The new financial year is upon us and like New Year’s Eve, it’s the prime time to rethink, take stock and plan for the year ahead.

In this five part series, we are going to look at the major things that will improve your financial well-being. Whether it’s saving for a house, paying your bills or investing, Really Simple Money will help you plan for the next financial year.

One of the hardest and what many Australians will find tedious is consolidating debts. By consolidating debts, you’ll have the opportunity to save and will help later on if you’re thinking of purchasing property.

Here are some key tips to making sure you get on top of your money:

Work out what debts you have and what they total

It might be a sobering way to deal with your debts, but a good starting point is work out how much you owe and list which providers you owe money. You will also need to work out how much you pay interest and fees to each. While this could be a slightly unpleasant wakeup call, it will give you a clear view of exactly where you’re at, and how different interest rates and fees could affect the amount you pay back.

Compare what you earn, owe and spend

Apart from identifying exactly what you owe, it may also help to be across how much money you’ve got coming in, how much cash is required for the essentials and where the rest of your cash might be going. This will help you identify where there may be room for movement and where you could extract a little bit extra to add to your repayments.

See if you can consolidate your loans into one

Multiple debts can mean multiple fees and interest charges, which is why consolidating your debts into a single loan, with a lower interest rate and lower fees, could help you to save money. If you roll your loans into one, it may also be easier to manage because you’ll potentially only need to make one repayment rather than having to juggle several.
However, before you make any decisions, you’ll want to look into whether your lender is licensed by ASIC and if you’ll really be saving money once you factor in interest rates, fees and any additional charges. Also, keep in mind if you don’t make your repayments on time, you may end up paying more.

Pay your debts on time

Time management and debt-management often go hand-in-hand, as paying things when they’re due can often help you to avoid things, such as late fees and added interest charges.
Consider setting up alerts to remind you when your payments are due or look into whether you might benefit from paying by direct debit. Remember, late payments may also lead to black marks on your credit report, which could affect your ability to borrow money, as it reveals to lenders whether you’ve been paying your bills on time.

Try to pay the full amount outstanding rather than minimum owing

When you’re making repayments, you typically get two options – to pay the full amount that you owe, or to pay the minimum amount owing. While it might be tempting to only pay the minimum amount owing, keep in mind that you could still incur interest on the balance that’s leftover, which means you may end up owing more money. On the flipside, if you’re able to pay the full amount, typically you won’t be charged any interest at all.

Look at whether you can afford to make extra repayments

Another idea is to make extra repayments on top of your regular repayments. This could help you pay off what you owe at a faster rate and you’ll typically pay less interest, which could mean thousands of dollars in savings, depending on how much you owe. However, before making extra repayments, check out the conditions of your loan, as there are some lenders that might charge you for paying off your debt early.

Shop around for a better deal

High interest rates and added fees can really affect how much you pay back, on top of the original amount you borrowed. With that in mind, it might be worth shopping around – and there are a number of comparison websites out there that could help do some of the legwork for you.

Have a back-up plan

Expecting the unexpected always goes a long way when it comes to your finances. Your loan provider could increase interest rates or change their repayment terms, or you might experience changes in employment or health, which could prevent you from working or making repayments. By having a contingency plan, such as an emergency savings fund, you could potentially avoid missing repayments, or accumulating more debt.

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