Download today Arrow<\/a><\/p>\n\u201cMost people can tell you roughly what their mortgage is but ask them exactly what they owe across the mortgage, credit cards, car loans, buy now pay later and other debts and the picture gets much less clear,\u201d Wilkinson said.<\/p>\n
\u201cYou can\u2019t build a strategy around a number you don\u2019t know.\u201d<\/p>\n
Wilkinson says it can be uncomfortable, but that is precisely why it matters.<\/p>\n
The number you may not want to see<\/p>\n
For some families, debt has accumulated gradually.<\/p>\n
A mortgage here, then a car loan, then the credit card used for an unexpected expense.<\/p>\n
Throw in a few buy now pay later purchases – and it gets scary.<\/p>\n
Individually, each repayment can seem manageable. Together, they can put enormous pressure on a household budget.<\/p>\n
\u201cOne of the biggest mistakes people make is looking at every debt separately,\u201d Wilkinson said.<\/p>\n
\u201cThey think, \u2018That payment is only $200\u2019 or \u2018That card is only a few thousand dollars\u2019.<\/p>\n
\u201cWhat matters is what all of those commitments are doing to your household every single month.\u201d<\/p>\n
His advice is to put every debt on one page. Then write beside it the interest rate, minimum repayment and any fees.<\/p>\n
\u201cThat piece of paper can tell you more about your financial position than almost anything else,\u201d he said.<\/p>\n
Find out where your money actually goes<\/p>\n
Once Australians know what they owe, Wilkinson says the next step is looking at their cash flow.<\/p>\n
That means comparing every dollar coming into the household with what is going out.<\/p>\n
Wilkinson says people are often surprised by the result.<\/p>\n
At his business, Sonder Advisory Group – which is is a financial planning firm helping individuals and families build personal strategies around debt, cash flow, super and wealth – he has seen it all.<\/p>\n
\u201cA lot of families genuinely feel like there should be money left at the end of the month, but somehow there isn\u2019t,\u201d he said.<\/p>\n
\u201cThat\u2019s when you need to stop guessing and look at the numbers.\u201d<\/p>\n
He says this isn\u2019t about cancelling every coffee or removing everything enjoyable from family life.<\/p>\n
It is about separating what genuinely matters from spending that has simply become habitual.<\/p>\n
\u201cA budget that makes you miserable for three weeks and then gets abandoned isn\u2019t a good budget,\u201d Wilkinson said.<\/p>\n
\u201cYou want something realistic enough that you\u2019ll still be following it six months from now.\u201d<\/p>\n
Not all debt should be treated equally<\/p>\n
Wilkinson says another common mistake is throwing extra money at debt without considering what that debt is costing.<\/p>\n
For households able to make additional repayments after covering essential expenses, one commonly recommended approach is to maintain required payments across debts while directing extra money toward the debt charging the highest interest and fees.<\/p>\n
\u201cPeople love the psychological feeling of wiping out a small debt, and there can absolutely be value in momentum,\u201d Wilkinson said.<\/p>\n
\u201cBut purely from a dollars-and-cents perspective, you also need to look at which debt is doing the most damage.\u201d<\/p>\n
A high-interest credit card balance, for example, can behave very differently from a home loan carrying a much lower interest rate.<\/p>\n
\u201cThe question should be: what is this debt actually costing me to keep?\u201d Wilkinson said.<\/p>\n
\u201cThat changes the conversation completely.\u201d<\/p>\n
The bills you cannot ignore<\/p>\n
But Wilkinson warns Australians against becoming so focused on paying down debt that they fall behind on essential household costs.<\/p>\n
\u201cIf things are getting tight, silence is usually the worst strategy,\u201d Wilkinson said.<\/p>\n
\u201cPick up the phone before you miss three payments, not after.\u201d<\/p>\n
\u201cAnd don\u2019t assume asking for help means you\u2019ve failed financially. The earlier you deal with a problem, the more options you generally have.\u201d<\/p>\n
Beware the \u2018easy fix\u2019<\/p>\n
Wilkinson also cautions families against solving one debt problem by immediately creating another.<\/p>\n
That could mean increasing a credit card limit, taking out short-term expensive credit or consolidating several debts without properly examining the new loan.<\/p>\n
\u201cMaking five debts disappear from your banking app and replacing them with one loan might feel like progress,\u201d Wilkinson said.<\/p>\n
\u201cBut if you\u2019re paying more interest or stretching that debt over another seven years, you haven\u2019t necessarily fixed anything.\u201d<\/p>\n
\u201cThe repayment being smaller doesn\u2019t automatically mean the deal is better.\u201d<\/p>\n
His warning for Australian families<\/p>\n
Wilkinson says the biggest danger isn\u2019t necessarily having debt.<\/p>\n
For most Australian households, particularly homeowners, some debt will be a normal part of their financial lives.<\/p>\n
The danger is having no strategy for it.<\/p>\n
\u201cYou don\u2019t need to wake up tomorrow and suddenly be debt-free,\u201d he said.<\/p>\n
\u201cBut you should know exactly what you owe, what it costs you and what your plan is to make that number smaller.\u201d<\/p>\n
\u201cAnd if you haven\u2019t looked properly at your debt for a year or two, make this the weekend you do it.\u201d<\/p>\n
Because while Australians cannot control every interest-rate decision or cost-of-living increase, Wilkinson says they can control how clearly they understand their own finances.<\/p>\n
\u201cThe families who make the biggest progress aren\u2019t necessarily the ones earning the most,\u201d he said.<\/p>\n
\u201cThey\u2019re often the ones who finally decide: we\u2019re going to know where every dollar is going, we\u2019re going to have a plan, and we\u2019re going to stick to it.\u201d<\/p>\n
This story contains general information only and should not be considered personal financial advice. Individual circumstances vary and consumers should consider professional advice appropriate to their circumstances. Australians experiencing financial difficulty can also access free financial counselling through the National Debt Helpline.<\/p>\n","protected":false},"excerpt":{"rendered":"One of Australia\u2019s leading financial planners has a direct warning for households struggling with mortgages, credit cards and…\n","protected":false},"author":2,"featured_media":911120,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[64,63,1625,44,184],"class_list":["post-911119","post","type-post","status-publish","format-standard","has-post-thumbnail","category-australia","tag-au","tag-australia","tag-lifestyle","tag-news","tag-personal-finance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/911119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=911119"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/911119\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/911120"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=911119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=911119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=911119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}