How to Deal with Too Much Credit If It's Getting You Down
It seems to be easier than ever these days to get a new credit card or another line of credit, and it can be very tempting to do so when you have a vision of bright, shiny object in your mind's eye. Yet this can easily get out of hand, and it's no wonder that more Australian households than ever are getting into financial trouble. If you have a wallet or purse that is bulging with credit cards and you're not sure where you're going with all this, how can you start to put matters back on track?
Understanding the Scope
It all begins with proper financial planning. You should be aware—down to the last cent—of exactly how much you earn and how you spend it on a daily, weekly, monthly and annual basis. There is no excuse for not doing this exercise, especially as there are many tools available online and elsewhere. You cannot manage what you do not understand, and this is job number one.
When you complete this task, you will undoubtedly see many different line items related to credit or loans. You will also see how much those individual repayments add up to and how this may be getting you into trouble on a cash-flow basis.
How to Repair
Begin by addressing the items that are relatively small, but nevertheless carry interest rates. See if you can pay them off as soon as possible and remove them from the equation. Alternatively, you may want to look at the vehicles that have the highest interest rate and concentrate on paying them down quickly. Either way, when you are done with those cards or credit lines, cut them up or turn them off, as appropriate.
Does Consolidation Work?
You may have been approached by a lender offering to consolidate all your debts into one. This may appear to be attractive, as they may be offering a lower interest rate, but you need to look at the fine print. Often, the lower rates are tied to the fact that the loan offering is very long. You will often end up paying much more than you would have otherwise if you're not careful. However, if you feel more at ease with a consolidation and are relatively happy with the repayment terms, then dial it into your budget.
Doing Better
When you get any credit card solicitations or indications that you qualify for a credit limit increase, make sure that you put these into the bin as soon as you get them. You need to engage better practices in the future if you are to be in better financial shape. However, if you need any further assistance or have particular difficulties relating to your finances, get in touch with a financial adviser for their help.
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