Dealing with debt and loans, and learning how to reduce your debts can be stressful.
Whether you have credit card debt, student loans, personal loans or a mortgage – it can feel like a you are on a merry go round… to successfully get out of debt (or reduce it), it helps to create a strategy that:
- You can realistically stick to, and
- Will put you in the best possible financial position.
The best debt reduction and management strategy will be one that is personalised to suit your individual needs
Making debt reduction one of your top priorities is the first step, no matter the size of your debt, taking small steps and implementing a strategy can help you achieve great things!
Steps to Successfully Reduce Your Debt and Create Wealth
1. Start a Budget to Understand All Your Expenses
Detailing all of your household and personal expenses, within a spreadsheet, will help you analyse how much money you need to direct into everyday spending and major household bills. It will also provide you with a surplus amount. You can then direct the surplus amount into reducing your debts quicker and longer-term planning for your future. Separating your income into different accounts to fund various expenses will help you stick to a longer-term strategy. We call this the ‘Jar System’ our parents and grandparents used this system, when they got paid they put money into different jars to ensure they could pay all their bills & they could use what was left over for discretionary items, these days we have online bank accounts that have replaced the ‘Jar System’
2. Decide on a Debt Reduction Strategy
- Debt Consolidation/Refinancing: This is where you consider if consolidating all your debts into one large debt is an option. However, you have to make sure that consolidating will actually save you money rather than costing you. Consider the average interest rate you are currently paying versus the new interest rate, term of loans and fees before making a decision – consolidating loans should only be an option if it improves your financial position.
3. Consider Gearing and Debt Recycling Strategies
Gearing means ‘borrowing to invest’. This borrowed money can be invested in a number of ways – shares, property, or bonds.
Debt recycling is used as part of an overall debt reduction strategy to create additional income from investments which can be used to pay off debts more effectively.
4. Stick to Your Debt Reduction Strategy.
For most people, debt is an unavoidable part of life. But debt doesn’t have to be a negative experience.
You can use good debts to improve your financial situation. Plus, with a great debt reduction strategy in place, it can keep you focussed on the end results and get you off that merry-go-round debt cycle.
How Can Prominent Financial Services Help You With Debt?
At Prominent Financial Services, we provide you with financial success, satisfaction, and confidence through superior service, guidance, and education.
Prominent Financial Services is where your smart financial decisions start.
Contact us and get closer to being debt-free today!
