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Reduce Debt

New Year resolutions – getting your finances in order

Chris Morcom
Partner/Private Client Adviser
21 Dec 2011

With the New Year around the corner many of us tend to start making resolutions or plans for the year ahead.  The usual suspects will be on the list…stop smoking, stop drinking (or back off a bit), more exercise, less food – you get the picture.

But what about your finances?  Have you got on your list something like “reduce debt”, or “pay off credit card”?  If you do, you need to spend some time thinking about how.  Like all plans, they are useless without action. Here are three critical goals to work towards in 2012:

Put an end to credit card debt: If you want to repay your credit card, how about cutting it up to start with – that way the balance won’t keep getting bigger.  Instead, get a debit card so you can only spend money you have.

If you have a home loan with some redraw, consider repaying the credit card by redrawing on your home loan.  Sure it will take longer to repay your home loan, but with interest rates on your credit card well over 20%, your home loan interest of between 6% and 7% doesn’t look so bad.

Review and monitor cash flow: The key to consolidating debt is to then look at your cash flow.  If you racked up a credit card bill, then you must have been spending more than you had coming in…a bit like Greece really!  The only way to remedy this is to adjust your spending (down) and/or increase your income (if possible). 

On the spending side, you need to know how much cash goes out the door, and to where it goes.  That way, you know when and what to reduce.  On the income side, what about up-skilling yourself to get a new position or role that comes with a higher income?  For those living on the income from investments, a review of asset allocation can yield surprising results and boost income.

Keep investing: For those of us investing, don’t forget to review your portfolio and keep investing.  If you are investing in shares, they are great value now and while next year could still see volatility we expect to see a recovery of share prices in 2012.

Stick to these and you’ll be in a better position to tackle the year ahead.

That’s it from us for 2011.  What a year it has been!  I am sure we will all remember 2011 as the year that Europe really got itself back on the map…but probably not for the right reasons.

From all of us here at Hewison Private Wealth we wish you a very happy and safe Christmas and a healthy and prosperous New Year.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.