SMART Archives - Credit Connection

Throughout your lifetime, you will always be saving up for something… whether it’s a bag, car or a house, these wants and needs all start as a goal.

Make a Plan for Your Money – Set Goals!

Making a plan and setting goals is the single most important step to achieving improved financial health. “If you fail to plan, you plan to fail” isn’t a saying for nothing.

Be SMART About It!

To give yourself the best chance of sticking to your financial goals, they must be S.M.A.R.T – specific, measurable, achievable, realistic and time-bound. Once you have your SMART goal in mind, you can create a plan for how you’ll achieve it.

For example, if you want to pay off your $5000 credit card debt by the end of the year, work out how much you are able to allocate to your goal each day/week or month. By breaking your goals into smaller, more manageable pieces, you will find the difficulty factor you have given to them decreases rapidly!

Specific: I will pay off my credit card balance of $5000 before the end of 2021

Measurable: The current balance is $5000; I will make monthly payments of $420 until it is paid off.

Achievable: I have 12 months of 2021 to pay the total, I know that I make X amount per week and I can use any extra from my tax return in July to cover any extra interest or make another payment.

Realistic: I’d love to pay it all off tomorrow, but that isn’t realistic. Based on my budget and discussions with my local financial adviser I am capable of paying $550 per month but have left a buffer for extra savings or unexpected expenses.

Time-bound: I will have it paid off by December 31, 2021.

Achieving Your Goals

Setting tangible and realistic goals; as well as following them up and tracking your progress, are fundamental practices to achieving desired success in anything.

Financial goals can be broken up into 3 sub-categories – short-term, mid-term and long-term. Figuring out which sub-category your financial goal falls under is the first step to setting up your goal. The next step is to determine how much money you need for it. Then, create a budget to regulate a percentage of your income to go towards a saving account for the financial goal. Now, you might have more than 1 goal, so you must prioritise each of your financial goals.

It is easy to enjoy spending money… it is used as a luxury and obscures any foresight of the future. This is why financial goals are so important. Setting financial goals will help you figure out what you are trying to achieve. You will better be able to define your own success!

For thousands of Australians, making day to day purchases on their credit cards and managing credit card debt is a common theme.

In fact, Australians made over 227 million credit card transactions in July 2020 alone.

Australians have a history of racking up large amounts of personal credit card debt; with credit card debt being a large contributor to Australia having some of the highest personal debt levels in the world.

But we’re also turning debt reduction into an art form in the 2020s.

Since COVID hit in March, Australians have wiped almost $4.2 billion off their credit cards.

There are people who love credit cards, and people who hate them. However, people who sit on the credit card fence do have a few points.

Credit Cards Can Be Debt-Traps!

There are more than a handful of debt strategy pro’s with credit cards, if using them correctly; people can make their payments on time, and keep their balance low.

By doing so, many Aussies are using credit cards to build a good credit score that can be used to qualify for a mortgage or personal loan.

Many credit cards also come with 0% interest on purchases, interest-free periods and balance transfers for an introductory period of at least 6 months. This gives you the convenient ability to pay off your balance over time, without incurring any extra costs. The use of credit cards also gives the ability to earn rewards that can be used for cash, gift cards, miles or other merchandise. You can use the rewards on the go, or save up for bigger redemptions.

There is great power in being aware of how to use credit cards efficiently. For a number of Australians, however, a few bad mistakes have resulted in a downward debt spiral that only contributes to the bottom line of the banks.

The Illusion of Credit

Credit cards open up additional purchasing power and give the owner the illusion that they have more money than they actually do.

This opens up the temptation to spend more than you can afford. Credit cards also bring the potential of debt into play. You can keep the debt from growing by paying off your balance each month… but if you only pay the minimum and keep making purchases, your debt will grow. This will also reduce your future income, each time a portion of your future income goes toward repaying your credit card balance.

While credit cards have some negative aspects, these can be easily minimised as long as you’re smart with the cards you choose, and the ways you use them.

There are a lot more pros and cons to credit cards that we didn’t mention here. If you are looking to get a credit card, make sure you do some research and find out what you are getting into, as well as what you’re getting out of it.