How to manage your family finances better
If you find you and your family is short money every month, you aren’t alone. According to the Australian Bureau of Statistics, 32% of Australian households experienced at least one indicator of financial stress in the September quarter of 2020. That’s almost one in three of us. It’s also well known that financial stress leads to mental and relationship stress. An American study showed that 41% of couples experiencing financial stress fight more often.
If you want to manage your family finances better, there are a few simple tips and strategies you can use to set things straight.
Audit your finances and set a budget
If you aren’t aware of where your money is going each month, it’s easy to lose track and over spend in areas you could easily cut back. A lot of households simply put expenses on the credit card and worry about it later – and it’s no wonder Australia has the second highest amount of household debt in the world.
The first step is to account for where all your money is going and sort them into categories. Rent/mortgage repayments, other debt repayments, transport, utilities, education, medical, groceries, entertainment, and whatever is left over. What’s next is to further sort the expenses into two categories – essential and non-essential. (Of course, some categories are absolutely essential – use your best discretion.)
Anything that is non-essential can be cut back and redirected elsewhere to debt repayments or savings. If you own two cars but barely use one, you could sell it and forgo registration, insurance, fuel, and other expenses. If you are paying for memberships or subscriptions you don’t use, you can axe them. Even taking your own coffee to work instead of buying it from a café each day could save a couple $2,080 per year (assuming a $4 coffee every working day each week.)
The hard part is sticking to it. The idea is to break down your goals into manageable chunks – perhaps a goal is to save $50 per week in the beginning, then increase it to $100. This can all be put into a high interest savings fund to help pay for a family holiday, for example.
Better yet, most banks and credit unions have budgeting and accounting features baked right into their NetBank apps.
Consider consolidating debts with a personal loan
If you have run the numbers and a large proportion of your income is going toward debt repayments such as credit cards, you may want to consider obtaining a cheap personal loan to consolidate your debts. Bill Tsouvalas, Managing Director of Savvy and personal finance expert says that debt consolidation can save families thousands in interest – and relieve worry.
“Taking out a cheap personal loan to consolidate smaller credit card debts is a way out of a debt spiral,” he says.
“Instead of 18, 19, 20% interest on a credit card that rolls over each month, each repayment you make on a personal loan gets you closer to zero, and closer to financial freedom. Paying off a credit card with just the minimum doesn’t take months, it can take decades and cost you tens, if not hundreds of thousands in interest. Just remember to cut up your credit card when you’re done, so you don’t fall into the trap again!”
See a financial adviser or counsellor
If you need additional help, it’s always wise to consult a financial adviser or financial counsellor. They can help you with budgeting and give you strategies to grow your wealth after you’ve tackled your debts – or help you manage good debts such as property while reducing bad debts, such as credit cards.
If you are struggling with mounting debts, you can contact Financial Counselling Australia, which runs a debt helpline. All calls are confidential.
You may also be entitled to government assistance – contact Services Australia to discuss your options.
This article was contributed by Savvy