Are Aussies becoming compulsive spenders
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Do you find yourself spending money you don't have on things you don't need? If you're worried that compulsive spending is hurting your financial future, take a look at our tips for kicking the spending habit and getting ahead!
Everyone occasionally feels the urge to splurge. You know how it goes – you spot something in a shop window, and suddenly you realise that it’s everything you never knew you always wanted! Once in a while, that might not be a big problem, but what happens when overspending becomes a habit you just can’t kick? Despite the impact of recent economic changes – the rising cost of living, increased interest rates and soaring energy prices – Aussies are still spending: ABS data revealed $20.2 billion in retail spending in October 2010 alone. But the question is, with budgets tighter than ever, where is all of this supposedly ‘disposable’ income coming from?
Recent Melbourne Institute research could hold the answer to where we’re getting the cash: the research revealed that credit card debt has become the most common type of debt in Australia, outstripping mortgage debt for the first time since November 2006 – 36.6 per cent of households now have credit card debt compared with 33.9 per cent with mortgage debt. Even more frightening, is that according to RBA statistics, Australians have $47,809,000,000 in credit card debt, nearly $35 billion of which is accruing interest.
But the bigger question is this: if times are so tight financially, why are Aussies still spending? Have we become a nation of compulsive spenders? Calling yourself a ‘shopaholic’ might sound like a joke, but being unable to control your spending habits can cause some serious financial problems – and if you’re letting the balance stack up on your credit card, your money problems are only going to get worse as the interest on your debt grows.
Keeping your spending under control is vital for maintaining good financial health. If you’re going to ensure that your ‘urge to splurge’ won’t leave you drowning in debt you need to take charge of your shopping habits and money management, starting with taking these three simple steps:
Take financial control
Cancel credit cards, restrict access to savings accounts, limit daily withdrawal amounts on debit and ATM cards and lock up the chequebook! Next, implement a credit debt reduction plan by tapping into your savings and concentrating your above-the-minimum repayments on the card with the highest interest rate first. You might be apprehensive about using your savings to repay your debts, but think about it for a second – your saving interest rate might be four or five per cent per annum, but your debts are likely to be costing you three or four times that much (or more). If you’re having trouble meeting your repayment obligations, contact your creditors as soon as possible – many of them will be willing to be flexible provided you are committed to repaying your debts. And think about selling excess purchases to fund your repayment plan and return unused items that you’ve purchased if you can.
Get some perspective
Stop and get some perspective before purchasing. Taking a ten-minute walk can take the ‘impulse’ out of the buy, and making a mental pros and cons list about the item you want to purchase is a great way to avoid buying something that’s going to leave you with ‘buyers regret’. For expensive purchases, sleep on your decision – the item will still be there the next day and you can ask the store to hold it for you if you’re worried about it being sold before you have a chance to go back and get it. Where possible, try to keep an eye on the retail sales cycle and plan ahead for large purchases – and take the time to research the best prices and deals. It’s always worth taking the time to shop around, as a better deal may just be a click or phone call away.
Make the switch
Debit cards offer the same convenience as credit cards, but prevent you from spending money you just don’t have. They can also help you monitor exactly how much you’re spending more easily than using cash will, because you’ll have an electronic record of each spend. If you really need a credit card, get one with a very low limit and the longest interest-free period available – and only use it in actual emergencies.
These days we’re inundated by glitzy marketing and advertising campaigns, all of which are designed to make us want to pull out our wallets and spend, spend, spend. While buying that thing that you ‘never knew you always wanted’ might make you feel good for a moment, the financial trouble overspending can cause you down the line can leave you feeling stressed and prevent you from achieving the goals that are really important to you. Taking these simple steps will help you to take control, stay financially secure and get more of what you really want out of life.
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Analaura Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.
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