Living a debt-free life is something many aspire to. Yet, it still often feels like nothing more than a far-off dream. With more and more Aussies struggling to get out from under household and personal debt, imagining your life apart from finances isn’t always easy.
In reality, the more you understand debt, the more likely you can take steps to find your financial freedom away from it. However, it’s okay to carry some debt, especially if you have a plan to manage it wisely. It’s all about learning to live a life apart from your finances. While finances are important, they’re not everything. In this guide, we’ll cover important topics about debt, life, and finding the right balance for you.
Why Do People Get Into Debt?
To begin, why do people get into debt in the first place? It’s important to note that most people don’t try to take on a large debt burden. It’s typically done out of necessity or on accident. Unfortunately, many people don’t recognise the danger of taking on too much debt, and it can truly be a slippery slope.
So why do people fall into debt? There are a lot of common reasons, and many of these you might be familiar with. They are:
- Poor budgeting: Firstly, many spend more than they can afford to. With the rise in popularity of credit cards, it’s easy to swipe now pay later. Though you might think you can afford that fancy new car, exotic holiday, or nights out, you might just end up struggling to make ends meet. A strong budget would have solved this from the start.
- Financial hardship: Sometimes debt is something we fall into due to an unforeseen circumstance. For example, losing your job suddenly or having a family emergency could lead to unexpected financial troubles (and debt).
- Unnecessary purchases: There’s a lot of pressure to ‘keep up with the Joneses’ and always have the latest-and-greatest things. If you’re trying to always have the ‘best,’ this could lead to a lot of purchases you don’t really need.
- Good debt: Not all debt is ‘bad debt.’ Some choose to get into ‘good debt’ like owning a house or taking on student loans (HELP loans) to finance their education. In most cases, this is a smart investment, but you still must create a payoff plan.
Ultimately, many get into debt without really realising it. It can become tricky to escape from this cycle once you get into it, and many people don’t know the next steps to take to live a life apart from finances.
How to Get Out of Debt
Next, let’s look at some of the most effective ways to get out of debt. Living a debt-free life is always possible, but it doesn’t happen overnight. It takes planning and strategy to find what works for you.
Luckily, there are so many different ways to create a debt payoff strategy. There’s no such thing as one-size-fits-all, so consider these options below if you’re struggling with your current debt.
- Consolidation: When you take out a loan or consolidation credit card to pay down your other debts, you typically have only one monthly payment and a lower rate long-term.
- Debt Settlement: In some cases, you might be able to settle your debt or reach a debt agreement with the provider. Though you’ll need professional guidance through this process, many lenders are willing to settle for less than you owe.
- Budgeting: Oftentimes, the best way to handle debt is to create a budget that suits you long-term. By determining where you can save in everyday life, you can put more income towards your debts.
- Bankruptcy: Lastly, bankruptcy is a solution not to be taken lightly. Though this can wipe most of your debts, it can have some negative consequences. That being said, it does have benefits and can relieve your current financial stress.
What Happens After Debt?
When you’ve finally paid off your debt, what comes next? It can be intimidating to cross this finish line and realise you no longer have to make payments to a lender. While it might be tempting to make more purchases, this is the time to get your savings in order.
If you want to stay debt-free, you need to pay close attention to your budget, emergency fund, and retirement savings long-term. Debt payoff is the first step, but keeping from falling back into that cycle is the next step. While it’s okay to celebrate this huge achievement, your priority should always be on saving and living within your means.
Live a Life Free From Debt
No matter what type of debt you’re in currently, a debt-free life is always possible. Debt affects every aspect of your life, from your relationships to your mental health. Being free from debt is a great goal, but it’s more important to find a financial strategy that works for you.
Do you need help taking the first step when it comes to debt? Debt Busters are here to help.Contact us now on 1300 368 322. Our team of experts are always ready to assist in creating a strategy designed for your needs and goals. Most importantly, we’re here to cheer you on throughout your journey to debt-free living.