Credit Crisis - Is there More to Come?

With the credit crisis still going through the throws of settling down we are yet to see the full impact of the US meltdown. The impact of the credit crisis is only beginning to be felt by the global economy, more so it is the individual consumer who will pay for this in the long run.

At this stage the Australian economy has slowed down in the finance sector, the property sector and we have also seen substantial impact in the share market. What we are yet to see is the impact from an unemployment perspective and also from a home loan default and personal credit default perspective.

Yes we are seeing more and more martgagee auctions but is the smaller ticket items such as credit cards, store cards and personal loan going into default which will impact consumers for years to come.

The amount of people in Australia which have a listing on their credit file will skyrocket over the coming twelve months as people struggle to repay debt which was accrued during a time of low interest rates and lower cost of living in general.

This was ok during this period of lower interest rates and cost of living although now where a home loan costs hundreds of dollars more per month and the average fuel bill is now an average of $100 per month more the amount it costs just to maintain these repayments has seriously sapped the disposable income which was once available.

Where does this lead from here? In many cases it leads to people juggling money between credit cards and potentially making late payments on their bills that are due. If this cycle is not broken quickly by way of cutting down on all unecessary spending or earning more money then these late bills start to pile up and can quite easily turn into a serious debt issue.

Once a bill is more than 90 days in arrears the provider of the service has the right to place a default listing on your credit file and this can take up to five years to come off your credit file even if you pay it in full at a later stage.

I have helped many clients break this cycle by way of a refinance and more specifically the consolidation of debt in their home loan.

I will be writing up more information on the impact of a credit listing in my next blog due out very soon.

Christmas is Nearly Here!! Is this a good thing??

With Christmas nearly upon us the time to spread the joy is knocking on the door. The question is, will the joy that we spread now come back and bite us where it hurts?

In short yes! With many of us relying on credit cards to carry us through this insane shopping season we often don't factor in that we need to pay this debt off and when the bill arrives in January along with the usual household expenses it can all seem too much. Especially if you have a home loan to juggle as well.

We can all too easily get caught up in the madness which is Christmas and yes it is great to be able to buy your loved ones a lovely present but do we actually sit back and consider the stress this will put us under when we actually have to pay for them all? No, and this is why you need to think carefully about what it is your actually spending, here are some tips on how to better manage your Christmas spend:

1. Set a firm budget on all the presents you need to buy
2. Plan months in advance and start saving towards this budget so you use cash you have and not credit
3. If you see a present that is on special even months before Christmas grab it now and keep it aside, this way you break up the spend required and save yourself some money in the process
4. Try to ensure you have enough funds available in January to cover all the bills and at the same time plan out what your bills will be for January so you save towards this as well
5. Keep in mind that buying a present is not about outdoing anyone in the value of the present, Christmas is not a competition

Being in the finance industry I often come across many people who approach me for assistance not long after the new year has begun and they ask me to help them lower their debt. There are many ways in which people can help themselves and the most common is that of consolidating their debt into either a low rate personal loan or into their home loan.

The point I make with all of my clients is that it is a great idea to consolidate debt and if they are serious about making a long term difference then as part of the debt consolidation process they need to cut up the credit card! More info at www.aussiewisefg.com.au

In the most they don't take too kindly to this suggestion but once I highlight the fact that if the card is still there then the likelihood is that they will again rack up the debt in a short space of time. If this happens and it most likely will, they will simply end up with another debt by way of a personal loan or a higher home loan repayment AND have to deal with a burgeoning credit card debt as well so they will actually be worse off then before.

Remember that Christmas is meant to be a joyous time and if approached in the right way shouldn't cause more stress in the new year simply to enjoy a few days of celebration.

Above all else, remember that Christmas is a time of celebration of another kind for many people so retain your focus on this and remember that buying presents is not the only aspect of Christmas we need to celebrate.