If the festive season has left you feeling a little flat, financially, there are a few tools to get you back on top of your budget and in control of your money.
Whether you’re a few months behind paying your credit card bill or facing a default notice after skipping mortgage repayments there are ways to keep creditors at bay.
First, stressed-out borrowers should immediately contact their lender or provider, rather than waiting until it’s too late. Most credit providers will offer hardship variations, particularly if you are struggling to make repayments due to illness, unemployment or financial stress. Adjusting your loan term or switching to interest-only repayments, for instance, may help you through the tough times.
It’s important to remember that you’re not alone – thousands of Australians households face financial stress; 1.42 percent of residential mortgages repayments were delinquent in the September quarter 2011, according to Fitch Ratings. Talk to a financial counsellor for more advice about how to solve the real issue, rather than opting for a quick fix.
Second, to get to the bottom of your financial stresses you’ll need to create a detailed budget. Try the government’s MoneySmart budgeting tool, which will give you a comprehensive breakdown of all your income and expenses. You’d also be wise to compare your financial products – mortgage, credit cards even everyday accounts – with the wider market to ensure you’re getting the best interest rates, low-fee options, and features to suit your circumstances. For example, switching a $400,000 home loan from a rate of 7.3 percent to 6.3 percent could save you more than $47,000 over 25 years! Try using a loans calculator to see how much you could save by paying lower interest rates.
Finally, take responsibility of your money. If the real issue is overspending and you fail to get your cash flow under control not only will you be under debt pressure, your total debts will be higher. There are ways to cut back on living expenses; if food costs are out of control, for instance, devise a family meal plan and do a big shop once per week. Use the extra money saved to increase credit repayments, because even a little bit can go a long way. For example, adding an extra $50 per month on a $400,000 mortgage at 6.3 percent could save you almost $20,000 over 25 years.
Revisit your new financial plan and goals every month until change takes effect, and review your financial products annually – switching a suite of products may not be feasible each year, but at the very least knowing the best available deals will beef up your negotiating power with your provider.