With Australian Household debt rates rising higher than ever, it’s easy to normalise your debt as everyone begins to think of debt as normal. But normalising debt can lead you to fall into deeper debt, causing a debt-cycle. So instead of taking out another loan to finance your next purchase, follow these tips to stop normalising debt and start living debt free.

Debt free man smiling and looking at money bag.

1. Create A Budget

People that normalise debt tend to live beyond their means and continue to use debt to fund their lifestyles. However, this may cause them to fall into a slippery slope as they fall deeper and deeper into debt. Thus, creating a budget is the first step in the positive direction if you want to live a debt free life. When you set a budget remember to be realistic and have an ultimate savings goal in mind that will go towards paying off your debt. Once you’ve worked out your savings goal you will be able to work out exactly how long that you have to stay on a budget to successfully pay off your loan.

2. Realise That A Credit Card Is Not A Source Of Income

Many individuals fall into the habit of normalising debt by thinking of their credit card as another source of income. But just because you have a high credit card limit, does not mean that you have that ‘extra’ money to spend on whatever you want. A credit card should not be seen as a source of income to use on luxury products and services but rather a card to use for emergency needs. If you find it difficult to change your mind set on how credit cards should be used, we recommend cancelling them to avoid falling into further unnecessary debt. Remember, to always pay off your credit card balance each month to avoid racking up extra charges and late fees.

3. Stop Justifying Your Wants

It’s easy to confuse those new pair of shoes that you really want as something you need. But an important step towards living a debt free life is to stop justifying wants as needs. Needs fall into these four basic categories – shelter, food, water, transport and a certain amount of clothing. However, lots of individuals tend to spend a large amount of their income on more luxurious forms of food and clothing; justifying their spending as a ‘need’ rather than a want. An easy way to avoid unnecessary spending on food is to come up with a meal plan and packing lunches to work.

4. Understand Your Debt

The final step to living debt free is to face and tackle your current debt straight on. To do this:

  • Evaluate the nature of your debts and ask yourself what current habits are making you fall into debt.
  • Calculate your total debt. When you owe multiple debts such as a home loan, car loan and credit card debt; it can be hard to calculate and pay off all your debts at once. Debt Fix offer debt consolidation services to bring all your debts together into one affordable payment.
  • Start an Emergency Fund. It’s easy to rely on loans in emergency situations, but it can take you a huge step backwards as it forces you into larger debt.

If you are struggling to pay off your debts we recommend you speak to a debt professional today. Debt Fix help thousands of Australian households regain financial control of their lives by providing tailored plans to overcome debt. If you need any help managing your debts, please don't hesitate to contact our specialists on 1300 332 834.