Posted on: 21 December 2015
Australian debt is growing, and the average household debt amount is almost a quarter of a million dollars. While a large chunk of this is tied to home ownership, many Australians dread opening their credit-card bills each January. Facing up to end-of-year overspending is depressing, but there are ways to avoid this happening again next Christmas. However, you have to start thinking about it now.
Start Saving in January
So how much did you spend this Christmas? Add the amount you spent—every single cent, from the presents to the food you put on the table for Christmas dinner—and then divide that amount by 11. Open a savings account as soon as the banks reopen in January and make a deposit every single month that is equal to one-eleventh of the amount you spent. At the start of next December, you will already have the money you need for Christmas in your bank account and you can pay for the whole thing without going one cent into debt.
Helpful hint—make sure your new savings account is not linked onto your current ATM card. It is too easy to impulse buy using the savings account when you can access it through your card, but you will think twice about dipping into it if you have to go to a bank branch to access the money.
Pay Off the Highest Interest Cards First
Now that you know how to tackle next Christmas, you have to get rid of the debt from last Christmas. The first step to take is to collect the statements for every credit card and store card you have. Write out a list of how much you owe on each one and list them in order of interest rate being charged.
The goal right now is to pay off the highest-interest card first, and once that has a zero balance you can move onto the next highest-charging card. Work out a budget of how much extra you can put into paying off your most expensive card each month and do everything in your power to get it paid off fast.
You will need to make sure that outside of the main card you are focusing on, you still make minimum payments for the other cards so you don't get into default with those lenders.
Seek Professional Financial Advice
Financial planning experts can be found at your local accountant's office, and they can give you further valuable advice to dig yourself out of a debt hole this year. Don't spend another year suffering from the debt hangover of the year before. Strong focus and belt tightening can make a big difference to your financial future.Share