There are some people who seem to manage their money perfectly and never seem to get into hot water financially. In this article, we look at how you can pay your debts like a pro. If you are like many Australians, you may have multiple credit cards with balanced that got out of control. You might also have high car payments with crazy interest rates, from when the car dealer talked you into all the bells and whistles and signed you up for dealer finance. Then there are the store cards that seemed like a great idea at the time. Before you knew it, you were paying money left, right and centre and barely keeping up.
If you are in this situation, it might seem insurmountable, and you have no idea how to get things back in control. But if you pay your debts like a pro, you can get ahead and be in control of your household budget once more.
Tips to pay your debts like a pro
Assess your income
Before proceeding to the actual payments, take a good look at your income and budget. With that income, you will need to pay for your basic needs (food, clothes, household items, etc.) and your debts and taxes. You will also want to save some money for unforeseen matters.
Put some money aside for future debts
When it comes to saving, it’s also best to think of the saved money as money that can cover future debts that you can’t control. It may not happen, but it’s always a good idea to have some money saved just in case.
An example: Be smart about phone/internet plans
Do you really need the latest and greatest phone and data plan? What will you actually use? One of our team members was on a $99 per month plan with Optus and just kept paying it without question. One day she decided to investigate and it turned out she’d paid off her phone, and went onto a prepaid $30 per month plan with her own phone, saving a whopping $60 per month. She also contacted her ISP about her broadband internet plan and realised that she could drop down from $99 per month to $69 per month with no loss of speed or uptime. That’s another $30 per month.
Why waste money you don’t have to. It can slowly cause you to lose control over your financial situation. Stick with simple and efficient plans that don’t lock you in over a long period, unless of course, it will save you money.
Reduce your expenses
Start by saving and reducing your expenses. There are a lot of areas that you can save money. Things like meal planning, making extra and freezing for nights you are too tired, to avoid expensive home delivery. For a family of four, one night of takeaway can be $60 or more, the average home-cooked meal for four is about $20. That’s another $40 saved, and over a week that can add up. If you need help cooking, try a meal subscription service like Dinnerly which is low cost and convenient.
Lingering overdue debts
But let’s take another situation. Let’s say you were paying your debts for a couple of years and you are behind with several debts. What can you do in those cases? Is there a plan on how to pay your debts in that situation?
Pay the small debts first
One of the best things you can do to avoid bad credit is by paying small debts first, that have little to no taxes attached to them. They are easy to pay and will save you some credit in the long run.
Next, pay the most critical
After paying all your small debts, focus on the outstanding ones, on debts you haven’t paid in months. Try to get rid of them as fast as possible to avoid negative kickback on your credit file.
Now that some of the critical debts have been eliminated, you will have a steady flow of paying your debts. Concentrate on controlling that flow and try not to skip any debt or taxes or you will end up to square one again.
Look into debt consolidation to combine debts into one payment
If you have a hard time paying some of your debts, you can either use your saved money or get a personal loan to help you with this endeavour. Or, you can consolidate all your debts and have only one that is easier to pay and control.
Hopefully, this article has shown you some savvy tips and tricks on how you can save money and pay your debts like a pro. It can be a rough start, but in the end, you will be able to be debt-free sooner