Credit card debt can be the source of anguish for many of us. We all know it’s easy to spend money, but paying it off can take a really, really long time. This is a great article for those of us who are looking for some really simple tips to take the pressure off and to help take control of credit card debt.
Tip 1: Making extra repayments goes a long, long way
Credit cards compound monthly meaning that if you don’t have a plan to pay your debt down quickly, it’s going to get expensive. For example, let’s presume you have a $5,000 credit card debt with an annual interest rate of 22%. By only paying the minimum repayments you will end up paying a whopping $44,235 over the next 10 years. Ouch.
So what’s the lesson to be learned? Short term sacrifices when making extra repayments on your credit card actually keeps your money where it belongs, in your pocket! To find out how much your debt is costing you visit MoneySmart.gov.au and check out their ‘debt clock’ app.
Tip 2: Plan your repayments
Making extra repayments seemingly invisible, painless part of your weekly budget is a really important aspect of paying down debt. Remaining happy and motivated is just as important as making budgetary sacrifices too. There is no point in being miserable and missing out on life simply because you are in debt.
To help get you started, check out this simple budgeting tool and have a go at calculating your expenses. The important aspect of this exercise is to calculate your capacity to save and re-rout any extra funds into paying off your credit card. Remember to factor in your lifestyle and to make room for fun!
Tip 3: Be realistic, set attainable goals
This may sound like a cliché, but it’s not. There is no point in setting goals for yourself that are unattainable. Don’t be too hard on yourself and remember when it comes to paying down debt patience is the number one virtue you must employ. Getting into debt is easy, paying it off simply takes time. There is a light at the end of the tunnel, its just a matter of getting you there!
If you need some help in formulating and formatting your goals check out this article from Forbes for some great tips.
Tip 4: Structure and communicate your goals
A great starting point is to write down your goals in order to keep them at the forefront of your mind. Go one step further to communicate your goals with friends and family to keep yourself accountable.
If you are really looking for a strategy for your long term financial future we absolutely recommend booking in to see a professional adviser to help you formulate a plan. The Australian financial system is a complex, ever-changing environment so it is well worth your while to get some good advice from a professional before signing off on any major financial decisions.
Tip 5: Seek debt consolidation advice
Consolidating your debt may be one of the most powerful tools that you can employ to save yourself stress in the short run and money in the long run. Remember the example of the $5,000 credit card debt in Tip 1? What if you could move your interest rate from 22% back down towards 14%, or even below 10%? You may stand to save thousands of dollars and speed up the time in which you are able to pay off your debt.
The importance of seeking professional financial advice before signing any new contracts cannot be overstated. As a financial services firm we know all too well that the devil is ALWAYS in the detail. Too often people get caught up in worse situations by not understanding the implications of their financial decisions (after all we get into debt with the best intentions, however it’s not until we start making repayments that we understand how painful debt really is).
Seeking a professional opinion before consolidating debt is a great way to maximise your savings, to minimise personal risk and to reduce stress. The added bonus may be that you avoid unnecessary financial stress and make an unsuspecting partner to help guide you in the future.
If it sounds like we can help you, why not give SALA Financial Services a call or contact us via email? Getting your debt straightened out may just be the best thing you’ve done for yourself in awhile.
Kate Hillas writes for Credit Card.com.au, she has an HR and Recruitment background in Accounting and Finance; she is well travelled and loves to share her unique insights with her readers. When she is not landing jobs for her clients she likes to write and spend time with friends.
About Us: Life Balance Financial Professionals is a financial advisory practice based in Brisbane, Australia. Our firm practices in financial planning, insurance and accounting. Life Balance is independently owned and governed.
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