How To Effectively Pay Off Debt

This vLog discusses the key elements that need to be considered when looking at how to effectively pay off debt.

(00:00): What lessons have we learned from the GFC in terms of managing debt, that we can apply today in the COVID-19 economic environment?

(00:17): Hi, it’s Raffi from Manly Financial Services here. In 2007 consumer’s confidence was high and we were spending. People were tapping into the equity of their homes with the rising house prices and instead of buying a car, they’d buy a car and a boat. Property values were growing, wages were rising and taxes were falling. We felt like we were getting wealthier by the day and we were spending.

(00:37): In Australia total household debt had risen to over 150% of household income from 100% only from the start of the decade. The outcome of all this spending is the accumulation of debt in the form of larger mortgages and high interest rate debt such as credit cards.

(00:58): These high rate loans represent another leakage or wastage from our cash flow. Interest rates on these loans do not follow the trend of falling household mortgage rates and additional transaction costs and late payment fees add to the amount that’s wasted every day in these accounts. You’re working hard to generate your income, so why waste money in the form of fees and high interest?