If you’ve ever carried a heavy backpack up a hill, you’ll understand the feeling of having a debt collector on your back. If you feel weighed down by the dread of debt, don’t worry – you are not alone. Lots of Aussies are feeling the pinch. That’s because they’re throwing their hard-earned money into the wind.
The NAB Life Moment’s hub was created for this purpose, to provide important information to help everyday Aussie’s tackle everyday struggles. If you’d like to learn how to get out of debt fast, read on to learn how to reduce your debt burden.
The Dirty Puddles Of Debt
Picture a family (the Smiths) frolicking down a street together on a stormy rainy day in gumboots and raincoats. Mum (let’s call her Karen) is holding her purse open to the ground watching the cash and pennies fall out. She’s standing there with her 7-year old daughter (Chloe) laughing and giggling about it. It’s so funny, the way the notes are landing in all the puddles. They’re all so muddy and wet.
This is sooo much fun.
Dad (Bruce) and his 12-year old son (Danny) are doing the same. Except they’ve got a pair of scissors they stole out of Chloe’s pencil case. They thought it would be funny to stand by a random fence and chop up all the money into little bitty pieces. They’re having a hoot of a time – watching the little pieces float into the sky in a gale force wind.
It’s so awesome.
This scene is a little like the day Danny lost his drone post Christmas in a random tree up the street. They never saw that $400 thing again.
It was fun – until it was sad.
But the Smiths are not only doing that. After they ran out of money, they knock on a few neighbours doors and ask for more money, so they can continue their fun. They promise they’ll give it all back.
The neighbours (Mr & Mrs Martin) are so nice. They’ve always been able to rely on them. They’re salt-of-the Earth types. They lend the Smiths the money and then the family continues up the street laughing and joking. They rip up the rest of the money the lovely Martins gave them in a frenzied afternoon of fun and puddle-jumping.
Australia: Why We Need Debt Management
If you would like to get out of debt, here are a few words you should familiarise yourself with:
- Debt calculator
- Debt consolidation
- Debt financing
- Debt management
- Debt recovery
Seriously, take these words to bed with you. Live and breathe them for the next month. Get your get-out-of-debt mind in gear. Put them on a sticky note and put them on your car’s steering wheel. Stick them on the fridge for 4pm snack time.
In fact, go straight to the source and get your burning questions answered. Check out NAB’s Life Moments Hub, specifically the ‘How to manage your debts’ section. The team at NAB has compiled a ton of financial advice and condensed it, into short and easy to read guides that will turn your financial situation around completely. For example, you can learn whether debt consolidation is right for you, as well as learn important tips on avoiding credit card or late payment fees. Also discover ways to boost your all important credit score.
Why Is It Important To Get Your Mind Into Gear When It Comes to Debt?
If you think what the Smiths did above is careless (not to mention downright disrespectful to the Martins), you should check these statistics out.
According to Finder.com, household debt has doubled between 1995 and 2015 from 104% to 212%. Most people are spending way beyond their means. According to the stats, most Aussies earning $80,000 are throwing double away.
Yep, that’s $169,600 in total.
That’s no shabby sum is it?
That’s people trying their absolute damndest to spend as much money as they can. Think random trips to Bali in mid-winter. Think Boxing Day sales. Think random trips to buffets on Wednesday nights with a bunch of hungry kids and their tired parents.
Most of the money spent is on one of those shiny, money-giving, fancy, slimline cards we all refer to as a ‘Credit Card’. The plastic fantastic. The giver of Christmas cheer. The flight out of winter to the sunniest spot on Earth.
Did You Know This?
Since the GFC most countries decided to get their acts into gear when it comes to debt. In many countries, personal debt declined. But, in Australia, it’s the opposite. Personal debt levels are some of the highest in the world.
First, Let’s Talk About Good Debt & Bad Debt
Good Debt: Worst House, Best Street
Bruce & Karen Smith are out on a walk one fine spring evening. They spot an awesome investment property. It’s a shabby house in the best street. A great investment. They’ll make a killing within a few years because everyone is flocking to their area. The local high school is going gangbusters and getting outstanding attention. It’s outranking some of the best private schools in the area. They’ll renovate here and win big.
