Tip #1) Write out how much you owe and to whom

Make a list of your debts, including the creditor, the balance, monthly or minimum payment required, and the due date. You can use your credit report to cross check the debts on your list. Having a list of all your debts in front of you will enable you to gain a complete picture of your financial situation.

Don’t create your list and forget about it. Refer to it often, especially when you pay your bills, and update it on a monthly basis to reflect payments made. By updating your list frequently you not only improve your debt management skills and remain on top of what’s happening but, you keep yourself motivated.

Tip #2) Pay your bills and debts on time

Late payments make it harder to pay off your debt since you’ll have to pay a late fee for every payment you miss or pay late. When you miss two payments in a row you creditor may decide to report the non-payment to the credit bureaus.

Tip #3) Set payment reminders or set up direct debits

Use your computer or Smartphone to set an alert to remind you when various bills and payments are due. If this is too much effort, you can download a financial management app on your phone. These apps are great tools for managing bills and debt repayment and will remind you when it’s time to make a payment every month.

Another great idea is to automate all your bill payment by setting up a scheduled payment from your online banking profile. Automatic payments are set up and managed by you and not the credit and you can easily remove the automatic payment once you no longer need it.

When it comes to repaying debts to creditors it’s best to opt for a direct debit. This will ensure the money due will be withdrawn on time every month and save you the hassle of having to manage it manually.

Tip #4) If you miss a payment contact your creditor immediately

If you miss a payment, don’t wait until the next due date to send your payment, by then it could already be reported to the credit bureau. Instead, make your payment as soon as you remember and contact your creditor to inform them.

Tip #5) Create a monthly bill payment calendar

Create a bill payment calendar to help you keep track of bills and payments. Write out each bill or debt payment amount next to its due date. Then, add in other important dates such as your various paydays.

Let’s say you get paid on the same day (on the 1st and 15th of the month), you can then use the same calendar every month. If you get paid on different days of each month, it’ll help you keep things accurate if you create a new calendar for every month.

Tip #6) Always make your minimum payments

If you can’t afford to pay the full amount, at least make the minimum payment. The minimum payment doesn’t help you make progress in paying off your debt faster, but it keeps your debt from growing, prevents unwanted penalty charges and keeps your account in good standing.

If you miss payments frequently, it will become harder to catch up and your creditors will report this negative behaviour to the various credit bureaus. This is bad news for your finances and should be avoided at all cost.

Tip #7) Decide what debts to pay off first

Create a debt list to prioritize and rank your debts in the order you want to pay them off. Paying off credit card debt first is a great strategy because credit cards generally have higher interest rates than other debts.

Your credit card with the highest interest rate should get repayment priority because it's costing more money. You may choose to pay off the debt with the lowest balance first so that you’re left with fewer debts to manage overall.

Tip #8) Prioritise accounts that are still in good standing

Don’t sacrifice accounts that are still in good standing for those that you’ve already defaulted on and that have already affected your credit score. Be aware that your creditors will continue to add penalty fees and interest until such a time that you bring the account up to date or pay it off completely

Tip #9) Use an emergency fund to fall back on

If you don’t have access to savings, you’d have to go into debt to cover emergencies and high-ticket expenses. Even if it’s a small emergency fund that will only cover little expenses, it’s an absolute must.

Work towards creating a small emergency fund of $1,000. This is a good place to start. Once you have this saved up, increase it to $2,000. Your minimum goal should be to have three months’ worth of expenses which is about $5,000 if you’re single and $10,000 if you have a partner. Eventually, you should build up a reserve of 6 months worth of living expenses.

Tip #10) Make use of a monthly budget to plan your expenses

Using a budget helps to ensure that you have enough money to cover your expenses. Plan far enough in advance so that you can take early action if it looks like you won't have enough money for your bills in the upcoming month. A budget also helps you plan and spend (or save) extra money wisely. You can also use this extra money to pay debt off faster.

Tip #11) Recognise when you need help

When you find it hard to your debts and bills each month, you may be in over your head. It’s always best to admit you’re in trouble and reach out for help before the situation gets out of hand.

Additional debt-relief options:

All of these have their own set of advantages and disadvantages so weigh your options carefully. If you think you have a spending problem, seek help.

Tip #12) Negotiate your monthly repayments to make them more affordable

Whether you're barely getting by or simply want to pay less per month on your loans, you can make the effort to have these payments lowered.

Ways to lower your monthly debt burden

  • Extending your repayment terms to lower your monthly instalments
  • Refinance loans and enjoy a lower interest rate
  • Contact your creditors and ask them for a revised repayment plan that will better suit your repayment abilities
  • Create a budget and stick to it
  • Consolidate high interest debts

Tip #13) Keep an eye on those credit cards!

There are 2 ways to pay off credit cards You can off the credit card with the highest interest rate or the one with the lowest balance first. You have to decide which one of these strategies is best for you. Think about whether you’d like to save money on interest or get rid of the entire credit card balance at once.

The reason to pay off your credit card debt early is to save money by reducing the total amount of interest payable. Your loans might have shorter terms, but high-interest rates on credit cards make them expensive. With high-interest debt, it's a great strategy to repay it as quickly as possible.

Tip #14) Pay a little extra towards your bond

Consistently adding an additional amount to your monthly bond payment can make a big difference in the long run and have you bond free sooner.

Early bond repayment example

Let us say you buy a house for $400,000 with a monthly payment of $2,400 over a 30 year term. If you simply change your payment frequency to fortnightly at $1,200 you can repay your bond in just over 23 years and save almost $100,000 in interest.

The biggest problem with this type of approach is that it requires willpower to reap the long term benefits. Making extra payments towards your home loan and sacrificing in other areas may not be as easy as it seems. It’s important to only make extra payments if you don’t have other outstanding high-interest debts.

Tip #15) Review your credit report at least once per annum

New Zealanders are entitled to one free copy of their credit reports per annum from one of the three major credit agencies. These are Centrix, Illion, and Equifax.

It’s important to do this so that you can review your repayment history and make sure there are no errors. Errors include listing of accounts that have already been paid up, listings of accounts that you don’t have or never applied for, and incorrect balances.