Paying off debt is hard work and it is also one of the most rewarding gifts you can give yourself.
The gift you give yourself is control, peace of mind and just the pure happiness of being debt free.
It is no surprise that debt is easy to accumulate especially if you’re living paycheck to paycheck. We’ve all made that purchase we shouldn’t have and went on that holiday we didn’t really need or couldn’t afford.
We’re all guilty of the odd purchase on the credit card we know we didn’t have to do.
The consequences can be many sleepless nights and stress as the debt gets bigger and you cant seem to get it down.
So if you’re feeling up to the challenge and finally want to live debt-free here is where to start.
Face your debt head on
Its scary and you’ve been avoiding the inevitable however the time has come to get your figures down on paper.
Its time to calculate all your debts from everything you have and that is every single credit card, afterpay payment, personal loans (including from people), car loans and your home loan.
Get to the heart of the problem
Why are you in debt? There is good debt of course like your home loan but if you have personal loans and multiple maxed-out credit cards, something else might be going on.
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Are you making enough money to cover all your expenses?
Are you living lavishly to ‘keep up with the joneses’?
Do you have a shopping problem?
Of course, there may be legitimate reasons you are in debt. A Health emergency is one of them.
The key is to get to the root of how this came about and moving forward so you can get on with the solution.
Get your final figure
Once you start facing your debt, its time to add everything up and get to a final single figure.
Having a final figure is not that as overwhelming as it seems. Having multiple loans or credit cards with 4K, 10K, 10K can be a lot more daunting.
So get that final figure so you know what you are dealing with.
Stop adding to your debt now
No really. Stop right now. Cancel. Delete. Repeat.
Cancel those credit cards and cut them up. Don’t take out any new loans. Stop borrowing money from your boyfriend or parents. And you know that last thing you were going to buy before you were going to be ‘good’ – don’t do it.
Stop accumulating debt now.
Understand how interest works
What are your interest rates for all of your debts? What are the minimum repayments and how can you pay off more to pay down the balance.
You’re probably paying 20% interest on your credit cards and you never knew it. Paying only the minimum repayments is not going to get you anywhere for a long time. Can you negotiate a better rate? Its worth a try!
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It’s also a good idea to get your credit limit reduced as you pay down more debt. That way you’re not tempted to use your ‘available funds’ on impulse purchases and non-essentials.
I know you want to put it off. The only way to get out of a financial mess is to start paying off your debt ASAP. Often going cold turkey is the best way to stop bad habits and start fresh.
Need more cash? Start looking into a second job, overtime or any side jobs you can do.
Workout your budget which will be a work-in-progress for the next few months but at least you have got a start and you’re on your way to financial freedom.
But wait, open a separate emergency fund now
So you’re paying off all this debt and bang, you lose your job, your hours get reduced or maybe your car breaks down and there’s no emergency fund to dip into so you have to get the credit card out…again.
Open a separate bank account now or start topping up your savings account in addition to paying down your debt because you never know what can happen.
Paying off debt is a hard road but its the most rewarding journey one can undertake. The feeling of financial freedom is like no other.