Having debt is not always desirable, but it doesn’t have to be stressful either. Often it’s about how to manage your money and your debt more than anything. In this article, we’ll take a look at a few tips and ideas and offer some guidelines for managing debt more effectively.
But first, let’s talk about debt itself.
How Much Debt Is Too Much?
There could be a number of ways to define this question. A certain amount of debt might prove stressful for one individual, but not another. The easiest way to determine if an amount of debt is too much is if you simply can’t afford to repay your debts. Unfortunately, many Australians find themselves in this unenviable situation, particularly when their financial circumstances change for the worse.
Having debt, and especially having too much debt, is even more reason why debt and money management is so vital.
Pay Off Debts With the Highest Interest First
If you can manage to do this, it’s a wise course of action. Any type of debt (possibly a credit card) that attracts a high-interest rate should be a priority when it comes to chipping away at and eradicating your debts. The higher the interest, the more you’re going to repay over the term of a loan or the life of a credit card.
This point is all about prioritising your repayments, so if you can pay a little extra than the minimum repayments each month, focus on the debt with the most interest and whittle it down.
Have You Considered Debt Consolidation?
If you have more than one debt and you find yourself struggling financially, you might want to consider consolidating all of your debts into one single debt. This is known as a Debt Consolidation Loan. The whole idea is to simplify debt payments and free up some of your finances.
This is achieved by potentially reducing the amount you pay in interest every month, possibly reducing the amount you have to make in repayments every month, as well as leaving you with only one debt to repay each month.
Pay All Debt Repayments On Time
This is important if you want to keep your head above water. Let’s say one month you forget to pay, or feel you can’t pay, one or more of your debts. All that will happen is the next month you’ll owe double, along with late payment fees in some cases. From this point on you’ll be struggling more than ever.
Another thing that may happen if you fail to make payments on time is this might get recorded on your credit history, ultimately lowering your credit score.
Try and avoid getting behind at all costs.
Search for Ways That You Can Trim Back Costs
We all have bills and debts that are required to be paid each week or month, but all of us also have other ‘expenses’ that can be adjusted, trimmed back or cut out altogether. The trick is to find what these expenses are, make a list of them and then take careful note of how much money is spent on these expenses each and every time they occur.
If you can discover where you are leaking money and plug the hole, you’ll have more free cash to put towards anything you either have to repay or spend money on. Chances are, you’ll find a number of things you can either cut back on or eradicate from your spending habits.
Consult With a Financial Advisor Or Accountant
If you’re really struggling with managing your finances, then it might be time to consult with an expert. This might be your accountant or a financial planner or advisor. Either way, they’ll be able to take a look at your particular situation and devise a plan that can help you get back on top of your finances.
You don’t have to deal with the stress on your own. Help is available if you find yourself snowed under in debt.
Cashify Can Help
Disclaimer: Please note this content is of general nature only and does not take into account your personal objectives, financial situations or needs. For advice tailored to your financial situation, it is advised that you seek guidance from an accountant or financial advisor. The information contained in this article is correct at the date of publication.