Each Year we Make New Year’s Resolutions that Focus on Our Health and Wellbeing.
But how often do we think about improving our finances? Here are five financial New Year’s resolutions that could help you start 2019 with a bang!
You might have missed it over the silly season, but the good news for mortgage holders is that many economists are tipping that we won’t see the RBA announce a rate rise in 2019.
Indeed, three leading economists now believe we may even see an interest rate cut this year. (Although, as we saw in 2018, that doesn’t necessarily mean the banks will follow suit).
But instead of sitting around waiting for the RBA and the banks to make a move that could save you money, here are five New Year’s resolution ideas to help you out in 2019!
Resolution idea #1: Cut back on the credit card purchases
The average card holder is paying around $700 in interest per year if their interest rate is between 15 and 20%, according to ASIC.
That $700 is nothing to sneeze at. It’s enough to purchase a new suit or outfit to help you land that new job, fund a year’s worth of home and contents insurance, or take the family on next summer’s camping trip.
Additionally, as of January 1, banks and credit providers are now required to check your debt-servicing capacity more thoroughly before issuing a credit card.
That means if you’re planning to load up on one credit card, and then transfer the debt to a card with a lower interest rate, you might find yourself out of luck.
With that in mind, the next question to ask yourself is: do I really still need a credit card if a debit card will suffice?
Resolution idea #2: Get a home loan health check
Whether the rates go up, down, or stay where they are, it never hurts to get a home loan health check to make sure there’s not a more suitable home loan out there for your situation.
Because while the RBA kept their rates on hold throughout 2018, not all banks did too.
In fact, every single one of the Big 4 Banks increased interest rates in 2018. To make sure you’re still happy with the rate you’re paying compared to what’s available in the market, give us a call.
Resolution idea #3: Purchase less take-away coffees, alcohol and other items
Buying a $4 take-away coffee each day costs you a whopping $1460 per year. Making it yourself using a French Press or Moka Pot can cost just $260 – a saving of $1200.
The lure of micro-transactions – purchases that are low in cost and trivial in nature – can be a real obstacle for those trying to achieve their financial goals.
Other micro-transactions that most families can cut back on include alcohol, take-away food, gym memberships, and multiple entertainment subscriptions such as Spotify, Netflix and Foxtel.
Resolution #4: Ask your employer about salary sacrificing
Salary sacrificing – also known as salary packaging – is generally tax-effective for people who earn more than $37,000 a year.
It helps you save on tax by allowing you to forego your salary in return for non-cash benefits, including car leases, childcare, student loans or superannuation contributions.
It all depends on your employer and the industry you work in but there are three broad categories of things that can be packaged: things that attract fringe benefits tax (FBT), those which do not, and superannuation.
If you’re interested in exploring your options, make an appointment with your employer when you get back into the office this month to see if they can make it work for you!
Resolution #5: Review your insurance, superannuation and banking costs
Whether it’s your home and contents insurance, your car insurance, or a life insurance policy, by calling three or four insurance companies, getting quotes, and then comparing, you can save hundreds of dollars each year.
While you’re at it, make sure you don’t have more than one superannuation fund. If you do, consolidate it by following these steps to avoid doubling up on fees.
Finally, look into your banking fees. Just like a home loan there’s often a better deal out there, so make sure your bank isn’t taking you for a ride!
Final word: Set a financial goal If you’re not back at work yet, then use this precious time to carefully consider what financial goals you want to achieve in 2019.
It could be saving up for a long overdue holiday, putting away more money towards your kids’ education, or buying an investment property.
If you’re stuck for ideas, come in and have a chat to us. We’d be more than happy to help you identify goals, and can also help with some of the suggestions listed above.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
By Dave Fleming : 20 March, 2019
A big four bank almost overhauled its broker remuneration model so that the cost of mortgage broking services would be transferred to the customer, the royal commission heard. Here’s how to prevent that from happening.
The Royal Commission recently revealed that back in 2017 the Commonwealth Bank planned to replace commissions paid to mortgage brokers with a flat fee, but baulked at the last minute.
CBA’s CEO Matt Comyn told the royal commission that CBA believed the most attractive model was one where “customers would pay a broker”.
The move would have saved CBA $197 million over five years if everyone in the market moved with them.
However, without regulator intervention to drive an industry wide move to this model, CBA feared they’d be left hung out to dry by the other big three banks.
“We came to a view that nobody will follow and we will suffer material degradation in volume,” Comyn said.
Not only would this model be a major disadvantage to consumers going forward, it would reduce a new broker’s revenue on an average loan to about a third of what it currently is.
Basically, the only real winner would have been the big banks.
Not the customers. Not the mortgage brokers.
Some interesting stats
Here are some interesting statistics from Deloitte Access Economics that may explain why CBA was looking to limit the growth in the mortgage broking market:
– Over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).
– 27.9% of residential loans are arranged through lenders other than the big four banks and their affiliates, providing competition and more choice for consumers.
– On average, mortgage brokers have 34 lenders on their panel and use 10. It’s this additional choice that adds competition in the market. The only winners from less competition are the big banks.
