How to manage your debt

Statistics on household debt levels reveal there is cause for concern for all Australians, including seniors.   

While debt can be a useful tool for financing a home or education, it can also become a burden if not managed effectively. 

This is especially true for members of Generation X (born between 1965 and 1980) and Baby Boomers (born between 1946 and 1964), who are facing unique financial challenges. 

Statistics show that Gen X carries the heaviest debt burden in Australia, with an average loan balance of $448,000, largely driven by mortgages. 

Boomers, on the other hand, have a lower average balance of $82,000, probably because they are closer to retirement and have paid down much of their mortgage debt. 

However, both generations are susceptible to feeling the pinch of debt, especially with the current high interest rates.  

Here are some strategies you can use to manage your debt effectively: 

• Budgeting and tracking: The first step is to understand your financial situation. Create a budget that outlines your income and expenses, including debt repayments. Track your spending for a month to identify areas where you can cut back. 

• Prioritise debts: Not all debts are created equal. High-interest debts such as credit cards should be tackled first. Consider consolidating multiple debts into a single loan with a lower interest rate.  

• Boost your income: If you are working, explore ways to increase your income, such as taking on a side hustle or negotiating a raise. Even a small increase can make a big difference to your debt repayment capacity. 

• Reduce expenses: Review your spending habits and identify areas where you can cut back. This could include eating out less, downgrading online and streaming subscriptions, and finding cheaper alternatives for everyday expenses. 

• Seek professional help: A registered financial advisor can provide personalised advice and help you develop a debt management plan.  

• Plan for retirement: With retirement on the horizon, Gen X needs to ensure their debt repayments don’t derail their retirement savings. Consider increasing contributions to superannuation or other retirement plans. 

• Downsizing: If you own a large home, consider downsizing to a smaller property with lower ongoing costs. This can free up cash flow for debt repayment and retirement savings.