Bad Debt: Flash Car, One-Up-Ville
Bruce notices that their other neighbours Bob & Elise – got a gorgeous new family car. It’s so shiny and roomy. It makes their car look so small and worn. It must be time to upgrade. They can’t have other neighbours think they can’t afford to be here. Plus, they’ve never liked Bob & Elise. They’re super snooty. Bruce and Karen decide they want to ‘one-up’ them.
So they go out the very next day buy a diminishing asset on tick. It’s a hotted up brand new SUV. They use the finance offered by the car lot. The minute they wave goodbye to the sleazy gold-toothed salesman (Barry), they’ve lost. This asset will not increase in value over time. It will sit in their driveway for years, parallel to Bob & Elise’s car.
Both couples in this picture will lose on their flashy money-sucking purchases.
Are you in debt?
Here’s how the Smiths can dig their way out of the debt hole…
First, think of debt more like a magic wand that gives you a phenomenon called ‘leverage.’ Bruce & Karen can take their hard-earned money and throw it into the wind by buying the flashy car. Or, they can do what makes them richer, not poorer. They can make a good investment and renovate the shabby house.
Picture all that money the Smiths threw around on that stormy day earlier. With a good investment, that money would dry out on the ground on a warm sunny day. Now visualise Bruce using his blower, to get it all the money back up to their home’s front lawn. Picture the Smiths getting to work in the garden, as a family, on that fine sunny day and scooping the money back up into a shiny red wheelbarrow.
Now think about little princess Chloe waving a magic wand and turning that wheelbarrow of cash into ten wheelbarrows of cash. Picture the family sealing all the money into big black rubbish bags right there on the front lawn and carrying that money inside.
Now picture the kids spending the afternoon counting the money into neat piles. Envisage the amazed look on Chloe & Danny’s faces when they announce how much money there is. Picture the whole family dancing around the room – like they all just won the lotto.
Finally, picture the family planting all the money so that it continues to grow money (like the picture above) for the rest of their days.
That’s the power of good debt.
My Two-Pronged Approach
29413646 – shopping trolley and piggy bank balancing on a seesaw
In my view, paying off debt is a two-pronged approach.
Do the following at the exact same time:
- Reduce expenses (overheads)
- Increase income (get more money)
Debt reduction is a simple mathematical equation. Read on to see how the Smiths (and you) can achieve better finances through a good old fashioned working bee.
Here are 20 Practical (Not Fluffy) Ways The Smiths Can Dig Their Way Out Of The Debt Hole…
People are super busy and time is short. But Bruce & Karen (and their kids) could work as a team for a month to get their finances ship-shape or at least start drastically reducing debt and improving their financial situation.
- Bruce: Spend an hour one evening a week finding ways to slash family expenses
- Karen: Hunt down the best utility rates
- Bruce: Source a money-saving bulk cooking system to slash grocery spend
- Karen: Find an insurance broker to help reduce insurance premiums
- Bruce & Karen: Drive their current cars for as long as possible
- Bruce: Start reading renovation books
- Karen: Learn as much about Council permits for their new investment property
- Both: Leave home earlier each day & drive slower
- Both: Start a side hustle each.
- Bruce: Start teaching Golf. Karen: Has I.T skills – start a local course in her area
- Bruce: Start a folder with all bills owing. Manage paying them all off over time. Pay off the smallest bills first to gain momentum. Be clear about debt figures e.g $8,230 owing (rounded numbers can make debt reduction feel less achievable)
- Karen: Start a vision board with get-out-of-debt goals and rewards
- Both: Watch YouTUBE videos a few nights a week to learn tips on how to get out of debt
- Family: Sort out the shed on weekends
- Bruce & Karen: List items online for sale using photos & apps
- Bruce & Karen: Download an app they can both use to track spending, set budgets and stick to budgets
- Bruce: Write down areas he can reduce spending
- Karen: Write down areas she can reduce spending
- Both: Figure out how they are overspending on the kids
- Both: Set a reward to congratulate themselves on milestones
- Bruce: Make it visual – show progress on a whiteboard
This article is a NAB paid promotion and was written in collaboration with NAB. As always, all opinions are my own