Few things are more universally agreed upon than the idea that debt sucks. We’re not sure if it’s strictly scientific, but the feeling of drowning in debts (especially ‘bad debts’ that don’t contribute to our future wealth) is suffocating, and leaves many of us feeling anxious, overwhelmed and at a loss as to how we will ever get ahead financially. We get it.
Luckily for you though sweet thing, you’ve stumbled into the right place.
Debt reduction is something we fancy ourselves to be pros at here at SOTM, so as a starting point, take a deep breath, pour a cuppa of your favourite tea and read carefully through the below, without any self-judgement. You’ve got this.
Steer clear of buy now, play later schemes that you can’t maintain control of. Sure, these programs can be a good way of making ends meet when required and if used cleverly, these methods can be a great technique for managing money. BUT, if you can identify that you have an ongoing issue with products like AfterPay, zipPay or credit cards then our best advice is for you to avoid using them altogether. Go with the simple approach of saving before purchasing – there’s definitely a sweeter satisfaction of earning your purchase before getting your hands on it and it’ll make sure you’re not racking up debt mindlessly.
Have an emergency fund. These are one of the things we preach consistently, as we truly believe emergency funds are an act of self-care, ensuring you’ll be okay no matter what life throws at you – and as we know from this year, things definitely don’t always go to plan. A good starting point is to have a few months of income saved in your emergency fund, that you could live off should you need to for an extended period of time. With this fund in tact, it’ll mean that should you become unexpectedly unemployed or temporarily without an income, you won’t need to borrow money and go into debt to pay for the unplanned.
Budget, budget, budget. Yes we know it sounds boring but we promise it is anything but! If you have a budget, you have power, as you’re able to see exactly where your money is being allocated and you’re able to make room for all of your expenses. If you are sticking to your limits and have a clear understanding of your financial situation, you’ll be able to pay for bills/essential items and you won’t need to go into debt to pay for them.
It’s 2021 – make the most of the brilliant stack of apps out there. Our pick of the bunch is WISR’s new app, which is a brilliant way to mindlessly pay down your debt. It’s Australia’s first app that lets you round-up your digital spare change to pay down your debt faster, which is very handy. Fun stats for you:WISR App has now paid $1M in customer debt and they’re also waiving the transaction fee of $1.25 per month until the end of March next year to help users out during COVID. Classy.
Scrub out unnecessary spending and stick with the non-negotiables. Pay off your debts faster by making some small compromises. An example of this would be to pause your $80 a week gym membership for a few months, and put that money directly towards paying down your debt. Do you need to buy that coffee every day? Nope! Pop that extra $25 a week towards the debt too! Just with those two small changes you’ll have an extra $105 to pay off your debts weekly, which is amazing. The idea here is that compromising a little goes a very long way and once you’ve paid off your debt, you can implement those things you love back into your life (when you can truly afford them).
Supplement your income. If you can, consider working towards an additional income, be that from picking up extra shifts at work, working overtime or starting a side hustle, and put all of that extra cash towards paying down your debt. We know it’s a tough time to be finding extra work, but if you can, it’s worth a shot that’ll help you move faster through your debt reduction.
Three clever methods of repayment…
Consolidate it. If you merge your debts, you’ll just have one larger debt to pay off, rather than several smaller ones which can make for a more confusing, anxious experience.
Snowball it baby. We are big fans of Dave Ramsey here at SOTM, as you’d know if you’re an avid listener of the pod. SO, this is his famous method where you pay down your debts from smallest to largest, leaving you with a sense of achievement each time you pay down a debt. The idea here is that you’ll feel accomplished rather than overwhelmed, which will inspire you to keep on progressing on your path to debt reduction. You’ll also be facing fewer debts, which can be a relief and keep you motivated rather than drained.
Avalanche it. Yeah look this is also one of Ramsey’s, the method being to pay off your highest interest debts first and then move through to your lowest. This method means technically you’ll pay less in the long run, as you’ll have less interest to pay. Just like an avalanche, you won’t see any changes immediately, but after you’ve gained momentum having stuck with it for a while, you’ll see your debts crumble away. It’s essentially the opposite to Snowball method, so pick whichever one works better for you.
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