Managing Debt to Create Wealth and Prosperity
Reducing Interest Paid and Cutting Costs Helps in Debt Management
Oct 7, 2009
There are several ways that a household can curtail expenses. When it comes to trimming the home budget, the common areas that people look to include:
- stop buying luxury items,
- if household items such as refrigerators or TVs need replacing, opt for secondhand or cheaper brands, or
- look for savings at the supermarket or grocery store.
However, there are a few ways that can reduce household costs without affecting a lifestyle.
Control Credit Card Debts
Credit cards carry the highest interest rates of household debts. Reducing the use of the credit card and/or shopping around for a card with a lower interest rate will help the debt management process.
The limit attached to a credit card is also a factor in managing debt. The higher the limit, the higher the temptation to spend.
If a credit card is a necessity, getting one with a reasonable limit, an interest-free period and the lowest interest rate is the best option. The total balance at the end of each month should be paid off to avoid interest charges. The temptation to take cash out of a credit card should also be avoided because cash advances carry a higher rate of interest than purchases and there is no interest-free period attached to cash advances.
Fees and Charges on Transaction Accounts
Get to know the features and benefits of the transaction accounts. Check to see if there are charges such as:
- a monthly account keeping fee,
- how many free transactions are allowed per month,
- is there a charge for using a same bank ATM,
- what is the charge for using another bank's ATM, and
- is there a cost to set up direct debits.
Analyze the spending pattern to see if any or all of the bank's fees and charges can be saved.
If the home mortgage and the transaction account are with the same bank, it is possible to negotiate a fee free transaction account.
When making purchases and paying by EFTPOS (electric funds transfer point of sale), paying for the items and drawing cash out at the same time in one transaction saves ATM fees as well as reducing the number of transactions per month.
Cost Effective Telephone and Internet Connection Plans
Researching the various landline, mobile phone and internet connection plans available is another way to cut costs and save money without affecting the lifestyle. With many providers offering savings on combined plans and also free or discounted calls and SMSs it is worth spending the time to source the correct plan for the household.
Reducing the interest paid on credit cards, fees and charges on transaction accounts and saving on phone and internet plans are some simple ways of cutting costs and managing debt.
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