Save to beat debt this New Year
DESPITE the Reserve Bank of Australia’s recent report that Australians have slashed their credit and charge card spending by 9.3 percent, CUA (Credit Union Australia) Acting CEO Mr Rob Nicholls said Australians still needed to have a plan in place to beat remaining debt in the New Year.
Mr Nicholls said he believed the PM’s Christmas bonus and the slowing economy had made people reluctant to turn to credit cards over the festive season, but still emphasised the importance of taking control of outstanding debt.
“Credit card spending over the 2008-09 festive season has not been as high as past years and although it’s expected there will be further interest rate cuts, it’s very important for Australians to continue clearing unnecessary debt like high credit card balances,” he said.
“The fall in credit debt on a national level is great news, but the reality is there are still individuals out there with credit card debt.
“For those in this situation there is no better time than the beginning of the New Year to reassess your financial position and put a plan in place to tackle and overcome debt.
“A good way to do this is to set up a direct debit with a portion of your salary going directly into your credit account.
“Allocate a set amount from your wage that goes toward paying off your debt regularly, even if it’s a small sum – something is always better than nothing.
“If your debt situation is serious, consolidation is another option that can reduce the overall impact as consolidating all money owed into one loan structure makes it easier to manage interest levels and pay the total debt off faster.”
Mr Nicholls said after the debt was cleared people needed to focus on reviewing their overall financial status and develop strategies to improve it.
“Once you’re out of debt, developing a well tailored budget is essential. Every facet of your life should be budgeted so it reveals elements where spending can be reduced and reveals how much disposable income you generate.
“Also, planning and actioning a regular savings plan is vital in establishing a solid financial position – a rule of thumb is 10 percent of your wage. An easy way to ensure this is to have your savings automatically transferred into a special higher interest savings account.
“Something important to remember is to keep your savings account separate to your everyday account so you’re not tempted to spend the money.”
Mr Nicholls said another important factor for establishing a secure financial position was to set realistic goals.
“People should take the time to assess their financial position and plan goals they want to achieve. This can be done at home or with a financial planner.
“No matter what your financial situation is, a planner can help you create a strategy to achieve your financial goals and secure a better financial status.”
Mr Nicholls said a smart way to avoid debt over the ‘silly season’ was to start a Christmas savings account.
“To avoid getting into debt next festive season prepare in advance by setting aside a certain amount of money each pay for Christmas spending.
“At the end of the year you’ll have saved enough for all your Christmas needs so you shouldn’t have to whip out the credit card again.
“If you started saving just $50 a fortnight from now you would easily have $1,000 by Christmas and if you put the $50 into a high interest rate savings account you could save even more with the interest you would accrue on top of your standard savings.”
