Well there are many ways to help you get out of debt in 2021, however some ways are not effective as others. What we are going to share, some of you might have already been using it but do not know the name of the method.
Do your best to find out what you can afford.
The next step is to determine the amount of money you can afford to pay off your debts. Compare money in and money out The budget is the simplest way to do this. Make a list of all the money: coming in (income) — such as salary, pension or benefit payments
going out (debts and expenses) — like food, rent or mortgage, buy now pay later, credit card, electricity, gas, phone, transport Add it all together and compare it to the money in and out. Make savings or cuts
Prioritize your debts and bills
Now that you’ve worked out your debt money, the next step is to prioritize your debt and bills. First, figure out what you’re going to pay Higher priorities include: rent or mortgage payments council rates and body corporate fees Power, gas, water and telephone. Car payments, if you are in need of a car for work or essential travel.
Make sure that you have higher priority payments planned or have a plan how to settle them
Work out a repayment plan for higher priority payments first using your debt money. Talk to your service provider if you are having difficulty paying a large bill. Tell me if you’re allowed to extend this period or make payments in instalments. You can set a reminder of the next due payment date in your calendar.
Avalanche Method
So one of the way to help you get out of debt is involving you making the minimum payments on all of the debts and any extra money that you have at the current time will be put into the highest interest rate debt that you have. This is called the debt avalanche method.
Example of Avalanche Method
Imagine having 3 debts account. 1st and 2nd account is charging you 1% per month but the 3rd is charging you 2% per month. So you are making a normal repayment of $50 per month for each account but now you are going to put an extra of $50 to the 3rd account to help it decrease in the compounding interest
Snowball Method
2nd way to help you out of debt is called the debt snowball method. In this method, you will be focusing on paying off the least or smallest amount of debt that you currently hold to eliminate it off your to do task in the next round while the others accumulate.
Example of snowball method
having 3 debts account. 1st account having $5000 debt at 1% interest per month. 2nd account having $1000 at 0.5% interest per month and last account having $3000 at 0.5% interest per month. In the example given, you will concentrate on finishing off the 2nd account first then move on to the last account before the 1st account.
There are many ways to get out of debt however its always up to the individual and always having a sense of direction and reason will always justify it.
Use our Clear Debt Tool to help you out along your debt journey
