This article is posted in its entirety in aid of our ‘Make Credit Work For You’ section, helping you to stay credit savvy, and giving you the best chance to prevent credit rating defaults and have your credit file looking its best.
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repair and www.fixmybadcredit.com.au.
Below is Savingguide’s article about why it is you might still be in debt:
The Top 5 Reasons You Are Still In Debt
By Alex Wilson, Savingsguide.com.au
Have you ever wondered why it is you are always in debt? I have. It’s much like trying to lose weight, you always find yourself secretly knowing what you are doing wrong but never wanting to admit it.
This is what led me to start thinking about some of the reasons we as consumers remain in constant debt. While we probably know that we are doing these things, it’s not until someone calls us up on it that we realise we need to fix it.
So here are the top 5 reasons that you continue to have a credit card debt, personal debt or any other kind of debt.
Tell me if you agree or not at the end as I would love to know your thoughts on this.
5. You earn X per day, but spend Y
I did the simplest thing the other day. I got my monthly salary, divided it by the number of working days in the month and found out how much money I make, on a daily basis, after tax.
What astounded me was that it wasn’t a whole heap when you factor in that each day I buy train tickets, coffees, food and the odd magazine or gift.
One of the biggest reasons we as consumers remain in debt is that we end up living to work, instead of working to live. Do you really want to spend all that money on a work day when it’s bit by bit taking away from your daily earnings?
Do the math – figure out your daily rate and then do a rough calculation of how much you spend on any given day. It’s scary.
4. You focus on what you want, not what you have
Another reason you are still in debt is that you forever focus on the things you want, not the things you already have.
Stop desiring over clothes, cars, fast food and other easy ways to spend. Start focusing on the clothes you already have, the car you already own and the food you already have in the cupboard.
Consider reading about how to stop buying stuff to solve problems – it might give you some ideas on how to make do or assess whether you really need something.
3. You swipe credit, delaying your rational thinking
Swiping a credit card obviously puts you in debt. Another thing it does is disconnect you from the reality of your finances. Money becomes a play thing.
Try and reconnect with your money, use only cash for a while. It gives you a better sense of what you are spending. Parting with a $50 note is much harder than swiping a card.
This mentality of delaying your rational money saving thinking is partly to blame for why you remain in debt. Always opt for cash where possible.
2. You have no clue about expenses, their amount and their due date
You know you pay the mortgage, phone bill, Foxtel bill and more – though you don’t really know how much they all cost as a whole.
Yes the phone bill is only $29, but when you add it onto the list of other expenses that recur every month, it quickly gets out of control.
Learn the total of your expenses by setting up a direct debit account that is solely for recurring expenses. After a month or so you will quickly see the stand alone expense transactions and it will help you calculate what you pay on any given month.
From there, open up your work PC or home PC and make a calendar in Outlook or Google Calendar. Make recurring appointments on the days these debits come out of your account. This means you will always know in advance what expenses you have coming up.
I even set mine to alert me on my phone 24 hours before they are due. It keeps me in charge of my expenses and fully understanding of just how much I am spending.
1. You have no budget and no focus on repaying debt
Another reason you remain in debt is because you are not proactive enough. Having a budget is one thing, but what you really need is a budget that focuses on finding spending leaks that can be repaired and used to fund extra debt repayments.
Read more about budgeting to get out of debt here or alternatively, check out the Savings Guide Budget Spreadsheet here.
A MyCRA Credit Rating Repair tip to stay credit savvy…
If you are educated on credit reporting in Australia, you will save money. Know what the rules are around credit reporting in Australia, and know what your credit file says about you. If you discover inaccuracies on your credit file you can save yourself money by having them removed.
If you have neither the time, nor knowledge of legislation that is required to deal with Credit Providers, a credit repairer can advocate for you to make the case for removal of inaccurate defaults from your credit rating on your behalf.
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