10 Ways to Get Out of Debt

Are you struggling with a debt mountain? Here are some top 10  Be Mortgage Free tips to help you win the battle.

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1. "Set yourself goals"

Setting yourself a series of achievable debt targets - rather than viewing your finances as one huge mess - can help you feel more in control.

Goals are set on a number of different levels: First you create your "big picture" of what you want to do with your finances, and decide what large-scale goals you want to achieve. Second, you break these down into the smaller and smaller targets that you must hit so that you reach your lifetime goals. Finally, once you have your plan, you start working to achieve it. It's the old question: "How do you eat an elephant? One bite at a time".

2. "Knowledge is power"

The first step on the road to winning your debt battle is acknowledging just how big the problem is. It may not be a pleasant experience, but you need to sit down and work out the following:

• Exactly how much you owe, and to whom;
• How often you need to make the repayments;
• How long it will take to pay off each debt;
• What the interest rates are.

With the cold hard figures in front of you, it allows you to address the situation realistically.

3. "Organise your finances"

Once you have established your debt, you now need to know where your money is going and organise your household bills.

Try the standard Be Mortgage Free Money Management System, it's free, and comes with the following features:
• Really easy to use and takes minutes to set up in only three easy steps.
• Browser based so you can upload or check your progress anywhere. 
• Patent-pending intelligent auto-categorisation of your transactions to save you time.
• Comprehensive reporting with graphic charts so you can see where your money is going.
• Alerts you when your spending is close to the self-imposed limits on your accounts (available only on premium). 
• Fully protected using 128bit SSL encryption (same as online banking).

With the use of EFTPOS and ATM's this money management system is the prefect partner when using our electronic banking and will help you stay organised.

4. "Attack the biggest % first"

Simply put, this means focus on the debts that charge the highest rate of interest by using the information from tip # 2.
 
It's called 'snowballing' your debts; this means you grapple with the ‘worst' debt first, throwing as much money at it as you can until it's cleared, while making minimum payments on the others. Then tackle the next most expensive one, and so on. 'Snowballing' your debt means that you can reach separate milestones in repaying your debt and feel like your getting ahead.

5. "Don't save whilst in debt"

Generally speaking, it's not a good idea to try and save money while you're in the red. This is because the interest you accrue will almost invariably not cover the interest you are paying on your debt.

6. "Remember that the little things soon add up"

This can apply to those daily coffees, vending machine snacks, magazines or a whole host of other little ‘treats'.

Buying lunch when at work? Making a packed lunch for $2, rather than buying lunch for $8, can save you a whopping $138 a month (based on 23 working days).

If you pay that towards your credit cards or other debt it will cleared them a whole lot quicker...

7. "Find out what help you're entitled to"

Millions of dollars worth of Government money goes unclaimed each year because people don't claim the subsidies they're entitled to. Check what your entitlement is with Working for Families or if you're due a Tax Refund.

8. "Cutting costs vs. increasing income"

Work out whether you'd be better off upping your income or reducing your outgoings. Can you work extra hours or a part-time job in the short term? This may be just the thing to get you out of debt quicker. Get a flatmate, boarder or student to help with your expenses. 
You could have a garage sale or sell stuff you haven't used on Trade Me.  Do this in conjunction with other ‘tax-free', cost-cutting moves first - like cutting your household bills, cancelling ‘luxury' subscriptions and working to reduce your food bill.

9. "Cut up your credit cards"

If your credit cards are maxed out you're not using them anyway. So cut them up; you don't need them and it removes the temptation to max them out again. Think twice before putting anything on credit. Don't be temped by the buy now pay later and interest free deferred payment schemes and advertising. Get serious about your debt.

10. "Consolidate Your Debt into your Home Loan"

Many people consolidate their short term debt into their home loan... great! BUT it needs to be done properly. If not, you will end up paying more for the debt than had you left it as short term debt. Why? Because a home loan is paid over a longer period and therefore costs you more in interest, that's if, of course, you don't apply the Be Mortgage Free Programme.   


For more advice call us on 0800 236 678 for no obligation actual assessment of your income and expenditure.

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Do not value money for any more nor any less than it's worth; it is a good servant but a bad master. ~ Alexandre Dumas fils, Camille, 1852

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Disclaimer
Articles provided are for information purposes only. It is not an offer to enter into any Be Mortgage Free Limited products or services. Accordingly, you should not take any action in reliance of this article without considering your particular circumstances and taking appropriate professional advice from your Accountant and / or Solicitor. No right of action shall arise against Be Mortgage Free Limited, its related companies or any of their respective directors, officers or employees either directly or indirectly as a result of the information contained in this article in particular, Be Mortgage Free Limited is not responsible for any mistakes, omissions or errors in the article or matters arising due to changes to the law, products or services over time.

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