Australians attitude to debt and savings - a recent survey

A recent survey conducted by RaboDirect has found the following stats:

• About 74% of respondents believe paying off their debt is the best way to save money
• One in five credit card holders worry about not paying off their bill in full each month, yet one in six are happy to make purchases knowing they cannot pay for it in the interest free-period.
• About one third of survey respondents consider their financial situation has worsened in the last year and have taken steps as a result. They have cut back on luxuries, such as dining, entertainment and holidays, and some have also considered their day-to-day shopping habits.
• The survey also found that 28% of Australians say their savings would only last two months if they lost their job
• Just over one in ten (13%) have no savings at all. This paints a worrying picture at a time of the year when the job market traditionally slows down.
• Low interest transaction accounts are the most popular home for ‘savings’ with 46% of regular savers putting money in their transaction account (representing 41% of total savings in last six months). This is despite the fact that interest paid on these accounts is negligible and often eaten away by fees

Below are some tips for better financial management:

• Set a budget and revisit it regularly and adjust as necessary to match personal/financial needs or changes to your finances. eg got married, started a family or got a new job
• Spend less than you earn!
• Pay off your most expensive, non deductible debt, first eg credit cards
• Regularly check that your financial products (such as your mortgage loan, transaction and savings account, insurance, credit cards etc.) suit your needs and offer the best value
• Have your salary paid directly into a high interest savings account rather than leaving money idle in a low-interest bearing account
• Seek help early if things get out of hand - speak to a financial advisor for more help

3 tips to get your debts under control

Finding a solution to controlling your debts means looking at your lifestyle and being prepared to make some changes. Below are 3 tips to help you take control of your money and debt.

1. Get rid of your credit cards

With all the unsolicited offers of easy credit, loans, store cards and credit cards that come through your letter box every day, getting into debt has become so easy. 

• If you have store cards or credit cards, get rid of them! Store cards in particular have high interest rates
• Get into the habit of using cash instead of reaching for your credit card to pay for items
• Do you really need that item? Think before you purchase

2. Get disciplined

• Stop overspending. Before you buy that new outfit, wait a day to find out if it is something you really need. Putting time and space into the equation can often make you realise that you don’t need that new outfit after all – even if you want it. 
• Never impulse buy. Separate life’s necessities from your wants and desires so you can keep impulse buying in check.
• Write down what you spend. Use a budget planner so you can see where your money goes. Seeing it on paper can make you realise where you are going wrong, and help discipline your spending habits.
• The key to any debt management solution is budgeting and repayment plans. Commit as much money as you can to paying off debts with high interest rates.
  

3. Be pro-active

• Firstly pay off debts with high interest rates or that put your home or assets at risk.  
• Find an independent financial adviser to help you formulate a debt management strategy.
  

For independent financial advice or to get more information on debt management, visit www.intellichoice.com.au or speak to one of our financial advsiors by calling 1300 55 10 45 or email info@intellichoice.com.au

Avoid a January credit card hangover

Christmas is usually a time of extra spending, between all of the gifts, functions, food and travel, so it can be all too tempting to charge a little Christmas cheer to your credit card. However, help is at hand: if you’re keen to avoid waking up with a hectic credit card hangover in the new year, follow these tips...

Tip 1: Make a list and check it twice
Ever wandered into a shop with a specific purpose, and then walked out an hour later with four bags full of goodies you never knew you wanted? Part of it is psychological: once you’ve picked up one item and committed to the purchase, you know you have to go through the “hassle” of paying, so you’re more likely to throw in a couple of impulse items on the way to the register. Resist the urge and stick with your list; you’ll feel so much lighter for it.

Tip 2: Pay with fantastic plastic – the other kind
There’s a slight thrill that goes with paying by credit card: you get to walk away with your new goods and you don’t have to hand over any cash, so the whole transaction almost feels like you’re using play money. Paying with cash, on the other hand, is a much more realistic experience. You immediately experience the repercussions of your purchase – ie, less money in your wallet – which gives you a clearer picture of your spending habits.

Tip 3: Lower your credit limit
Do you have a high credit card limit, or an extra credit card that you keep “in case of emergencies”? At Christmas time we tend to get a little busy and stressed, so it can become harder to distinguish between “emergency purchase” and “cocktail dress that would be perfect for my work Christmas party!”. Consider chopping the credit limits right down to the bare minimum so you can avoid temptation. If you don’t have it, you can’t spend it.

