Whether you’re drowning in debt or looking to covert bad debt into good debt, or you want to become completely debt-free, the first step is taking control of your debt.
Being debt-free is a goal for many, but debt comes in dual forms. There’s good debt and bad debt. The true goal shouldn’t be to become debt-free but to turn bad debt into good debt. Going about this is no easy task. Knowing when and how to may payments off bad debt can equate to having more money to invest in good debt, your goals.
Taking control of your debt will reduce the financial pressures and stress associated with bad debt, allowing you to focus on positive changes to improve your financial position.
Only when you know what you owe can you work out how much you can afford to pay off your debts. The key is to prioritise essential debts such as rent, rates, utility bills, car repayments, etc., paying them off ahead of non-essential debts; the bad debts; credit cards, laybys, internet and phone bills, etc.
After paying your essential debts, the balance is how much you can put towards paying off your bad debts. The key to becoming debt-free is maximising the balance to pay off your bad debt faster.
You can take measures to reduce debt yourself, or you can contact a financial advisor to develop a debt management plan tailored to your spending.
A strategic debt management plan can help optimise your debt repayments and place you in a better financial position, potentially saving you hundreds of thousands in interest.
Knowing when to put money towards debt, i.e., before interest is applied to your credit card, can yield significant savings that can go towards paying off your bad debt. Self-control also goes a long way. Ask yourself, do you really need to get a coffee on your way to the office each morning, or can you bring one from home? It’s the little things that add up that can present significant savings.
One dilemma you may face if you have extra cash is paying down your debt or investing it into something new. The answer here may not be as simple as you imagine. Both options may be beneficial, but it depends on your individual circumstances.
Obviously, the quickest way to become debt-free is to put all your spare income towards paying off your debt. In the case of bad debt, such as a credit card, which will likely carry a high interest rate, you will want to work on paying that off first and foremost. Likewise, if you have a bad credit score, you will also want to pay off all your bad debt as soon as possible. The reason to concentrate on paying off bed debt over-investing (good debt) in this scenario is that a credit card’s interest rate will generally be higher than any investment’s annual return.
On the other hand, you have a credit card with a low interest rate, and your investments returns are higher than your credit card interest, then it makes sense to invest. However, you always want to be proactively reducing your credit card debt, regardless.
Take the first steps in becoming debt-free today by contacting one of the Gold Coast’s most awarded financial planning firms, Centaur Financial Services. Whether you’re in a financial crisis or looking to improve your financial future through smart money choices, the best professional advice comes from a financial advisor.
Centaur Financial Services’ financial advisors understand debt better than most. Our experienced Gold Coast debt management team have a wealth of knowledge and proven debt management strategies that help reduce bad debt and accelerate wealth accumulation. We work with you to identify your debts, analyse the good from the bad and cultivate an action plan that puts you back in control of your finances.
The information provided on and made available through this website does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Centaur Financial Services do not warrant the accuracy, completeness or currency of the information provided on and made available through this website. Past performance of any product discussed on this website is not indicative of future performance.
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