Page 24 - Smart Money

Chapter 1

people don’t realise that if they are only paying the minimum, they are
never going to pay off the debt.

Many people are living from pay cheque to pay cheque and wondering
why they never have any money. They struggle to pay down their mortgage
because they are living this way. We live in a world where it’s all about the
image. We tend to spend money on things that will make us look good
without any thought about future repercussions and how we are actually
going to manage the repayments. We are keeping up with the Jones’.

Case Study
A good example is a guy working in the mines, earning $250,000 a
year. He buys a boat, a jet ski, a car and everything is on fi nance. Then
the mining industry takes a bit of a hit and he loses his job. He has to
come back to Perth, where he only earns a quarter of the money, but
he still has all that debt. He obviously wasn’t thinking about the future,
because he took out too much debt, based on an income he might not
always have. That is a perfect scenario for that outcome.

A lot of people who come to us often have four or five different credit
cards, with differing credit limits that are quite high, and they owe the
maximum on each of them. They might also have a personal loan that
they used to borrow money for a car. This happens too often.

If they get an interest-free credit card, they think that they will pay it
off in 12 months, when the interest-free period is up. What they don’t
realise is, it is 30% on the interest, and that accumulates pretty quickly.
That is when they fall behind, because they think they can pay it off in 12
months, but they don’t.

Most people don’t have a budget. They don’t generally open a separate
bank account and put money aside every pay cheque – they just don’t
think of doing these things. You need to set it up so that the money comes
out before it hits your bank account, so you do actually save it. It is
money that you never see, so there is less chance of spending it. It is little

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