Debt is not inherently bad. However, you do need to make allowances for it in your spending plan and forecast.

Building your debt management into your spending plan will enable you to feel more in control and have a plan as to when you will be able to pay it off. You will be amazed at what an impact having a plan to pay off debt will have on your mindset.

Most of us will have had experience with debt, whether it’s a home loan, a car loan, a credit card or education debt. You need a clear plan for repayment and also a back-up plan, in case of the unexpected.

As a part of this plan, you also need to gauge which debt is tax-deductible (e.g. investment lending) as opposed to non-deductible (e.g. your own home).

Continually refinancing your credit cards to a new ‘interest-free’ offer is not the solution to overall debt reduction.

Here’s my list of tips to reduce your debt:

1. Know your debts

Make a list of exactly how much you owe to each provider, what the repayment terms are (date due and minimum amount due) and (the yuck part) the interest cost to you.

While this will often be an uncomfortable exercise, sometimes it is just the wake-up call you need to commit to repaying these as quickly as possible.

2. Prioritise

Work out which debts are high priority to pay off (bad debt and high interest rate first).

3. Budget

Compare what you earn to what you spend. We all know which way the surplus should fall!

4. Consolidate

Often, having one repayment is easier to control.

Warning: too often, I see people buy cars with the equity in their home to enjoy the lower interest rate. Remember the life span of a car – it is definitely not 30 years. If you do this, commit to repaying the car in a maximum of five years.

Otherwise, I guarantee you will essentially be continually increasing the loan (you just won’t see it in black and white).

5. Pay your debts on time – period!

You do not need to add late payment fees to your debt. Set up direct debits a few days before the due date where possible.

6. Repay the full amount

By paying off the entire debt, you are eliminating the need to pay interest. Over time this can add up to substantial savings, which in turn means more money in your hand.

7. Try to make extra repayments

Increase the amount you pay on a regular basis where possible. Another option is to direct bonus money (e.g. tax refunds) to repay a lump sum off the debt.

Before making lump sum repayments, ensure that you are not penalised to do so (e.g. that there is no fee involved).

8. Review

Shop around for a better outcome. Don’t just look at the interest rate when comparing options.

Remember to look at the fees associated with either exiting the current option or the overall fees of what looks like the better option.

9. Don’t be fooled by ‘Buy Now, Pay Later’ schemes

It is still debt, so someone (not you) will always be making money. The consequences for defaulting can be extremely costly.

Make sure you prioritise reducing non-deductible debt, with the highest interest rates at the top of the list, such as credit cards.