Avoiding life's financial traps

From personal loans to credit cards to long-term planning, the world of finance can present many pitfalls and painful lessons for those who do not tread carefully - but a new survey of financial experts could offer Australians some handy lessons in avoiding those personal finance traps.

The panel of professionals interviewed by the Advertiser newspaper said people looking to pick their path through the personal finance jungle need to bear a number of tips in mind.

AMP financial planner Mark Borg's golden tenet may sound obvious - but it's one that people ignore at their peril in an age where we are bombarded with a constant stream of 'must-have' gadgets and products.

"It might sound simple, but spending less than you earn is probably the number one rule," he said.

Phil Butterfield of Savings & Loan Credit Union added that paying off the balance of a credit card during its interest-free period is a good way of making sure spending stays in check.

Another expert, Steve Aspinall of Finance Mutual, commented that credit cards can be a "useful tool" for managing cashflow - but consumers should avoid only making the minimum repayment, as this usually leads to debt growing.

Other tips that could benefit consumers include using a personal or home loan to consolidate existing debts into a single repayment. However, Mr Borg noted that while this reduces the interest paid on the debt, it can mean that repayments are spread out over a longer period.

The experts also agreed that planning ahead and not leaving things to chance is essential to healthy personal finances. Mr Butterfield noted that "an hour or two once a year" can be enough to get money matters in order.

For help with budget planning, the Australian Securities & Investment Commission's Fido website offers a number of financial calculators.

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