Paying Off Our Debts in Australia: Our Financial Freedom Journey
Embarking on a new life in Australia brings a mix of excitement and challenges. For us, one of the most pressing hurdles was managing and ultimately paying off our debts. After getting our finances in order, our next crucial step was to tackle our loans head-on. While we avoided credit cards, we were managing a car loan and a personal loan that significantly impacted our finances. Here’s how we navigated this crucial phase and why paying off our debts became a top priority.
This article shares our real story of how we paid them off—and practical steps to help you do the same.
Financial Hurdles as New Migrants in Australia
When we first arrived in Australia, we were on a tight budget. We had taken out a car loan to purchase a second-hand vehicle from my in-laws. We also had a personal loan that we were repaying monthly. These debts, combined with our regular expenses like rent and childcare, put a strain on our finances.
Initially, the burden of these loans was overwhelming. Most of my salary went towards servicing these debts, leaving little room for anything else. I vividly remember the sleepless nights, plagued by anxiety over not being able to enjoy my hard-earned money. It felt as though every cent was being siphoned away, leaving us with little to show for our efforts.
Paying for the car in cash would have been ideal but we lacked that kind of money at the time. We were just starting out, and tying up a large sum in a single transaction wasn’t feasible without jeopardizing our emergency savings. We didn’t envision this situation for our new life in Australia but we had to face this reality.
How We Paid Off Our Debts: Step-by-Step
1. We Sat Down and Listed Every Debt
One night, my husband and I finally said, “Enough.” We made some tea, grabbed a notebook, and listed every single debt we had—from the personal loan to the car loan. It wasn’t fun, but it was necessary. Seeing everything laid out clearly was a wake-up call. No more ignoring or avoiding—we were ready to take action.
2. We Created a Realistic Budget
With our debts in full view, we built a budget that actually reflected our reality. We included both our incomes and tracked every monthly expense—from rent down to the tiniest subscriptions. This budget became our roadmap, helping us allocate money towards repayments while still covering the basics.
3. We Cut back on non-essentials
This was the tough love part. Once we had a clear budget, it was painfully obvious where we were overspending—especially on eating out and takeaway. We decided to embrace home-cooked meals. I even made our home dinners feel like a treat—fancy plating, special dishes—just without the restaurant price tag. The savings we made? Straight to our debts.
4. We Steered Clear of Credit Cards
The temptation was real, but we stayed strong. We knew adding more debt would only dig a deeper hole. Sticking to debit cards kept our spending intentional, and helped us stay accountable to our budget.
5. We Celebrated Every Little Win
Every time we made an extra payment or paid off a chunk of a loan, we celebrated. Nothing fancy—maybe a little treat at home or a cozy family movie night—but those tiny victories kept us going. They reminded us how far we’d come and kept the momentum alive.
Why Paying Off Debt Became Our Mission
Paying off our debts was not just a financial goal but a personal mission. Here are the key reasons why we made debt repayment a top priority:
1. Achieving Peace of Mind
The peace of mind that comes with being debt-free is invaluable. There’s a unique relief in knowing you owe nothing but a mortgage, if that. We felt constant worry about meeting payment deadlines and accumulating interest while we repaid our car and personal loans. We found it crucial to eliminate our debt for mental and emotional well-being. Eliminating our debt allowed us to focus on enjoying life in Australia. We enjoyed life in Australia without the shadow of financial anxiety.
2. Reallocating Funds to Enjoy Life
One of the significant motivators for paying off our debt was the desire to redirect our money towards things we genuinely enjoy. We envisioned using our earnings for travel family activities and experiences that enrich our lives without the weight of debt. We wanted to transform our salary from a mere tool for debt repayment into a resource for creating memories. Moreover, to enjoy the vibrant culture and lifestyle that Australia offers.
3. Reducing the Number of Bills
Imagine if every paycheck was consumed by bills and debts, leaving nothing for savings or discretionary spending. The repetitive cycle of earning money just to pay bills can be disheartening. We aimed to break this cycle by prioritizing debt repayment. Reducing bills increases financial freedom and allows us to focus on goals beyond mere survival.
4. Investing in Our Future
We had long aspired to start investing in our future but found ourselves unable to do so while carrying debt. Paying off our loans freed up funds that we could then channel into investments, whether in property, savings accounts, or other financial vehicles. Eliminating debt was a crucial step toward building a more secure financial future and making our Australian dream a reality.
5. Saving Money on Interest
Interest on loans can be a financial drain, especially as rates rise. We quickly realized that the longer we held onto our debts, the more we paid in interest. By focusing on paying off our loans, we aimed to minimize this extra cost. Our goal was to reduce the total amount we paid over time and to shift our focus to earning interest on our savings instead.
6. Teaching Good Financial Habits
One of the most profound reasons for our commitment to debt repayment was to set a positive example for our daughter. Growing up, we witnessed our parents struggle with debt, and we knew we didn’t want to replicate that experience for our family. By managing our finances responsibly and eliminating debt, we aimed to instill good money habits in our daughter. We wanted her to learn the value of financial discipline and the benefits of living within one’s means.
Life After Paying Off Debt in Australia
Paying off debt was a significant milestone in our financial journey. It allowed us to shift our focus from merely surviving to thriving in our new Australian life. With our debts cleared, we could now enjoy the benefits of our hard work, invest in our future, and provide a stable and secure environment for our family.
Every person’s financial journey is unique, and the reasons for paying off debt will vary. However, the principles of discipline, commitment, and strategic planning are universally applicable. By following these steps, we moved closer to our goal of financial freedom and laid a solid foundation for our future in Australia.
Embrace the journey, stay focused on your goals, and remember that every step towards financial stability is a step towards a brighter future.
Feel free to contact us for more tips and advice on managing finances in Australia. Good luck on your financial journey!