New Year, no debt!

Take some simple measures to make sure you don’t start 2011 struggling with credit card stress  

The New Year is a great time to sort out your finances and make plans for the year ahead but for some of us, it’s also when we face up to maxed-out holiday season credit card bills.   

If that sounds like you, you’re not alone. According to the RBA, Australians owed more than $49 billion on their cards in December 2010*. With the annual Christmas and holiday season surge (generally around $1 billion in extra spending), that figure just keeps on growing, year on year.

While getting your credit card bills under control can seem like a daunting task, there are a number of simple things you can do to put your finances back on track.

Curbing your credit

• If possible, pay off your credit card in full before the interest-free period expires.
• If you can’t pay off your bill in full, do your best to pay off more than the minimum amount, and do so before the interest-free period expires. 
• Make sure your credit card is right for you. You can try one of the handy online credit card comparison tools at www.infochoice.com.au or www.canstar.com.au to find out if there’s one that might suit your needs better.
• Switching your balance to a new card can often give you access to an extended interest-free period that can help you pay off your debt faster. Just remember to read the fine print carefully, as there could be entry and exit costs and other administrative charges to watch out for.

Budget smarter

Many people avoid creating a budget because it sounds like hard work. The truth is, it’s simple, and sticking to it can help you improve your financial confidence and achieve your long-term financial goals.

Work out your incomings, your outgoings, and whether you’re saving or you’re spending more than you get. If you’re in the red, look closely at ways you can reduce or eliminate unnecessary spending that ultimately drives up your credit card bills.

If you have money left over at the end of each month – great! Why not consider driving your money further by investing it. You could consider investing in a managed fund, term deposit or high interest savings account, amongst other things, all of which help you to save for your future.

Use some of the excellent AMP online tools available, like the AMP budgeting calculator, to make it even simpler. Simply go to the AMP website at, amp.com.au and click on the ‘Investments’ tab (at the top of the page) to take you to the budgeting calculator.

Plan ahead

To ensure that you don’t find yourself in the same position next year, think about ways to minimise the costs of Christmas and the holiday season.

Some ideas include starting a Christmas savings account, work out how much you’re likely to want to spend, then how much you need to put aside each month, and find the right savings or investment account that will give you the best rate of return.

Another way you can manage holiday spending is to write a list of gifts (including Christmas and birthdays) that you’re likely to need over the year, and buy them during off-season sales.

By planning ahead and applying a few simple rules, you can overcome credit card debt and have that happy New Year you and your family deserve.

For more information on how you can improve your finances, please contact us today.

What you need to know
Information current as at February 2011.  This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances.  If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of the premium you pay and/or the advice fee you agree with us.  Further details are available from your planner or AMP Financial Planning Pty Limited, telephone 1300 157 173.

* ‘Credit and charge card statistics report’. Reserve Bank of Australia, December 2010.