Sorting out finances more important than finding love this year, survey finds

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Forget love. Debt is the four-letter word on everyone’s lips.

That’s according to research released by ING Australia on Thursday, which found that more than two-thirds (68 per cent) of Australians are now comfortable opening up about debt.

It’s translated into nearly a third of households saying they will focus on paying down their high-interest loans in 2021, compared to just 11 per cent who said their main goal was to find their soulmate.

ING Australia head of consumer lending Fiona Prater told The New Daily the pandemic had removed the stigma around debt, as many had experienced hard times financially or knew someone who had.

She said by normalising these conversations, the pandemic had provided a catalyst for families to find the best ways to tackle their interest-accruing payments and stay accountable to their goals.

According to the OECD, Australia’s level of household debt in relation to national GDP ranks second in the world behind Switzerland.

But families have taken major strides to tackle high-interest debts during the pandemic.

Australian households squirrelled away $113 billion in extra savings between January and November, while reducing their credit card debt by $7.25 billion over the 12 months to November.

Climbing a mountain

Sydney mother of two Serena Ryan, 44, said her journey towards paying off her debt started with a conversation with her son.

“One day he said: ‘Don’t you like spending time with us?’ And I realised the pressure of paying off debt and contributing financially meant I was prioritising the wrong things,” Ms Ryan told The New Daily. 

She said she was accustomed to living with debt after buying a home and having her first credit card by the age of 20.

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Serena Ryan says her 18-month journey to reduce a $17,000 debt mountain to zero has improved her quality of life. Photo: Serena Ryan

And although living without debt has relieved plenty of pressure, she still budgets as if she is contending with interest payments to live a more comfortable life.

“I don’t want to live like that again. I want to be someone who has got rid of the debt and shaken the habit so I don’t accumulate it again,” she said.

Nexia Perth financial adviser Fran Hughes said families should first prioritise their highest-interest debts by taking steps to move from credit to debit and reducing their reliance on fast credit (i.e. buy now, pay later).

If there’s leeway in the budget, Ms Hughes also recommended families maintain the same level of mortgage payments when interest rates fall, as this could save them thousands of dollars over the life of the loan.

“Working Australians are looking to make smart money decisions, and if that includes paying down debt, then that can segue into helping you start to build an emergency cash fund,” Ms Hughes told The New Daily.

How to pay down debt

  • Tackle debts with the highest interest rates (“avalanche method”) or wipe out smaller balances first (“snowball method”), depending on your situation
  • Negotiate deals with providers to lower interest on big-ticket items, including car and home loans
  • Draw up a debt plan (similar to a budget), with specific timeframes for when you want to completely pay off your loans
  • Be realistic about how much of your income you want to devote to paying off debt. Allocating money from take-home pay into a separate bank account can help reinforce your targets.

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