A leading financial expert has shared six of his simple smart tricks to help Aussies pay off their debts and get back on track.
Glen James, a former financial advisor and host of the top-rated Millennial Money podcast, says now is the perfect time to get your money organized after Covid’s financial impact across the board.
In his new book, Sort Your Money Out and Get Invested, he’s provided a practical, “no BS guide” to getting your finances in order and listed ways to eliminate debt and move forward now—from side hustles to selling old items on Gomboom.
Glen James (pictured), a former financial advisor and host of the top-rated Millennial Money podcast, says now is the perfect time to get your money back on track after Covid’s financial impact across the board
SET A GOAL BIGGER THAN YOUR DEBT
One way to focus on paying off debt is to have a goal greater than the debt itself.
A useful goal is to add up all your debts and total monthly payments and do a basic calculation to work out how many months it will take to pay off your debt.
Your challenge is to try and cut that time period in half.
Since we want to throw it all on your debt restructuring campaign, think of some things you might want to do — financial or non-financial — after you’ve paid off every debt, and you should also celebrate when you’re completely out of debt.
Use a blank sheet of paper to write down a few reward goals.
Since we want to throw everything at your debt restructuring campaign, think of some things you would want to do (financial or non-financial) after you’ve paid off every debt and you should also celebrate when you’re all set. out of debt
PULL A BUDGET LEVER
There are four levers you can pull on a budget to make changes so that you have more money to pay off your debts.
You can increase your income with a pay rise or a part-time job.
You can reduce your savings because you really shouldn’t be saving while trying to get out of debt.
You can reduce your costs by looking at the categories in your budget. Do you need a personal trainer and a gym subscription?
And you can cut something completely out. If you stick to the health and fitness examples, you can choose to completely scrap this category while attacking your guilt. This might be when you leave the gym and PT and decide to just go for a jog to keep fit or buy some weights for the back deck.
What are the biggest mistakes first home buyers make?
Have consumer debt: A down payment is often required to buy a home. That or a parental guarantee. Consumer debt cripples many people, especially millennials. What people may not realize is that for about every $10,000 in consumer debt you have, your borrowing capacity can be reduced by $40,000.
Borrow more than you can afford: There is often a difference between what the banks say you can borrow and how much you can actually afford. The internal ‘responsible lending calculations’ of some banks and lenders are not very realistic. If you’re looking to buy your first home, try to keep your monthly mortgage payments to less than 30 percent of your after-tax net income — 25 percent is ideal, if possible.
Not having a ‘buy’ strategy: You really need some kind of strategy when buying your first home. If you buy a house to live in, will it be used as an investment property in the future? You should consult with your mortgage broker or financial advisor to ensure you have the most appropriate structure.
Not having an exit strategy: It is so exciting to buy your first home. You have a roommate; discussions happen about a wine; and the next moment you buy a house together! What could go wrong? ‘The chat’ isn’t necessarily who buys dishwashing liquid; rather, which is agreed upon if there is to be an exit from the property. Put everything in writing and have an ‘exit’ plan in place if someone has to save.
To make quick purchases when you withdraw: You have a beautiful new place that you want to call home. Great. Just don’t allow this event to cripple your finances by pinning your cash flow with new “stuff.” There is only one time when you should use interest-free plans and that is: never.
TURN TO GUMTREE
What cr*p (I mean, ‘valuable stuff for others’) do you have lying around that you could take out of your life?
If it hasn’t been used for 18 months and it’s not a family heirloom, sell it and put the money into paying off debt.
You can always buy more cr*p later when you are out of debt. And think about how good you will feel after cleaning up and getting your house and garage to reflect that you have your financial life in order.
If something you have hasn’t been used for 18 months and it’s not a family heirloom, sell it and put the money into paying off debt
LOOK AT YOUR EXISTING SAVINGS
If you have consumer debt on the one hand and cash savings on the other, it’s probably because you don’t have a solid money system and/or you’re conflicted and have a mix of logic and emotions in your mind.
Which is good. It can be scary.
Start by deciding that you are no longer saving and each time you pay, you are spending your savings on your debt.
GET A SIDE PRINT
Side hustling is when you work outside of your regular or main job and ‘hust’ to make extra money or to advance your career. I’m not a fan of chasing after an afterthought. I believe there are a few specific reasons why you should do a side job.
A side job can give you extra cash to get you out of debt and save for a short-term goal. If a side job grows exponentially, you have the option to quit your main job and run your own business 100 percent of the time. You can also allocate your ancillary income to investments.
It’s important to understand that if you’re doing a side job to pay for food, rent, and other daily expenses, it’s really just a second job.
This could be a sign that your expenses are higher than your income, meaning you may need to consider cutting your expenses or you may be underpaid.
You can now start cleaning up your mess. In fact, you can tell people that your afterthought is “debt cleaning.”
Edited excerpt from Sort Your Money Out & Get Invested by Glen James (Wiley, $32.95), available where all the good books are sold.