Why Saving May be More Harmful than Good in 2016

As the holiday period comes to an end, thousands of Australians find themselves low on funds and riddled with debt.

Financial experts are encouraging Aussie debtors to focus on remaking repayments as soon as they can in the New Year, rather than making efforts to save money for the future.

The numbers and facts:

Australian household debt has reached an all time high in the last quarter of 2015, sitting at 122.30% of GDP.There are also growing concerns over increased interest rates and Australia’s imminent recession, which has led to greater emphasis being placed on prioritising debt repayments as opposed to generating savings in the bank.

It is understood that Australia’s current standard variable home loan rate is 4.90%, with additional figures depicting 3.89% for a 3-year fixed rate. These figures are clearly reflected by the Reserve Bank of Australia’s continuation of a historically low cash rate of 2%.

Financial advisors warn Australians to steer clear of debts as the economy faces a forecasted recession in 2016:

For those cycling their debts month to month, it is important at this point to dump those ineffective spending habits, which may directly be impacting your credit. As Australia’s economy is predicted to face a volatile year and a forecasted recession, now more than ever it is the time to start prioritising repayments, as average credit card interest rates settle at a whopping 17%.

Australian Bankruptcy Services recommend the following 4 ways to help you keep on top of your debt in 2016:

  • Review your home utility provider’s pricing:
    There have been subtle increases on gas and electricity bills in the previous two years. Look over your records – it may be time to switch to a more competitive provider.
  • Be wary of credit card rewards programs:
    Rewards programs often deliver minimal benefits to those who are not spending big bucks. The majority of the rates are higher than that of the average credit card.
  • Be mindful of how much interest you are paying on your credit card:
    Despite some individuals’ general understanding of how, when and why rates change, it’s important to note that banks will rarely cut interest rates on credit cards despite a low cash rate. Post 2011, a 2.75% drop in the cash rate created no shift in credit card interest rates.
  • Wait to travel:
    Everyone needs a holiday, but the Australian dollar’s position is forecasted to depreciate in 2016 even further. Keep it local next holiday season and gain a peace of mind by making those repayments to your emerging debts.

If you are experiencing financial distress and are unable to keep up with repayments, don’t leave it any longer. Speak with one of Australian Bankruptcy Services trained professionals for the right solutions to tackling your debt. Call us on 1800 462 767.




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