4 Steps – Getting out of debt for good
Australia has the world's second largest level of household debt. On the individual level, 37% of Aussies are struggling to pay off their debts.
Debt is anything that someone owes to someone else. Usually, a debt is in the form of money. Before you get into debt, you should engage in a review of your needs and financial situation. Money that is borrowed must be paid back later, usually with interest.
Having too many debts might lead you to financial trouble and even bankruptcy. Hence, we are offering you a step by step guide to help get you out of trouble.
When you are in deep debt, living life becomes stressful and frustrating. Creditors and debt collectors will be calling you frequently, keen to get back the money you owe them.
You must find a way to break the debt cycle. It is possible to be debt-free only if you are fully committed to seeing the process through.
#1) Sort & identify your debts
Write down the outstanding amounts on each of your credit accounts. Sort your debts out and work out how much you owe by identifying:
- The sum you owe
- To whom you owe it
- The interest rate and fees you are paying
#2) Calculate your expenses
Calculating your expenses will help you know what you spend your money on. This will have a huge impact on you on your way to a debt-free life.
While you’re calculating your expenses, you will also notice unnecessary expenses which you’ll be able to cut off. This will leave you with enough money to make the minimum repayments on all your debts.
#3) Differentiate between a need & a want
Sometimes we spend a lot of money on things that do not add value to our lives. Sometimes the overspending can be caused by peer pressure. Like when your friend just bought a new makeup kit or car, and you desperately want to buy one.
Sometimes you know very well that you cannot afford it but, go ahead and buy it. When you differentiate a need from a want, you’ll be able to buy only what you can afford, regardless of how much you want it. It will also teach you to buy what you need, not what your peers have.
#4) Act & ask for help
When you start missing repayment dates, it is clear that you have a problem with your finances. It’s better to act early than late. The problem might arise while you’re delaying your response to issues and so, asking for help early might save you from getting into deeper financial trouble.
Get free advice from experts
When you cannot afford to pay for anything you can opt to get free advice from experts. A social worker will help you with counselling, budgeting, and emotional support. However, you can also talk to someone who is financially smart and close to you.
That person might help you with tips that will guide you throughout your financial journey. You can also use the internet to find a range of free financial guides and advice.
Get a financial counsellor
You can get free financial counselling session from the National Debt Helpline. You will get a confidential and independent service. The counsellor will help you with the following:
- Improving your financial situation
- Negotiating repayment options
- Getting you help from other services for gambling, personal problems, or community legal aid.
Talk to Hardship teams
Several businesses, including banks, electricity, and other service providers have hardship teams. So, you can consider this option. It can help you secure a repayment holiday or reduce or waive debt repayments depending on your situation.
You can ask your financial counsellor to speak to creditors on your behalf because they can get better results when they negotiate for you.
Rural Financial Counselling Service
This option is mainly for those businesses that fall under the Agriculture sector. The counselling falls under the Department of Agriculture and Water Resources and, is only offered to the fishing industry and small rural businesses who are suffering from financial hardship.
Seek legal help
Legal notices are serious. You might receive a Court Order, Summons, Statement of Claim, or Liquidation Claim as a result of unpaid debt.
Seek legal help which will ensure you make a wise decision which will help you take control of your life and finances.
The benefits of being debt-free
When you are debt-free you will no longer be living in fear, avoiding certain calls, and being broke. However, here are the full details of the benefits you might enjoy.
Better mental health
Debt stress can lead to depression. So, after you have paid off your debts you become less stressed. And you’ll be able to make better financial decisions in the future.
When your mind is in a good place, you also gain your confidence and self-esteem back. You walk with pride and determination to improve your life and never repeat the mistakes you made.
You'll have better job prospects
Too many debts can also hold you back at work. They cause sleepless nights at home which will result in you being a lot less productive on the job the next day. So, paying off your debt makes your job more satisfying.
You become more motivated to work harder when you get to keep the money you make, rather than spending it all on debt payments.
You have more free income
The repayment of a huge debt ties up a big chunk of your income. After you have paid off your debts you will be left with extra every month.
There is less risk
Debts bring the worst risks to people’s lives. Especially when you have no emergency savings to fall back on, you’re always just one financial blow away from disaster.
Failing to make repayments might result in:
- Endless calls from collection agencies
- Bad credit
- Possibility of being sued for non-payment, and possibly having your wages garnished
- Repossession of your car
- Losing your home
Improve your credit score
Having a lot of debt weighs down your credit rating. When you pay off your debts, your credit score will automatically improve.
Benefits of a good credit score
- Better interest rates on any future loans
- Lower insurance premiums
- A better chance of landing your dream job
- A better chance of finding an apartment, since landlords look at your credit score
- Better cellphone service deals.
Live the life you’ve always dreamed of by becoming financially savvy
Everything in this guide will help you live a stress-free and debt-free life. Get out of debt today because debt does not only affect your financial status it also affects your well-being.
Having too much debt is more like taking a first step in shortening your days on earth. When you start having many debts, you are slowly saying goodbye to happiness. Get out of debt now by facing the issue head on!