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We’ve all heard of a juice cleanse to detox our bodies but what about facing up to the burden of our debts and cleansing ourselves of the guilt and trappings that come along with it.

Here is a five step plan to help you face and finance your way out of debt:

Step 1. Face the facts

Open all your bills gathering dust, check all your account balances and understand where you’re at with each area of your debts.

Knowing the balances, repayments and interest rates will help you prioritise which ones are the nastiest.

You can’t solve the problem until you have a thorough understanding of where you’re at.


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Step 2. Prioritise your repayments

Work out which debt is charging the highest rate of interest, which is usually a credit card, and work towards paying it down first – credit card interest rates average around 17.5%. Plus you’re also more likely to get stung for things like late payment fees.


 


 

Step 3. Consolidate what you can

If you have multiple credit cards, transfer the balance of these onto one card with a long 0% balance transfer offer attached to it.

Instead of paying multiple high interest rates you’ll get 0% for up to 24 months to help get your debt under control.

Plus, one payment will be easier to manage than two or three.

Step 4. Communicate with your lenders

Many people are afraid to contact their lenders in fear that you’re alerting them to your high debt. We hate to break it to you but they already know about it!

On a positive note, they might be able to offer advice or change your payment plan if they have a better understanding of your situation.

In fact, banks want to help customers who are in legitimate financial strife i.e. hardship and often do this by restructuring debt, waiving fees or deferring payments.

The sooner you have this conversation the better.

Step 5. Make a change

If you’re going to tackle your debt, chances are you’ll need to make a change to your budget or your day to day spending to siphon any extra cash in the direction of your debt.

This might mean making small sacrifices – packing lunches or living a more basic lifestyle – or big sacrifices like selling an asset.

Either way something’s got to give to get you back into the black.

Image courtesy of Shutterstock.com
  • it’s always a good idea to re-evaluate where you stand financially. You should be aware of how your finances look. Try to save what you can and improve your situation. I like the idea of the detox

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  • We don’t have any debts. Just the usual power, phone, Internet, wood, car, grocery bills etc

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  • it just takes time to look for best offers, but I guess it is worth it if you can get a good deal.

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  • That is great advice. It is so easy to spend beyond your means.

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  • Mastering your money can be very challenging but can be done!!

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  • I think one of the biggest and most obvious things is don’t spend more than you earn. Don’t use a credit card to bridge the gap. Work out what you can cut back on so you’re living within your means.

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  • Staying ontop of your finances is definately something important. Debt is never fun.

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  • Great tips. It’s so important to keep track of your finances and stay empowered

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  • We are going through all this now as we are getting really serious about paying down our debts as fast as possible. There is some great advise here.

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  • Great ideas, pleased we don’t have debts though.

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  • that’s why i don’t like to use credit card. much prefer to use cash when i need so i can keep track of the spending

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  • looking great

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  • this is exellent great

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  • great

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  • Tip 2 Prioritise your repayments. No matter how much I am drowning in debt, I always try to put $1 in each of our children’s school banking account every month. $4 per month may not seem like much but it equals 4 litres of milk or 4 loaves of cheap bread from the major supermarket, so it adds up. My main reason for never missing is while the kids see me counting how much we have left for groceries or fuel, they still see a regular savings pattern adding up in their statement – and bonus interest too – to encourage them about good money habits.

    Reply

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