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It’s something that affects many of us, and to some extent it’s almost unavoidable in today’s world. What is it? That’s right, debt.

According to the Australian Bureau of Statistics in 2019-20, 75% of Australian households had some form of debt. And with the rise in inflation and the impacts the cost of living has had on us all more recently, it’s likely that this number has increased.

Whether it's credit card debt, student loan debt, debt related to medical bills, Buy Now Pay Later debt or home loan debt, managing it is a crucial aspect of achieving financial wellness and long-term financial stability.

So, where do you start when you want to tackle your debts? We’ve put together some practical tips and strategies to help you make your debt manageable and get you on a path to debt-free living. But first, let’s look at good debt versus bad debt.

Understanding debt: Good vs. bad

Debt is simply money that you owe to someone else. While it's not inherently bad, excessive debt can delay you reaching your financial goals and cause you (and your family members) stress. It's essential to understand the types of debt you have, and on a very basic level it’s possible to classify debts into ‘good’ and ‘bad’:

✔️ ‘Good’ debt could actually generate you wealth over time. For example, if you have a home loan on a property, by paying it off you are working towards owning the property outright. Alternatively, the property may increase in value and if you were to sell it, you could clear the debt and make a profit too.

❌ ‘Bad’ debt carries more risk and may reduce your overall wealth in the long-term. This type of debt often allows you to spend significantly beyond your means. For example, credit cards, Buy Now Pay Later or an unsecured personal loan.

Bear in mind that any debt can become a bad debt if you’re unable to repay it. This is evident in the increase of homeowners struggling to meet their minimum repayments and suffering mortgage stress due to the interest rate rises that occurred in 2022 and 2023.

Assessing your debt

Now you know whether your debt is good or bad, but what next? If you want to start work on lowering your debt, you should begin by gathering all your financial statements and making a detailed list of your debts. This list should include the outstanding balance (total and individual if you have multiple credits cards or loans), the interest rates, and your minimum monthly payments.

Doing this will provide you with clarity on your financial situation and will help you prioritise which debt to pay off first. Which leads us on to…

Prioritise high-interest debt

As we’ve mentioned already, not all debts are created equal. High-interest debt, such as credit card debt, can quickly spiral out of control if you don’t pay it off in full each month. That’s why you should focus on paying off these debts first. They will accrue the most interest over time and this can very quickly add up.

Consider strategies like the avalanche method to start clearing debts. The avalanche method involves you tackling the debt with the highest interest rate first while making minimum payments on the rest. Once the highest interest debt is cleared, you would then move on to clearing the next highest rate, and so on.

A slightly different method of debt clearing is the snowball method. This method involves you focusing on clearing the smallest debt first (while still making minimum payments on the others), and then gradually moving on to the larger debts in size order.

Create a budget

Whichever option you choose, you’ll probably find that a budget is your most powerful tool. When it comes to managing your finances and paying off debt, a budget can help you track your income and expenses. You’ll be able to identify areas where you can cut back and allocate more funds towards your debt repayment.

Remember, every dollar saved can make a difference and help reduce your debt burden. A great example of this is reviewing your subscription services. If Netflix is costing you $11 per month and you pay $18 per month for Spotify, you’re paying $348 per year – and this could be redirected to pay off some of your debt.

We have some tools available to help you get started with budgeting, and of course, stick to it! Read our five easy steps for creating a budget, try out our budget planner calculator to make a start and use our mymo by P&N Bank budgeting app to stay on track.

Explore debt consolidation

If you have a number of debts that you’re having difficulty clearing, you may find that consolidating them helps ease some of the burden. Consolidating your debts into a single loan with a lower interest rate can streamline your payments and save you money in the long run. You can learn more about debt consolidation in this article.

It goes without saying, that it's essential to carefully evaluate the terms and fees associated with your debt consolidation options before making a final decision. If you don’t feel confident with finances, you may find it helpful to talk with a Financial Counsellor or debt expert. P&N Bank customers have access to financial coaching through our partnership with Vinnies WA.


If you're struggling to make payments, you’re likely feeling some financial stress – and keeping it to yourself will only make this feeling worse. It’s a good idea to open up and speak to your family and friends, as well as professionals for support and guidance.

You shouldn’t hesitate to reach out to your creditors and explain your situation. Many offer hardship programs or repayment plans to help reduce the burden of the debt and allow you to manage it more effectively.

Open communication can help you prevent missed payments and potential damage to your credit score and long-term financial health. Read more about the benefits of talking about money.

Stay committed

Paying off debt requires discipline and perseverance. By staying focused on your long-term financial goals and reminding yourself of the freedom that comes with being debt-free, you’ll likely find it much easier to stay on track. Make sure you celebrate any small victories along the way, such as paying off a credit card or reaching a milestone in your repayment plan to help keep motivated.

When you do start clearing debt and free up funds in your budget, ensure you put that money to good use. Make a commitment to your financial future by opening a savings account and regularly saving money. It doesn’t have to be large amounts to start off with, but you’ll soon see that the balance grows – in a far more positive way than debts do!


Dealing with debt is a journey, but with the right strategies and mindset, you can regain control of your finances and achieve your goals. Remember, you're not alone in this journey. We’re here to support you every step of the way and help you thrive financially.

Other resources you may find helpful:


Banking and Credit products issued by Police & Nurses Limited (P&N Bank) ABN 69 087 651 876 AFSL/Australian Credit Licence 240701. Any advice does not take into account your objectives, financial situation or needs. Read the relevant T&Cs, before downloading the app or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available.