Category: Blog

Effectively managing your debt is one of the best and most proactive ways of ensuring a sustainable financial future. It is deeply gratifying knowing that you’re doing something right when you see your debt shrinking!

The journey of exploring the best ways to manage your debt can improve your attitude and enthusiasm towards settling it. Instead of seeing it as a burden to your financial goals, you’ll recognise that it’s an inspiring investment towards your financial freedom.

Here are three often-cited ways to repay your debt.

• Snowball method

The snowball method is frequently thought of as the best debt-relief option as it means you start off by paying the smallest debt and then move on to bigger loan amounts. This technique can be valuable for boosting morale and improving your sense of achievement as you start to see the results early on. Your debtor statements are reduced and you will be encouraged to continue with this debt repayment plan.

However, this means you end up paying higher interest costs, because it considers the payment of the debt and not the interest rates around it. To get around this, you can find other ways to refinance your high interest debts.

• The Avalanche method

This strategy is the opposite of the snowball method. You start off with the biggest debt and finish with the smallest. If you’re looking to save on interest this is the best strategy to employ. 

This strategy requires patience as it doesn’t offer immediate results but, in the long term, you can be debt-free quicker. You need to have the resolve to settle bigger debts. From there you’ll be more motivated because only the small obstacles will be left. 

• Debt consolidation

Through debt consolidation you can easily keep up with multiple payment deadlines by combining all your debts into one. This involves taking out one large loan, equal to the amount of your entire debt, and paying off what you owe in one place. 

The obvious risk is that you would now be using debt… to get out of debt. However, you will end up owing one creditor instead of many, and could potentially secure a more beneficial interest rate overall. When followed effectively this method can help reduce your debt whilst improving your credit score.

All three of these strategies can be useful for reducing your debt. Discipline is required with all of them because having the best strategy is not enough – you have to follow through with it too. 

If you need help with this – just give us a shout!

Saving is not just about a plan – it’s a behaviour.

Part of this behaviour is rooted in our mental ability to overcome our own fears. We reduce these fears by mentally preparing for life goals and recognising that we have what it takes to achieve them.

Mentally preparing for long term savings is like preparing for a long-distance race or a trip. You start exercising today so you can cope with the physical demands of next year’s marathon. You sort out your travel necessities now so you don’t struggle with them when you have to go on your trip.

The same goes for your long-term savings. Starting to save today helps to accumulate more wealth for the future; anticipating and providing for the expenses that you expect to incur.

Here are four ways to help you prepare for a financially secure future:

1. Set a goal and start saving as soon as you can

Establishing a monthly budget helps you develop healthy spending habits, reduce your expenditure and have more to invest. Having a goal is a big part of this process because it’s really hard to save if you don’t know what you’re saving for.

The value of saving early is that you’re creating an opportunity for your money to work for you longer through the value of compounding interest.

2. Start working on your debt

Being engaged with your budget means being engaged with your debts too. Actively dealing with your debt now, frees up money to direct towards your future. Picking a debt management plan that will work best for you and your unique goals is the first step.

Diminishing your debt should be one of your goals. Seeing your debt decrease will encourage you to save and build more wealth for your future self. There are various strategies you can use to settle your debt in a way that works best for you.

3. Stick to your retirement plan

It’s like sticking to the road map, even if there is construction along the way. Having a retirement plan can help you look into your future more optimistically because you’ll be comfortable knowing steps to ensure it have already been taken. This can be really hard when markets bottom-out or there is a major crisis – but this is when it’s even more important to stick to YOUR plan.

If you’re struggling to stick to your plan, consider doing your research on the various retirement plans and consult your financial adviser for help with balancing your investments or maximizing your tax advantage in order to build a substantial investment portfolio whilst creating more liquidity for your current situation.

4. Adopt a more positive outlook on your finances

Developing a positive outlook towards money begins with you understanding that a life of abundance is created by starting to enjoy what you have instead of focusing on what you think you need. It’s about stopping to smell the roses on your long-distance run, or taking a break to drink in the scenery on your road-trip.

Learn to make saving a part of your lifestyle. Recognise that short term savings can be good but prioritizing long term savings can create a more sustainable future for you. See it as a way of ensuring you have more spending power in the future.

Partnering with a financial adviser can help you put a plan into place – but also change your behaviour and attitude when it comes to money to make sure that your complete financial plan supports the life you want to lead and the legacy you wish to leave.