It doesn’t matter if it’s a car payment, credit card or store card – debt can cause both unnecessary stress and additional money problems.
How could your daily life change if you were able to clear some debt and relieve the stress associated with it? Would you then be able to place more money into your biggest debt – generally your mortgage?
There is a plan of action you can put into place to work towards a goal of reducing or eliminating debt and relieving mortgage stress.
Did you know?
“Australians total personal debt is around $2 trillion and the average Australian household owes $250,000. This debt can be broken down into 5 categories: mortgage (56.3%), investor debt (36.5%), personal debt (3.1%), student debt (2.1%) and credit card debt (1.9%)”. Source: Finder.com.au
This is one job that shouldn’t be delegated to the too hard basket!
It’s a little like the quote “Most people don’t plan to fail, they fail to plan” – John L Beckley.
With the right approach, you can start a plan today – saving yourself thousands and getting back on track for some healthy financial habits. Depending on your current situation, level and type of debt – below are three options you might like to consider:
- Clear the smallest debt first
One option could be to pay the smallest debt off first. Maintain regular payments on all other debts and work to break down the debt in manageable pieces. Once the debt has been cleared on your smallest commitment, use the money for those repayments towards your next debt.
2. Pay off the debt with the highest interest rate
A different approach could be paying off the debt with the highest interest rate. If you have a debt commitment with very high interest rates clearing this one off may mean you save thousands in costly interest. Money that could be working harder for you on your other debts.
3. Transfer your balances
If you have debts and really don’t know where to start, an option could be consolidation of the debt into one loan or credit card with a lower interest rate. To avoid any surprises, make sure you know what interest rates will apply, both as an introductory offer and as an ongoing rate.
My additional tips for staying on track:
- Always make your minimum payments
Without a doubt, it’s very important to ensure you are always making your minimum repayments. If you are not meeting these minimum obligations, you could be stung with very high penalties.
- Close each account as you pay it off
To avoid temptation and falling into the same trap, make sure you close off each credit card or loan as you pay it off. Once you are in a good position, you may wish to consider lowering the credit limit of your only card – if you choose to keep it.
- Engage help if needed
Don’t forget to ask for help if you need it. It’s very important not to ignore debt if it becomes unmanageable as it can affect your credit report.
Need to know about your credit report? You can check your credit report here with the Australian Securities and Investment Commission (ASIC).
I am a Brisbane based financial adviser with clients in Ashgrove, The Gap, Kenmore and Chapel Hill. I help professionals make informed decisions and take back financial control. These are just some of the examples of tips I like to share with my clients to help them gain control over their finances and to prepare for planning for their future. By following these tips, like my clients you’ll be able to ensure that when you engage a financial adviser they will be able to help you with what you need. I can also help you implement the appropriate tips for you.
I offer a 30-minute financial review session. In this session, I can review your current financial situation. I can see if I can help you achieve your financial goals and the best (and quickest) way to do so. You can contact our office on 07 3102 4948 or book a time that suits you via the link below.
If you would care to share your experience with me, please comment below!