Too many people accept debt as a way of life, only making their minimum monthly repayments and adding to what they owe.

If you need an incentive to take control of your finances, add up how much you pay in interest each month on your debts. Include your home loan, credit card debt and other loans. For some, this will be thousands of dollars a month. Just think what you could do with that money if you kept it in your pocket!

 
Own up to your problems
The worst thing you can do is pretend you don’t have a debt problem and hope it will magically go away. It won’t.

If you’re having serious trouble meeting repayments, contact your creditors and explain the situation. Don’t hide anything, and ask for their help – financial institutions and credit card companies will be much more lenient if they know you’re trying to tackle the problem. They may offer a repayment holiday or lower interest rate while you sort your finances out. Also ask if they’ll reduce the amount you owe if you make a lump sum payment.

Develop a plan
You need an action plan to shrink your debt – and then you have to stick to it. Balance your family budget so you’re living within your means and not adding to your debt. Work out the maximum you can pay off your debts every month. Each pay period, set aside money to cover basics, such as food, transport, utilities and rent or mortgage payments. Use all the cash left over to pay down debt.

If this doesn’t make much of a dent, increase your income. Get a second or third job in the evenings or on the weekend until your debts are cleared – and ensure all the extra money is used for this purpose.

Don’t invest
Until you’ve paid off your debts, don’t even think about investing any money. I’m talking about credit card bills and personal loans. Don’t play the share market when you’re charged 20 per cent interest on your credit card debt. I bet you won’t make any more than 10 per cent by investing your savings, and you’ll have to pay tax on returns. Pay off debt first and save a fortune in interest.

Switch to cash
Once you get your debt under control, it’s time to change your spending habits for good. The last thing you want is for debt to build up again. Live within your means and either reduce your spending or permanently increase your income.

Don’t use your credit card for everyday expenses unless you have money in the bank to pay your bill in full each month. Also, think about replacing your credit card with a debit card. It allows you to purchase things online or over the phone like a regular credit card, but only uses your own money, not credit.

Make extra repayments
It will take years to eliminate your debts if you only make minimum repayments. Your credit card provider will charge you interest on the rest of your bill, adding to your overall debt. And if you only make your minimum mortgage repayments, it’ll be decades before you own your home outright.
If you can manage it, scrape together an extra $1000 or so every few months to put towards your debt. You’ll save a huge amount over the term of the loan and may even shorten it by many years. 

Switch to cash
Once you get your debt under control, it’s time to change your spending habits for good. The last thing you want is for debt to build up again. Live within your means and either reduce your spending or permanently increase your income.

Don’t use your credit card for everyday expenses unless you have money in the bank to pay your bill in full each month. Also, think about replacing your credit card with a debit card. It allows you to purchase things online or over the phone like a regular credit card, but only uses your own money, not credit.