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November 18, 2022


If your debt is getting out of hand, we’ve got a five-step plan for you to consider that might just help to get you back in the black.

If your debt is getting out of hand, we’ve got a five-step plan for you to consider that might just help to get you back in the black.

Step 1. Tally Up

Let’s rip the band-aid off and get a handle on your monthly outgoings and income straight away.

First, get a list together of the things you purchase every single week. Got any fortnightly costs? Write them down.

Next up, add your monthly costs – so all your regular bills and any other minimum repayments you must make.

If you really don’t know what you’re spending your money on, make a diary of your expenses for a couple of weeks. For anything else, err on the side caution and round up, not down; it will probably prove more accurate.

Multiply your weekly and fortnight expenses as needed then add to your monthly costs.

Before you finalise your total monthly outgoings, add a special treat for yourself to get you through to the other side. A little regular luxury may stop your debt reduction plan from derailing early. So, whether it’s a monthly pizza night at your favourite local, a daily coffee, or a weekly smashed avocado, nominate that one special thing and its monthly cost right off the bat.

You did it! You now have a list of your monthly outgoings.

Now, it’s time to run your monthly incomings.

Add up your salary payments and any investment or asset deriving income to get your magic figure.

Step 2. Deal Or No Deal

It’s time to hustle.

Before you look to pay off your debt, it’s a good idea to look at areas you can reduce spending first. Just because you are spending that much on your monthly costs, doesn’t mean you should. Take a look at your gas, electricity, phone, Internet, memberships and subscriptions. Do a quick search to get a handle on the best in market offers. Now, with those hot deals at your fingertips, ring around all your current providers and ask them to match, or better, those offers. If you’re met with any push back, ask to speak with their disconnections or customer retention department. A sweeter deal should be forthcoming. If not, change providers.

If you can’t reduce it – ask yourself – do you really need it?

If you have a home loan, it’s also a good idea to review the interest rate you are paying, and if applicable look at refinance options.

Once you’ve locked everything down, you’ve probably shaved 5% off your monthly costs that you can put into your debt pay down bucket.

For the final hustle, take a quick audit of the miscellaneous items in your home that you no longer need. Get everything onto eBay, try a local Facebook Buy, Swap or Sell page, or even organize a garage sale.

Whatever cash you make from this exercise, put it to one side – it’s also going straight into the debt pay down bucket.

Step 3. Debt Consolidation

OK, next step is to consolidate what debt you can before you finalise your pay down strategy.

If you have multiple credit cards, consider consolidating them. See whether you can transfer some or all of that debt onto one card with an interest free period. Try to do this with the card that has the highest interest rate first. Check with your existing card provider in case they can provide this to you.

If you now have some cards with a balance of zero after all that close them down. Do not give yourself any temptation to accrue further debt.

If that’s a no go with a new or existing credit card provider, you can also look to consolidate your debt into a personal loan or if you have a home loan, access any equity you have to pay them out and refinance at a lower rate. For more information on Debt Consolidation through your home loan, check out this page on the Online Home Loans website.

At this point, it’s important to state that if you are in serious financial difficulty you should seek help. Chat to a financial counsellor or get legal advice. Check out moneysmart.gov.au, nationallegalaid.org or call the National Debt Helpline on 1800 007 007.

Step 4. Rank Your Debt

In preparation for paying down your debt, list all debt left from smallest to highest. Not only does this put some order to it (and I love organisation), it will help with your payment strategy in the next step.

Step 5. Payment Plan

First up, deduct your outgoings from your monthly income. That’s the monthly bit of gold you’ve got to knock that debt on the head.

Now, divide your total debt by the amount you can afford to make in debt repayments each month. This will tell you roughly how many months it’s going to take you to pay down your debts.

Lets look at the debt list you have ranked from smallest to largest.

Starting with the smallest amount first will give you some more immediate gratification before hitting up the more intimidating debt.

Make minimum repayments on all your debts, except for the first one you are working to eliminate. Pay as much off that debt as you can afford with the balance left over from your incomings and monthly outgoings.

Once you have determined all of our repayment amounts, update your regular bill payment details to a debit card linked to your savings account. Set and forget it. This way you don’t have to remember each month to pay the bills and it take the stress and hassle away.

It will be hard work, but remember you’ve got that weekly or monthly bit of joy to look forward to, and keep you on track.

As you pay off each debt, add the payment for that debt to the next one you are going to tackle. This means your individual debt repayments get bigger as you go along (no more minimum payments), so that you are paying down your debt faster over time.

Once you have your high interest debts out of the way, you can turn your attention to saving for a home or going on the trip of a lifetime; or continue with the debt plan if you have a mortgage and pay this down, enabling you to save some serious interest on the life of your home loan.

Good luck!

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