Managing your debt

By You and Money

Debt can be a good thing – without it, most of us wouldn’t have a home or a car. But debt can also be a trap if it’s not used wisely. Planning and taking action to reduce your debt as quickly as you can is a good way to make sure you stay out of trouble.

About debt

Before you decide to take out a loan, be honest with yourself. Can you afford the repayments? Is borrowing the right option for you? Remember to take your time and not to sign anything in a hurry.

If you’re applying for a credit card, think about whether you will be able to pay it off each month. If you do, you’ll avoid paying interest and accumulating a debt that might take you years to pay off.

Here are some tips to help you manage your debt.

  • Change your repayment cycle – making weekly or fortnightly rather than monthly repayments can make a real difference.
  • Prioritise – order all your debts from least expensive to most expensive and pay the ones with the highest interest rate first.
  • Develop a budget
  • Pay your bills on time with funds from your bank account using BPAY or a debit card:
    • pay them monthly rather than annually – it sometimes helps to pay small, regular repayments than one big lump sum
    • set up regular payments from your bank account in advance.
  • Try to use cash or a debit card for regular purchases instead of credit (unless it’s a major expense where you need time to pay it off, or unless you always pay off your credit card on time).
  • Use a debit card to access your cash rather than using a credit card.
  • Don’t ignore your debt – it won’t go away.

Dealing with problem debt

If you’re struggling to pay your debts, think about using extra money such as tax refunds or bonuses to pay off your debt faster. Or look for extra sources of income – sell some unwanted goods, get a part time job or work overtime.

If your debt is a serious problem, act quickly. Contact your credit provider (they might be able to restructure your payments) or think about financial counselling.

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