As more Australians fall victim to financial stress now is the time to take control and get organised with household finances.
Despite falling interest rates, just under 10,000 people filed for debt agreements – a form of bankruptcy – in the 12 months to June 30, up nearly 8 percent on the same time the previous year.
Of those who did fall into financial stress, excessive use of credit cards was the most common cause for those aged under 25, while economic conditions and unemployment were common causes for older people.
If this sounds like you, the first thing to do is contact your financial institution and they will offer you financial hardship options to help you get back on track, or you could speak to a free financial counsellor for further advice.
For many Australians struggling with their finances, though, circumstances could be improved with good money management. Consider these tips for taking control of your money:
Track your spending
You may think that spending on big things is what gets you into trouble with money. But often it’s the everyday little things that end up costing you more. It’s good to keep track of where your money goes so you don’t live beyond your means.
The federal government’s MoneySmart website recommends writing a spending diary where you make note or everything you spend for one pay or at least a week. If you have a smart phone you could download the TrackMySpend app, which helps you keep track of your spending on the go.
Gather your bills and statements
One way to keep an eye on your spending is to match your budget with your bank statement.
Look at the money coming into your back account and the money going out. Use both your transaction account and credit card statements to see if your budget truly reflects your spending.
Create a budget
One of the best ways to take control of your finances is to do a budget. This is a simple tool that helps you understand the money going in and out of your household. A budget shows you if you are spending more or less than you can afford. It enables you to direct money to where it matters most, so you can stay on top of bills and start putting money towards your future goals.
MoneySmart’s free online budget planner is easy to use and you can save your results online – it can be a great way to start managing your money.
Doing a budget doesn’t have to be about making cutbacks, it’s about redirecting your money so you can spend it on the things you really want to spend it on.
Free up more money
A really simply way to free up more money without having to make cut backs is to give yourself a financial health check.
Get all of your financial products in front of you, make a list of the interest rates and fees that you’re currently paying and challenge yourself to get a better deal. You can do this using a free comparison website such as RateCity.com.au and you potentially free up a few thousand dollars each year!
For example, if you have a home loan and are paying the average rate of interest, switching to one of the lowest rates on the market could save you up to $400 per month. You may also find big savings by refinancing your credit card, personal loan or car loan. But before you switch, make sure you’re refinancing into a product that offers all of the features you need and that you read the product disclosure statement.