Mort­gage buster 10 New Year’s res­o­lu­tions to get you out of debt in 2013

Central and North Burnett Times - - DOMAIN -

HOME loan bor­row­ers are be­ing urged to take ad­van­tage of record low in­ter­est rates to slash debt and act their wage’ in 2013.

Crown Lend­ing ceo Scott Parry, who has stud­ied sea­sonal debt, said con­sumers were more likely to ex­pe­ri­ence debt-re­lated stress in Jan­uary than in any other month, mak­ing the new year the ideal time to take ac­tion against debt.

“How of­ten do we make the same New Year’s res­o­lu­tions ev­ery De­cem­ber, whether it’s to lose weight, eat bet­ter, drink less or ex­er­cise more, only to fall off the wagon af­ter a month or two at best?” MrParry said.

“The same pat­tern ap­plies with debt re­duc­tion where, come 1 Jan­uary, you’re no bet­ter off fi­nan­cially than you were the year be­fore be­cause you don’t make the changes to your bank­ing struc­ture that will en­able you to pros­per fi­nan­cially.”

In sharp con­trast to the cul­ture of debt and bor­row­ing that char­ac­terised the boom years, Mr Parry said Aus­tralians should be en­cour­aged to take con­trol of their fi­nances and re­duce debt.

“The start of a new year is an ideal time to take stock of your fi­nances and take some sim­ple steps to re­duce debt,” Mr Parry said.

“As rates de­cline, hous­ing af­ford­abil­ity im­proves and home loan re­pay­ments mod­er­ate. Rather than bor­row­ing more, homeowners should take this op­por­tu­nity to in­crease their re­pay­ments or make ad­di­tional re­pay­ments on their loan. Th­ese sim­ple steps can shave years off the loan term and save thou­sands in in­ter­est.”

Mr Parry said home loan in­ter­est rates were pre­dicted to fall even fur­ther in 2013, cre­at­ing the ideal op­por­tu­nity for home loan bor­row- ers to slash years from their home loan.

“It has al­ways been the great Aus­tralian dream to own your own home but many peo­ple strug­gle to pay off their loan and end up in debt for 30 years or more,” Mr Parry said.

“In­stead of chip­ping away at a home loan for sev­eral decades, the trick to get­ting out of debt comes down to dis­ci­pline, cre­at­ing a smart money man­age­ment plan and mak­ing sure you stick to it. Get­ting your in­come work­ing for you and not the banks is the key to debt re­duc­tion.”

Mr Parry said his top ten tips for get­ting out of debt in 2013 were:

1. Con­sol­i­date debt. Con­sol­i­date all ex­ist­ing ’bad debt’ such as credit cards, per­sonal loans

and car loans into your home loan. Get­ting this debt onto a lower in­ter­est rate will help

ease your cash flow cri­sis and your debt will be paid off a lot quicker.

2. Make your money work for you, not the banks. Get your in­come banked di­rectly into

your home loan ac­count so that is starts work­ing for you, with your sav­ings count­ing

to­wards your loan so you pay less in­ter­est.

3. Keep up your re­pay­ments. Keep paying at your old in­ter­est rate when rates drop to save

big in the long run. If pos­si­ble, you should never de­crease your mort­gage pay­ments.

4. Au­to­mate your Money Man­age­ment. Get your in­come au­to­mat­i­cally paid into your loan

from your pay­roll of­fi­cer, don’t wait to pay ex­tra with what money is left over at the end of

the month as there is usu­ally very lit­tle to work with.

5. Don’t re­fi­nance onto an­other 30 year Term. Ev­ery time you re­fi­nance the 30 year clock

is re­set and you are back at the start of an­other 30 year mort­gage. In­stead you should

re­fi­nance so that you keep the ex­ist­ing term left on your mort­gage.

6. Put large lump sums to­wards your mort­gage. Sums of money such as tax re­turns or

bonus pay­ments can save years’ worth of in­ter­est on your loan. Even small lump sums

to­wards your mort­gage will add up over the long run.

7. Think about your spend­ing. Make higher re­pay­ments by cut­ting back on other

ex­penses. Small sac­ri­fices, like mak­ing lunch in­stead of buy­ing it or cut­ting back on

cof­fee, can lead to big sav­ings in the long-term.

8. Set short term Fi­nan­cial Goals. Like ev­ery­thing, we get bet­ter re­sults when we have a

plan in place. If you want to pay $12,000 off your home loan this year set the goal of

paying $1000 per month off the prin­ci­pal and mon­i­tor it reg­u­larly. Al­ways re­ward your­self when you achieve the goal. 9. Cut up your credit card. If you can, get rid of your credit cards com­pletely and switch to a

VISA DEBIT card. You think and spend dif­fer­ently with cash than you do with credit.

10. Live within your means. Set a weekly spend­ing al­lowance and stick to it. If you can’t

af­ford some­thing us­ing cash, don’t buy it.

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