Summer has finally arrived and not only has your summer wardrobe been collecting dust, but your debts probably have too.
Recent studies show that Australians have been cutting back and minimising their spending and decreasing their debts since the Global Financial Crisis in 2008. However we are still collectively paying interest on around $31.7 billion on credit card debt alone, and between all the different ways that we can now obtain a line of credit, it is very easy to fall into debt before you even realise.
Here are five (5) ways you can freshen up your finances to clear your debts faster and maintain a debt-free life:
1. TAKE RESPONSIBILITY
You have managed to get yourself into debt, and now it is time to take responsibility. Grab a pen and a piece of paper and start to write down the outstanding balance of all your personal debt that you currently owe. Once you have your list, next to each of the outstanding balances write down the interest rates that you are paying on each of your debts.
2. CONSIDER YOUR OPTIONS
You now have a list of all of the interest rates you are paying for each of your debts. You will be surprised how much interest you are paying on some of your loans.
The average interest rate is around 15%-18%, so it is important that you take the time to review your loans and compare them with what else is on the market to make sure you are getting the best interest rate for yourself, and not wasting money and growing your debt by paying too much in interest payments.
3. BE REALISTIC
Debt usually doesn’t appear overnight, and in most cases gradually builds up over time. Likewise, paying debt off usually takes time. It is important to set yourself realistic goals that you can achieve. Making unrealistic goals is counterproductive and will only leave you disappointed. Although, it is also important to reward yourself along the way (without spending more money) for achieving the goals you set for yourself.
4. CONSOLIDATE YOUR DEBTS
Depending on how many loans you have and the amount, you may want to consider whether it may be beneficial to consolidate your debts, preferably with a lower interest rate. The more loans you have the harder it is to keep track of them, and missing payments will only result in you paying more money than needed.
5. STAY OUT OF DEBT
Understand how you managed to get into debt in the first place. No matter whether it comes down to overspending, an unexpected bill, or a drop in your income, you need to take steps to be sure you don’t wind up on the debt merry-go-round again. Living within a budget, building a pool of rainy day savings and sensible money management are the keys to living debt-free.