Begin Budgeting

Many people spend what they earn. Some have little idea how much money they spend and what they spend it on. Budgeting will help you understand where your money goes and to help you prioritise where your money should go. Budgeting may help you in better managing your debt.

Pay your bills immediately

This is part of your budgeting. Many people pay their bills on the due date while some people pay them late. Late payment of bills may affect your credit rating or it could increase the amount you have to pay, for example, you may be charged a late payment fee. If you pay your outstanding bills immediately, it will help you manage your money better.

Recognise your debt as a total sum

Many people view debt in pieces and not as a whole. Some people think they have low debt levels as they have a small personal loan and a couple of credit cards. But if you have a personal loan for $4,000, one credit card with a $4,000 balance and another credit card with a $3,000 balance then you have $11,000 of outstanding debt that needs to be serviced and paid off as soon as possible.

Have a look at the big picture and begin managing your debt effectively.

Eliminate your higher interest debt first

Depending on the type of debt you have, the levels of interest you have to pay varies. Manage your debt by eliminating debts with high interest rates, for example, on your credit cards. If you have multiple debts with high interest rates, it might be a good idea to consolidate them into a single loan at a lower interest rate – for example, with a debt consolidation loan. We recommend that you speak with one of the financial planners at Intellichoice first to see if a debt consolidation loan suits you, as every person's financial circumstances are unique.

Set up automatic debits from your accounts for over the minimum payments

Minimum payments do not help you manage debt as you are only paying the interest portion of the debt and not reducing the principal amount. Paying above the minimum payment will help you to reduce your debt faster and ultimately, you pay less interest on the loan. Set up a direct debit facility so the amount leaves your bank account automatically.

If you have any questions about debt management or if you require further assistance, please speak to our financial planners at Intellichoice today by calling 1300 55 10 45.