In Australia alone, families carry an average  long-term credit card debt of about 3,000. With an average credit card interest rate of 19%, and say,  a minimum monthly repayment of  $60  (i.e. 2% of balance), Only $12.50  goes to pay down your balance . The $47.50 goes to interest repayment.

Opening balance:  $3,000
Interest  : $47.50  (interest of 19 %)
Minimum payment : $60.00  (2% of balance)
Balance repayment : $12.50
Remaining Balance : $2987.50

Continue with this manner of payment and it will take 8.33 years to pay off a $3,000 debt and a whopping $5,991.22  in total repayments  where $2,991.22 is the interest.

However, an increase of just $10.00 on top of minimum, and payment years will be reduced to 6.08 years with  interest down to $2057.53. A clear savings of 2 years and almost $1,000 in interest repayments.

How about if you double your repayments to $120?  Repayment period is then slashed to 2.75 years with total interest repayment of just $849.29.

The point that I am trying to drive home is that credit card carries a very high interest. Interests are also computed on a daily basis. So, even a small amount like additional 10AUD towards your balance per month makes a huge difference. If you are one of those who take daily trips to your office cafeteria for coffee, banana slice or even for a meal, you may want to divert the money to your credit card balance instead. It’s a short term sacrifice that provides long term gains. Instead, consider getting up early to have your coffee and proper breakfast at home. Also, any dinner left over will  be good  for lunch the following day.

Further, if you have a savings account, however small you think is the balance, you might want to consider using the balance to pay down your credit card debt. There is no point keeping the savings account balance that earns say 6 to 7 percent if you are paying an interest of  19% on you credit card.

How about if you if have more than one credit card? I suggest you consider paying off the one with higher interest first. But if it gets to a point where your multiple credit cards seems a bit much to handle, consider consolidating your debts by transferring balance to lower rate credit card. However, please be aware of the pitfalls of transferring your card balance to a lower rate. These products usually have a “honeymoon period”. After which, interest would revert to a higher rate. Sometimes, even higher that your old credit card rate. Also, check if the honeymoon rate covers any new purchase. Oftentimes, they don’t. They only include the original amount transferred. If so, make sure you do not make any new purchase, especially any cash advance with your new, lower-rate card. Remember that cash advance rate is always higher than purchase rate by at least 1%.

For some, it may seem a bit overwhelming to put their credit position in order. This is why you should start with something small. As I said earlier, try to pay more than the minimum. And once you’ve paid off your debts, it is best not to carry any credit card balance at all.

Lastly, I would like to stress that I am not against the concept of credit card. We actually have one. Provided that we use it wisely, credit card is I think, quite handy.

1. Do not spend more than you earn

We heard this from our grandmother, mother, and father. Live within your means. It’s an acutely simple advise yet most often ignored. Wouldn’t life be much easier if we commit to live within our resources? At the very least, to aim for our incoming to equal our outgoing. So at the end of the day there are no bank overdrafts, no overwhelming credit card bills, no overdue debt notices.  No stress.

2. Save for a rainy day

Unfortunately for some, this current financial crisis, the rising unemployment statistics, the increasing number of people defaulting on their mortgages and other personal debts, the rainy day has come. The question is, have most prepared for it? We can only hope so. This second age-old advice is more productive as it entails saving a part of what we earn. Personally though, the word “rainy day” sounds a bit depressing. I think, rain or shine, we should have extra money set aside for just anything. It can be for emergencies like sudden sickness, unemployment, or just to help a family in need. Or it can also be used to enjoy life while we are here, to take a short break, and give ourselves little rewards for our good efforts.  So call it, emergency fund, sanity fund, play money, whatever you want to call it, knowing that we have extra money set aside provides a great feeling of security. We know that whatever happens, nothing can immediately jeopardize our finances.  A standby fund to cover three to six months of our living expenses I believe is ideal.

3.  There is no calamity worse than our lavish desires

“Simplify,simplify,simplify”. It’s our personal mantra. I find that until we make the first step to simplify, we will not realize how our home, our mind, and our life were filled with so much clutter. Clutter eats space; it wastes time, energy, and yes, money. Personally, by keeping things simple around the home, and around our life in general that I find peace. Aim for simplicity and be surprised to discover that more often than not, we already have what we need. We will not easily succumb to material urges which as we very well know now, is one of the reasons we are suffering from this great financial crisis. As Dr. Demartini astutely puts it, “Some people spend money they do not have, to buy things they do not need, to impress the people they do not like. There truly is no calamity worse than our lavish desires.

4.  Diligence leads to prosperity, hastiness to poverty

I am sure that most of us at one point or another have ever wondered where our money has gone. We looked at our account balance and asked ourselves “how did it happen?” To avoid such mystery and potential misery that comes with it, we owe it to ourselves to know where our money is going. This requires thoroughness and consistency. Make a budget. Review expenses and identify any leaks that need immediate fix. Personally, we regularly review our outgoings and identify improvement areas in our finances. In this GFC, there are no small or big savings. Everything counts. We should be good bargain hunters, keep our expenses to minimum, focusing only on the essentials. At home, one thing that we are trying to practice now is to live on one income. It helps us honor our budget. And by sticking to a budget, it so much easier to avoid any financial leaks.

