Module 2: Debt management and finance tips

“Knowledge is of no value unless you put it into practice.”

Anton Chekhov


Effectively managing your debt isn’t just the key to a good credit score, but it’s one way to set yourself up for success. Finance plays a big role in your life, and it dictates what kind of life you can live. Being good with your finances, and effectively managing your debt, can be the difference between living life how you want to live it and barely getting by.

With this in mind, we’re going to take you through some of the key concepts that we’ve explored during this online course, so you’re refreshed and equipped with the knowledge you need to financially thrive!

In this module, we will cover:

  • How to manage your debt;
  • The importance of savings;
  • Different types of budgets.

How to manage your debt

Whilst the specifics you employ to manage your debt will differ depending on your individual circumstances, we’ve put together four simple steps to help you get on top of your debt, and stay on top!

Step 1: Know where you’re at 

Before you can manage your debt, you need to know exactly what debt you have and how much spare cash is left after all your obligations. 

If you don’t know where to get started, check your credit reports. They will list all your current credit accounts, maybe even some that you forgot about. Your credit report may include mortgages, credit cards, personal loans, business loans under your name and even in-store credit cards. However, if you owe relatives or friends, this won’t be listed in your credit report. 

Step 2: Prioritise your debts

While we at Tippla will always do our best to provide you with the information you need to financially thrive, it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions. You can find more information on prioritising debts on the National Debt Hotline website. 

With a strategic approach, you don’t necessarily want to just increase your repayments for all debts. There are better ways to structure your repayments. If you do have spare money to pay towards your debt, you should prioritise debt you want to get rid of first and increase your repayments.

But how do you know which ones to choose first? While all debt is important, some may have serious legal implications and should be rated higher on your priority list.

Here are some examples:

  • Car loans are often secured against the car you have purchased. Therefore, not being able to repay this loan may mean that you lose your asset;
  • Mortgages – same concept here, your mortgage is secured against your house. If you can’t repay your mortgage you might lose your house;
  • Some loans have higher interest rates than others. You may be saving money in the long run if you pay higher interest loans off first and then put your energy into the others. 

Step 3: Choose your method to reduce debt 

Create a financial plan

By allocating a specific amount of money for each category in your life, you ensure that there is enough money for each category. However, sticking to a set budget is easier said than done. It is important to set a realistic plan that includes all areas of your life, even spending. We will cover some steps to set up a financial plan in the next module. 

There are plenty of apps that you can use to track your spendings. Additionally, most banks allow you to set up designated savings accounts for certain budgets. 

Snowball system 

  • Look at your list of debts and organise them from the biggest to the smallest amount.
  • Make minimum payments towards all other debts and increase the amount for your smallest.
  • Once it is paid off, move the remaining amount from your debt budget towards the second smallest debt. 

Avalanche system 

  • Look at the list of debts but organise them from highest to lowest interest instead. 
  • Choose the debt with the highest interest rate. The longer you keep high-interest debt, the more it will cost you. 
  • Make the minimum repayments towards all other debts and increase the amount for your highest interest debt.


Credit offers change all the time and sometimes, a better option may be available while you are still repaying your old debt. In some cases, refinancing a loan under better conditions will end up being cheaper for you. 

Refinancing, as the name suggests, is when you finance something again. Typically this is done with new loans at a lower rate of interest. It is common for people to refinance their mortgages. 

In essence, this basically means you trade in your old mortgage for a new one – sometimes at a new balance. When you’re refinancing your mortgage, your bank or lender pays off your previous mortgage with the new one. However, you can refinance more than just your mortgage.

The benefits of refinancing include a better interest rate which means lower monthly repayments, shortening your loan term, consolidating your debts and more!

Debt consolidation 

If you have accumulated debt from multiple sources, you may be able to consolidate them into one loan. 

