Control your debt before it’s too late

Debt can be a wonderful slave but an unforgiving master. Australians have an extraordinarily high level of consumer debt. It fuels our lives.

For example, there were more than 242,000,000 credit-card transactions just in the month of July 2018 – valued at more than $28 billion. This included $758-million in cash advances.

The scariest part of this equation is accruing interest on outstanding balances.

With interest rates ranging from 10 percent to 22 percent a year, billions of dollars are being added to these outstanding balances every year. Banks love credit cards.

Please don’t misunderstand; properly managed debt can be a great tool. Most people need LW WR KHOS WKHP EX\ WKHLU ¿UVW KRXVH DQG RWKHU necessities in life.

It is also very important in investment planning, enabling investors to buy income-producing growth assets, such as shares or property, to boost long-term wealth. In this case the interest may also be a tax deduction.

The problem arises when debt is used for basic living costs or purchasing depreciating assets.

This is further aggravated when the interest rate applied is too high and there is no planned debt reduction program in place.

When interest rates increase most people focus on their mortgage rate and forget that the interest on their credit cards sneaks up as well.

Rate decreases tend to take a bit longer to be passed on.

Most major cards are charging about 18 to 20 percent a year, with many customers paying little more than the minimum amount and sinking further into debt.

How to master your debt

If you are not paying off your credit cards in full every month, have other high interest loans, or your current level of debt is keeping you awake at night, you need to seriously consider \RXU ¿QDQFLDO GLUHFWLRQ

Follow this simple plan and take control of your debt before it takes control of you –

• Avoid the mental attitude of ‘keeping up with the Kardashians’ – it’s literally impossible.

• Restructure your debt by consolidating what you owe at the lowest available interest rate. Keep one credit card and cut up the rest!

• Prepare and keep to a budget to ensure your cost of living is within your means and put a debt reduction program in place.

• Ensure new loans are only for a productive SXUSRVH VXFK DV LQYHVWLQJ DQG FDQ EH MXVWL¿HG E\ SRWHQWLDO IXWXUH SUR¿W

• Be smart when it comes to ‘interest-free’ offers and make sure you can afford to pay off the entire balance by the end of the contract. A lot can happen in 50 months, so don’t get behind on your payments.

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All of the above steps will make for a happier life.