8 Tips On How To Reduce Debt

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We live in a debt driven economy and it is not unusual to see people seeking help to eliminate and reduce debt. Of course, it is not just individuals but even nations getting into debt. Getting into debt is far easier than getting out of it thanks to credit cards and loans being so accessible and common. Our credit cards have made us into compulsive spendthrifts and we have become slaves to this debt driven system.

In fact, many Australians will spend their entire lives trying to dig themselves out of debt. Being in debt can be horrible and even quite crippling by affecting your physical, mental and emotional well being so it’s important that you seek to reduce debt as quickly as possible.

So, what can you do to minimise or reduce your debt? It is all about using common sense with the best debt management advice. Here are a few debt management tips that might prove helpful:

1. Be mindful of your money habits

Most people who get into debt never seem to have an idea of how much they can afford to spend. It is important to pause and take stock of your financial situation periodically. By monitoring your spending every week or every month, you can begin to understand the true depths of your financial debt and then figure out a way to get yourself out of it.

Be conscious of how you’re spending your money. Aside from paying for the necessities like rent or mortgage, car payments, groceries and household bills, be mindful of those times you go out to eat, get a manicure or purchase those new pair of shoes. Many Australians tend to purchase on impulse rather than need, so learning how you spend your money can be the most important lesson in how to reduce debt.

2. Manage your credit card debt

Credit card debt can be one of the most damaging kinds of debt for many people because it often carries high interest rates and can spiral out of control if you spend unwisely. A good credit card trick is to minimise the use of your credit cards and try to pay the amount you owe in full every month. However, even if you can only pay just a small portion of your balance every month, it can make a huge difference to your debt in the future.

Another great tip is to look around at the best offers when considering your credit card options. Many credit card companies offer great terms and conditions that include low interest rates or even zero interest rates for the first 12 months!

If you have more than one credit card, you can also consider transferring all of your debt to the one card with the lowest interest rate as a way to save money, as that way you are only paying interest on one card instead of many.

3. Combine your debts into a debt consolidation loan

Debt consolidation means getting all of your debt paid through one single loan. By doing this, it allows you to pay off all of your debt and then you only have one outstanding loan at a much lower rate of interest. This can go a long way in easing your financial situation and is considered one of the best debt management techniques.

You can ask your bank for a debt consolidation loan and if you have good credit history then the bank will gladly oblige. Be careful that you don’t apply for credit too many times, even if you don’t proceed with the offer. The more you apply for credit, the riskier you will appear to future credit providers.

Also, if your accounts are in arrears or there are any negative listings on your credit report such as defaults or judgements, then you may be regarded as bad credit and it will be nearly impossible to be approved for a debt consolidation loan.

4. Make some financial sacrifices

Eliminating your debt is all about self discipline and may mean having to make a few financial sacrifices. By assessing your monthly income against your monthly spending, you can determine how you can cut back and save money. Whether it means giving up a Friday night out with friends, a new outfit for the wedding you are attending or a weekend away, putting that money towards paying off your debt now will minimise your debt quicker. Even putting some extra cash like your Christmas bonus or your tax refund toward your outstanding debt can be a great way to get yourself out of a financial burden sooner.

5. Ask for less not more

Another way to reduce debt is to ask for lower credit. Credit card companies and the banks that issue them are perfectly happy to provide you with a lot of credit but this can be a dangerous thing because you can end up spending more than you can afford. By having a lower credit limit, you will be able to borrow less and have complete control on how much you spend which will help you reduce debt.

6. Increase your income

The only way to accomplish this with your current job is by asking for more hours, negotiating a pay rise or reaching your bonus. Many Australians choose to take up a second job so that they can earn more to put towards paying off their debt because the more you earn the more you can repay. While it’s not an ideal situation for most people, it is the quickest and best way to eliminate your debt. You will even feel better knowing that you are doing all you can to improve your financial situation in the quickest way possible. As mentioned earlier, those short term sacrifices will result in long term gains!

7. Consider a debt agreement

If you are committed to repaying your debt but are struggling to meet the minimum repayments, a debt agreement or Part IX may improve your financial situation. It’s an alternative to bankruptcy and usually the last option for those wishing to honour their debt obligations. A debt agreement is a formal payment arrangement that combines the payments of the majority of your unsecured debts into one. It offers you relief from debt because the repayment is based on what you can afford rather than what is owed.

One thing to note is that your credit standing will not be the same once your debt agreement is accepted by creditors. Of course, remember the long term goal you’re working toward: taking a hit on your credit standing now is a small price to pay for eliminating your debt in the future.

8. Seek professional help to reduce debt

When you find yourself in this precarious position, it’s better to seek professional help. Most people shy away from seeking help as it is often a source of great embarrassment; however debt relief professionals can assist you with the best tools and advice to reduce debt and improve your financial situation.

Debt does not have to control your life if you know how to handle it. We’re here to help! Debt Busters can give you the right advice about the kind of debt relief you may require. To find out more, get in contact with us and we’ll provide all the information you need so you can reach a stress free financial future sooner.

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Debt Busters is an Australian owned business which was founded in 2005 - since then we have been able to help thousands regain financial control.

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