Short-term debt like credit cards, personal loans and car loans are easy to accumulate, sometimes too easy as they can be closely linked to things that we wish to do now, but can’t afford it – like:
- Having that big holiday; or
- Perhaps splurging on some discretionary items that you want, however may not need.
As quickly as liabilities can accumulate, unfortunately it can take a lot longer to pay them off. Below are a few strategies on how to manage your debt and have it paid off sooner rather than later.
- Stop creating more debt
A great start to reducing debt is to stop incurring more debt. Limiting (or perhaps forfeiting) your access to credit is a great way to contain the amount of debt you have.
Some ways of containing your debts are:
- Reducing your credit limit on your credit cards
- Perhaps cancelling your credit cards altogether (once paid off OR amalgamated).
Although in the past we were forced to use Credit Cards to make certain purchases, these days you can use debit card (using savings) to make the same purchases. By getting rid of available credit this will force you to use your own hard-earned savings to make such purchases in the future – and perhaps may make you rethink whether you really need that purchase or not.
- Increase your repayment rate
Increasing your monthly repayment will reduce the amount of time it takes to pay out the loan then if you keep on paying the minimum monthly repayments. Not only will it pay the debt off quicker, you will also pay less interest along the way. If you have the choice, ideally you would pay the debt with the highest interest rate first before making extra payments on other liabilities that have a lower interest rate.
- Focus on one debt at a time
If you have multiple debts and you increase your repayments for all of them, you may feel that your progress is slow. Sometimes picking one debt and focusing on hammering that down in a shorter and more reasonable time period can give you a sense of achievement, and more importantly - motivation to move onto the next debt.
How can we help?
We can help you assess your budget and cash-flow situation, and determine how much we can fast track your debt reduction. If you wish to speak to one of our financial advisers, please contact us here.
Altitude Financial Planning is a Corporate Authorised Representative of Altitude Financial Advisers Pty Ltd
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The information contained on this website is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Document.