Sadly, more than 600,000 Australians are at-risk for credit default, according to credit reporting agency Veda. That’s over half a million of us who are so loaded with debt that could ruin our finances for over 7 years or more.
If you play fast and loose with your finances, there is hope. Like all bad habits, you can replace them with good ones. Good financial habits take approximately 66 days to become “automatic,” according to research, meaning you can also commit to three months of conscious good financial habits to attain financial freedom.
Below are some new habits to get started on:
Choose bulk over convenience
There is a mark-up with buying from convenience stores and retailers know it. That’s why they’re within walking distance of work, on the sides of roads, and so on. Stock up on large quantities and save money. Stop forking out $4 for a coffee – try making your own at home and taking it with you. The average cost for 250g of ground fresh beans your baristas use is about $12. It can last you for two weeks. That’s $88 saved each month!
Get a 0% balance transfer to a lower-rate credit card
If you’re in debt, chances are it’s due to your credit card. According to ASIC MoneySmart, the current average credit card debt for all Australians is $4,258! The first step to financial freedom from credit card debt is transferring your current balance to a low rate credit card, and paying that debt off while still under the 0% interest period. That way you can start at a baseline without chasing your own tail by adding interest into the mix. As a first step, you should compare credit cards on internet, so you can make a decision that increases your value in terms of paying off your debt.
TIP: Make sure your new card has interest free days, so you can pay off the debt without accruing more interest.
Set a non-negotiable credit limit
Ideally, you wouldn’t use your credit card again until you’ve paid off your debt. The next best approach is asking your bank or credit card provider for a hard credit limit. Once you’ve hit it, that’s it. No more credit. This stops you from overspending and getting deeper into debt. You can also set your own spending limits from within your banking app.
Set up automatic payments – and make extra payments
To wipe out debt, you need to make more than the minimum required payment each month. This is how many people get trapped into credit card debt. You need to set up substantial automatic payments to pay off your card and make headway with your balance. If you get a bonus or your tax return, put it into your credit card. You’ll thank yourself later.