Owing money or falling behind on repayments can be stressful. The good news is there are steps you can take to relieve the financial pressure.
1. Know what you owe
The first step is to get a clear picture of what you owe.
Make a list of all your debts, showing:
- how much each debt is
- the minimum monthly repayment (if any)
Include credit cards, loan repayments, unpaid bills, fines and any other money you owe.
Then add up all the debts to see how much you owe in total. It may be confronting, but remind yourself that you’re taking charge of your money. And that’s a good thing.
2. Work out what you can afford to pay
The next step is to work out how much you can afford to pay towards your debts.
Compare money in and money out
The easiest way to do this is to do a budget.
List all the money you have coming in each month (income), such as salary or benefits. Then list all the money going out (debts and expenses), for things like food, rent or mortgage, credit cards, electricity, phone and transport.
Tally these up, then compare money in and money out.
Maximise your entitlements and find savings
If your income has dropped because of the coronavirus, check if you’re eligible for extra Government financial assistance. Services Australia have a guide to help you find eligible payments.
If you have more money going out than coming in — it’s time to make some choices. Think about what are:
- ‘needs’ (can’t do without)
- ‘wants’ (could do without, at least for a while)
Identify some expenses that you can cut or reduce. Be realistic — don’t make it impossible to stick to.
3. Prioritise your debts
Work out which debts are your priority debts and try to pay them first. Priority debts include:
- rent or mortgage payments
- council rates and body corporate fees
- electricity, gas and water
- car repayments — if you need your car for work or essential travel
If you can’t keep on top of these you can request financial hardship. You could also request financial hardship for lower priority debts like:
- internet and phone bills
- credit cards
- payday loans or consumer leases
The National Debt Helpline has a step-by-step guide and can help you to prioritise your debts.
4. Build a savings buffer
Use any surplus you have each week to build an emergency fund. This will provide a financial safety net to cover any unexpected expenses or future changes to your income.
5. Get help if you need it
Before you jump in to anything, you might want to consider discussing your circumstances and options with a financial adviser. Get in touch with us here.
Wealthness Pty Ltd ABN 13 231 248 112 [t/a Better Financial Planning Australia] is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL No. 236523. It is important to be aware that Better Financial Planning Australia is not authorised by Infocus to provide advice relating to credit services or property advice. Infocus is not responsible for any advice outside of the scope of this authorisation and should you wish to act on any of this general information, please first seek professional financial advice.
Wealthness Pty Ltd t/as Better Financial Planning Australia will endeavour to update the website as needed. However, information can change without notice and Wealthness Pty Ltd t/as Better Financial Planning Australia does not guarantee the accuracy of information on the website, including information provided by third parties, at any time.
This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.
Wealthness Pty Ltd t/as Better Financial Planning Australia does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, Wealthness Pty Ltd t/as Better Financial Planning Australia and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.
Wealthness Pty Ltd (ACN 613 313 250) [t/a Better Financial Planning Australia] Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL Licence No. 236523.
Source: ASIC MoneySmart