Chip­ping away can bring big changes

A ‘set and for­get’ at­ti­tude to re­pay­ing debt im­proves fi­nances, writes SO­PHIE FOSTER

The Courier-Mail - Property - - REALESTATE -

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.”

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.