Thinking about debt probably doesn't spark a positive reaction for most people, but it is something that we will all need to contend with at some point in our lives.
Although not all debt is bad, if you're finding that it's causing you anxiety or it just seems to keep mounting up by the minute, take comfort in knowing there are ways to help alleviate it.
Here are four strategies that you may consider implementing when it comes to managing your debt, depending on your circumstances.
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Help manage your debt by understanding the amount and what it’s costing you
Laying all your cards out on the table can be extremely confronting, especially if you've never done it before. But as harsh as it may be, this is a critical step to seeing the bigger picture of your financial situation.
Being aware of the total amount you owe enables you to forecast future payments and potentially allocate some of your income to help pay off these debts. Making at least the minimum payment required each month will also help you avoid any additional interest and charges.
Consider how much it's costing you
It's important to understand how much your debt is costing you too. A higher interest rate will require more money to repay the loan so you may want to consider paying it off faster or look into other loan options.
- Seek professional support to help manage your debt
Managing your finances is not something that comes easily to most people.
Sometimes speaking to a professional can help put your mind at ease. They'll be able to help you assess your situation and provide you with a manageable repayment plan which may see you pay off your debt faster.
- Help manage your debt by knowing what you earn versus spend
One strategy that may help to remove or reduce your debt is finding ways to free up the money you already have available.
Staying on top of what you earn versus what you spend will provide a clearer picture of what you're spending your income on. You may then be able to identify ways to cut down on expenses and allocate any additional income you save to help pay off your debts.
- Help manage your debt by setting priorities
Depending on what type and how much debt you have, one option may be to prioritise repaying debts with the highest interest rate first, given these will be costing you the most to keep them around longer. However, another approach you may prefer is to pay off your smallest debt first. This often helps to motivate people by process of elimination so the debt doesn't seem so cumbersome.
- Consider balancing debt repayments with saving
While managing your debt may be your key priority, it's important not to dismiss other financial goals like saving for your future.
Making additional contributions to your super is a great way to save for retirement while you're working, and may still be achievable even if you're paying off high interest loans. Speaking to a financial adviser may help you determine whether this is suitable for you and the best approach for doing this.
Bottom line: managing your debt is really about taking control of your financial situation by implementing strategies that will make your money work for you.
Important information and disclaimer
This article has been prepared by GWM Adviser Services Limited (ABN 96 002 071 749, AFSL 230692) (‘GWMAS’), registered office at 105 –153 Miller St North Sydney NSW 2060. GWMAS is a member of the National Australia Bank Limited group of companies (“NAB Group”). Any advice provided in this article is of a general nature only and does not take into account your personal objectives, financial situation or needs. Please seek personal financial, tax and/or legal advice prior to acting on this information. If any financial products are referred to in this article, you should consider the relevant Product Disclosure Statement (PDS) or other disclosure material before making an investment decision in relation to that financial product. Information in this article is current as at 10 February 2020. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way and no liability is accepted by GWMAS nor any member of the NAB Group, nor any of their, directors, agents or employees for any loss arising from reliance on this article. Any opinions expressed constitute our views at the time of issue and are subject to change. Any tax information provided in this article is intended as a guide only. Any investment returns referred to in this article are hypothetical examples for illustrative purposes only and do not reflect the historical or future returns of any specific financial products.