Australians household debt and latest budgeting theories

Australians household debt and latest budgeting theories

16 June 2009

Australian household debt may not be as out of control as many people fear with latest figures showing that the median Australian household debts equate to approximately 8 per cent of total household assets. This figure illustrates that claims of a debt crisis in Australia are relatively unfounded with some economists saying that the only real threat of pushing Australian debt issues higher will be if unemployment rises significantly.

However, promises of low interest personal loans and credit cards deals in addition to the First Home Buyers grant may also encouraged people to get into debt.

Figures show that less than 10 per cent of Australian households had excessive debt in 2006 and as of 2009 the majority of household debt across Australia is held by those in a higher earnings bracket that have the ability to repay any debts and personal loans relatively quickly.

Of course, this doesn't mean that people shouldn't be trying to budget and save money where possible with the majority of the financial and accounting industry advising that people create a budget and stick to it that will allow them to manage their finances and repay any debts as quickly as possible. One of the latest approaches be supported by many financial and budgeting experts is the "Bucket Budgeting" theory.

Bucket budgeting, in particular the three buckets budget approach, is where an individuals or families income is divided into three separate bank accounts, aka buckets, all with a different purpose. These are long term savings account, fixed expenses including mortgages and personal loans, and daily expenses such as petrol allowances and groceries.

This approach suggests that people first decide how they will divvy up their weekly income into savings and spending and how to allocate it into the three accounts, meaning how much of their weekly earnings to save, how much to meet fixed costs and how much for daily living.

Bucket budgeting allows for unexpected expenses and is ideal for people with minimal time to balance their budgets and finances while maintaining their savings and personal loans.

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