Five ways to stay out of the red now – to get you into the black in the future
According to the latest ABS figures, more than 70% of Aussie families are carrying some debt – with 26% of this group holding debts worth three or more times their annual disposable income.[1]If debt is holding you back, don’t despair, there are plenty of ways you can take control of your debts and set your family up for a strong financial future.
1. KEEP RECORDS
Don’t know where your money’s going? Then it’s time to keep records. For a month, write down everything you spend – from bills, repayments and groceries, to entertainment, trips to the doctor and the hairdresser. Don’t forget to include quarterly or annual payments like car registration, insurances, electricity and school fees. This will give you a realistic indication of your spending, which you can use to create a budget.
2. ELIMINATE UNNECESSARY SPENDING
Once you’ve had a good look at your where your money’s going, cut out any wasteful spending and save that money or use it to pay off debt. This could be things like the gym membership you never use, or subscriptions for pay TV channels that you rarely watch.
While you don’t have to deprive yourselves, be realistic about what’s really adding to your life. A themed birthday party for your four-year-old may look great on Pinterest, but is it really the best use of your hard-earned cash?
3. DITCH THE PLASTIC
Possibly the biggest drag on your budget will be unsecured debt that’s accumulating interest. This means the credit card debt or personal loans for things like holidays and meals out, or items like clothing, shoes and technology that depreciate quickly.
Carrying credit card debt does more than drain your resources now. If you end up defaulting on credit, it can hurt your credit rating down the track, making it harder to get good debt like a mortgage or business loan. So leave your cards at home or even cut them up, then tighten your belt and get them paid off once and for all.
4. BUY SECOND HAND
One way to cut costs, and do the environment some good, is to buy second hand wherever possible. This can be a great way to get good quality items at a fraction of the price. Check eBay or Gumtree, head to a garage sale, or log onto Facebook to find buy, swap and sell groups in your area. You might even be able to get someone to deliver the goods as part of the cost.
5. KNOW WHEN TO TRADE DOWN AND WHEN TO PAY FOR QUALITY
Of course, this isn’t to say that you should always go for the cheapest every time. Sometimes it can be false economy to buy cheaper versions of items that need to last for a while, such as whitegoods. So think carefully about where you can trade down, and where it makes sense to pay a bit more.
For advice specific to your personal situation get in touch with us today o 08 8223 3774.
[1] ABS 6523.0 – Household Income and Wealth, Australia, 2013-14
Any advice in this post is of a general nature only and has not been tailored to your personal circumstances. Please see personal advice prior to acting on this information.