later on!
- Pay when you can – you might be paying your debts once every month, but if you have some extra money in your budget for a random week pay some off then!
- Categorise your debts – some advise paying the debt with the highest interest rate first to save you money in the long run. Others advise paying your lowest debt first to get the ball rolling. It is all about what works for you!
This is a scary time but it will be temporary. Asking for help and being organised now will save you loads in the long term. Good luck!
If you are struggling with your mental health in this hard time – please reach out. Call Beyond Blue on 1300 22 46 36, 24 hours a day. Or live chat, 24 hours a day.
