Did you know that everyday Australian’s are spending well beyond their means, more so than ever before?
If you feel like you are heading into debt the first thing you should do is recognise this and take effective steps to minimise sinking any further into debt.
Your first step should be to stop spending money by using your credit card, in fact it’s probably a good idea that you cut it up and throw your credit card away. Credit cards come with expensive interest repayments and if you are trying to stop sinking into debt, the last thing that you would want is more debt that you have to deal with.
With your credit cards not accessible to you, getting out of debt will be much easier and the temptation to use them is removed.
Now when it comes to heading into debt and the steps to avoid it, it’s important to be aware that there is both good and bad types of debt.
Your monthly mortgage repayments should be seen as a form of good debt and while already mentioned above, credit cards are one of the worst forms of bad debt. If you find that your financial situation is getting difficult, paying off any bad debts should be one of your first priorities.
Always be sure to pay off any debts which have the highest interest rates first.
High interest rate debts such as your credit card bill should be taken care of as soon as possible. If left to spiral out of control, you could find yourself in the situation of heading into debt much faster.
On average, credit card debts and the interest repayments can end up costing your thousands of dollars and take many years to be fully paid off. Once you have credit card and store card debt under control, you can then move onto other forms of debt such as car loan repayments and your home loan.
If you do have a card debt, a smart idea is to shop around for a lower interest rate credit card and to make a balance transfer.
A balance transfer will enable you to pay a lower amount of interest, save you money in the long term and allow you to take advantage of popular interest free periods. Once you transfer your balance to the new card, be sure to cut that up as well to avoid any temptations.
By now you should be starting to see the light that is at the end of the debt tunnel. Once you have your high interest debts under control, you can begin to aggressively tackle your mortgage if you have one.
Remember, if you find that you’re heading into debt, discipline and a smart financial plan are a great way to get your life back on track.
