Believe it or not, nearly one in five Australian households are spending more than they earn, new research from ING Direct reveals. ING Direct treasurer Michael Witts said the overspending could correlate to credit card debt for some households.
If you want to be truly successful as a property investor, then you need to make a serious and concerted effort to pay down any ‘bad debts’, such as credit cards. This is vital because they chew through your disposable income and divert precious funds and resources away from your investing pursuits.
Helen Collier-Kogtevs of Real Weal Wealth Australia offers these proven debt reduction strategies:
- Acknowledge your overall debt
Most people don’t want to know the full picture of how much debt they actually have, but it’s essential to know what you’re dealing with.
- Create a structure
Getting all the information into one spreadsheet or document is the key to managing and eliminating your debt.
- Reduce discretionary spending
You may need to sacrifice some lifestyle ‘wants’ in the interim, which isn’t easy; remember that this is short-term pain for long-term gain.
- Have a clear goal
Having a clear goal to work towards (ie two credit cards paid off in 12 months) will help you stay focused when your motivation is waning.
- Commit to your ‘why’
You want to get out of debt to invest in property and create wealth, right? Keep this ‘why’ front and centre to avoid overspending unnecessarily.
- Target the smallest debts first
By paying off the smallest debts as quickly as possible, you will streamline your debts and march quickly towards financial freedom!
- Stop using your credit cards
You need to stop using your credit cards immediately, otherwise all of your debt repayment efforts will be in vain.
- Cancel your debts
As each credit card, store card or personal loan gets paid off, cancel the account so you’re not tempted to run up the debt again.
- Consider consolidation
You may want to consolidate all of your debts into one large personal loan, in order to minimise interest payments and fast-track your debt repayments.
- Set a goal for saving a deposit
While you’re paying off your debts, you also need to boost your savings so you have some funds to invest with. Whether it’s saving 10% of your salary or $500 per month, put a tangible savings plan in place.
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