Getting In Control Of Your Debts

Often the debt spiral can happen before we know it or realise what is happening. Here are a few tips to get in control of your debts:

Find Out Exactly What Debts You Have

Using Money Detectives Debt Tracker you will be able to track down and record your different loans. Remember to input all of your loans including student loans, money borrowed off family members, car loans, home loans, interest free finance etc. You may also have to pull out your initial loan paperwork to complete the information. The more accurate the information is that you input into this Tracker the more useful you will find it.

This Tracker allows you to gain an accurate picture of your current debt situation.

Determine How Much Your Debts Are Costing You

Using Money Detectives Debt Reduction Calculator, determine how much your current individual debts are costing you. You can do this by looking at how much interest you will need to pay on the debt during the term of the loan. If you know what your fees and charges are on the loan this also needs to be included. By doing this exercise it will give you a good picture of your true situation and the long-term impact debts have on your finances.

Using this Calculator you will be able to see how much money you can save if you increased your regular payments over time.

Decide Which Debts To Pay Off First

Prioritise your debts and decide which one you should pay off first. There is no right or wrong order for prioritising your debts. The important thing is to have a plan and to start tackling your debts and getting in control. You need to determine what will work best in your circumstances.

There are a number of considerations to help you to prioritise your debts such as:

• Looking at which debt is urgent or behind with repayments and making this debt your first priority.
• Deciding if you have any loans from family / friends that are putting a strain on your relationship. To preserve these relationships you might decide to pay these off first.
• Sorting out your bad debts and selecting the ones with the higher interest rates. These debts are costing you the most in interest costs. You may like to pay these off first. Refer to Good Debt vs Bad Debt section of website.
• Deciding if any of your debts are keeping you awake at night with worry. Make these ones your priority to pay down.
• Assessing what will give you a sense of accomplishment. This may include paying out a smaller debt first to provide you with a sense of achievement.

Start A Budget

The quickest way to pay down your debt is to pay extra money off your loans on a regular basis. To allow you to achieve this, you will need to have a budget and be in control of your money. A budget will allow you to determine what surplus money you have to pay towards these loans.

You may decide that drastic measures need to be taken to get your debts under control and be willing to sacrifice some of the ‘wants’ in your budget (such as entertainment / luxuries) to free up money to reduce your debts.

For further information on how to set a budget and succeed with budgeting please refer to our How To Budget section of the website.

Look For Ways To Make More Money

The quickest way to pay down your debt is to pay extra money off your loans on a regular basis. To allow you to achieve this, you may wish to look for ways to increase your income.

You may be prepared to sacrifice some of your time by getting a part-time job, doing some overtime, or starting a home business. There are many ways you can earn some extra income. Please refer to our Ways To Make More Money section of our website.

Set Goals

Set a goal for when you want each loan to be paid off. It is important to have a written plan for clearing each of your debts as this will help you to remain focussed and provide you with the motivation needed to achieve these results. For further information on goal setting please refer to our How To Set Goals Section of the website.

It is important to give yourself some rewards for each milestone that you reach to keep the momentum going on your new path of debt reduction. This may include rewarding yourself:

• When a loan is cleared in full
• When the balance of a loan falls below a certain amount
• When extra payments are achieved over a period of time

Get To Know Yourself

Look at your underlying attitudes to debt and when bad debt habits are more likely to occur. When you are more likely to go into debt? What is happening around this time?

For example do you:

• Go on a credit card funded shopping spree when you have had a bad day with the kids or had a fight with your partner?
• Do you feel the pressure to upgrade your car when you have been over Fred and Janice Jones’ place and seen their new Holden Caprice?
• Do you feel guilty for not spending time with your family and try to make up for it with presents?

There may be many more reasons for going into debt and not all of them bad. But by understanding your attitudes now, it can help you recognise when you are feeling like this so you can look at other ways to combat these feelings and / or attitudes.

Look at ways you can limit any bad spending habits. For example:

• Leave the credit card at home
• Focus on your new goal
• Give yourself rewards for reaching your milestones

Reduce Your Debts

There are a number of strategies to help you reduce your debts. Some ideas you may like to use are:

• Review your individual loans and see if there are better deals in the market
  
  Often if you have been with the same banking institution it is easy to become complacent with your current loan interest rates and fees. Using our Money Detective Debt Tracker you can compare the features of your current loans with those of other lenders in the market.
  
  Using your internet search engine, search for ‘comparing loans’ and you will find some great resources to compare different loan products.
  
  Consider interest rates, fees and charges, flexibility, features and conditions of the other lenders.
  
  You might like to change your lending to another lender. This may be fraught with danger if you don’t really understand the risks of refinancing your loans. For further information on Refinancing Loans please refer to the Refinancing Debts Webpage.
  
  You could also then contact your lender and see if they can do a better deal for you. You never know unless you ask.
  
  
• Commit to paying the loans with the higher interest rate first
  
  By paying off the loans with the higher interest rate first, you are reducing your overall interest costs and saving yourself money.
  
  
• Make extra repayments to the loan
  
  By making extra repayments to the loan, you are paying more off the principal amount of the loan each time and reducing your interest costs. An additional $10 or $20 a week into a loan will make a big difference over time. Why not check it out for yourself. You can run your own numbers in the Money Detective Debt Reduction Calculator.
  
  
• Make more regular repayments to the loan
  
  Generally interest costs on loans from banking institutions are calculated daily. If you can make more regular repayments to the loan, then you are able to reduce the interest costs on that loan.
  
  You therefore may set up your loan repayments to match when you receive your wages / income. I.e. if you get paid on a fortnightly basis you may wish to pay the fortnightly portion in that pay, rather than waiting to pay it on the day of the month, when your repayments fall due.
  
  
• Consolidate your loans
  
  An option may be to consolidate your debts into a lower rate loan, with lower fees and continue to pay the same overall repayments on the new loan as you would have with the other individual loans.
  
  It is important that you run the numbers to ensure that you are better off consolidating these debts in the longer term than if you kept these all separately.