Gerry Incollingo is the MD of LCI Partners which specialises in advisory, lending, wealth, property, insurance and legal. With over 30 years’ experience, Gerry has managed the financial affairs of a diverse client base and his key focus in the day to day contact with management of the business to help grow the profitability and strength of his clients going forward.
There are some things we aspire to leave behind as we learn and grow,be it toxic relationships, a current job, or unhealthy habits. but unfortunately there are just some things you cannot run away from – and one of those things is debt.
The challenges of recent years have created a ton of financial stress from pay cuts to job losses, forcing people to budget and savour every cent. A solution to some has been to pay by credit card, especially in emergencies that they could not have afforded otherwise. With the pinnacle of big spending happening towards the end of the year from Christmas to Boxing Day sales to New Years’, it’s hard to enter a new year with a debt-free slate.
Credit cards are vastly used in Australia to make not only purchasing easy, but also racking up debt easy – as credit cards come with interest, you are losing the money that you could have been saving. Finder has reported that there are 13,668,490 credit cards in circulation and the average balance is $2,868 at any given time.
The good news is that figures from the Reserve Bank of Australia have shown that outstanding amounts on credit cards have fallen to $20.6 billion, the lowest level since 2004, which goes to show that people are taking this on board.
6 top tips to reduce your credit card debt
If you are dragging your credit card debt around with you, here are some tips on how to rid yourself from it.
- Keep track of all your expenses – you have heard this before and it can be super effective if done correctly. Consider apps such as GoodBudget, Humaniti, MoneyTree and Pocketbook to input data of all your spending to pinpoint exactly where you are losing money most. You can then work from those results to better your spending. For example, if most of your money goes to eating out, consider cooking at home and making your own lunch.
- Paying with debit is the leading form of payment, and with online banking available almost instantly through bank apps, opening a savings account has never been easier. Transferring an X amount of money into that account each week is a good start to clearing your debt.
- Get creative – if you are looking for a more interesting means of saving, I recently stumbled across a challenge that has gone viral this year for saving money. It allows you to save $5050 in 100 days. It requires you to make a lucky dip from cards with numbers ranging from 1 to 100. Every day, you randomly fish out a number and whatever number it has on the card, you will need to put away into your savings account. For example, if you pull out card 33, that card is removed from the lucky dip and you will then have to transfer 33 dollars to your account. You repeat the process every day until all numbers have been drawn. At the end, you should end up with over $5000. A challenging yet quick and fun way to knock off your debt.
- Make sacrifices – to clear your credit card debt is one of the toughest pills to swallow but is crucial. Recognize that paying off your debt is not permanent and the quicker you get it right, the quicker you free yourself from it. Skipping that dinner with your friends or missing out on huge sales from your favourite store will be challenging right now, but it will pay off, literally. Another tip, to reduce the temptation of shopping, unsubscribe from mailing lists in your email that you find yourself spending on often.
- Prioritise – weigh up the importance of your priorities in your budget. For example, rent/mortgage/ food/electricity/school fees. Think of what your must-haves are. Don’t forget to cater for the one off like a car service or insurance.
- Check your statement – see what you are buying that is not necessary. If you find your Uber Eats and subscription fees are too high, consider not using some of these services until you pay off your credit card.
How to prevent credit card debt from reoccurring
Once you have your credit card paid off:
- Have a savings strategy. It’s one thing to pay off your credit card, but once it is paid off, rather than blowing your money again, why not put it into a savings or interest account so you can use that money to pay for things instead of the credit card. Out of sight, out of mind they say, so put the money into a different account.
- Create a realistic money goal. For example, can you save $5K every 3 months? Do so.
- See a financial advisor. Now that you have started saving, stop leaving your money sitting around doing nothing. Get someone to advise you on interest accounts and other ways you can invest it.