How to get on top of debt in 2022
With inflation rising and interest rates set to be going up throughout 2022, Australian women need to get on top of their debts sooner rather than later. That’s because inflation eats away at the worth of your dollar and interest rates means your revolving debts such as credit cards will go up too.
Getting a handle on your finances
Before you start tackling your debts, you need to figure out where you’re at. That means taking a deep dive into your bank statements and credit card statements to find out how much money comes in each month and where it all goes out. This also includes your investments, mortgages or car loans, and subscriptions to various services. It’s made easier these days thanks to online banking apps – which can also be trained to categorise expenses – but you have to do a complete “stocktake” first. There are templates you can use, such as this PDF.
Reduce expenses, increase income – or both
Like the business experts say: it’s not about turnover, it’s about what’s left over. At the end of each month (or pay period) you should have money left over. This can be pooled into savings or investments, debt reduction, and “play money.” The ratio for each should be about 40%-50%-10% – though you can probably increase or decrease your percentages by about 5% or so if you really need.
Ideally, you should open a high interest savings account for your savings – or use a micro investment app such as Raiz, Commsec Pocket, or Sharesies. This takes small amounts of money and invests it in shares, bonds, and futures over time, building a nest egg. NOTE: Share investing does have risks, even though it may have greater rewards than most high interest savings accounts.
The alternative is to increase your income – and you can do that by starting a side business, participating in the gig economy, or investing in yourself – more on that later.
Debt consolidation
If your audit has turned up lots of little credit card debts – or large ones – the time to act and consolidate these debts are now. You should take a look at the best personal loans and apply for one before interest rates go up again. Most personal loans are fixed rate – which means the rate doesn’t change throughout the lifetime of the loan – so getting one sooner rather than later will mean paying even less in interest compared to trying to tackle all your small credit card debts piece by piece.
Can you invest in yourself?
Personal loans can also be used to fund education – books, tuition, and equipment can be costly – but an investment in yourself may be able to find you a new job in a more lucrative field of work, thereby increasing your income and giving you extra “firepower” to defeat your debts. It does take a while, but like all investments; it’s a marathon, not a sprint.
Remember to talk to a financial adviser about debt consolidation and your money – all the information here is just a guide and general in nature.