The Reserve Bank will again decide next Tuesday whether to raise interest rates further in their ongoing quest to reduce inflation, and many economists are predicting it could happen.
So what can borrowers do, to handle another possible rise in their home loan repayments?
One easy way to feel like you are taking charge of your finances is to have a monthly budget plan to pay off the mortgage, pay bills and cover daily living costs, while constantly reassessing your lifestyle and what your family actually needs to live happily.
The experts are also predicting that inflation will settle throughout the coming year, and that interest rates could be lowered. In the meantime, here are some tips to help manage your finances now and into the future:
– Reassess the personal budget
Think about what daily, weekly, monthly and annual costs you can remove, even seemingly insignificant costs such as takeaway coffee, snack food and ‘niknaks’. Track expenses and train yourself to think about where the money is going and whether it’s necessary for it to go there. Perhaps even carry around a small notebook for a few weeks and make a note each time you spend money – when you tally it and take a good look, you will possibly be surprised to see why it disappears so quickly.
– Review loans, credit cards and other debt
Consult a mortgage broker, accountant or financial advisor to see how to go about paying off your mortgage, personal loans and credit cards sooner or lowering your repayments. Use these professional resources to first of all make sure you borrowed within your means and then to work out what you can really afford as a regular repayment. You might find debt consolidation is a potential solution. Above all, remember that you need to have an enjoyable life. Your saving, your sense of achievement and your property should add to your happiness.
– The big things – are they needed?
Are you in a job that doesn’t pay what you are worth? Could you get another better-paying or more incentivised job fairly easily? Are you driving when you could walk or catch public transport? Does your vehicle guzzle fuel or always need repairing? Are you keeping but rarely using gadgets or big toys that consume power or petrol? Do you use goods and services out of habit, without comparing costs between products or companies? Take control of your spending and see what you really need, what you can give up and where you may need to analyse your reason for continuing with the status quo. You could be very surprised at the extra money saved.
– Take a home loan health check
The Australian mortgage market becomes more competitive every week, with new and existing lending institutions vying for consumers’ dollars. This means there is a wider range of mortgage products out there for a broader range of borrowers. If you are currently a mortgagor you may be surprised to find with just a little research a better loan out there – whether that is because it has more features and benefits or a lower overall cost. Most reputable mortgage brokers do not charge customers for service so you have nothing to lose by making sure you are doing the best thing by your budget in respect to your mortgage.
– Start a new saving account
Higher rates have meant that some savings accounts now come with better interest, so if you have any money to spare each month, consider putting it away. Do your research for the right account to save for a property or vehicle deposit, or to pay off lump sums on your mortgage or other debt. You might even use it to treat yourself over the next festive season. If you save $20 each week, you could end up with over $1,040 plus interest by the end of the year; not an amount to be sneezed at!
Above all, think of money and mortgage management as a positive learning experience, a technique to hone, rather than ‘mission impossible’. Changing your thinking may be all you need to succeed with your finances and live life with more freedom.
