Con­trol your debt be­fore it’s too late

The Weekly Advertiser Horsham - - News -

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.

‡ 6HHN SURIHVVLRQDO JXLGDQFH IURP D ¿QDQFLDO DGYLVHU WR SODQ \RXU ¿QDQFLDO JRDOV DQG KRZ WR achieve them.

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

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