Seven steps to cutting debt
It’s time to drop your debt weight and get financially fit.
You enjoy a challenge – right? Then step towards financial fitness by cutting your debts this year.
- Understand and embrace your debt. Firstly, work out where and what type of debt you have and start to plan how you’re going to cut it down. For example, if you roll multiple debts into one, you may save on fees and interest rates.
- Create a budget. Work out your daily, weekly and monthly spending. There are various online tools available to help you do this such as the AMP Budget Planner on www.amp.com.au
- Reframe your thoughts. Think about money in a new way. Tell yourself how proud you’ll be if another $500 comes off your credit card debt instead of going towards new clothes. Make your lunch: buying your lunch every day tends to cost more than making it. So try making your lunch for some extra savings that can then put toward paying off debt.
- Work actively with your money. Set up separate accounts for debt payments and monthly bills. Consider using cash instead of EFTPOS – this may make you realise how much money you are actually spending!
- Look for larger debt cuts. Can you drive a smaller car so you’re paying less in fuel? Can you use public transport instead of having a car? Can you find a cheaper place to rent? Look at ways you can cut debt in more substantial chunks, as this will mean paying less interest sooner.
- Earn some more cash. What about a second job on the weekends? Or, selling your unused goods on eBay or at your local markets.
- Reward your progress. Update your budget each week – and reward yourself with a low-cost treat.
Use these steps and you’ll be on the way to reducing your debt in no time. Review your situation in a couple of months – if you’re not progressing as quickly as you’d like, speak to your financial adviser.
By AMP, originally published on 17/3/15 amp.com.au/insights