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Top tips for getting organised with money

Top tips for getting organised with money

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.

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Learn more about credit cards

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

How to get money from a credit card

You can get money from a credit card, but generally it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you may be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you may also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.