Advice Market Blog
I’ve Just Gone on the Trip of a Lifetime – How do I pay off my Debt?
June 28, 2016
Travel is one of life’s most memorable experiences and enjoying the “Big OE” is a rite of passage when you are young. Unfortunately travel doesn’t come cheap, and you may be left paying the credit card bill for some time after the memories have dulled and the mementos have started to gather dust on the mantelpiece.
If you plan on travelling again any time soon, or just want to get on with enjoying the rest of your life without the lingering hangover of your holiday loan, then it’s important you clear that debt before it becomes a crippling liability that soaks up your income each month. Getting behind on your debt at a young age can make it hard to build for your future.
Here’s nine tips to help you get that debt under control.
- Allocate a regular amount to repayment. Being consistent is one of the most important things you can do if you want to clear your travel debt. A little amount regularly is a sure and steady way to make strides. The great thing with debt repayment is it becomes a cycle – the more you pay down the less interest you have which frees more funds up to repay the debt faster.
- Look to consolidate your debt. Combining loans through debt consolidation can be a cost effective way to keep servicing and interest costs down. If you have cheaper credit facilities available it makes sense to use these first to clear more expensive credit card bills. $10,000 on a personal loan at 8% is a lot more affordable than leaving it on a credit card at 19%. Just make sure you then don’t run up more bills on that credit card once it’s repaid!
- Pay the most expensive debt off first. Opinions can be divided on this. It certainly makes sense to get rid of the personal loans and credit card balances that cost the most interest, but if you have several smaller loans or credit card amounts then getting rid of the smallest ones first, even if their interest rates are lower, can give you a quick win and encourage you to keep going.
- Transfer your credit card balances. You can take advantage of introductory offers to switch your credit card provider. Often low or no interest rates apply for the first twelve to eighteen months on a new balance transfer and this may save you interest during this time, especially if you can make inroads into repaying the full amount.
- Supplement your income. Have you thought about a second job? Alternatively you may be able to put in for overtime. Increasing your income can be just as effective as reducing your costs.
- Cut living expenses. Now can be a good time to review the costs of your lifestyle and decide where you might make cuts. Accommodation and eating out can be two of the more expensive lifestyle choices. Have you considered a room-mate or moving to a cheaper apartment? How about inviting friends around for a nice cooked dinner rather than eating out at an expensive restaurant? Do you need that cable television or the gym membership you keep meaning to use?
- Don’t make the bill any worse. It’s one thing to repay your credit card bill – it’s another to resist the temptation to charge more on it. You don’t want to undo your good work by spontaneously purchasing a new television that sets you back to square one on your debt.
- Cancel any extra cards you have. It’s tempting to keep several credit cards in case of a rainy day but this can lead to temptation, and certainly won’t deliver you from evil! Cut up all but your one remaining credit card once you have your debts down to just one provider.
- Set a reward for yourself. Saving takes discipline – what better way to pat yourself on the back for your hard work than to make sure you have a reward at the end of it? Set a goal of what you will treat yourself to when your debt is cleared. You will deserve it.
Lastly set a goal with the help of a financial advicer. It can be hard to keep on track when you are doing this on your own. A good financial planner will not only help you get there faster but will set you on the road to a long term savings plan that will set you up for your future success. They can be your coach and confidant to help you on your way.
Advice Market can match you with a financial adviser in a matter of a few clicks. Visit here to see how our service works.
The information provided is intended as a guide only and does not take into consideration your personal situation, needs and objectives and should not be considered as advice of any nature.