New Year, New Budget

New Year, New Budget2018 has well and truly begun, the festive season is over, and some people will be a few kilos heavier!

Goals are being set about fitness and business, but too often we forget to set financial goals, including our personal finances. So, we are making a call for February to be the time to set financial goals and make 2018 the year for reducing debt and keeping on top of your money!

Here are some quick tips to get you started:

1. Budget

Most people hate the word budget however it is one thing I work closely on with my clients. If you run a business, you know when your money is coming in and when your money is going out. It should be the same for your personal budget. There are so many items being direct debited from your account, keeping on track of them is hard to do, sit down, take the time to know how much is coming in, going out and the date those repayments are coming out of your account.

2. Saving to a separate bank account: As part of your budget, set aside an amount to be automatically transferred to a separate savings account. It doesn’t have to be a lot, sometimes all you need is to start. If this transfer happens regularly enough, you will start to see your savings build nicely.

2. Home Loan Interest Rate

If you have a home loan, you need to regularly review that loan to ensure you have the lowest possible interest rate you can get based on your circumstances. There is no point paying an extra 0.50% to a lender when you are trying to pay your home loan off as soon as possible. Be sure to contact your broker for a chat on how to check your bank is doing the right thing by you. With so many changes in recent times there is a very good chance you may be eligible for a rate reduction. Even the smallest reduction in rate can translate to a large saving over time.

3. Offset account

An offset account is not for everyone, however if you are good with your money then an offset account is beneficial to maximise every dollar you earn. When your lender calculates your monthly interest amount, the balance in your offset account is deducted from the loan balance, making your interest liability significantly lower.

Don’t be fooled with the name either, an offset account is a regular savings account with full access to your money. Have your pay credited to this account and keep the balance as high as possible for as long as possible. Have your bills come out at the end of the month so you have more of your own money in your own account for as long as possible.

4. Make extra repayments to your home loans, personal loans and credit card debt

If you have had a home loan when interest rates were at the other end of the cycle and were up at 6 or 7%, did you notice when the interest rates were being reduced that your home loan repayments didn’t reduce? This is because when interest rates fall, the lenders keep the repayment the same. They don’t ask you to reduce your repayment. It is up to you to make the call. In most cases people don’t even notice the repayment staying the same and in effect they are paying the home loan off sooner.

When home loan rates are nice and low like they are now, increase your regular repayments by a small amount, whatever you’re comfortable with, and before you know it you will be in front of your home loan and paying your debt off sooner.

There are always ways to help reduce debt, manage money and build your savings, however it all starts with you. If you don’t take the time to review your finances, then it just makes it harder to manage.

Start 2018 off with a review of your finances and stay on track for a successful year! If you would like to discuss your finance, please don’t hesitate to contact us.

Alex KempthorneNew Year, New Budget