It’s one of the top 10 New Years’ resolutions so Les McGuire MBA ADFS(FP), Principal of Future Proof Financial is here to help you achieve it once and for all
With the end of year fast approaching, are you getting excited, buying presents for Christmas and preparing for the festive season? Or, is cash flow tight and you’re not sure how to make ends meet?
Can you feel the pressure of debt weighing you down? Well you’re not alone.
In Australia, we are affected by so many external factors internationally when it comes to inflationary and interest–rate risks. One of the critical issues is that half of the funds that Australian banks borrow is from overseas sources. If American interest rates are increasing, then the cost of funds sourced is more expensive and this results in higher interest rates.
Most Australians have the infamous credit card in their wallets, and while spending money by swiping plastic seems easy at the time, we have to effectively repay the debt.
A recent report by ASIC shows that Australians owe $45 billion in credit card debt. More than one in six Australians — around 1.9 million people — are struggling to repay their debt.
Repaying debt in the most effective way is a crucial strategy to become debt free faster. So, let’s look at some strategies to reduce the credit card debt faster and free up cash flow.
You have a mortgage on your home and, assuming you’re paying 4% interest on the debt, you may have available offset or redraw on your loan. If so, imagine (as scary as it sounds) using the additional repayments to repay credit card or personal debt first. This can save thousands of dollars in unnecessary interest rate repayments and free up that much–needed cash flow far quicker. Once you have repaid the credit card it’s best to either reduce the available spending limit or cut up the card. Credit cards can be a significant detriment to financial freedom.
There are some credit cards available which have zero percent interest for balances being rolled over from existing credit cards. It is vital to ask the issuer if there are any hidden fees. If you have multiple credit cards, pay the minimum balances on these cards monthly.
If you consolidate the outstanding credit cards onto the new credit card this creates an interest–free period in some cases of up to 24 months. Once completed, pay off the highest interest rate debt first.
Just remember, you’re not alone, and you don’t need to suffer in silence. With some useful debt and cash flow strategies, you can enjoy what life has to offer.