Debt weighing you down?

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DEBT & THE AUSTRALIAN MARKET

Debt is something most people have faced in their lives, and in Australia levels of debt are higher than ever, with Australians ranking fourth highest in the world next to Denmark, the Netherlands and Norway.
When it comes to defining debt, comparisons of household debt usually look at the total owed as a percentage of net income. As a country, Australia’s debt has increased over time, and are now reported to have some of the highest personal debt levels in the world.
While much of this can be attributed to a desire to own a home or car, and credit cards, levels have increased at an alarming rate over the last 10-15 years. ‘The ratio of household debt to income has more than doubled between 1995 and 2015, going from 104% to 212%’, according to the OECD Data released in 2015. In layman’s terms this means if the average person earns $80,000 net, they are spending $169,600 per year. As of 2016, Australia’s total personal debt was around $2 trillion and the average Australian household owes $250,000.
Debt includes several categories, including mortgages, investor debt, personal debt, student debt and credit card debt. However, not all debt is classed as ‘bad’, as often debt is a way of building wealth in the long term, like an investment in education or a home loan that will be of benefit in the future.

SB Recruitment have gathered some top tips for you to manage debt:

• Set up a regular savings plan. By creating a separate savings account from your every day spending you can put small amounts in each pay day that can make a big difference over time. This also gives you safety net for large or unforeseen purchases like that dishwasher breaking on a Tuesday night (that wasn’t in the budget)! So rather than putting bigger purchases on a credit card and then having to pay interest you already have some funds to draw from or use for a holiday.

• Consider consolidating your debts. If you have several loans, credit cards and the like that you have been paying for a long period of time there is a fair chance you are spending a lot of money just paying off interest and not really moving your debt. Speak to your financial institution about rolling all of your debt into one, low interest loan or interest free credit card, and you can save yourself a lot of money long term on interest and get your finances back under control, and also simplify bills by only having to pay one account.

• Make sure you have a budget (and stick to it). Many say the key to managing your money is to know where it is going and what you need. By creating a budget, you can be sure to manage your finances appropriately, and make sure you are not living from pay check to pay check, or worse still over spending and running out of money, which can in turn lead to debt as you borrow. Not sure where to start? There are so many great budgeting apps in the market, many of them free. They can be a great tool for managing your current situation.

You don’t have to be scared of debt, as debt designed to get you ahead can be worth the short-term sacrifices, it’s all about making sure you keep things in balance. Consider talking to a financial planner or bank advisor to assess your situation and plan for your current situation.

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