5 WAYS TO DOWNSIZE YOUR DEBT
5 WAYS TO DOWNSIZE YOUR DEBT
Financial adviser Helen Baker shares some tips to reduce debt and make your money work harder for you in the new year .
I t ’ s said that only death and taxes are certainties in life , but in the modern world , some form of debt is almost guaranteed too . Here are five ways to downsize your debt and get more control over your finances .
1 . Look at your money holistically
It ’ s all too easy to look at our money in different silos : this is what we owe , this is what we have , and this is what we expect to come in . But you have to consider all your money as a single pool to work out what represents the best overall value for you financially .
For example , tax deductions for extra superannuation contributions may be bigger than the low home loan interest rate you ’ re currently paying , meaning you could be better off by beefing up your retirement earnings than paying down the mortgage a bit faster .
2 . Tackle the most expensive debts first
We often think of debt as the mortgage , but it may also be personal loans , car loans , credit cards and store cards / repayment plans . Each will have different interest rates .
You ’ ll downsize your debt much faster by tackling the most expensive – that is , the ones with the highest interest rates – first . That ’ s because debts with high interest rates will grow much quicker , and can even spiral out of control .
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