If you are ready to start paying off your debts, developing a personalised debt repayment plan might take time. But do you know what steps to take to become debt free?
There are better ways to eliminate your debts than making one-off or random repayments. An organised and consistent repayment plan is the best way to get rid of debt. Not only does this keep your finances under control, but it also motivates you to make repayments.
Today, we are looking at how to be debt free with the top tips for making a repayment plan. Whether you are creating a plan from scratch or reviewing your current strategy, keep reading to learn more about paying off debt and to get started ASAP!
What Is A Debt Repayment Plan?
Making a debt repayment plan is a crucial step towards being debt free, but the first step is learning how to make a debt repayment plan and what it involves.
A debt repayment plan is a systemic approach to paying off your debts in a specified amount of time. Plans usually involve organising debts, determining monthly payments and creating a timeline. You can create a plan alone or with a financial advisor — there is no right or wrong route to choose.
5 Debt Repayment Tips Everyone Should Know
Everyone’s financial situation is different. However, these tips can help you navigate the debt process and become debt free sooner.
Consolidate Debts
Part of making a debt repayment plan is identifying your outstanding debt. When you do this, consider whether you can consolidate any debts into a single loan. In some cases, debts can be added together to simplify payments. Some may secure a lower interest rate on consolidated debts, saving money in the long run.
Cut Unnecessary Costs
When paying off debt, it’s wise to budget your income and expenses carefully. Saving money where possible is vital, as you can funnel any extra funds into debt repayments.
Review your monthly budget and see if you can eliminate any unnecessary expenses. For example, can you get rid of any subscription services? Could you eat out fewer times? If you can, reduce your expenses and put the disposable income towards your debt.
Use Unexpected Funds Wisely
Unexpected funds are always exciting, but they are very tempting to spend. You should resist the urge to splurge these surprise funds when in debt. Whether they are a work bonus, tax refund or a gift, consider using the money to make a lump-sum debt repayment, as this will bring you closer to debt free life.
Put High-Interest Debts First
Some debts have higher interest rates than others. When examining your outstanding debts, consider their interest rates and focus on the higher ones first. By prioritising these debts, you will reduce the overall interest you’ll pay and save money in the long run.
Continually Check-In
Don’t forget about the strategy once your plan is in place and you are making frequent repayments. Remember to regularly check in with your progress and review your monthly budget.
Tracking your progress is an excellent motivator. The smaller your debts get, the more focused you’ll be on repaying them!
Checking in is also a great way to review how much you can afford to pay towards your debts. If your income changes or an emergency expense occurs, you may need to amend your repayments. Therefore, check in regularly to keep your finances on track.
Are you ready to supercharge your finances? Jump to our blog for more actionable personal finance advice.
