If your new year’s resolution is to get your finances in order due to overspending at Christmas and your credit card or bill statements are bigger than you anticipated, here are some tips to help you sort out your debts and get your finances in check.
Know what you owe
Make a list of all your debts and work out what you owe – how much each debt is and the minimum monthly repayment. Include credit cards, loan repayments, unpaid bills, fines, and any other money you owe. Then add up all the debts to see how much you owe in total. It may be confronting but remind yourself that you’re taking charge of your money. And that’s a good thing.
Work out what you can afford to pay
The next step is to work out how much you can afford to pay towards your debts. Compare money in and money out, the easiest way to do this is to do a budget:
- List all the money you have coming in each week, fortnight, or month (income), such as salary or benefits.
- Then list all the money going out (debts and expenses), for things like food, rent or mortgage, credit cards, electricity, phone, and transport.
- Tally these up, then compare your money in with your money out.
Maximise your entitlements and find savings
If you have more money going out than coming in — it’s time to make some choices. Think about what your needs are (can’t do without) and what your wants are (could do without, at least for a while). Identify some expenses that you can cut or reduce. Be realistic — don’t make it impossible to stick to.
Prioritise your debts
Work out which debts are your priority debts and try to pay them first if you can. For example, priority debts include rent or mortgage payments, council rates and body corporate fees, utility bills (electricity, gas and water), and car repayments if you need your car for work or essential travel.
If you are finding it hard to keep up with bills or loan repayments and you are experiencing financial stress or difficulty, the first step is to contact your lender or service provider. Many companies have hardship officers who can assess your situation and work out what help is available. Hardship options can include setting up a payment plan or altering your loan repayments for a short or long time.
If you decide to speak to someone by phone, keep notes of what you discussed. You might be asked to provide further information or documentation to prove you are experiencing financial hardship – so be prepared. For example with a Centrelink income statement (job keeper/jobseeker), a letter from your employer or a medical certificate for an illness, your current income, and other major financial expenses like other loans.
Think about the repayments you can afford on a weekly/fortnightly/monthly basis when negotiating a payment plan. Don’t agree to an amount that is too high for you to pay. If you’re not sure how much you can afford, use the budget planner (in point 2 above). It is in your best interest to keep paying what you can. You will keep chipping away at your debt and it will be easier to resume normal payments at a later date. If you find you can’t stick to the new arrangement, tell your lender or service provider straight away. Keep paying as much as you can afford, even if it is not as much as you agreed to.
To work out what your options are with your credit cards, or how to pay them off faster, find information on the Money Smart website: https://moneysmart.gov.au/credit-cards/credit-card-calculator