Tips to pay off debt and save money

With summer almost over, it is time to turn your attention to the credit card, which usually takes a hammering over the holiday period and plan how you are going to knock it back into shape.

Rod Attrill, general manager of banking at comparethemarket.com.au, believes now is the perfect time to get proactive about reducing your spending and offers his five best tips to get your finances quickly back in shape.

1. Set up four bank accounts
Set up low-fee accounts for your bills, then savings, a splurge account for holidays and fun, and finally an everyday account. Figure out how much should be allocated to each, then automate regular transfers.

2. Get proactive about reducing expenses
If you are struggling to pay bills at the end of each month, or not meeting your savings goals, you can reduce your spending by cancelling memberships you are not using (such as the gym, local clubs, etc.), finding better deals across your bills or switching loans to lower interest rates.

3. Reduce the limit on your credit cards
For some of us, the danger of having a $10,000 limit on our credit card means that we automatically count that $10,000 as part of our everyday spending money. Take control by reducing the limit on your card to an amount you can pay off confidently every month.

4. Hide your savings
If you are able to easily access your savings, it is difficult to have the will power not to touch it. Work out what you need to do to protect your finances, so you aren’t constantly drawing down on your savings with your card or through internet banking. Think about choosing a savings account that penalises you for withdrawing money – for instance, some accounts do not pay interest within any month that you make a withdrawal.  

5. Make payments towards your high-interest debts first
Prioritise clearing high interest debts quickly – these are usually credit card debts. The interest on some debts can be reduced temporarily if you, for instance, transfer your credit card debt to a 12-month zero-interest card, or fix your mortgage interest rates. These will enable you to prioritise paying down other debts first.

What strategies do you employ to help you pay off your debt?

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben

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