How not to fall into the same traps when consolidating debt

Posted on Thursday, November 29, 2018 - 15:44

No one likes to be trudging debt around. There are many finance options that can help Australians manage their debt, but despite this, there is one mistake many Australians that are repeating that will take them back to square one.

Catching the spending spirit

Australian households are no strangers when it comes to struggling with debt. A recent report by financial foundation revealed that household debt has increased to 83% in a decade, while wages have remained relatively the same.

Australians use various ways to reduce their debt such as taking out a balance transfer card or a personal loan to help them consolidate their debt. However, many find themselves back at square one because of spending more.

When it comes to the festive season or going on holiday many Australians catch the spending spirit which results in not sticking to a set budget. This has caused many Australians to spend money they do not have, which inevitably adds to their debt.

Returning with holiday debt

With more than 14 million Australians planning to travel. According to reports, 41% of travellers returned with a whopping $7 billion holiday debt. With the festive season upon use the average Australian is planning on forking out $464 on gifts, while 50% of Australian household budgets will be dedicated towards travel costs.

How to consolidate your debt without getting into debt

Consolidating your debt with a personal loan can be a handy way to stay on top of your debt this festive season. With its ability to be flexible in handling various expenses and the low interest rate that comes with it could work for you.

To avoid getting back to where you started, it is vital that you create a realistic budget. According to ASIC, paying off debt was the second top money goal Australians had but 17% failed at achieving this goal because their goal was unachievable.

Set a realistic budget

Setting a realistic budget before the festive season takes full swing can help you keep track of reaching your goal of paying off debt without accumulating more. Make a list of the debt you would like to pay off. You can also make a separate list of your incomes and expenses. This can help create a realistic picture of what needs to be paid off, what you can afford, and what you can use to spend of the festive season.

Track your spending

Not tracking what you spend is also the quickest way to accumulate more debt. While on holiday you can get into the habit of checking what you have spent each day at the end of each day. This can show you a realistic picture. It can also curb those treating yourself to an unplanned meal or gift that can affect your finances.

Cut down where you can

Cutting down on anything this festive season can have you feeling like the Grinch is taking away your Christmas, but by the end of it, you would have saved a considerable amount of money. Cut back on things that can be recycled or bought through a sale.

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