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In today’s economic climate, carrying ‘bad’ debt, such as credit card debt or Afterpay-like debt, can lead to a financial downward spiral. This is particularly true for many Australians who are feeling the pinch of inflation and rising costs. If you find yourself in this situation, don’t despair. Here are five actionable steps you can take right now to start getting on top of your debt.

1. Change Your Spending Habits

The first and often the most challenging step is to change your spending habits. This involves a thorough examination of where your money is going and identifying areas where you can cut back. Consider using a money management app or keeping a spending diary to track your expenses. Remember, every dollar saved is a dollar that can go towards paying off your debt.

2. Create a Realistic Budget

Creating a realistic budget is a crucial step in managing your debt. This budget should take into account all your income and expenses and leave room for savings and debt repayment. It’s essential that this budget is not only achievable but also one that you and your family can stick to. Involve your family in the budgeting process and make sure everyone understands the importance of sticking to the budget.

3. Pay Cash Where Possible

Once you have your budget in place, try to get a set amount of money out each week and start paying cash for everything. This strategy makes you much more conscious of your weekly spending habits. When you physically hand over cash for purchases, you’re more likely to think twice about whether you really need what you’re buying.

I acknowledge that in todays world paying cash for everything may not be feasible and a debit card will still be required for some items. However, there is still power in using cash for as many purchases as possible.

4. Consider a Balance-Transfer Credit Card

If you owe a significant amount on your credit card, consider getting a balance-transfer credit card with zero or a super-low interest rate. This can help you pay down your debt quicker. However, be sure to read the fine print and understand the terms and conditions before you make the switch. Some cards may have fees or their low-interest rate may only be for a limited time.

5. Pay More Than the Minimum Amount

Lastly, make sure you’re not just paying the minimum amount on your debt. While it might be tempting to only pay the minimum, doing so can keep you in debt for a longer period due to the interest that accrues. Try to make extra payments whenever possible to reduce your debt quickly.

Conclusion

Getting out of debt is no easy task, but with determination, discipline, and a solid plan, it’s certainly achievable. Remember, the journey of a thousand miles begins with a single step. So take that first step today towards a debt-free future. You’ve got this!

Remember, everyone’s financial situation is unique, and what works for one person may not work for another. It’s always a good idea to seek advice from a financial advisor or counselor if you’re struggling with debt. They can provide you with personalised advice and strategies to help you manage your debt effectively.

Every step you take towards managing your debt is a step towards financial freedom.