28 Feb Debt Management
For those of us with debt (which is most of us), the question ‘how can I pay this off quicker?’ might have crossed your mind. According to National Debt Clocks, the average debt per person in New Zealand is just shy of $19,000. On the surface of it, that might not sound too high, but that is across EVERY person in NZ – from a newborn to those hanging out in a rest home.
$19k of debt is far from the worst in the world (Greece for example is over $47,000 NZD per person, while the US is around $85,000 NZD), but in New Zealand, our debt is private and very high in proportion to our GDP, so not good.
So, if you want to save yourself a chunk of interest and clear your debts quicker, what can you do?
Don’t borrow more than you need to in the first place – you might not have a whole lot of choice if you are borrowing for a house or a productive asset, but NZ has a large amount of credit card debt. How often are you swiping the card for something that you don’t really need?
Make extra repayments – this might seem obvious, but many people DON’T do it. The earlier you make these extra repayments, the quicker the balance tumbles down – $1000 borrowed for a 30 year term at a rate of 5.3% will result in $1000 of interest over the life of the loan!
Pay fortnightly rather than monthly – If your loan/debt is calculated monthly, paying it fortnightly will mean that you squeeze in an extra payment every few months.
Negotiate a good deal – if you can get yourself on a better rate (ideally while still paying the same amount), the savings can be significant. Switching credit card suppliers can be a real saver.
Use an offset account for any savings – Saving up for a big purchase? Set up an account that you can offset against a mortgage, i.e. if you have $500 saved up you can offset that so that you don’t pay interest on $500 of your loan
Cut back on ‘discretionary’ spending – how much do you spend each week on coffees? smoking? any of the multitude of forms of discretionary spending? If you are buying a coffee each work day, that is around about $1,000 per year.
Much of what we spend and how we spend is a habit. You don’t have to give up on everything you enjoy, but making a few better choices and tweaks, you can save yourself a considerable amount of cash.
Want to find out more? www.sorted.org has some great tools to help, and you can contact us if you want to talk through your debt and how to get it under control.
Not everyone gets excited about tax and tax news, but developments in the US of A will have far reaching implications, including for NZ businesses. Have a quick read about it here.
