If you have 2018 pegged to be the year that you take control of your finances then you are going to need someone in your corner championing for your success. The big, wide world is fraught with temptation to spend instead of save. Whether it’s Afterpay, interest free, rent to own or buying it on credit, adopting a more controlled approach to spending can seem impossible especially if you are used to operating on impulse.
So how do you free yourself from the firm and sometimes suffocating grip of debt?
Well, the big secret to succeeding is that THERE IS NO SECRET. That’s right, if you are pinning your hopes on clearing your debt by striking it rich on Powerball then the bad news is that you have a one in 76,676,600 chance. In fact, you have a better chance of an asteroid strike (1:74,817,414), becoming a movie star (1:1,505,000) or being the same height as Hugh Jackman (1:23.3).
So with winning the lottery off the table, where do you start and how should you tackle your debt?
Understand your full financial picture
Do you have a budget? Do you know how much money is coming in every month and how much is going out? Do you know whether you are spending more than what you are making?
Understanding the numbers when you’re planning to kick some financial goals is important. It helps to map out your monthly debits and credits, and even group and calculate your expenses so you know how much you’re really spending in areas where you could potentially cut back.
Just like the popular 90s cheerleader chant says you need to, ‘be aggressive, be be aggressive’. Crunching your debt takes planning, commitment and stamina, and if you are serious about improving your financial landscape then you need to really attack your debt front on.
Depending on your financial situation will depend on how aggressive you may choose to be. If your overall debt is fairly manageable then you may choose actions like reducing your weekly takeaway coffees or lunches and choosing cheap or free weekend activities. If your debt is a bit higher or you want to make progress more quickly, you may opt to cancel subscriptions like Foxtel and Netflix that you can go without, reduce how much you spend on your weekly grocery bill and review your insurance and electricity providers to see if you can switch and save. In most instances, there are a number of areas you can save in, even if it is just a few dollars. Be creative and ask yourself, do I NEED to spend that much?
Adopt a planned approach
Just like following a recipe to bake a cake, when deciding to pay down your debt you need a plan to guide you through the process. Although it might be scary, you need to lay your cards on the table or in this instance, your debt. List it out in order of smallest to largest. If you have a mortgage, you may wish to exclude this and just focus on your credit cards, personal loans and other consumer debt.
Start by paying the minimum amounts on your larger debt and increase your repayments on your smallest balance. As your smaller debts are repaid you can then direct these payments towards the next debt. Continue until you only have the highest amount left to pay.
Do you need more help with managing your debt or assistance with budgeting? Our team can provide practical support, contact us for your free consultation on (07) 4632 1966.
GENERAL ADVICE WARNING | This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial advisor before making any financial decisions.