How to Get Out of Debt: 10 Tips to Live a Debt-Free Life!

How to Get Out of Debt: 10 Tips to Live a Debt-Free Life!
  • Did you know that the average household debt in Australia is around $350,000 for those who have mortages? In fact, household debt has more than doubled in the last 20 years.
  • Living with debt can be stressful, worrying and hard to navigate through. Of course, everyone wants to be debt-free, but many people don't know how to get there.
  • Fortunately, there are some simple steps you can follow to work towards becoming debt-free. Read on to discover 10 tips you can start using today.

Everyone wants to live a debt-free (and stress-free) life, but not all people are lucky to achieve this dream.

You will be surprised to know that in 4 minutes and 17 seconds, one person becomes bankrupt or insolvent in Australia. What's more, the average household debt in Australia is $350,000.

Although more and more people are getting into debt, getting rid of it doesn't have to be a challenging task. The main reason why people are in debt is that they don't spend wisely.

Once you stop spending money on unnecessary things, you will save yourself from any kind of debt.

However, the general rule of thumb is to avoid taking loans in the first place as they can make your life miserable.

How can I get out of debt?

Wondering how you can live a debt-free life? Well, we are here to help you.

We have gathered 10 of the most effective ways to navigate your way through debt. Try to follow all of them so that you can become debt-free as early as possible.

1. Try the 50/30/20 rule

The 50/30/20 rule was an idea of the bankruptcy expert, Elizabeth Warren, which she shared in her book All Your Worth: The Ultimate Money Plan which gives you ways to save and spend money.

It tells you to spend 50% of your income on your essential needs, 30% on things you want to get, and let 20% for your savings.

Do remember that these are the maximum percentages, and you can’t use more than that. Spending less can help you save more money for future use.

2. Pay more than the minimum loan repayment

Let's paint an example: If a person has an average credit card balance of $15,609, pays 15% APR and has a minimum monthly payment of $625, the person will need 13.5 years to pay it off completely. Not to mention, if a person doesn't add balance in this time duration, it can lead to many problems.

If you face trouble with personal loans, credit card debt and student loans, one of the best ways to get rid of them is to pay more than the minimum payment. This will not only reduce the amount of interest you pay, but you will be free from the debt much sooner.

Make sure that your loan doesn’t have any prepayment policies before you start paying it.

If you are looking for someone to motivate you, you can take help from the free online debt applications such as ReadyForZero, Unburry Me, and Tally. They help you to keep an eye on your debt and how much you have paid.

3. Save your money and spend less

Find ways to earn more money to help you cover the debt, such as spending more hours of your day working. You can do any part-time job to make more money. The gig economy helps you to increase your income in easier ways.

You can make plenty of money in a short amount of time with the following companies' help:

  • Uber
  • Lyft
  • Shipt
  • Grubhub
  • Instacart
  • Postmates

Gig economy work is getting popular because of these companies and it only needs little effort. So, why not try this to help you become debt-free.

4. Sell unnecessary things

If you are looking to get money quickly, then your pile of old newspapers, clothes, and other things can help you. In almost every household, some stuff is not in use for years.

Some people also have plenty of items that they keep for years to use in the future. Why not sell these things and use the money to get rid of debts?

In this case, you can opt for an old-fashioned garage sale. This is the best and cheapest way to sell your unnecessary belongings. If your neighbourhood doesn’t allow it, you can go for online resellers like Facebook yard sale groups or consignment shops.

5. Check for deals

The best place for online shopping is none other than Honey, which has a free extension for Google Chrome. This tool automatically gives you all accessible coupon codes from the internet and uses that code for your online order at check out so that you can get items for a lower price.

Using a price comparison tool is also great for online shopping - or even to purchase a car or book a flight.

6. Ask for lower interest rates

If you are facing debt because of your credit card, then make sure that you don't use the credit card again once you pay it off. For the time being, if your interest rates are high, then it can be challenging to pay them.

It’s better to call the company of your credit card to negotiate. You may think it as a foolish idea, but people asking for the lowest rates are common. Not to mention, there is more chance to get the lowest interest rate if you have a history of paying your bill on time.

Moreover, if you try, you can also negotiate for other types of bills and eliminate the interest as well.

Always remember that only your efforts can help you to achieve this. Of course, the less you pay interest, the more money you will have to pay your debts.

7. Quit expensive habits

If you are looking for the easiest way to have a debt-free living, changing your habits is the best idea. You need to consider all the regular expenses, no matter if they are big or small.

Evaluate them and see if spending money on these things is worth it or if you can live without them. Find a way to minimise your spending.

If you smoke or drink regularly, then QUIT. Tobacco and alcohol can never help you except creating a wall between you and your future goals.

In case you don’t have any incendiary habits, and you do other things like drinking lattes daily, dining-in most of days, eating fast food a lot or using your car for long drives, you need to cut them off.

Even if you have a subscription to Netflix, look for alternatives. Replace all these habits with the less expensive ones.

8. Consider a balance transfer

If your credit card company is not ready to dislodge your interest rate, then another option is a balance transfer. So, you can get a 0% intro APR for more than 18 months in balance transfer offers. However, they can ask you to pay a balance transfer fee.

Not to mention, if you believe that your recent credit card balance is less and you can pay it off during this time duration, transferring the balance to your card will help you to pay off the debt easily.

9. Use ‘found money’ for your balances

Many people get some kind of “found money” at a different time of the year. Most possible, you may get a bonus at work, inheritance money, or annual raise.

You can also get a hefty amount of money from the tax refund. No matter what type of “found money” you get, it can help you a lot to get rid of the debts.

You should use this money to pay the debts. If you have different debts, then first pay off your small debts, and then go for the big ones.

10. Make a budget

This is important not only for people struggling with debt but also for every person to make a monthly budget to save themselves from any problem. Creating a proper budget helps you to track your money that where it is going, and helps you minimise the unnecessary expenses.

You can use any of the plenty of online apps to control your finances, like HelloWallet or Mint. Mint can help you to know where you are using your money or if it is worthy.

Using apps can help you make a budget by giving you a platform to set bill payments and check your finances to read graphs and charts.

Intuit is also great for budgeting purposes. It has many tools to track your spending like Turbo, which offers you to keep an eye on your financial health.

It's not compulsory to use online tools for creating a budget. You can of course make it on your own, but you need to be honest with yourself and don’t add any unnecessary things in your budget.

The bottom line

Now that you have learned about how to become debt-free, you should go for it. You only need to calculate your steps towards spending and saving money. The money you save will help you eliminate your debts.

So, try to follow the tips mentioned above so you can live a happy and stress-free life.

Tom Jones


Business owner and financial consultant.