How You Save Money Even with Mortgage Commitments
For most people mortgage repayments makes up a big part of their financial commitment. This is not surprising since with rising home values, loans required to buy property have gone up significantly and with-it mortgage repayments amounts. This makes savings a lot harder for borrowers especially when they have day2day living expenses as well.
What if, the solution could be as simply as working off a budget?
Most people either cringe at the thought of a budget or even the word “budget” while others probably do not even know what budget means. We are here to help you see that your budget can be a great tool to help you feel more comfortable and hopefully assist you in saving while paying off your mortgage.
How can having a Budget Help?
A budget is a way to keep yourself and/or your family on track with spending while also holding yourself accountable for what you are spending each month. One of the first steps to managing your budget is learning how to do that.
If you have multiple credit cards and high interest debt accrued, it may be hard at first to find those extra dollars. You will have to train yourself to spend less and get rid of unwanted credit facilities where possible.
1: Prepare a Budget
If you’ve never had to budget before, we won’t lie to you, it will take some time and dedication. However, the result and reward will be worth it. You’ll feel a little lighter knowing that you’re only spending what you can afford and that you’re disciplined and have control of your finances. You will need to know some key information before you can begin making a budget like your monthly income, your monthly bills, and your plan for how much you would like to spend each month.
A budget can be a great tool and does not mean you have to eat bread and water for every meal to try and save money. Remember, you just have to be smarter about your decisions and know that reaching your goal is just around the corner.
You will actually feel more in control of your money and more confident about the financial choices you’re making. Start by writing down your total income on the right side of a page. Do not leave anything out. Add the total pay after tax for you and your spouse or significant other and note at the bottom of the page (Using an excel sheet will be lot easier option).
Next, list your expenses on the left side of the page. The mortgage, the power bill, water bill, Foxtel. (This is where you ask yourself if you REALLY need it when there are over 50 free-to-air stations plus YouTube available) Don’t forget to include your non-monthly bills such as a quarterly rate levy or insurance payment as well as things like credit card bills, groceries, petrol, etc. Now subtract your expenses from the noted total income and see what you are left with.
2: Review and Adjust Your Spending
If you feel like you are spending too much in a certain area, such as at the supermarket, start planning your shopping trips. Make a shopping list before you hit the road and even try buying non-branded products. Store brands are typically much cheaper and contain the same ingredients as name brand goods (and potentially made at the same factory).
Or if you have large debts like credit card bills or personal loan payments, start trying to pay those off more and more each month. Once you get the figures down you will see the light at the end of the tunnel and be that much closer to paying them off forever. The money you’re able to save each month should be applied to pay down debt with highest interest rates first.
3: Consider a Refinance
If you currently have a home mortgage and feel your payments are too high or you would like to pay less, you should consider refinancing. Refinancing and moving your loan to a lower interest rate can help you save a lot of money each month!
It’s important to know where you stand with the current mortgage you have in place. If you have owned your home for a while and you are close to paying off your mortgage (say within 10 years), or have fixed interest rate, you’re probably better off keeping your current loan term as the break fee may be greater than any interest savings. Refinancing helps you save in the long term, but saving is saving when you are hashing out a budget.
Facts to consider: Banks usually give their best mortgage deals to new customers, some also provide between $1,000 - $2, 000 in cashback reward to new borrowers, regardless of it being for a purchase or refinance. No only is this sufficient to pay any mortgage/ title transfer fees, in most instances, clients have surplus funds left to place into their offset accounts.
4: Utilities and Insurance
Take some time to review your insurance premiums and what you are paying for. Many people don’t realize they may be overpaying for things like car insurance or home & content insurance by sticking with their current company. We’ve all heard it, “we’ve been with them from the start”. However, it’s time to consider reviewing your policy with every renewal notice.
Most people have health insurance as well and if your rates are increasing each year and your premium seems to get higher and higher, use the free government comparison site https://www.privatehealth.gov.au/dynamic/search and check if there is a comparable policy for cheaper.
Like insurance, utility cost is another big drain on your cashflow and can potentially put cash back into your pocket if you take time to do some research. Again, the federal government has a free comparison site https://www.energymadeeasy.gov.au/ to assist consumers in locating the cheapest utility provider for their city.
Getting a budget in place and actually sticking to it may provide you with extra cashflow which you can use for discretionary purchases. Or better yet, place it in your offset account so that you can pay off your mortgage over a shorter term by reducing the amount of interest payable over its life.