It can be easy to accumulate smaller types of debt like credit cards, car loans and personal loans that can be challenging to repay. These pesky types of credit facilities also reduce your capacity to borrow for a home loan, and make it more challenging when you’re looking to fund the purchase of a home. Here is a simple seven step guide, which could assist with reducing debt and purchasing a home sooner.

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1. Establish how much you’re spending

Start a spreadsheet and record your expenses over a month – track all your expenses to establish where your money is going and how much you’re spending on different things.

2. Decide where you can cut back

Now you have a spending record, you can decide where to cut back; think about the small things, such as takeaway coffees and lunches and UberEats on the weekends. With a bit of discipline and commitment (and some meal prep), you can save yourself $1,000’s and have far greater capacity to reduce debt.

3. Make a budget

Create a budget you can realistically commit to each week or fortnight.

Record your net income and deduct the necessary expenses you’ve already recorded in your spreadsheet.

You should have surplus money for discretionary spending or repaying debt, if not, review step 2 again to see if you can cut back anything further.

Consider including backup savings in your budget for contingencies, this way your credit cards are omitted when unexpected expenses arise.

4. Highlight your debt

Establish how much you really owe and keep it in focus. You can only repay what you owe if you confront it and stay aware of it.

By only paying the minimum, you may struggle to clear credit card debt. Be aware and set yourself a higher repayment in your budget.

5. Put a repayment plan in place

With your budget established and having highlighted your debts, you can focus on which debts you will pay off over what period of time.

Putting a plan in place will give you a sense of control over your debt, and committing to it will boost your sense of achievement.

6. Set and celebrate goals

It is intimidating to think of paying off all of your debt, so set smaller milestones in your plan to help you keep track of the light ahead. You could set goals such as paying off in 10% increments or clearing the higher interest debts first.

Every time you reach a milestone – treat yourself to small reward for your hard work, such as one of those cutback takeaway lunches or some UberEats on the weekend!

7. Commit to the plan

Like any hard work that puts you in a healthier position, it takes time, discipline and commitment. Stay positive and don’t get too negative with any setbacks. Always look forward to the next milestone in your plan.


Speak to a Bernie Lewis Mortgage Broker today about how they can help plan your journey to home ownership, simply call 8300 8300.

The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice.