Are You Getting Too Comfortable With Your Debt?

We all know that we work hard. We all know that spending on credit cards and carrying a balance simply makes rich bankers (and some middle-class bank shareholders) even richer, and keeps us on struggle street. But the catch is … we do it anyway. Australians owe many billions of dollars on credit cards to banks, who collect an average of 16% interest on those billions every single year. We’re constantly told that even the best credit cards will cost us a lot of money if we use them improperly; however most of us continue to ignore the exhortations. Are we just too comfortable with our debt?

Debt in the 20^th century

In the early 20^th century, debt was usually limited to the family home. Banks were certainly not so free with credit, but more importantly, there was a social perception that to have debt was to have failed as a person and productive member of society. You weren’t beholden only to yourself anymore … there was somebody or some institution out there that laid claim to anything you might do in the future.

Debt in the 21^st century

However

How to kick your debt habit

The only way to kick a debt habit is to get off your bottom and do it! You need to get that credit card statement down to zero, and keep it there for some time in order to de-familiarise yourself with the feeling of being in debt. Rejoice in the fact that every little bit of your money is your own. Revel in the feeling of owing nothing to anybody … that way you’ll be averse to accumulating debt in the future.

Create a plan for getting out of debt, including one of the following popular options:

• Consolidating your debts into a home loan
• Consolidating your debts into a personal loan
• Consolidating many small debts into a balance transfer credit card – just make sure that the interest rate doesn’t revert to the cash rate after the 0% period.
• Seeing a financial counsellor and making a budget! This mostly includes evaluating every single purchase against where it sits on the need-want continuum.
• Putting a set amount of your pay onto your debt as soon as your pay lands in the bank each week

Can I never have a credit card again?

Definitely not! There are tonnes of great credit card deals out there, especially for people who aren’t comfortable with debt and therefore don’t carry a balance on your card. Preferentially look at a no annual fee credit card, or a card with plenty of interest-free days (like the Coles credit card), or a rewards credit card so you can spend, pay off, and enjoy the rewards without the burden of debt.