Most people are dealing with debt in some way or another – whether it be a credit card bill, a mortgage, or a series of unpaid loans. Yet, we all want to become debt free. Here’s five tips to consider when starting your journey to become free of debt.
- Acknowledge your debts
The first step in solving any problem is acknowledging it. Open all your bank statements, letters from banks and lenders, and ensure you have documentation for every financial transaction. Tally up your debts and find out how much you really owe – it’s surprising how many people aren’t aware of the amount of debt that they might have. Lay everything out on the table and ensure that you know what you’re dealing with.
- Figure out your budget
Once you’ve laid out what you owe, sort out how much you have. Figure out how much money you have coming in personally or in your household, then budget it out on the necessities: rent, mortgage repayments, electricity, water, food, internet. There are hundreds of online tools available, like budget calculators, loan repayment calculators, budgeting software, and even quickly setting up a spreadsheet on Excel can be handy.
- Factor in unforeseen circumstances
Unfortunately, things can happen throughout life to put a hefty dent in finances. Even those living comfortably can be affected by sudden job redundancies, children’s schooling, vet bills, hospital bills, unforeseen accidents, or world events like the economic crisis. If you’ve budgeted out your income over your mortgage, bills and necessities, you’re doing well – but, make sure you have a little extra in the bank for that rainy day when you just might need it.
- Consolidate your debts
There are a number of debt solutions that can be considered when sorting out your debts. Debt consolidation is the most common, and most simple option. Debt consolidation entails combining all your debts – mortgage, loans, credit cards – into one easy monthly (or weekly, bi-monthly) payment, with details to be confirmed with your various creditors. This means you won’t have the chance to get behind on payments and won’t lose track of what and who you owe.
- Talk to a financial advisor
lifeafterdebt.com.au boasts a team of professional, experienced advisors who are prepared to help you become debt free. Contact us now on 1300 237 669 or take a look at our website today for more information or to book a consultation.