9 Simple Steps to Absolutely Get Rid of Your Debt

Click a link next to “Podcast” below to listen to the recording from a Teleseminar I did about the 9 simple steps to absolutely get rid of your Debt, listen to the end.

Here is the direct link to DebtBuster which is referred to in this recording, have a read whilst you listen to the audio, definitely worth checking out.

http://www.simplybudgets.com.au/debtbuster/index.html

As for the free bonus mentioned, remember to email admin@simplybudgets.com.au after you have followed the instructions in the audio.

Would love to hear your stories, comments and ideas on the topics I raised, feel free to reply with comments below…

Podcast: Play in new window | Download

Financial Crisis Cloud Has a Silver Lining

With the Reserve Bank announcing another 1% cut in the offical Interest Rates last week
and petrol prices now hovering around $1 a litre there is a lot to be thankful for when it
comes to the current World Economic Crisis!

Admittedly there is possibly tougher times ahead but so far a lot of people in Australia
would be feeling pretty happy with how the crisis is affecting their lives!

Thousands of Australian today will be receiving huge bonusses from the Commonwealth Govt
who are asking them to spend up big with the money. Retailers are out with their cash register
drawers wide open waiting to cash in on the spending spree. I notice at least one promonent
national retailer started a strong radio advertising campaign in the last day or so in anticipation
of the extra cash in people’s pockets going to someone so why not them?

Sadly I missed out this time around; no dependent children, not on a pension and no other way of
qualifying so I guess I’ll just have to go without the shopping spree this time!

Good luck to you if you did get the bonus though.

David Wright
Simply Budgets

‘Line of Credit’ mortgage confusion

Francine,

Thanks for your enquiry.

I am deeply concerned by the fact that you had to go back to your bank to ask them if you had a Line of Credit. I would have thought you should have been aware of the loan type you chose or accepted at the time you signed on the dotted line. I wonder who is at fault there?

I notice you made reference to ‘monthly interest’ a number of times in your e-mail but it sounds to me like you are confusing your ‘monthly repayments’ (which will be the same each month with an Offset Account type mortgage) with ‘monthly interest’ which will vary from month to month with a Line of Credit.

You said that with your previous Line of Credit loan your interest reduced each month. I would be very surprised if it did not fluctuate both up and down because there are times of the year when you tend to have higher expenses and your loan balance would be likely to rise at this time rather than fall (causing the interest to rise as well). Just an thought and maybe you were aggressively paying it down each month.

Your bank manager is sort-of correct in his response to you. As far as overall interest charged by the bank is concerned he is correct, but a Line of Credit has different uses than a Mortgage Offset account attached to a mortgage.

Most people will be far better off without a Line of Credit because it is too dangerous. Your mortgage becomes your day to day bank account and there is no requirement for you to pay it off. Without a budget plan you might never reduce your level of debt and even then it takes nerves of steel and the discipline and focus of a Tibetan Monk.

It sounds to me like you really need to get that budget happening because it is the key to paying off your credit card successfully (and your mortgage as well for that matter). If your Credit Card is not being paid off in full each month then you should not be using it at all unless there is an essential payment that you can not make any other way. You should pay with cash, EFT, or EFTPOS using money you do have rather than money you will need to pay back later with interest.

For this reason, when you are setting up your ‘Simply Budgets’ budget I would recommend that you do not activate the Credit Card facility until you can pay the Credit Card off in full each month. In the meantime, treat it as if it is a personal loan that requires regular repayments and budget for these each month in the Regular Expenses part of your budget.

Go to http://www.simplybudgets.com.au/hints-tips/8.html to find out more about Line of Credit loans and ‘interest free’ Credit Cards.

I hope this helps.

Regards
David Wright

Some other comments that apply to this issue:-

A line of Credit can be very useful once you have created enough equity that you are in a position to be looking around for investment opportunities. You have the ability to pay instantly without having to wait for a loan approval and that could mean the difference between missing out and not missing out on the deal.

In certain instances an investment opportunity will require you to hold an asset while improvements are being made. I’ll use purchasing a house and renovating it before putting it back on the market is an example. If you have enough equity available in a line of credit you may be in a position to make no repayments at all while you do the renovation and wait for it to be re-sold. The interest will accumulate, but your personal cash-flow is not affected.

You can not do this with a normal mortgage because regular repayments are mandatory and you would find yourself having to make repayments the whole time you are renovating and marketng the property whereas with a Line of Credit there is only one requirement; Do not go over your limit.

You should get financial advice before taking any action of this nature. The above is merely an example and your personal circumstances need to be carefully considered before attempting something of this nature.