Getting on top of debt (for good)
Debt, when managed responsibly, can be used to help adapt to changing life circumstances. But it getting out of hand can happen to the best of us.
Debt is a fact of life for most Australians - whether it's getting into your first home or a car that suits your family situation. And as life progresses, and your debt grows, keeping on top of it can be tricky.
The good news is that you're not alone. According to the latest AMP Income and Wealth report, the average Australian household debt is four times higher than what it was 25 years ago, rising from $60,000 to $245,000 (after inflation).
So how do you go about nipping debt in the bud?
Keeping up with the Joneses
So why do we have debt? It's simple. The cost of the great Australian dream is growing, and things like housing, investments or major purchases (like cars) are often beyond the means of many savings accounts.
But with bringing major purchases forward comes a responsibility to service the ongoing repayments. When coupled with your other debts, it can become difficult to control, picking up interest and charges along the way, and making securing your financial situation more of a headache.
Discover the best ways to reduce debt.
Forget the quick-fix solutions. Unfortunately, there's no magic wand that'll make debt disappear in an instant. However, there are a few tried-and-true ways that can help you get started.
- See what you spend your money on. Go through your statements with a fine-toothed comb and figure out a budget based on where you can cut back
- Pay your bills on time. Avoid paying pesky late fees that can bump up your balance even more
- Put in more than the minimum repayment. It could be $10 or $100, either way it’ll help you avoid paying extra interest in the long run
- List your debts and make a plan. Jot down how much you owe next to each debt. Then, set up a realistic payment plan. (Psychologically, it may help to knock off your smallest debts first, followed by tackling the larger ones)
Avoid reloading your credit card. Don’t be tempted to celebrate your recently cleared credit card balance with a new purchase
Put all your debts in one place
If you've got a mixed bag of debt and administrating it is becoming a challenge, you might like to consolidate these into a personal loan. Instead of juggling several loans at once, you'll have one regular payment, one interest rate and one balance to keep an eye on.
There's less paperwork to worry about, just one provider to deal with and a fixed date for the debt to be done and dusted.
It's a great way to simplify your finances, and it might just help you get a good night's sleep.