Top 5 ways to pay your credit card debt faster

While attempting to pay off debt, there’s a common path that Australians take but it could see them in even worse trouble.

Trying to get ahead with your money while running personal debt is a bit like trying to fill a leaky bucket, you take two steps forward and one backwards. But nailing your debt is an important part of creating a solid financial foundation and setting you up for your next smart money move.

Here I cover my top five tips to ditch your debt faster and easier.

Set a solid budget and spending plan

Spending brings us an immediate hit of pleasure, so in the heat of the moment it’s easy to make choices inconsistent with what’s really important to you.

The starting point of your spending and savings plan is laying out all the things you need and want to allocate your money towards. The key is to prioritise the things that are most important to you, and to de-prioritise anything that’s not bringing you real value or enjoyment.

Spending on your day-to-day living, your annual travel budget, and your debt reduction and savings targets are all different priorities, and there is no one ‘right’ set of priorities that works for everyone.

You can use the Cashed Up calculator to help with this. Think about the things that are most important to you and you’ll end up with a spending and savings plan that will actually work for you.

Get Cashed Up

Created by financial advisor Ben Nash, Cashed Up is news.com.au’s free six-week course to help Aussies get their finances in check. Those who sign up to the budget bootcamp get weekly, step-by-step challenges to improve their financial fitness.

By the end of the six weeks, participants will have set a budget, created a savings plan, learned how to invest, and sorted their superannuation. The interactive course can be started at any time and aims to empower participants to make more informed financial decisions.

Automate your banking

Once you’ve got your spending and savings plan laid out, it’s time to make it actually happen. The reality is that pretty much everyone has done a budget that didn’t work, so to make sure your savings and debt reduction plan turns into results, you need to make your money management easy.

Having seen inside a lot of people’s money and what works and what doesn’t, I’ve found that using different accounts for your different buckets of money goes a long way toward setting yourself up for success. Running different bank accounts can help ensure you have the right money in the right places at the right time.

Debt can feel like a burden but there are smart ways to pay it off without too much stress.

There are only so many types of expenses you have: fixed costs like your rent and bills, your day-to-day pocket money for food and entertainment, debt costs, your savings to spend on bigger ticket items like travel and new tech toys, and your savings.

Once you’ve laid out how much you want to be spending across these categories, think about using separate bank accounts to automate your day-to-day money management, and ultimately set your default strategy to savings and debt reduction success.

Consider balance transfers and consolidating your debt

Calling out that this option isn’t right for everyone, but reducing the interest rate you pay on your debt will mean less of your debt repayments evaporate through interest costs, and more money goes to actually paying down your debt.

But a word of warning here, if you go down this path you need to be disciplined or you can end up with an additional debt and make ditching your debt even harder. If you’re looking at consolidating debts as an option, don’t fall into this trap.

Set your timeline

Paying down a chunk of debt can often seem like a mammoth task, but when you break it down it’s often surprising how quickly you can get there.

Map out your debt repayment timeline so you know exactly when you’ll hit your debt repayment milestones – this will give you a motivation boost as you put in the work to make it happen.

Planning ahead to when a date when you will have paid off your debt is motivating.

Prioritise and target your debt

If you’ve got more than one loan or credit card, being strategic around the order you target and pay down your debt can help you get there faster.

Eliminating the higher interest rate debts first will save you on interest costs and mean more of your repayments are actually paying down the amount you owe. Another approach is to target smaller debts first, this can help you eliminate their minimum payments, freeing up more cash to target your other debts.

This approach can also help you keep motivated as you see your debts disappear.

There is no ‘right way’ to target your debts, the key is giving some considered thinking to the strategy you feel works best for you. Think through as part of your debt repayment timeline so you can set a strategy that’s going to have you making the progress you want at the rate you want.

The wrap

Paying down debt can seem overwhelming, but making it happen will help you set the foundations of your financial success. Follow the steps above and you’ll make ditching your debt easier – your future self will thank you for it.

If you want to make your next steps easier, check out the news.com.au free six week Cashed Up challenge – where you’ll get my top tips and money hacks to make it easy to save more money faster, then learn how to get your money working harder for you.

Ben Nash is a finance expert commentator, podcaster, financial advisor, founder of Pivot Wealth and author of the Amazon best-selling book Get Unstuck: Your Guide To Creating A Life Not Limited By Money.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.