Skip to Content

6 Ways to Easily Reduce Debt

6 Ways to Easily Reduce Debt

How to pay off Debt Faster

Australians have extremely high debt and while most of our debt is mortgages we still have a lot of consumer debt including loans and credit cards.

Debt is debilitating.

It means you pay more for things in the long run and prevents you from being able to take up many other opportunities.

Debt is borrowing from tomorrow to pay for today. You cannot live that way forever.

Even though debt is considered ‘normal’, it doesn’t mean you need it.

Instead of staying trapped in the cycle of borrowing, look at how you can clear your debts and feel free.

This post may contain affiliate links. Read the full disclosure here.

What can you do to Clear Debt?

Knowing the details of your debt enables you to create a proper plan to pay it off.

Write down all the debt you have, how much it is, what it is for, the interest rate, any account fees, early termination fees, and how long until it is paid off.

Financially, it is best to pay off the debt with the highest interest rate first while continuing to pay the minimum on other debts until this one is gone.

Once this debt is gone put all the money you were putting on that debt onto the next debt.

However, psychologically, many find it easier to pay off the smallest debt first, working your way up from smallest debt to biggest debt with the snowballing method. 

The reason is that you feel like you are achieving something with each debt paid off and the small debts are paid off faster, thus boosting confidence and desire to pay off the debt.

What can you do to pay Debts off Faster?

Firstly, if you need assistance there is free financial counselling you can access through many charities.

Don’t view it as a last resort.

They can help you negotiate with those you owe, work out a budget and get back on track.

As for what you can do personally, here are my tips then further down, tips on dealing with debt collectors.

Dad used to be one so he offers his advice and it has helped numerous people I know.

1. Know Your Debt

Get it out all in front of you so you know what you owe, what your interest rates are, fees and charges plus how long each debt has left.

Put it into a spreadsheet or have a file with all your paperwork so you can see exactly what you owe.

With this, I’ve also liked having debt free charts printed.

With these charts, I have the debt listed and each block on the chart represents a specific amount as I pay off the debt.

2. Compare Debt Providers

Banks, credit unions and loan providers (or debt enablers) offer different options.

Check interest rates, annual fees and look for 0% balance transfer options where possible so you can save interest and pay off your debt.

You can compare banks, their interest rates, fees, and charges for other loans to see if it is worth switching.

If another bank is offering a better deal you can always try and negotiate with your current bank to match it.

Now, do not actually apply for anything until you find the right one.

Each application goes on your credit report which impacts your credit score.

The lower your credit score, the higher your interest rates and the harder it is to get a loan or credit card.

Do your research without applying, then applying when the deal is right.

That said, you can get bank opening bonuses that are not debt. e.g. $100 for opening a new everyday account with ING or $14 instantly from UP.

3. Negotiate a Better Deal

If you aren’t in a position to switch providers, negotiate with your current one.

If you have a few things with the one bank or have been with them a long time ask them what they can do for you.

Will they reduce the interest rate?

Tell them you would like all the monthly fees removed and things like that.

Any money you can save this way is money you can pay directly off your loan.

You can even play banks against each other and try to get the best deal.

Remember, you don’t just have to stick to banks, there are credit unions and other financial institutions.

4. Transfer All Excess

Whenever you save money on something transfer that amounts to your debt.

For example, if you budgeted $350 for groceries this week but only spent $320, transfer the $30 savings to your debt.

If you have $1.36 left the day before payday, transfer it to your debt. Another thing you could do is round down.

Every time I check my banking if the amount is something like 106.73 I transfer the $6.73 (to debt if I have it, or savings if I have no debt), to round my balance down.

I cleared an extra $300 off debt in a few months without noticing it by rounding down a few years ago.

5. Save in Every Area Possible

Go over your budget with a fine-tooth comb by doing a financial review.

I saved almost $5,000 with it one year. Where can you cut back?

Compare your insurance (I saved over $1,000 doing this), compare your phone/internet/electricity/gas/any bill you have to see if you can either get a better deal or ask for a discount.

I am currently with Red Energy for electricity. They offer a $25 bonus when you join too.

Use these 17 tips to reduce your electricity bill.

If you have a pension card, are you getting all the discounts you could be?

Do you need two cars?

Would it be cheaper to walk and get public transport everywhere?

Are you utilising VIP and loyalty programs?

Are you using all the coupons/discounts you can in Australia?

Have you signed up for these Aussie freebies, gotten bonus cash or signed up for these Australian birthday freebies?

Where can you save more money?

With each small amount you save, put it straight into your debt.

6. Make More Money

What can you do to make more money and throw it into debt?

We share 23 ways to make money on the side in this article.

