What I’ve discovered from living with debt stress
When I’m worried about putting food on the table, paying the electricity bill, or finding next months mortgage payment, the credit card bill is the last thing I want to see in the mail.
After examining my spending habits, I have discovered that if I were to get rid of my credit card, I would be able to save hundreds of dollars in fees and interest every year. Paying for everything on credit just makes it all that more expensive in the end. I figured it’s time I took control and reigned in my spending habits.
Doing a little research on the net and talking with my mortgage broker and financial planner has yielded some priceless advice on not just how to get rid of my credit card sooner, but also how to pay off my other debts as well. I am now well on my to enjoying a life free of debt and the stress that it always causes.
Here’s what I learned, but be warned, the road to financial freedom isn’t always easy and takes some sacrifice.
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Take one debt at a time
If you have more than one debt, then focusing on reducing the balance on one at a time can help with the insanity of trying to pay off everything at once.
When choosing which debt to pay off first, the one with the highest interest rate should win every time. Pay off as much as you can afford every month while also keeping up your responsibilities on all the other debts you carry.
Interest is a mongrel. To give you an idea of how much interest can cost you, consider a $10,000 credit card. For simplicities sake, we’ll say the interest rate is 20% per annum – which isn’t unusual.
If the card is maxed out and you make the minimum payment of $200 each month, you will accrue an interest debt of $11,680 (for a total repayment of $21,680) over the nine years and eight months it takes you to completely pay out the balance.
It’s even worse for a lot of credit card holders who don’t take steps to pay out their balance completely and are paying interest year in year out for the entirety of their lives.
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Speak to a mortgage broker and lower your interest rates
If you have more than one credit card, you can take advantage of a lower interest rate on one card by using it to pay out the balance on the other. You then have a lower interest rate overall.
You can also take advantage of lower interest rates in your home mortgage as well. If a competing bank has a lower interest rate, there is no harm in ringing up your lender and asking for the same deal.
If they don’t come to the party, then it may be in your best interests to change providers, providing the fees don’t obliterate any potential savings of course. If you decide to change banks, then your best course of action would be to set up a meeting with your local mortgage broker.
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Create a budget and stick to it
Most people go through life without a budget, but it’s the single most significant step to taking control of your finances. A budget doesn’t have to be complicated; write down what you spend by order of importance versus what you earn, and adjust the amounts accordingly until you have a budget worked out which has you making more than you are spending.
Divvy your weekly earnings up into essential spending, savings, and fun, or whatever way works for you that doesn’t make you feel like you always have your nose to the grindstone and life is just a chore.
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Speak to a financial planner and start planning your financial goals
Knowing where you to want to go is the best way to figuring out how to get there, and that’s where goals come in. Write down your financial goals – include your short-term. mid-range, and long-term goals.
Paying off your mortgage is an excellent example of a long-term goal while owning your car in 2 years could be a mid-range goal, and getting another $1,000 into your share trading account could be a short-term goal. If you have no idea what your financial goals should be, or you do but have no idea how to start then your first step should be to visit a trusted financial planner.
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Celebrate
As you reach various milestones, there’s no harm in celebrating, just so long as you don’t go overboard. For instance, don’t go celebrating getting rid of $20,000 worth of debt by treating yourself to a trip to Disneyland (and paying for it on credit). A nice dinner and a night out is plenty enough of a reward to keep yourself motivated.
Need help managing debt stress?
If your credit cards and loans are getting you down, but you’re worried about being taken for a ride by a financial planner or mortgage broker who may be looking out for their own best interests, then you’ll love Tradebusters Connect. It’s Top 3 Local Business Pick directory features only the best-recommended businesses in your area.
Why not connect with one today.
Find a Top 3 Local Business Pick near you:
Mortgage Brokers Hills District
Mortgage Brokers Sydney Blacktown
Mortgage Brokers Sydney Castle Hills/ Hills District
Mortgage Brokers Sydney Parramatta
Financial Planners Castle Hill
Dural Financial Planners & Advisers