Chipping away can bring big changes
A ‘set and forget’ attitude to repaying debt improves finances, writes SOPHIE FOSTER
DOMINIC John Taylor is among buyers who’ve adopted a “set and forget” mentality that’s helping bring down his mortgage faster as interest rates fall.
But it could very easily not have been the case several years ago when Mr Taylor’s love of his credit card was circumventing his financial plans.
“I was experiencing some difficulty,” he said. “I loved the convenience of credit cards so I was always buying on credit.”
The 41-year-old Daisy Hill resident hit a turning point when he used money maps to lay out exactly where his money was going.
“When you get it in a graph, it hits you in the eyes,” he said. “You realise if you were a little more disciplined, you’d save.”
To wean himself off the use of a card, he took to withdrawing “a couple of hundred dollars a week to live on” cash.
“That was a hard behaviour change,” he said. “It took two or three months, but I was saving two or three hundred a fortnight.
“At that point I thought I have no overwhelming lifestyle needs so I thought I’m going to whack that on my mortgage – then you start to get a sense of what extra (repayments) can do.
“It sounds passe, but the little change that happened in July 2015 is starting to add up now. The cumulative effect over a couple of years will be suite significant.
Mr Taylor said once he realised he was regularly saving several hundred dollars a fortnight, he set up a direct debit of those extra funds into his mortgage.
“Set and forget,” he said, “I look back 10 months later and that’s making quite a big difference.”
QSuper chief executive Michael Pennisi said now was the best time to start chipping away at debt levels given interest rates were so low.
He said debt could be divided into three categories – good, bad and necessary, with mortgages necessary, education and investments good, and things like credit cards bad.
“Knowing how to pay them off is crucial to clearing the debt,” Mr Pennisi said. “Typically the interest rate you are repaying on credit cards and other personal loans will be greater than the percentage you are earning from your investments.”