2007 the right time to kick start your savings plan
1 January 2007
The repercussions of the Christmas ‘spending frenzy’ can have a significant impact on a person’s financial status, but by addressing the debt situation early, people can prepare for achieving a more secure financial position in 2007.
Credit cards are the major culprits and the most common form of debt at this time of year and according to Mr Graham Olrich, Managing Director of Credit Union Australia (CUA), ensuring the debt is under control is imperative.
“There are over 10 million credit cards currently on issue and it’s easy to see how thousands of Australians get caught in the credit card trap, particularly at Christmas when people are tempted tend to break budgets and over spend,” he said.
“Following Christmas the main priority should be for people to reduce their credit card debt by paying it off as quickly as possible.
“A good way to do this is to have a portion of your salary deposited directly into your account. As long as it is more than the minimum monthly payment, allocate a set amount from your wage that goes toward paying off your debt regularly. Something will always be better than nothing.
“If the situation is serious, debt consolidation is another option that can reduce the overall impact of the debt by consolidating the money owed into a more manageable loan structure with easier to manage interest rates.”
After the debt has been cleared, Mr Olrich said the focus should be on reviewing a person’s overall financial status and devising strategies to improve it.
“The essential tool is a well tailored budget that covers all aspects of spending from the obvious items, such as rent or mortgage payments, to the less considered elements, such as health and beauty. Every aspect of your life should be budgeted for so it reveals areas where spending can be reduced. It will also show the amount of disposable income a person generates.
“The other important issue is to ensure your budget allows for anticipated savings. A rule of thumb is 10 per cent of your wage.
Mr Olrich said establishing solid saving practices was a characteristic of a strong financial position.
“Developing a regular savings plan is instrumental in establishing a solid financial position. People should aim to have their money automatically transferred into a special higher interest saving account. It is also important to keep a savings account separate to the everyday spending account if possible.”
Mr Olrich said setting realistic goals was another key to establishing a secure financial position.
“It is important that people take the time to assess their financial position and create goals they want to achieve. This can be done at home or with a financial planner. No matter what your financial status, a planner can help you create a strategy to achieve better long term success and a more secure future.
“Finally, if Christmas spending has hit people hard this year, starting a Christmas Club account now in preparation for this year’s silly season is a smart move. It will ensure you have money at the ready for when the spending frenzy strikes again.”