5. Money does not grow on trees

We all have heard of the phrase “men of action are favored by the goddess of good luck” (from the book The Richest Man in Babylon). Unfortunately for those who are already caught in this nasty crisis, it may take a lot more work than others such as sending hundreds of application for a new job, upgrading skills, going back to school, etc. And yes, they may take some time too. While waiting for that next big break of steady income, a great way to ride out the cruel waves of GFC is to maybe, change some of our habits. Like too much takeaways, frequent night outs or parties, impulsive use of credit card.  Speaking of credit card, if we cannot pay things in cash, we probably cannot afford them. Or if we cannot afford things today, maybe we cannot afford them tomorrow?  We should take a long and hard look at our habits. Who knows, we might just be pleasantly surprised to discover how we can squeeze extra money from dropping one or two of them, temporarily or otherwise. In this GFC, we cannot just sit back and expect for financial miracles to happen. Big or small, we need some positive action to get us through the bad days. Our life after all is shaped only by our actions. And I agree, sometimes the harder we work, the luckier we get.

1.        A Place for Everything.

It’s happened to all of us at one time or another. We look for something we so often use like keys, TV remote, mobile phone even. Yet at the time we need them, they are nowhere to be found. We search every possible place to no avail. So, wouldn’t it be nice if we know exactly where to get things when we need them? Wouldn’t it be great to skip all the stress and save our precious time? This is what my hubby and I try to practice at home. As much as necessary, we designate A PLACE FOR EVERYTHING.  Be it remote, keys, old big-item receipts, warranties, sewing materials, stationery, and electronic parts – everything has a home.

We are also quite mindful of labels. Not only that things have their own residence but where they’re kept must be properly marked. Labeling takes seconds and doesn’t cost much. A simple marker, post it or any A4 and tape will do the trick. For us, this is most helpful during change of season when we put away summer or autumn clothes and bring out our winter gear and accessories. Labels just make it a lot easier for us to find and retrieve what we need when we need.

The last tricky part is location. Things must be suitably stored depending on usage. The more we use them, the more accessible their location. And whether it’s about housing stuffs or just basic arrangement of things at home, I find that location or placement based on frequency of usage helps a lot.

2.       Say No to Unnecessary

My husband and I agreed that our home has no room for anything unnecessary. We love coming to a clutter free place. And we like being surrounded only by the things we love. So, we regularly take stock of what we have and get rid of anything that we do not need or want. As a rule, anything we have not used for 12 months must definitely go. Donate, Sell or Throw – they all must go. We also keep a TO GO basket near our door so anytime we find something, the basket comes in handy. As cold as it may sound, this includes unused gifts. To avoid the guilt of parting with friends’ and family members’ gifts though, is another story. There are definitely ways to avoid it. Maybe I should write about it later. Going back to my subject, instead of us letting those unused and unwanted stuffs eat up valuable storage space in our apartment, AGAIN, we THROW, SELL OR DONATE.

Tip : once you’ve decided to do the T,S,D exercise, put them away quickly. Finish it off before you lose your motivation. As the old adage, “strike while the iron is hot”.

3.        Be a Good Doorkeeper

Simply put, avoid buying things you don’t really need. The main source of clutter at home comes from buying those little stuffs which we don’t need now. However, we still buy them because of our tendency to think that  we might need them later. Sadly, “later” never comes. And all those little things we collect don’t only end up as “clutter” at home, but they add up and ultimately hurt our pockets.   My hubby and I strive to be good doorkeepers. We try our best not to let unnecessary stuffs get into our door. We sometimes leisurely go to mall and find ourselves wanting things on impulse. But each time, we ask each other, “Do we need it?” If the answer is NO, we just walk away. However if we really like it but are still unsure, we do the same thing, we walk away, sleep on it for a day or two. We’re always surprised that by sleeping on it, the urge of buying  magically disappears. More often than not, we end up feeling proud of ourselves for not succumbing to our impulse.

4.        At the End of the Day, It’s Clean and Clear

This is where I have to remind my hubby the most.  Be it in Kitchen, Bedroom, Lounge and Bathroom, at the end of the day, before we go to bed, we always try to put things back to their place. In the kitchen, sink has to be clean and clear of any used glass or mugs, food speck, and wet spots. Bathroom is the same; we try to wipe any wet areas to avoid build up of moulds. With the help of our portable vacuum, our bathroom floor is almost always clear of hair and dusts. In our bedroom and lounge, magazines or other reading materials, pens and notepads are returned to their home. We do our best to do it everyday. For us, it is always a good feeling to wake up to a clean and clutter free home not just on weekends but throughout the week.

5.        Plan Plan Plan

I guess the habit of planning has been with me for as long as I remember. Many years back when I was a student, apart from studying hard to maintain good grades to keep my much needed scholarship, I was also quite involved with numerous extra curricular activities. To fulfill both my academic and socio-civic commitments was a huge challenge. But with planning, I did survive. 16 years later and I am now a working wife, planning is still what keeps my sanity intact. From our weekly meals, household chores, bills, weekend activities, to holidays, we always try to plan well ahead of time. We find that planning not only allows us to save and enjoy our time, but it also saves us a lot of a very important resource, money. Planning the weekly meals means that we won’t buy anything more than what we need for the week. It means no impromptu takeaways which when done frequently,add up and hurt our budget. It means no daily trips to our office cafeteria because our lunch for the week is well planned. With our household chores, our clear and clean system means there is not much cleaning to do on weekends.  We try to squeeze in as much during weekdays like laundry on Thursday and Friday nights to free up more time. For us, weekend is a time to relax and play. Do the things we want like watching DVD movies, practice photography, start or finish small arts projects, go someplace we like, or just do nothing. When it comes to our bills, organizing them means that we never have to miss any payments and suffer from any late fees. And when it comes to planning our big holiday, we usually give it 6-9 months. It allows us to explore special deals available instead of leaving the accommodation, airfares bookings closer to date. But for us, the most important benefit of planning the holiday ahead is that everyday, we have something to look forward to. Especially when we suffer from a bad day at work or just when we feel a bit worn out, just by thinking about our coming big holiday makes the stress go away.

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