Have you ever heard of a debt spiral?
A debt spiral happens when your spending habits are no longer sustainable. You may have reached a point where you never seem to be on top of your finances, caught in a cycle of borrowing and spending that only increases your current debt.
Debt spirals are hard to stop once they’ve started. But they can be prevented. Here’s how to start.
The Challenge With Overspending
Overspending is the main culprit behind debt and the precursor to why people who don’t keep track of their expenses are at risk of falling into a downward debt spiral.
Many consumers cling to finance options like credit cards and Buy Now, Pay Later (BNPL) payment schemes to get the items they need now while paying for it at a later time. However, many don’t realise that when these are stretched out longer than anticipated, your savings are placed at risk. You are at risk to miss payments, accumulate late payment fees, interest rates pile up, and your credit rating also takes a hit. Eventually, this can lead to bankruptcy if left unchecked.
Taking a close look at your budget and monitoring your expenses is crucial to prevent yourself from being swallowed by a debt spiral.
How Credit Cards and Buy Now, Pay Later Schemes Can Lead To Overspending
Alternative finance options like credit cards and BNPL platforms can be great when they are used properly. However, the illusion of having unlimited access to funds can be hard to resist. This can encourage you to spend more than you can actually afford, leaving you at risk of ending up in debt you can’t pay off.
In a report by the Australian Securities and Investments Commission, one in six people who use BNPL schemes had become overdrawn, delayed a bill payment, or borrowed additional money to overcome payment obligations.
In the same way, credit cards can lead you to overspend and overcommit on purchases that you may find difficult to repay in the future.
Even worse, hidden and nasty surprises such as late fees, account-keeping fees, early exit fees, and interest charges can all pile up and put a bigger dent in your dwindling budget.
Restrictive terms and inflexible payment schedules can also leave you feeling trapped when the unexpected happens. Imagine how hard it would be to keep up with repayments if you lost your job or had expensive medical bills to worry about.
How Budgeting Can Help with Overspending
Proper budgeting can help prevent overspending and protect against entering into the endless cycle of a debt spiral. Creating a budget plan allows you to track your spending habits and see whether you’re shelling out more cash than you can afford.
It also helps you prioritise your needs first so you can create a balance between saving and spending. Having a budget plan prepared gets you to focus on paying off a credit card or loan quickly so you save on interest rates. More importantly, it allows you to allocate your money towards bigger goals and plans for the future.
To prepare your budget, you’ll need to choose a time period that fits your needs and lifestyle. This can be done weekly, fortnightly, or monthly. Track the money going in and out across this period and include all payments such as your phone or electricity bills, rent, any existing loans, transport needs, food expenses, and so forth.
Once you’ve outlined the money you have on a particular period versus the expenses you’ve incurred, it’s easier to track if you’re spending more than you should.
You’ll find yourself in a better position to identify what areas of your spending you’ll need to reduce or adjust to ensure you’re covered for a particular time period.
To get started, you can download apps like Pocketbook to track your expenses and use any available budgeting template online and customise it as needed.
How a Gimmie Plan Can Help
Gimmie was launched to give Australians a better way to get what they want. We know that it can be difficult to control the unexpected, which is why Gimmie offers flexible payment plans to suit your budget.
Gimmie gives you the ability to choose how long you need to pay to suit your lifestyle with the following options:
- 1 year – a great way to stretch your payments but pay it off quickly
- 2 years – keep your payments as low as possible
Once you’ve picked your payment term, you have the option with our 90DayPay to pay out your Gimmie plan within 90 days and only pay the original price.
You never have to feel trapped by restrictive terms and inflexible payment schedules. Gimmie offers you a better, fairer, and affordable way to own what you want now so you can stay in control of your finances.
Don’t get sucked in by boundless credit limits
Don’t be enticed by boundless credit limits from credit card companies and BNPL schemes. They’ll only trap you into overspending. Gimmie gives you a smarter and safer choice. Since we’re regulated by the National Credit Code, responsible lending assessments will be conducted to ensure that you can afford your purchase. This means you get extra support and protection to make sure you don’t end up in a debt spiral.
No hidden nasties
With Gimmie, you get simple and easy finance. You don’t need a law degree to figure out our terms and conditions. Gimmie is always clear and upfront about fees and payment terms. Have peace of mind knowing there will be no nasty surprises along the way that can blow your budget and send you into a debt spiral.
Stop overspending, and start budgeting with Gimmie.
Learn more about how it works and if Gimmie is right for you.
