The New Year is a great time to plan for better financial health. Here’s a few tips from us.
Good, bad and necessary debt
You may have heard about good debt versus bad debt.
- Essentially good debt is debt that will help you in the future. Taking a loan to buy a house, get an education or develop new skills - is all good debt.
- Bad debt is unnecessary debt. Getting into debt for things you don’t need. This might be a bigger TV, a newer car or spa pool.
- Somewhere in the middle is necessary debt. That’s the debt you need to smooth things out when you have a shortfall. Examples are: money for car repairs, replacement whiteware, unforeseen emergencies or replacing things that are now too old and expensive to keep going.
When considering going into debt, consider whether it is something you really need. Is it something you could save for or wait for interest free terms? Consider whether it's good, bad or necessary debt.
Paying your debt off quicker
Put a budget together and see if you can create a surplus to help pay back debt.
If you have something on interest free terms be careful to ensure that the minimum payment clears the debt before the interest free period is up. Be particularly aware of this if a payment holiday is part of the deal.
Look at all your interest payments and target the debt with the highest interest rates for early repayment.
Then, avoid going into further debt unless it's essential or an investment in your future.
