Money

Paying off debt: 8 steps to empowerment

Published on October 31, 2016 9:47 am, by

Debt, debt, debt – house, car, education, holidays and other stuff. Do you feel like the trade-off for living your life is to be constantly paying off debt?

There is nothing as freeing as being free of debt. But paying off debt leads to a whole range of emotions. It may be scary, it may be frustrating, it may seem never-ending. The ideal way to feel to pay your debt off effectively is empowered. Here we give you our 8 steps to getting there!

STEP 1: Understand your debt

  • Order your debt from highest interest to lowest interest
  • List each debt with the corresponding minimum payment, the payment you make, the interest you pay and how long it will take you to repay the debt at that rate

STEP 2: Look at options to streamline your debt position

  • Can you consolidate your debt into one debt & one payment at a lower rate?
  • Can you transfer the balance on your credit card/s to another card and take advantage of a no or low-interest period to repay the principal faster?

STEP 3: Set a goal

  • When do you want to have your debt repaid by?
  • Chunk it down with the first milestone at Christmas (8 weeks)

STEP 4: Make a plan for your money

  • What money is going to which debt?
  • Put all the money you can free up to the debt with the highest interest rate while paying the minimum on your other debts
  • Work out how long it will take you if you stick to your plan

STEP 5: Understand where your money goes

STEP 6: Commit to spending less

  • If you don’t already have a budget, now is the perfect time
  • Forward plan the next 8 weeks or more
  • Allocate any additional money you can commit to the debt with the highest interest rate

STEP 7: Document your plan and take action

  • Apply for any products that you have identified in Step 2
  • Go back to Step 4 and work out how long it will take you to repay your debt with the additional money you have committed to freeing up
  • Write out your timeline including payments and when your debt will be repaid
  • Set up payments to make sure your money goes where you want it to
  • Set up alerts in MoneyBrilliant to keep you on track

Diarise the time to check in

  • Check in on your as often as you can
  • Check your balances and payment on payday
  • Watch your account balances reduce

Related Articles –
10 savvy ways to save in the 10 weeks to Christmas
Is paying your debt off one card at a time the best way?
Is credit card debt holding you back?

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Jen is an experienced banking professional who loves wine, coffee, finding a bargain and of course her three beautiful children. Since Jen's first budget led her to buy a home at 20, Jen has passionately helped others to make better decisions with their money.

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