Strategies For Coping With Debt

With prices soaring and wages staying relatively stagnant, many Australians are forced to use debt just to survive and pay the bills. Many Australians are struggling under the pressure of high inflation.

If you have debt that you need to pay off and are struggling to make ends meet you may wonder how to pay down your debt while staying afloat financially.

You can do it yourself or get professional advice from Agile Debt Solutions.

Budget

If you don’t have a budget, you need one. You need to understand where your money is going. Start by keeping track of your spending for 30 days. Write down everything you purchase, from gasoline to groceries. You can use a computer spreadsheet or a simple notebook journal.

Go through your expenditures category by category. If you have anything you can do without, like an expensive streaming service or a gym membership you rarely use, cut it out. Make a list of expenses you can scale back if needed. Knowing you can adjust your budget gives you an action plan and peace of mind.

Additional Work

Assess your skills and interests and see if there is any way you can make some extra money. You might be able to start a side hustle or pick up some extra work at a local retailer or restaurant. Be wary of getting involved in “get rich quick” schemes that promise big rewards. Such things rarely turn out well.

Use the extra income to start building an emergency fund. Hopefully, your current employment won’t be affected, but if it is you will at least have some income to help you weather the storm.

Home Refinance

If you have equity in your home, consider getting a home equity loan.  There are lots of online mortgage calculators that can help you determine whether a bill consolidation loan makes sense for you.

Transferring balances from high-interest credit cards to a lower-interest home mortgage can make sense.

High-Interest Debt

There are several schools of thought when it comes to paying off high-interest credit card debt.

• Debt Snowball – This approach focuses on paying off your smallest debt balance first regardless of the interest rate.  Take the card with the smallest balance and put as much toward paying it off as you can. Make more than the minimum payment.  This method can give you quick wins and keep you motivated.
• Debt Avalanche – This strategy prioritises the balance with the highest interest rate. Put everything you can towards the card with the highest interest rate. This may seem daunting, but it can help you save money in the long run.
• Debt Consolidation – If you have more than one loan it may be a good idea to roll them into one consolidated loan. Be careful that you do not end up spending more in fees and interest than before. Only use licensed reputable companies if you pursue this option.

It might be uncomfortable, but you can come out the other side financially sound and with the peace of mind that comes from knowing you are living within your means.