10 steps to stop the cycle of debt!

Updated: Apr 4, 2020

Look at the light below, it symbolises stopping! Now is the time to take action, not tomorrow, not in the future - Now!

Ok, so here goes. This list is not exhaustive and please note that these actions are advisory only, you should seek the advice of a financial professional before making any major changes.

1. Write down your incomings and outgoings. You must do this! This is the only way to stay on top of where you're at financially. This is also where couples in particular can come unstuck. You've got to work together on this. There's no use only one partner being serious, get on the same page! Remember if you're married, in the eyes of the law and the church you are as one - this includes finances. It doesn't matter who earns more, who spends more,blah blah blah. Use an old fashioned pen and paper, excel, google sheets, whatever works.

2. Are you up or down!? If you've included everything and I mean absolutely everything, unfortunately some of you will be down. Work out the exact figure and then what to do about it.

3. Work out where the problem is. Do you have loads of debts, if you write them down. Is your car loan through the roof? If it is, have you thought about selling the car? Downsizing the car?

4. Cut back on unnecessary spending. Did you really need to hit the town with the girls? Next time, hold a get together at someone's house. Say no to the takeaway latte you get on the way to work each morning. Make one at home!

5. Realise that just because you work doesn't mean that you "deserve" a treat. The most successful people tend to delay gratification, they work hard today for a better tomorrow. The problem with most of us is we grind Monday to Friday 9 til 5 and because of this we believe we are owed a treat - heck we worked for it! This simply isn't true but even for those of you that may disagree, could your "treat" cost less - could it even be free!? Give your partner a massage, that's doesn't cost and even for the most pampered, it should still be a treat!

6. Can you get a side hustle!? In a future blog post, I'll be looking at the best side-hustles. A side-hustle is something that brings in additional income on top of your usual income. It may be doing online surveys, dog-walking or becoming a mystery shopper!

7. Cut up the credit cards! New Zealanders are increasingly using their plastic "friend". Credit card companies suck people in with offers of great deals, whether it be 0% interest offers or airpoints but the truth is that lots of people end up in serious debt over them. Also, they can take years to pay off. A $1000 balance on a credit card at 20.95% interest would take 10 years to pay off, if you made just a minimum $20 payment per month plus the amount paid back would be well over DOUBLE the original $1000.

8. Prioritise your debts - people tend to do this one of two ways. Either is fine, it's what suits your personality. Once you've listed your details you can either pay of the one with the lowest total amount - this is known as the DEBT SNOWBALL. Once you've paid this one off, you go to the next lowest debt and pay that off. It's worth noting that you still need to be paying off minimum debts for the others whilst doing this. Alternatively, some people choose to do the DEBT AVALANCHE - with this method you find out which debt has the highest interest rate and pay that off first!

9. Shop sensibly - There's plenty of help with this, the TV programme Shop Well for Less is a great example of how people shop poorly for groceries. When you do your Supermarket shop, try and stick to a list, don't buy impulsely stick to your original budget.

10. Ditch the brands! - This goes for anything cars, clothes, food, etc. Many cheap alternatives are just as good. There's no need to spend $200 on a pair of shoes you can't afford. There really is no need. Same for the flash car. Cars depreciate in value (generally) so as soon as you buy one they are worth less than they were worth the day before. In fact, just driving a new car from the car showroom after you purchase it means it has lost a lot of value immediately.

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