Despite historically low interest rates, by global standards Australians are living with a high level of debt – almost $1600 billion, according to the Reserve Bank of Australia. But it is possible to get on top of your mortgage by making a few simple changes.
First off, you need to get an accurate picture of how much money you are earning and how much you are spending. To help you do the numbers, turn to one of the many online budgeting tools, such as the Australian Securities and Investment Commission’s (ASIC).
After you have covered your expenses each month, take any money left over and decide how much of it you can spare to pay off your debts. Don’t forget to also allocate some to put towards savings. After all, having some savings to fall back on just may help prevent future debt.
While there are certain expenses that generally remain the same each month, such as your mortgage, you can change how much you spend on things like entertainment and dining out. Take a close look at your budget and see if you can reduce your spending on nonessential items, then put that money towards your debts or savings. Be honest with yourself: are there some things you can do without completely?
If you are digging your way out of credit card debt, you will struggle to make progress if you pay just the minimum each month. Ideally, it’s best to pay off the whole balance in full each month. If that’s not possible, draw up a plan to pay as much as you can afford each month, until you have paid off the balance.
To avoid adding to your credit card debt, opt to pay with cash rather than automatically pulling out your credit card. Go to the ATM once a week and take out only the amount you have budgeted to spend. Then, when you are tempted to buy that new pair of shoes or eat out again, you only need to open your wallet to see if it fits into your budget.
Don’t forget that paying off debt takes time. To stay focused and motivated over the long term, be sure to schedule time in your diary to review your budget plan regularly and make any adjustments. Soon you will see your debt shrinking with each passing month.