Master Your Money This Year
The beginning of a new year feels for so many of us, like the right time to improve ourselves and/or our situation. Whether it be a healthy new diet, shedding old bad habits or developing new good ones, the cliché ‘new year, new start’ brings us an opportunity to kick new goals.
Getting out of debt is one of the top ten resolutions made by Australians. If you are among the many of us trying to get our finances under control, your first priority should be paying back any outstanding arrears in order to look after your credit rating. Then, to be master of your own money, choose one of the three strategies below.
1 – Start with your most expensive debt first.
Which of your loans or credit cards is costing you’re the most money (looking at both fee and interest rates)? Prioritise this one. Do your budget and establish what extra you can afford to spare and make additional payments. By paying more than the minimum instalment you will accumulate less interest and decrease the life of the loan.
Advantage: Long Term this approach will save you the most cash, hundreds possibly even thousands in interest.
Disadvantage: It will be a long term goal and need your commitment to pay it off (though the eventual reward will be worth it, you can do it!)
2 – Go for the quick win
If you are the type pf person who needs a win to keep motivated, then tackling your smallest debt first could be the right strategy for you. Using the same approach as you would with expensive loan, pay any spare cash onto the debt and bring the overall amount down faster. When you’ve ticked that one off give yourself a pat on the back and target your next debt.
Advantage: With the first loan paid you can use that money you are in the a habit of committing to your next debt target, making the repayments easier.
Disadvantage: Your more expensive loans will continue to accumulate interest.
3 – Debt consolidation
If you have a number of small loans you need to pay back, all on a similar rate, debt consolidation could be an option. To do this well you need to understand exactly what your current ongoing commitments are costing you and for how long you have left to pay. Compare the total cost of the loans you want to consolidate with the estimated cost of a loan. Make sure you understand all fees that are being charged by all the lenders
Advantage: If you are struggling with multiple repayments debt consolidation could ease the pressure.
Disadvantage: The financial commitment could be for a longer term.
If debt consolidation seems like the right answer for you find out more hereFind out more