Pros of debt consolidation
  • Potentially a money saver – if you choose to consolidate your debt, you may be able to save money as you only pay interest on one loan and will make it easier to manage your repayments. 
  • Convenience – instead of remembering multiple repayment dates, you only need to keep track of one. 
Cons of debt consolidation

Before consolidating your debt, there are a number of things you should consider and check first. 

  • Higher interest rates – whilst there are numerous benefits to consolidating your debts, sometimes, it may cost you more if you end up with a higher interest rate or have to pay fees. You should compare the interest rate of the new loan, and find out whether there are any fees or additional costs, against your current loans. If the new consolidated loan ends up being more expensive than your current loans, then it might not be worth it and better to keep things as they are!
  • Watch out for fees – Some fees you should keep an eye out for include: penalties for paying off your original loans early, application fees, legal fees, valuation fees and stamp duty. 
  • Long-term isn’t always the best – another thing to watch out for is switching to a loan with a longer-term. Although the interest rate might be lower than what you’re currently paying, if you have a longer repayment period, then you might end up paying more in interest and fees in the long run!

The importance of savings

Putting savings aside is an investment in your future and a great way of providing security for yourself. A solid savings strategy could help you: 

  • Save for fun trips;
  • Put down a deposit for a home one day; 
  • Be prepared for any emergency; 
  • Feel more confident and comfortable with your finances; 
  • Prepare for your retirement. 

If you think savings are that boring thing your parents tell you to have, we need to break the news to you: looking after your financial wellbeing can be fun and empowering! It doesn’t mean you have to miss out on anything either – at Tippla, we believe in the concept of finance without FOMO. 

Different types of budgets

There are many different types of budgets out there, here are a few.

Make a transition budget 

Do you want to move towards spending less money in the long run? Some people go into extremes and commit to a month of non-spending to reset their personal habits. If that’s just not your cup of tea, you can use a ‘transition budget’ instead. By changing your budget gradually over the next couple of months, you change your spending habits in a more sustainable way instead of asking for a habit change straight away. 

So how can you do this? Work out your goal budget and then use a series of e.g. 6 months to move towards this budget. Therefore, you don’t create just one, you create 6 realistic budgets towards your dream budget. But don’t forget to still accommodate your actual needs such as rent and bills. These parts of the budget won’t change while other parts may be more flexible. 

50-20-30 Budget

If you don’t know where to start, this is a great way to set up a first budget. You can adjust over time according to your income and needs. The general idea is to split your income into three different categories: needs to cover everything that is non-negotiable. Payments like rent, groceries, utilities and transportation would be considered needs. Wants includes fun items and events that you splurge on, and savings is probably self-explanatory! 

When setting up your budget, split your income the following:

  • 50% in Needs 
  • 20% in Savings 
  • 30% in Wants 

By the end of each month, anything that is leftover in wants and needs should be transferred into savings. Each month starts with a fresh budget. 

Automate your savings 

Saving money is much harder if you let the money sit in your personal account, looking like it could be spent. Nominate a certain amount and automatically transfer it to a savings account right after payday. This will eliminate the false feeling of having more money to spend than you actually should and helps you grow your savings without having to do anything. 

It doesn’t have to be a huge amount. Instead, rather set a realistic savings goal and save towards it. If you put $50 into savings each fortnight, you save $1,300/year.

Don’t dig into your savings just because your budget feels a little tight this month and you want to go for brunch with friends. Savings are for emergencies and this is not one of them! Consistency is important if you want to grow your wealth. Discipline yourself with your spendings and you will feel a million times better about your finances in the long run. 

Developing an emergency fund 

Life doesn’t always go to plan as we all had to learn with the recent pandemic. You will sleep much better at night knowing that you’ve got your own back in case of an emergency. Having enough money in your bank account to cover your expenses for a while will take a huge weight off your shoulders. 

You don’t have to rush. Set up a savings account and slowly save towards your goals. If you want to take it easy, start with the goal of saving one month of income as a safety buffer. Once that is achieved, save your way towards three months.