Credit card SOS: Six steps to get control of your debt before the new financial year

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Sandy Bhalla uncovers the six steps that will help you get control of your debt before the start of the new financial year.

May 20, 2010

Imagine living your life debt free. Imagine being able to walk into any store and buy whatever you want, whenever you want without the guilt. Now imagine being able to finally put investment plans into place to build wealth for a secure future without having to worry about paying off the dangerously, unhealthy, growing interest on your credit card, which only continues to spiral out of control.

This is a dream that has started to fade for many Australians due to rising interest rates over the last few months. For some, the federal government's budget release for 2010 signified the need to reassess and re-evaluate strategies in minimising personal debt, in particular credit card debt, before the new financial year.

Any reformed debt-aholic would tell you that living debt free is indeed one of the most beautiful feelings in the world. It is a feeling of accomplishment coupled with a sense of achievement and satisfaction that stems from knowing you are finally free to use your money in any way you desire and simply because you were able to follow the following six steps:

  1. Establish a budget. By budgeting you can find extra money to pay your account in full every month or at least enough money to pay more than the minimum repayment. A budget will also allow you to plan ahead for your bills.
  1. Stop borrowing money or accumulating any more debt as soon as possible.
  1. Know your cards intimately. Understand exactly how much interest you're paying on each of your credit cards and only keep one card for emergencies, example a broken-down car.
  1. Use excess cash. Eliminate your credit card debt in the quickest way possible. You need to put all your excess cash into the debt that has the highest interest rate first.
  1. Use cash instead of credit. People often spend more when using a credit card instead of cash for purchases, as it makes you think twice about impulse buying.
  1. Find a better rate on your existing credit cards. No matter how much debt you have, compare balance transfer credit cards to get the lowest rate and pay your debt off sooner. For instance, RateCity shows two cards by ANZ and HSBC offering 0 percent for the first six months.

The simple fact is if you continue to owe money, you can't be debt free. However living within your means, setting a budget, paying cash and finding better interest rate terms on your credit cards will have your dreams of being free, turning to reality before the new financial year.


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