Buy things to resell or sell off your excess. I made over $10,000 in a month buying things to resell.

List your home on Airbnb if you are legally able to or offer tours and experiences through Airbnb.

Rent our your garage. Consider remote work such as freelance writing, market research, virtual assistant etc.

For more ideas, have a look at how I made $33,277 on the side in 12 months, 43 ways for single mums to make money and 19 ways I’ve made money from home.

Or buy 99 Side Hustles for Aussies which includes 99 ideas, how to get them started, how to market them and how to make more money with them.

How to Deal with Debt Collectors

My dad was a debt collector years ago and while the industry has changed a little, his advice still stands.

1. Get all Your Paperwork in Order

Keep all your debt paperwork in one file which is easy to access so you can see at a glance what the terms and conditions are, what can be expected and how much you owe.

Having it in one file makes it easier to negotiate and talk to a debt collector as the information is in front of you.

2. Talk To Them

Don’t avoid phone calls. You need to get it sorted and if you ignore it, it will get worse.

Debt collectors try to catch you off guard, so when they call, ask for a moment to get your paperwork together or request to call them back (or have them call you) at a specific time when you are available and ready to discuss it with them.

Do not do this then avoid the call. You must take it.

They will push to get their answers and an immediate payment on the spot.

Be calm, clear and keep repeating you will discuss it when you have your paperwork and are ready.

3. Make a Payment on the Spot if you can

This is a gesture of goodwill and shows you are willing to pay.

If you cannot afford what they push for, don’t agree to it. Only agree to what you can afford to pay.

If you can afford to make a larger payment that is close to the total amount, you may be able to negotiate the payment down to the amount you have and get it cleared completely.

4. Arrange a Payment Plan

A debt collector will push for the highest amount possible.

Do not agree to it if you cannot afford it.

If you can afford $20 be firm and say it will be $20 a week for as long as it takes.

They can’t get blood from a stone and some money is better than no money.

5. Get the Amount Reduced

As mentioned in tip 3, you may be able to get the total reduced.

This is often offered when a debt has been outstanding for a long period or you are closer to the end of the debt.

I have managed to knock thousands off debts for friends by offering the debt collector a lower amount in full today or asking what the lowest total they could pay would be if they paid in full today.

This doesn’t always work and ultimately, you did accrue the debt, so should pay it in full. However, for them, most of the money is better than no money.

I also know of debts being completely wiped because the person was unemployed and would be long term. It’s not common but it can happen so always see if you can negotiate.

Woman on laptop sitting at a table. The text reads 6 ways to easily reduce debt.

Bonus Advice On Debt

Along with clearing the debt, change your habits and mindset.

Think about what caused you to get into debt, your relationship with money, why you spend how you spend and what you need to change.

A few articles that might help are 10 tips to help you stop spending and 5 tips to deal with temptation.

One last tip, just like Dave Ramsey and Scott Pape, I think it is a good idea to have a $2,000 mini emergency fund.

It is there for real emergencies like your car needing unexpected repairs, your insurance excess etc.

It will stop you from using your credit card and help you break the habit of depending on one.

What are Your Debt Reduction Tips?

You might also want to check out how this couple cleared $90,000 worth of debt in a year (they started unemployed) for inspiration too.

For more ways to make and save money follow us on social media:

The Thrifty Issue Facebook Page
The Thrifty Issue Facebook Group
The Thrifty Issue Instagram

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Friday 28th of October 2016

Some great tips here! We're currently in the "Sell off your excess" stage. It's amazing how much we have that we don't really need. I'm enjoying seeing a whole lot of space open up in our home as we get rid of stuff too!

The Thrifty Issue

Friday 28th of October 2016

I love seeing the space as things get sold off too! Good luck with yours.

Christine - Jar Of Lemons

Thursday 27th of October 2016

These are great and practical tips. Saving!

The Thrifty Issue

Friday 28th of October 2016

Thanks Christine!


Wednesday 26th of October 2016

Great advice, Thanks! Changing our habits and relationship with money is so crucial! - yet this can be the hardest part!!!

The Thrifty Issue

Friday 28th of October 2016

Thanks, Sharon. It has a huge impact but is so hard.

Raquel Serrano

Wednesday 26th of October 2016

That emergency fund is so important. I agree with Dave Ramsey when he suggest having those $1,000 placed aside first before beginning to chip away at debt. Nice post.

The Thrifty Issue

Wednesday 26th of October 2016

It makes a huge difference to how our money mindset works having that $1,000 emergency fund.


Wednesday 26th of October 2016

Very Informative!

The Thrifty Issue

Wednesday 26th of October 2016

Thanks, Janet.

This site uses Akismet to reduce spam. Learn how your comment data is processed.