7 Debt Management Tips and Tricks
Table of Contents
How Small Details Make a Big Difference
It isn’t always a huge mortgage that will cause someone to lose control of debt. Sometimes it’s the culmination of the many little monthly repayments that can push everything over the edge. Before your small debts turn into a big problem, take a moment to consider some clever ways to manage the monthly debts.
Between the summer holidays, Christmas spending, and the general cost of living, many Kiwis find that debt has accumulated to levels that feel unmanageable. The questions start coming up: “How do I pay off my holiday expenses?” “How many loans and credit cards are too many?” and “Does a debt consolidation loan actually make sense?”
1. Get the Info on What You Owe.
It’s true – a little education goes a long way. Rather than hiding from what you owe, take a good look at exactly what’s going on. It may not be a pretty picture, but in the long run, it may be just the thing you need to do to clear debt faster.
Set aside some time and look at all the repayments going out. It’s easy to overlook small payments across multiple accounts and credit cards, so go through it with a fine-tooth comb. Then, take a look at the interest rates and fees that come with these repayments. You may be shocked by what you see, but sometimes we all need a wakeup call. Having a clear idea of what you pay out each month will give you a big picture view on your situation, and help you decide if it’s time to go with a debt consolidation loan option.
2. Organise Everything.
Get a calendar (either online or printed) and use it. Getting organised is one of the simplest yet most effective ways to pay down debt faster. Not only will you know exactly what is coming up, but you can also avoid annoying late fees and penalties.
The worst scenario is when money is available but you forget to make the payment. Set up automatic payments for ongoing bills like power, phone, internet and rates, and use your calendar as a reminder when automatic payment isn’t an option. Penalty payments can mount up easily over the year and they are entirely avoidable.
Not only will you know exactly what is going on, but you will also reduce the stress that occurs when you feel like you’ve lost control. Take a look at what payments you need to make each week or month, and synchronise these payments with your payday. This is a simple way to keep the bank balance in consistent good shape throughout the month.
3. Give Credit Where It’s Due
Most of us have a love-hate relationship with our credit card. While the plastic fantastic can save the day it can also be one of the fastest ways to unmanageable debt. Credit cards make spending too easy (that’s the whole point), so keep a tight hold on the reins and don’t let it get the better of you. Remember, these days a debit card can do just about everything a credit card can do – except it uses money you actually have.
One of our favourite tips for managing credit card debt is to pay more than the minimum amount each month. While you may be tempted to only pay the amount on your statement, paying more means you are closer to knocking off the debt and avoiding paying interest on a higher balance. To become a credit card management pro, set up an automatic payment each month that is more than your monthly minimum to ensure you are moving forward with wiping the debt and ensuring you never miss a monthly payment.
4. Take Out a Debt Consolidation Loan
This is the single most important rule of consolidation: if you consolidate three credit cards, you must close or freeze all three. Leaving them open creates the temptation to run up new balances, and you end up worse off than before — carrying the consolidation loan plus fresh credit card debt on top. The idea is to get yourself into a better financial position, not a worse one.
Debt consolidation loans have proven very useful for many of our customers in the past as they seek to regain control of their finances and to step free from the pressure of paying off multiple debts. A debt consolidation loan is essentially a personal loan that is lent to cover the costs of these smaller debts.
5. Shop Around
A hefty phone bill or power bill can send anyone into a tailspin. But before you lose your head, remember you are the customer, and therefore, you are free to choose the provider to go with. And it may be time for a change.
If you have started the process of shopping around for a different electricity, gas or phone provider you may become overwhelmed with the multitude of options. It can be just about impossible to compare plans against each other and figure out which is best. To make life easier take a look at the Powerswitch website, which does the hard work for you. The site will give you an estimate on how much money you could save if you switched providers and help you make the move.
As well as this, many providers have systems in place to support those who are experiencing hardship. Talk to your power company to see if you are on the right plan, and if you still need help, you can find advice and support on the Electricity Authority’s website.
6. Take a Good Hard Look at Your Spending Habits.
If you find yourself in a situation where you are no longer able to manage your debt, then it’s time for radical change. You can’t continue to spend and live in the same way and expect things to get better. You will only be able to pay as much on your debt as you can afford so it may be time for a reality check.
Get clear on what your goals are and work (very) hard to achieve them. Every time you are tempted to splurge on a non-essential item check whether a brief moment of joy is worth the stress of paying it off later.
Decide which debts you want to tackle first. In many cases, this will be the Buy Now Pay Later (BNPL) loans like Afterpay. BNPL services like Afterpay, Zip, and Laybuy are incredibly easy to access, and it does not take long before you have multiple active balances, each with their own fees and deadlines. Our top tip is to make these debts a priority to eliminate. Our top tip is to make these debts a priority to eliminate.
7. Seek Budgeting Advice.
Helping individuals manage their financial affairs better is hugely beneficial to New Zealand’s wider society – our communities are stronger thanks to the wellbeing of everyone within them.
That’s why there are many community budgeting outfits that can help you set up an initial budget and an ongoing programme for debt management and reduction.
When to Ask for Help
If your total repayments consistently exceed what you earn, or if you are borrowing from one lender to pay another, free help is available. MoneyTalks (0800 345 123) is a confidential financial helpline run by FinCap in New Zealand. They can help you assess your options, including budgeting advice and referrals to local budget services. For debts that can be restructured through consolidation, the team at Quick Loans can walk you through what is available based on your circumstances.
If it’s all becoming too hard and you feel like you can’t see a way to end debt, it may be time to consider consolidating everything into one cash loan. We specialise in personal loans designed to help you break free from a downward debt spiral. Get in touch today.
More Information
QuickLoans can help you with all sorts of loans, including personal loans, debt consolidation and car loans.
If you want to talk to us about applying for a loan, please call us on 0800 200 275 or apply online.
This is not legal advice.
Frequently Asked Questions
Q: Should I use my savings to pay off debt?
In most cases, yes. The interest you are paying on debt is almost certainly higher than what your savings are earning. However, keeping a small emergency buffer — even a few hundred dollars — is important so the next unexpected expense does not send you back into debt.
Q: Which debts should I pay off first?
Focus on the highest-interest debts first, which are usually BNPL balances and credit cards, while maintaining minimum payments on everything else. If motivation is an issue, paying off the smallest balance first can give you momentum to keep going.
Q: Is it better to pay off debt or save for a house deposit?
Clearing consumer debt first usually puts you in a stronger position for a mortgage application. Lenders assess your existing commitments when determining how much they will lend, so reducing your debt-to-income ratio before applying improves both your approval chances and the amount you can borrow.
Q: Can I get a loan to pay off other debts?
Yes, this is exactly what a debt consolidation loan is designed for. Quick Loans can assess your existing debts and, if approved, pay your creditors directly so you are left with a single, manageable repayment.
by Ash Horton
19/04/2021
Ash is a professional content writer with extensive experience in business development in the financial services. Ash has founded businesses from the age of 19, including franchising ventures, and working alongside some of the largest retailers in the world.