Tip 4: Avoid store cards
Around the silly season, many department stores offer interest-free promotions so you can do all your Christmas shopping under a “buy now, pay later” scheme. The catch? Store cards typically have higher interest rates than standard credit cards once the interest-free period comes to an end: in some cases, rates can go as high as 29%.

Tip 5: Be creative with gifts
Rather than spending hundreds or thousands of dollars on countless Christmas presents, organise a “Secret Santa” program with your friends or family, so that each person only has to buy one present. Alternatively, give the gift of time or favours: some ideas might include car washes, hair cuts, babysitting, home repairs, home cooking, gardening or cleaning.

Plan for Christmas debt now

Credit card debts are expected to soar in the next few weeks as consumers stock up for Christmas. Financial counsellors warn that February is often a month of misery for many as they try to deal with debts racked up over the summer.

Debt ratings agency Veda Advantage recommends that consumers set a spending limit and stick to it. “We are not saying don’t use your credit card, that is what they are there for, to spread out lumpy purchases like Christmas – but plan your repayments before you go out and spend the money.”

We have also included some tips to help you save money during Christmas, yet keeping it fun for the whole family.

Make it fun
Christmas shopping shouldn't be a chore. Variations of gift exchanging include:

• Secret Santa - If you have a group that’s keen on the idea, Secret Santa can be a fun and inexpensive way to participate in the holiday season on a minimal budget
• Gift Themes -  Choose a theme — travel, computers, food, whatever — and encourage everyone in the group to base their gifts around it
• Draw names - This is an excellent way to cut down costs while still participating in a gift exchange. You can draw another person’s name from a hat and give this person a nice gift. This is similar to secret santa
  

Do it yourself gifts
Homemade gifts demonstrate caring, creativity and passion. 

• A hand-assembled collection of gourmet salts, complete with written description of each.
• Biscuits, cakes, muffins 
• Art. (Do you dabble in photography? A framed print of your nephew is a great gift for your sister-in-law.)
• Home-made jams and jellies 
• Hampers for example a cheese and wine hamper, or a hamper made up of someone's favourite foods including chocolates, fudge, shortbread and jams
  

Other ideas

• Send postcards or a letter instead ofChristmas cards 
• Save your children’s (or grandchildren’s) holiday crafts and artwork from school each year and use the artwork as Christmas decorations for around the house or on the Christmas tree
• Cuting up old Christmas cards can make wonderful gift tags too
  

If you require assistance with debt management, budgeting or savings plans, please speak to one of the financial planners at Intellichoice today to get you back on track.

Tips to safeguard your financial identity

An increasing numbers of Australian home owners are becoming victims of fraud as criminals steal their identity and take out mortgages in their name.

"What we're seeing is organised crime groups taking over the identities of people who own their properties, which are unencumbered, and then masquerading as them and getting loans using the property as security," said Detective Superintendent Colin Dyson of New South Wales Police.

While traditionally fraudsters had to commit many crimes to receive a reasonable amount of money, just one high value mortgage fraud could net over one million dollars.

The criminals obtained identity information by stealing mail, stealing discarded documents from rubbish or stealing details online using keylogging viruses said Dyson. They then used that stolen information to create fake driver’s licenses and Medicare cards to show to prospective lenders.

Below are some tips to help protect your personal information.

Beware of phishers and vishers
Be wary of emails or phone calls that appear to come from your bank – these may be phishing (email) or vishing (phone) scams to get your personal details. Do not give your personal details out!

Don’t post your personal details online
Fraudsters may scour your profile for personal information which they can use to pass themselves off as you. Never put your personal financial information in an email.

Disable pop-ups
Clicking pop-up messages may allow others to download and install a program on your PC to spay on you and steal your identity.

Change your password often
Use a combination of letters, numbers and punctuation and change passwords frequently.

Safe online banking
When you visit secure sites, make sure you always log out. Avoid using public computers for internet banking. Most banks have PC’s in their branches where you can access internet banking securely.

Is the website secure?
If you’re asked to provide personal information online, check that the details in the address bar of the browser start with ‘https’ – the ‘s’ stands for ‘secure.’

Don’t throw out personal information
Fraudsters may go through your rubbish. Destroy account statements and cards to stop them getting hold of your personal information.

Check your credit report
Make sure your name isn’t being used to run up debts. Your credit report contains your personal details and shows credit applications and defaults. You can get a free copy of your credit report from My Credit File (Veda Advantage), Dun and Bradstreet or Tasmanian Collection Service.