Women In The Black

Hi Angus. Just hoping to get some guidance on managing our financial situation. My husband and I earn a total of $160,000 gross. We have three investment properties with LVR around 85%. We rent our current home. We have $20,000 in savings, $10,000 in shares, and we owe $17,000 in credit card debts of which $10,000 is on a zero balance transfer card. We have 14 months to pay this off. We have a car loan of $50,000. We anticipate to be receiving $20,000 in bonuses. Should we use this to pay off some of the car loan, or wipe off the $7k credit card debt (11% interest rate) completely. We would like to keep a buffer in savings for emergencies. What should we be doing to save more? We seem to struggle with keeping to a budget.

March 7, 2014   Asked by Kathryn, Public Servant, Victoria

Hi Kathryn,

Congrats on reaching out. With 3 investment properties you sound as if you are committed to improving your financial wealth. Well done!

Subject to you retaining adequate cash on hand to cover any emergencies, it is a wise decision to repay your credit card off in full.  There are three types of debt: Good debt, OK debt and bad debt.  We consider credit card debt as a ‘bad debt’.  In all my years I am yet to see one single person fulfill their financial potential if they carry credit card debt. While I am unsure how your credit card came about (& I recognise that sometimes life throws a curve ball that can create a credit card debt beyond one’s control), I suggest you commit to finding a way of having no more credit card debts.  Ever.  Without the credit card debt, you can maximise your financial potential. With it, you will just continue to make life harder for yourself.

You are not alone in struggling to keep to a budget.  So many of us struggle to make the shift from living ‘hand to mouth’ to creating additional savings and achieving your financial and life dreams. Here are four tips to make it easier to stick with, and benefit from, a spending budget:

1. Make a list of specific goals that you want to achieve within a timeframe

Much like dieting, budgeting without a goal is, frankly, not all that enjoyable and typically ends in failure. You must give yourself something in return for the budgeting process – a goal that could be a holiday, a home deposit or financial security to quit your job to pursue another passion.  It doesn’t matter what goal(s) they are as long as they are specific, important to you and you actually give a commitment to achieve them within a realistic timeframe (& both you and your husband commit to the process).  Reward yourself for sticking to the budget along the way (& give yourself consequences of not meeting the budget).  Not only will you be more likely to stick to the budget, hopefully it will make the process more fun!

2. Use technology to make the budgeting process easy  

Most lenders provide a budgeting tool to help you track your spending.  There are also some pretty cool apps that automate and track what you spend where. The simple process of working out where all your money goes can surprise and incentivise you to modify your spending behaviour.  I know when we last revised our household budget, it surprised how much we spent on takeaway meals after coming home from a busy day at work… something we solved with having a big cook up on Sundays for the week ahead!

3. Allocate different spends into different ‘buckets’

Breaking your spending down into your known/fixed costs (or non-discretionary costs), your discretionary costs and your savings will help. The budgeting tools referred above will help here. People find it easier to budget if they automate the payment of your fixed costs and automate your savings plan leaving your budget for discretionary items to be paid into your ‘everyday spending account’. When it comes to spending the amount you have budgeted for your everyday spending, I suggest you spend this element of your budget using cold, hard physical bank notes and coins.  Make your everyday spending as ‘visible’ as possible.  With it being (too?) easy to spend money via credit cards or PayWave, I suggest avoiding PayWave.  Spend your everyday spending budget by going to the ATM, withdrawing the cash and spending it at the cash register.  The psychology of using physical cash makes it easier to stick to your budget & not overspend.

4. Use the ‘freezer’ technique

For some, having a credit card in the wallet makes it too easy to spend money, blow the budget and find yourself caught in the debt cycle trap – and yet it may be something one doesn’t want to give up completely.  If you don’t want to cut up the credit card forever, I suggest removing it from the wallet, putting it in a glass of water and putting the glass of water in the freezer. The next time you are at the shops and find the next ‘must have’ purchase by the time you come home, take the glass out of the freezer, allow the card to defrost you will have had the time to really work out whether that ‘must have’ purchase is must have or an impulse buy that you could probably do without.

Congrats again on your obvious progress.  Wishing you the best of success.


This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.

Expert Profile

Angus Dockrill
Angus Dockrill   Personal Finance Expert

Principal Advisor of McIntyre Advisory, Certified Financial Planner, Self Managed Superannuation Specialist Advisor with post-graduate studies in investment and applied finance.


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