7 Tips to keep on track with Debt reduction

smash your debts May 09, 2022

Debt reduction isn’t fun, so why should I do it?

There’s a saying “what got you here won’t get you there”.

In order to be focused about paying down your debts, you need to look beyond your debts. You need to think about what life will be like after it has been paid off. There needs to be a reason to pay down the debt, otherwise it will keep coming back.

Here’s some things to think about if you have debts that need to be paid down, or if you have previously borrowed money and you are struggling to pay it back.

  1. Debts are repaying something that happens in the past. If you no longer have that item, and are frustrated that you have to keep paying for it, then switch the thinking around trans be thankful that you had the opportunity, and make every payment of the debt a gracious thank you for that thing.
  2. Debts arise because of a situation that you might have been in. It’s ok to be ashamed of your debt, especially if you don’t think that you should have debt, because of what happened. What can you do? Accept that the situation happened. Acknowledge it (to yourself - it doesn’t need to be anyone else) and know that what you are paying now is the price you have paid for that lesson. Yes, the payments still might go on for a while, but this is your reminder that your lesson has been learned.
  3. Have fun with it. If you love a challenge, or are a bit competitive, then see how you can save some money elsewhere that can go towards the debt instead. Some people use their grocery savings (the grocery store loves to tell you how much you saved on the bottom of the receipt) and transfer that amount to the debt. What could you do?
  4. The longer you have a debt, the more interest you owe. This is a big one when it comes to credit card and store credit debt. There’s no set repayment amounts like a formal loan, and so no end in sight as to when it will be repaid. Use a tool like https://moneysmart.gov.au/credit-cards/credit-card-calculator to work out how quickly you can pay it off, and keep it as a nil balance.
  5. Lock away your cards! If you don’t have access to them, they are really hard to use. Some people tell me that they keep their credit card in case of a family emergency and they have some big bills to pay. This is great, it’s your plan just in case. However, if you keep the card in your wallet, and have access to it when shopping (eg save your card details to your device) then it becomes a temptation that may not be resisted. Store your credit card with its nil balance in your filing cabinet, or a safe, and remove it from easy access from your devices. If you typed it in enough that you remember the card number, now’s a good time to cancel it.
  6. Reduce your limit. Banks want to increase your limit so you can spend more. But if you are working on smashing down the balance, you can give the bank a call and ask them to reduce your limit. Easy - then you can’t spend it.
  7. Add up your current repayment amounts and dream of what you could do with that money instead…. A new house? New investments? Upgrade something important in your life?


Note that this debt is for higher interest rates, not lower house rates.

Module 4 in Money Matters is all about Smashing Down Debts - giving you a structure that can help make it work for you.

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