How to manage debt effectively

How are you managing your debt?

By Julie Nipperess

Many Australians started the year in debt. This is not uncommon. But if you’re stressed out by what you owe and are not sure how to manage debt effectively, then this article is for you.

Immediate and expensive debt

Avid followers of this blog will remember that in January we wrote a step-by-step guide for getting yourself out of Christmas debt. By now, if you are following this plan, you will have been tackling your immediate and expensive debt, and by this month, you’ll be starting to put a little more money aside, into your savings account.

If you haven’t been following this plan, never fear, it’s not too late to start.

The important thing is that you actually do make a start. ASAP.

The struggle is real

The struggle is real

New research from comparison site which was released at the start of the year predicted that 37% of us – the equivalent of 7.2 million people – or about one in three Australians – will have entered 2020 with a ‘Christmas debt hangover’.

While many people will have got that debt paid off by the end of February, a quarter won’t have, and will spend up to five months paying it back.

Ouch. I think you’ll agree, that’s a lot of sacrifice.

As a nation, we were expected to spend about $28 billion on credit cards alone to celebrate Christmas, New Year and the holidays.

Now, don’t get me wrong, it’s important to be festive during the festive season.

But it certainly doesn’t hurt to counter the festive spirit with a little dose of frugality either.

Getting on top of your debt

Getting on top of your debt

Many people end up spending money they can’t account for, not just on gifts, but on eating and drinking, and end up with nothing to show for it in the new year except a few memorable hangovers and extra kilos they’re desperately trying to shed.

For Aussies, it really is the holiday season. Because it’s the annual corporate shutdown and the time that many of us typically take a few weeks off work to relax and recharge, so it’s expected, in some ways, that we’ll spend more than we might at other times throughout the year.

But the point I’m trying to make is that it’s vital to find balance – balance between having a good time with family and friends, and knowing your spending limits.

The danger of debt

The danger of debt

But, if you’re still not making headway with your Christmas debt by now then you’re heading into very dangerous territory.

Why? Because if it’s not dealt with, it can affect your credit score, which then affects your ability to get finance down the track when you want to buy a home, or a car, or even set up an internet or electricity account.

If you’re not managing debt effectively, you can find yourself in deeper debt, paying high interest rates and possibly even late fees which are costs you just don’t need to accrue.

If you’re seriously in trouble, then you can end up with your savings account completely eroded. And without savings, you don’t have a ‘buffer’ if something goes wrong. This can start a downward spiral that’s hard to get out of.

What’s more, having debt that’s difficult to manage means you’re missing out on opportunities. Like being able to put a little cash aside for investing in shares or a managed fund, or a property, top up your superannuation, all of which will make a big difference to your future.

Financial hardship

If you’re in financial hardship, then it’s time to contact your debtors and talk to them about payment plans. There are other options too, like debt consolidation.

Once the debt is under control, you need to start a personal budget, so you can avoid the same predicament in the future.

As many of you know, I’m not one to get too hot under the collar about very many things, except unnecessary debt. And aside from all of the reasons outlined above, mostly I get fired up about it because it’s a burden.

It’s stressful. And totally avoidable.

A few years ago, the Australian Psychological Society Stress and wellbeing in Australia survey found that the number one cause of stress in Australia is personal finances!

As well all know, stress is exceptionally bad for your health.

The thing is, that life, my friends, is for living.

There will always be things we cannot control, but finances are not one of them. With a little planning, preparation, budgeting and knowledge you can get on top of yours.

Are you ready to Step Up and take control of YOUR financial future?

Using the Step Up Financial Process we help you launch the plan that will grow your wealth, protect your wealth and keep you in control.

Step up and take control of your financial future by contacting our local team of experienced financial planners today.

This is general advice and should not be treated as personal advice. Julie Nipperess is an authorised representative of Step Up Financial Group Pty Ltd ASFL No: 512509.

Need more information? Get in touch with Step Up Financial

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      Orange, NSW 2800

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