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Debt Free in 12-months

Debt Free in 12-months

1. Get our budget package | Click here (<$50)

Or, for $30 or $0 even! Just buy or borrow some of these books (and continue reading this blog):

    1. The Barefoot Investor
    2. Budgets Don’t Work, But This Does
    3. Ditch The Debt and Get Rich

Credit: this summary below is created based on my own lived experience, money lessons I was taught growing up, my accounting degree, and also from ideas presented in the above books. 


2. Figure out your ‘basic b*tch’ budget

What are the ‘must have’ expenses? These are the expenses that you need to live. Think: school fees, rent/mortgage, insurance, groceries, petrol, utilities, medicine, minimum debt repayments on loans, and phone/internet.


  • $450 Rent per week
  • $100 groceries per week
  • $50 petrol per week
  • $50 phone per month
  • $50 internet per month
  • $60 insurance per month
  • $1,000 school fees per term
  • $400 utilities per quarter

*These are examples only and are not designed to be indicative of what your costs might be or ‘should’ be. 


3. Set a target for your ‘buffer’

We’re going to build you your own safety net - a buffer. Before we create our buffer we need to calculate the cost of the above must-have expenses for one year and then divide it by 4. This gives you a target amount to save for. 

Rent         $  450   per week    x52 = $23,400 per year
Groceries $ 450 per week x52 = $ 5,200 per year
Petrol $ 50 per week x52 = $ 2,600 per year
Phone $ 50 per month x12 = $ 600 per year

Internet $ 50 per month x12 = $ 600 per year
Insurance $ 60 per month x12 = $ 720 per year
School Fees $1,000 per term x4 = $ 4,000 per year
Utilities $ 400 per quarter x4 = $ 1,600 per year
Total = $38,720 per year

= $ 3,226 target
(for 1x month of a buffer)
= $ 268 per week to put aside
For 12 weeks

4. Live on the basic b*tch plan for 12 weeks

This will be tough, but if you can live on the basic b*tch budget for 12-weeks, AND put aside your buffer amount each week, then you will have created a buffer account that is equal to 1x months worth of your necessary expenses. Think of the peace of mind you’ll have knowing you've got that covered in case you get in a jam!

This buffer money needs to go into a separate bank account, not attached to a bank card, that you don’t see or access regularly. You keep it there unless you really need it - like if your car breaks down or you lose your job. It is not for covering bills you weren’t expecting (because with proper budgeting you will be expecting them and will be prepared), and definitely not for a new hair do or pair of sneakers.
When the 12-weeks are up…


5. Create your Best Life Budget

Using our budgeting videos, put together your best life budget. This will tell you what income/revenue (after tax) to be working toward. This will be your goal that you are conscious of and can work up to.


6. Live your NOW Budget

One more budget… using our budgeting videos, again, tweak the ‘best life budget’ to make sure it shows only the actual revenue/income (after tax) you are expecting this year, and make sure the expenses you plan for fit within that. This will ensure you don’t plan to spend more than you earn.

You should also budget for debt repayments and savings if you can. 

Start to live off this budget now.

7. Get rid of buy-now-pay-later

Pay off these debts first: credit cards, After-Pay and any equivalents. Then, cut up the cards, cancel memberships, remove from your browser savings. These are designed to help you spend more than you earn. In the future you can see things you like, make a wish list (save those links!) and come back to them when you have saved enough. You might actually find that by the time you have saved up for it you don’t really want it anymore anyway!

This will be easier with the method of budgeting we recommend - if you are putting a little aside every week for new clothes, then when you see something you like, the money is already there ready to spend. There is no need for After-Pay if you have saved in advance.


8. Set Goals

As part of the budgeting process, you have set your intentions of how you will allocate your income; to expenses, debts and savings. We suggest then converting the debt repayments and savings goals to a graphic tool that you can stick up somewhere (home office?) and tick it off as mini-targets are achieved along the way.

Example: if the goal this year is to pay off a $5k debt and then save another $5, you might have two ‘towers’ on a page, with $500 building blocks on them like this (below). 

Each time you pay $500 off the debt, colour in a building block. This encourages you to keep that money there and not grow the debt again.

Similarly with savings you can colour in a block when you save $500 and keep track. This also helps if you choose to pay debts and save at the same time (not necessarily our recommendation but we know some people like this). Then you can see.. Ok I paid off $1,000 and saved $500… or I could have paid $1,500 off the debt and had $0 for savings.

DEBT                 SAVINGS

$500 | $4500 to go | $500 | $ 500 saved
$500 | $4,000 | $500 | $1,000
$500 | $3,500 | $500 | $1,500
$500 | $3,000 | $500 | $2,000
$500 | $2,500 | $500 | $2,500
$500 | $2,000 | $500 | $3,000
$500 | $1,500 | $500 | $3,500
$500 | $1,000 | $500 | $4,000
$500 | $ 500 | $500 | $4,500
$500 | ALL GONE | $500 | $5,000 GOAL


 9. Get on top of ‘bad’ debts FIRST

Paying back any money to friends and family is important for your relationships, but these are often interest-free loans, so from a financial sense they are pretty good debts. If you have a mortgage you want to be paying that off as quickly as you can of course, but it is a reasonably ‘good’ debt.

This section is focused on paying off ‘bad’ debts - the ones that cost you a lot (credit cards, AfterPay, short term loans). Hopefully no one is going to break your knees over them, but they might be breaking the bank!

How to crack the debt: and yes in this order!!
1. Stop spending (using these credit cards and buy-now-pay-later solutions)
2. List all the debts, noting the balance, the repayments you need to make (amounts and dates), interest rates charged, fees etc.
3. Add it all up. Big total. (have a cry if you need to… then back to taking ACTION)
4. Figure out the issue… did you get into debt because of splurging? Or maybe because your necessary expenses are higher than you can afford? Read the books we’ve recommended, chat to your accountant, use our budgeting resource to help yourself figure out how to adjust your spending to make sure you are not going to continue to need to rely on these credit cards etc. Basically spend less or earn more. I am sorry but that is the reality of how you get out of this hole. BUT, it is not forever. Once you have repaid those debts, that money you were putting towards repayments will be available to you to spend on other things ๐Ÿ™‚
5. Chat to the lenders and see if they can give you better rates (you might get lucky!).
6. Pay debts before saving. If money in your bank earns 3% interest, but your credit card costs you 15% in interest… hello? Put everything ‘extra’ you get towards the debts and pay them off faster than scheduled.

In the book ‘Ditch The Debt and Get Rich’, Effie Zahos presents a few different debt repayment strategies you might want to check out (pg. 51), like the snowball strategy or avalanche (among others).

 10. Track Spending and Savings

You can use a Xero cash-book (a subscription to xero accounting software only accessible through an accountant, but for a cheaper price). This is designed for business but can be re-worked for personal expenses tracking and is a lower cost than the standard Xero subscription.

There are other apps too: MoneyBrilliant, PocketBook, Spendee, and Frollo. Check them out and tell us what works for you! Otherwise there is always a free spreadsheet, but that requires manual input.  

By tracking the actual amounts you can compare what your intentions were (in the budget) to your targets/goals, and then either tweak and adjust if necessary, or REWARD YOURSELF if you are killing it :) 

All a bit much? We are here to help, but I know we come with a fee, so if you need some free financial counselling, please check out the National Debt Helpline: // ph: 1800 007 007. 

There is a light at the end of the tunnel and a way towards feeling more financially secure.

Download our FREE bills and expenses tracker here


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