Becoming debt-free has always been one of my biggest personal finance goals – and last year, I got to say that I achieved this. It was the moment I received a letter from my finance company confirming that my car, a gorgeous red Mini Cooper, had officially been paid off!
For a time, I had no consumer debt – and it felt good not to owe anyone anything. Unfortunately, this didn’t last too long because shortly after, I had to get several expensive dental treatments. Fortunately, my local dental clinic partnered with a finance company to offer interest-free finance for 6 months – so naturally, I went ahead for the sake of my oral health.
This interest-free finance felt like a personal loan, but technically, it was a credit card – and once issued, I was approved with a credit limit way higher than I needed. Seeing that they wanted me to spend more, accruing more interest, I reduced my credit limit immediately to help myself resist the temptation to spend. On top of this, here’s 3 more easy, effortless ways that I’m paying off my debt faster that you may find helpful too!
1. Creating an automatic payment – set to go out fortnightly.
Setting up an automatic payment means that I’m consistently paying down my debt, and it’s so convenient to do so on your online banking – especially when you can choose your own day of the week and frequency. Mine goes out every second Thursday, aligned with the week of each fortnight when I receive my rental and job income.
But why fortnightly? It seems like there isn’t much difference between paying fortnightly or monthly, so why not just pay monthly at double the fortnightly amount?
With fortnightly payments, you get to fit in a whole extra payment for the year! For example:
12 months x $200 = $2400 or 26 fortnights x $100 = $2600.
12 months x $100 = $1200 or 26 fortnights x $50 = $1300.
12 months x $150 = $1800 or 26 fortnights x $75 = $1950.
So if you can, set up your automatic payments or direct debits fortnightly. You’ll save time, hassle, and potentially a lot of interest!
2. Refinancing at 0%.
Just before my 6 month interest-free period was up, I did a balance transfer. Shopping around, I was ecstatic to find that my bank had the best deal: a 0% balance transfer for 12 months. It was easy to transfer my credit balance across, especially knowing I was avoiding paying a high 25.99% interest rate!
So currently, my credit balance is sitting on a bank credit card (while the actual card itself is put away altogether), accumulating all of zero interest for a whole year while I take my time paying it off! There’s still a minimum monthly payment every month of 2%, but the payments are extremely manageable.
If you have debt, I’d highly recommend taking 5 minutes to do a quick online search for any balance transfer specials banks are currently offering. It could be one of the best financial decisions you make; not only buying you time and saving you interest but giving you peace of mind. I’m certainly more relaxed with the steady pace I’m now able to go at.
3. Saving the change & zeroing out to increase repayments.
To pay off debt faster, you should always pay as much as you can over the minimum payment – and here’s my favourite way to do it effortlessly. I call it ‘saving the change’ and ‘zeroing out’.
It’s incredibly easy to send extra repayments when your everyday account and credit card are with the same bank, especially when you can transfer payments instantly via their mobile banking app! From my knowledge, this goes for all NZ banks – ie. instant payments from ASB to ASB, from BNZ to BNZ, etc.
I love my instant payments. Every day, when I buy something or make a payment, I round up what I need and transfer it over, then pay the remaining difference to my credit card. I do the same for anything remaining in my everyday account at the end of the day. For example:
If I need to pay $24 for something, I transfer over $30, then send $6 (the ‘change’) to my credit card.
If I have $58.46 sitting in my everyday account at the end of the day, I’ll send $8.46, $18.46 or $28.46 to my credit card and the rest (that’s $50, $40, or $30 etc – all ending with a zero) to my ‘Miscellaneous’ account (what I named my on-call/flexi account).
The result? My credit card payments look extremely random, but since it’s instant, I won’t worry that there isn’t some poor person manually processing each and every single one of my payments of $5, $12.50, $8.40 or $20.98! Yet, I can honestly say that it makes a huge difference because I do it often and consistently. I’ve actually paid off over $1000 without even noticing any difference in my life or feeling like I’ve made any sacrifices! Sometimes, if it’s a day when I’m making a lot of payments (say I’m out grocery shopping, running errands, eating at a restaurant, or just paying a lot of bills), I even do it every few hours.
I hope you’ve enjoyed reading what I’m doing to pay off my debt faster and that these tips helped you too. Good luck!