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A new survey of 2,000 Australians, undertaken by research agency Enhance Research on behalf of mutual lender Credit Union Australia (CUA) in January, asked consumers how they were were feeling about debt for the year ahead, particularly following the festive season.
The survey found that only 21 per cent of Australians feel they have “complete control” over their finances, while 38 per cent reported feeling “somewhat” in control.
Generation X (those born between 1966 and 1982) reportedly feel as though they have the lowest level of control over their finances, while Baby Boomers (born between 1947 to 1965) and the Silent Generation (born before 1946) were more likely to feel like they had greater financial control.
Further, the survey concluded that more Australian men (62 per cent) feel they are managing their finances, compared to 55 per cent of women.
Around 14 per cent of Australians surveyed expect it will take more than six months to repay their post-Christmas credit card debt, or that they would never pay it off, choosing to keep carrying forward a balance each month.
On average, those with personal debt had an average of $28,000 in personal loan debt and just over $4,000 in credit card debt.
Todd Skerman, head of member experience at CUA, said that it was unsurprising that there was a link between how financially indebted people were and the level of financial stress they felt, but added that many people reassess their financial situation in the new year to initiate changes for financial fitness.
“A significant number of Australians are making plans that are designed to get back in control of their finances this year, with reducing spending and paying down debts coming in as the most common financial resolution for 2019, followed by setting up a weekly savings plan, developing a household budget, and spending less money next Christmas.”
He added: “We saw that the more people owed on personal loans and credit cards, the more likely they were to say they’re finding it hard to make progress on repaying their debts.”
The head of member experience added that too many consumers focus on the dollar figure they repay to their debts each week, rather than realising how much of their debt was incurred off the principal or the outstanding balance.
This can generate a “vicious cycle” for borrowers, who pay off as much debt as possible each week while only covering costs of interest, not the principal.
“This often leaves people feel a sense of hopelessness and like their financial wellbeing is going backwards,” Mr Skerman said.
He continued: “Consolidating a number of smaller debts into a loan or credit card with a lower interest rate can be one strategy to pay down your debt more quickly. Others may need help with financial planning – it could be as simple as setting up a manageable and realistic budget you can stick to long-term.”
It could also be beneficial for consumers to consider their spendings on cash, credit or using “buy now, pay later” services like Afterpay, according to Mr Skerman.
“Think about how long you expect it will take to repay the debt and then look at what is the most suitable credit product to take out,” he added.
“Credit cards are best suited to purchases you expect to pay off more quickly, but if you think it will take longer than three months to repay, you may want to consider a personal loan.”
Although personal loans are commonly sought after to acquire assets, like a car or boat, they can also be a good option when planning a wedding or travelling abroad.
“Nobody wants to be paying high interest on a credit card six to 12 months after the tan has faded.”
He concluded: “Every individual’s circumstances will be different, so it’s important to chat to someone about your situation, your goals and the best options to get you there.”
[Related: Mortgage borrowers more satisfied with brokers]
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