How to cut your cost and own your home quicker

As we slowly return to normalcy, businesses are starting to rehire and extend employee work hours, though for many, it’s going to be a long journey back to pre-covid19 income levels.

How can you save money during income uncertainty? Individuals and businesses alike have found themselves coming up against this issue because they failed to budget during the good times.

For individuals, saving money through cost cutting is in many ways like flossing – we all know we should do it, but most of us never get around to it.

We often feel guilty because we know we should have done it a long time ago, and we feel overwhelmed because there are hundreds of things we could cut back on, but chose not to because we want to maintain a certain lifestyle.

Money is emotional

Money is about so much more than maths; finances can have a big impact on your emotions and sense of meaning.

Start off with quick wins, wins that you can achieve, pick something that over time is going to be meaningful and have a lasting effect on your finances.

If all you decide to do is save by buying occasional cheap bread, you may have saved $100 over the course of your life, but that doesn’t mean anything to your financial prosperity.

For greatest savings, focus on your top 3 expenses

For most people, it’s wisest to re-evaluate your top three expenses that you have the ability to save on through cut backs. This will often be mortgages (or rent in some cases), which you can try to negotiate down, eating out, and sporadic spending on clothing and material items that you may want, but don’t truly need.

There’s no need to go rummaging around to save on a $10 expense here and there, when you can get bulk of your cost-cutting wins from these three big items.

The easiest way to increase your cashflow by 100’s of dollars per month is through biggest ticket item: your mortgage. Why? Because banks give the best discounts to their new customers while the existing customers get partial rate savings or none at all.

What’s amazing is that, 3 out of 4 Australian’s leave thousands of dollars on the table even when regulators such as ACCC release research showing it’s almost effortless to save money by refinancing.

That tells us that getting a better loan is not so much about knowledge but the perceived effort required to change lenders even if one could potentially save thousands of dollars.  

At loansHub our customers don’t worry about the effort because our technology undertakes continuous reviews of their mortgages and when there is a better loan with financial benefits, our clients get the option to move their loan without leaving our platform.

Just like loansHub customers, you can ensure your financial success by setting up the right systems to enable long term financial gains, be it with your mortgages or savings.

Automation is key to staying on track

Too many people distract themselves trying to determine which high-yield savings account is the best one, when, realistically, unless you have millions of dollars, small differences in interest rates do not make a meaningful difference.

The yields on these savings accounts are not that high anymore – that’s fine, that’s normal. You do not really make money from having your money in a savings account anyway, it should be in your offset or redraw account.

A common mistake that people make with their home loans is not using their offset or redraw accounts effectively to maximise their interest savings. Reducing the amount of interest portion, you pay on your loan repayment, directly equates to reduction in your loan term.

You can however quicken your savings by setting up automatic transfer of additional repayment from your wages account into the offset account.

Automation is one of the best decisions you can make in your life, if you don’t automate your savings, you’re depending on your own nature to remember and manually contribute every month.

And despite all good intentions, most people will forget to do this.

The data shows us that when you automate extra contributions to your offset or redraw, that money grows because we forget about it and let the system take over.  Remember: Systems over willpower will get you financial freedom sooner.

Enjoyed this article? Take our mortgage shredder challenge and discover how much you can save on your home and investment loans by using loansHub technology as your personal mortgage manager. To read more insightful articles, click here.

This article via Business Insider does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.