What is the easiest way to get rid of debt?

Debt is a common financial challenge in Australia. Most people have a nice, comfortable lifestyle but fail to budget effectively. When things get tight, they fail to pay their bills on time and then find themselves in a situation where they need to find a way to pay down their debt.

It can be a vicious cycle for many Australians, and it's not just the inability to pay that bothers people. It's the fact that debt can make you feel held back in life, and causes worry, anxiety, and depression, to the point where it may affect your health and wellbeing.

So is there a way out of it? Can someone pay off their debt and live a better and stress-free life? Yes, it is possible, but it won’t be easy.


What are the top causes of debt? 

According to a recent survey, more than half of Australians spend at least half of their income on paying off debt, despite the fact that more than half of us believe it is the responsibility of the government to make sure the economy runs smoothly.

Australians have the highest average debt per person in the world. (The average is around $60,000) and this is due to the fact that borrowing money is an easy process in the country. 

According to the Australian Financial Security Authority (AFSA), these are the top reasons for Australians getting into debt: 

  • Unemployment
  • Loss of income (active or passive)
  • Health emergencies
  • Gambling
  • Adverse legal action
  • Liabilities due to guarantees
  • Living beyond their means


What can you do to get out of debt? 

There are several ways to get yourself out of debt. Our team has compiled this list to serve as a guide to help you out. 

Pay more than the minimum payment

Whether you’re paying off credit card debt, student loans, a mortgage on your home, if you can afford to put away a little more from your income on a monthly basis and pay it towards your debt, you can save money on paying interest and it will also speed up the process of debt repayment. 

Making a spreadsheet that outlines your monthly income, as well as all your necessary expenses, will paint a clear picture of how much exactly you can afford to put towards debt repayments. 


Debt snowball 

This method is best if you’re paying off multiple debts at once. It requires you to pay the minimum amount for your other debts while pouring all your extra resources into your smallest debt. 

Continuing to do so will have a “snowball effect” which allows you to pay off your smallest debt faster without incurring as much interest as you would have if you were only making minimum payments. 

After successfully paying your smallest debt, you can then move to the next smallest. The cycle continues until you will hopefully pay off all of your debt. 


Take on a second job

If you are willing and able, you should consider taking on another job solely to use the income derived to pay off your debts. This way you aren’t jeopardizing the budget that you have come up with. 

There are a lot of secondary jobs you can take on in Australia. Retail stores are always looking for sales personnel to work part-time. You could even try your hand at online jobs which pay a reasonable amount and the work hours are very flexible. 


Refinance debt

Debt refinancing involves replacing an existing debt with another one with conditions that are more favorable to the debtor. The most common reasons to refinance debt are: 

  • Take advantage of better interest rates
  • Reduce monthly payments by extending the term of the loan
  • Switching from variable-rate to fixed-rate debt or vice versa

While a lot of people choose this option, it is not available to everyone. Some loans can come with a provision for penalties if the debtor wants to refinance as well as closing or transaction fees. 


Create and try to live on a bare-bones budget

While this is not an ideal way to live, in some cases it can be necessary. Cutting down your expenses to the minimum will help you pay off your debt faster. 

A bare-bones budget doesn’t have to be the absolute minimum. It could consist of you cutting back on the eating out and exchanging it with home-cooked meals. You could also opt for doing home workouts instead of paying an arm and a leg for that gym membership. 

It may seem like a daunting task but remember it won’t be forever. 


Balance transfer

A balance transfer is a way to move debt from one credit card to another. One of the most common types of a balance transfer is shifting debt from one credit card to another credit card. Most often, people transfer a balance in order to take advantage of a lower interest rate.


Learn a new, in-demand skill

Sometimes the best course of action is to increase your revenue. Consider trades where the training is not too long but pays well. Polished concrete flooring contractors are such an example. Another is a front-end website designer. Research things like ‘in-demand professions’ to get more ideas.


Switch to cash basis

A credit card is a very tempting thing to have. It is so easy to swipe the card and not think about what you’ll have to pay at the end of the month. A debit card would be a better alternative because it will only allow you to spend what you actually have in your account. 


No matter what option you choose to get rid of your debt, the most important step to take is to actually accept that you are in this situation and start figuring out how to get yourself out of it.