piggy bank debt

Getting started – the key to minimising debt

Reducing interest charges and repaying or consolidating debts is a focus for many people who are keen to better manage their finances.

The key is getting started. The first step should be creating a budget so you know exactly where your money goes.

Create a budget

Gather your bills and make a list of all debts, including the name of the creditor, your total balance, minimum monthly payment and interest rates. You should also list other necessary expenses, such as groceries, fuel and other transport costs, insurances, rent and school fees.

Add up all the minimum debt repayments and in a separate column document essential expenditure – the total of both columns will be the minimum you need to cover for the month.

This exercise may reveal your income is not enough to meet all your expenses. If that’s the case, you may need to reduce some costs, such as pay TV or your mobile phone.


The next step is to focus on repaying the debt with the highest interest rate first. Put as much towards these repayments as possible – the sooner the debt is cleared, the less interest you will pay over the life of the loan.

It’s important to continue repaying other debts and if possible, repay slightly more than the minimum so the balances can be reduced.

Consider debt consolidation

Depending on the size of the debts and the interest rates charged, it may be worth taking out a Debt Consolidation Loan. Instead of paying multiple creditors a variety of interest rates, you take out one loan to pay off all those accounts and make one single, monthly repayment.

However, be sure that the costs of the new, bundled loan are less than the total of current interest costs, otherwise there will be little to gain.

Assess your credit card debt

For those with a growing credit card debt, it may be beneficial to transfer the balance to a card with a zero per cent interest rate for a fixed period. For this strategy to work, it is vital that the balance is paid off before the no interest period ends.

There is one other important ingredient in a successful debt reduction strategy – discipline. By staying focused on the end goal, you’ll be well on the road to better money management.

^Ross – General Manager, Operations