POST-CHRISTMAS FINANCIAL STRESS

11/01/2012

Hard to believe it’s that time of year again, yet here we are - 2012. It would be nice to begin the year in a secure financial position. For many Australians though, post-Christmas is a scary time. It’s the time of realisation - when Christmas spending catches up with you.

Credit card bills start to mount. Expenses start to roll in, like back-to-school needs.

Many consumers have taken advantage of retailers’ interest-free loans. These obviously seem attractive - take the goods home today and pay later. If you can pay within the interest-free period of the contract then there’s no problem. But if you can’t, the repayments escalate dramatically.

The cycle of debt can be difficult to escape. Can’t pay off a credit card? Just get another one to pay it off, right? It’s a worrying pattern.

Young consumers, perhaps more inclined to put things on credit that they can’t really afford, are particularly at risk. They may not understand the impact that having a default recorded on their credit report can have on their future borrowing needs.

It would seem that now is a critical time to put good financial management strategies in place. A new year’s resolution. But how?

A good starting point is to work out where you stand financially. How much do you owe? What can you realistically afford to pay back?

If you can’t make a repayment by the due date, don’t be afraid to seek an extension. Creditors may be happy to negotiate. Many financial institutions have a hardship team that deals with these requests.

From a practical point-of-view, it’s a good idea to make a weekly budget and record everything you spend. Avoid spending on credit, particularly making cash advances which attract high interest rates. Pay back as much as you can, not just the minimum credit repayment.

Seeing a registered financial planner can be a good move, to help you establish a long-term plan. For example, consolidating all of your debt under one single personal loan or mortgage can mean a lower interest rate than your credit card rate.

There are also legal solutions you can explore, such as a debt agreement, personal insolvency, or bankruptcy as a final resort. These decisions should never be taken lightly, or without first seeking specialist advice.

You should also be aware that if there is a dispute about what you owe, the Consumer Trader and Tenancy Tribunal has wide powers to make orders in a fairly informal setting. If there is enough at stake, you can apply to the court to set aside or vary an unjust contract under the Contracts Review Act and the Australian Consumer Law.

Good financial management now is imperative. ASIC’s consumer website (www.moneysmart.gov.au) has some great tips.



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