– 56% of residential loans were settled by mortgage brokers in the September quarter in 2017. This is up from 44% since 2012.
– 70% of a broker’s business comes directly or indirectly from existing customers, demonstrating high levels of customer satisfaction.
– 9 out of 10 customers are satisfied with the services provided by mortgage brokers.
It’s still a live issue
Basically, the only reason CBA didn’t pull the trigger on the move was because it was worried that if it did, the other lenders wouldn’t join them. Instead, they’d swoop in and steal their business.
However, if the regulator enforced a flat fee model, then all the lenders would have to get onboard.
That’s exactly what could happen if it becomes a royal commission recommendation, which is a possibility considering the extensive line of questioning from the royal commission’s counsel assisting, Rowena Orr.
How can you help?
The best way is to contact your local MP to let them know you’re happy with the mortgage broking service we’re currently providing.
By letting your local Federal Member of Parliament know this you can help prevent the cost of our future services being transferred from the bank over to you – and you’ll also be showing your support for us.
Seven in 10 Australian mortgage holders have not stress tested their home loan. But don’t stress, it’s much easier to do than you think.
Deloitte Access Economics’ latest report makes for pretty interesting reading.
It turns out the average Australian has a “wide-ranging hesitancy to make any sort of change” when it comes to their mortgages and other financial products.
“Why is it that educated consumers who know they’re not getting the best deal on many of their household products are so unwilling to take action to improve their household finances?” asks a surprised Deloitte.
Interesting mortgage stats
It turns out that 41% of Australians with a mortgage don’t check for interest rate changes because they either have no interest, don’t know what the RBA cash rate is, or do not see its relevance.
Even more interesting is that 68% of people say they have never stress tested their home loan.
“This is a particular worry,” says Deloitte.
“Recent estimates show that a 0.5% increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three.”
Worse still, a 2% increase would throw half of all mortgaged households into stress.
Now, that might sound like a big increase, but don’t forget that it wasn’t so long ago that interest rates were at that level. In fact, it was only six years ago in June 2012.
So how do you stress test a home loan?
Calculate how much extra a 0.5%, 1% and 2% increase on your mortgage would cost you each month and whether your budget can allow for it.
If you’d run into trouble, give us a call and we can work through some risk mitigation options with you, which could include locking in a home loan rate.
Why don’t people care about getting a better deal?
Interestingly, 1 in 3 people know there are better deals out there, while 1 in 5 don’t bother to check for a better deal.
It turns out there are three key reasons people don’t change to a home loan that would see them better off financially, with the first being decision making paralysis.
“Too often, many consumers get stuck before making a choice – and then they do nothing,” explains Deloitte.
Another big reason is people “hate feeling dumb”.
“Consumers also hesitate when they fear or worry about the possibility of making a bad decision. This, coupled with the fact that people tend to avoid what makes them nervous,” adds Deloitte.
The final key reason is that people simply put it off.
“Outcomes set in the distant future typically lack a sense of urgency in contrast with everyday needs, making it easy to defer decision making to a tomorrow that never arrives,” says Deloitte.
How can you overcome these barriers?
Well, here’s the good news. We can help you overcome all three.
For decision making paralysis we can come up with a shortlist of options, reducing the choices you need to make.
Worried about feeling dumb? I bet you we’d feel pretty dumb if we did your job for a day too. But we make it our business to help educate you and bring you up to speed in this market.
And how can you overcome avoidance? Simple. Give us a quick call today and we’ll get the ball rolling for you. You’ll be surprised how little time and effort it takes.
By Dave Fleming : 20 March, 2019
We thought we’d have a little fun this week and look at how much it costs the average Aussie family to own a pet. After all, two in three households have one and very few budget for them!
Let’s be honest, owning a pet goes hand-in-hand with the great Australian dream of property ownership.
So let’s be clear here: we’re definitely not making a case against pet ownership. However as Christmas time usually coincides with a spike in pet purchases, it’s a good time to look at the monthly cost factor.
Because if you’ve decided to take on the responsibility of welcoming a pet into your household, then it’s something you oughta plan for and do right!
Basically, you’re looking at an average of $123 a month for food, vet care, health products, grooming and boarding.
To avoid any vet bill blow outs, it might also be worth considering pet insurance, which will cost an extra $293 per year. Or $25 per month.
And while we’re at it, here’s a fun fact: the number one thing that dogs eat that makes them sick is underwear! So be sure to keep them out of reach!
It’s also worth noting that the above figures don’t factor in upfront costs, which can range from $1000-$5000 to purchase a select breed, or $300-$500 to adopt an RSPCA dog.
If you’re more of a cat person, like 29% of Australian households, expect to pay $1,029 per year. That’s about $86 a month.
Pet insurance is slightly cheaper for cats, coming in at $20 a month, but then again – cats probably aren’t underwear connoisseurs!
It costs between $100 and $300 to adopt a cat from the RSPCA – depending on their age – while a select breed will cost you between $1,000 and $2,500, and sometimes even more.
Bird and fish
If you’re looking to ease yourself into pet ownership, welcoming a bird or fish into the fold is a much cheaper option.
It costs just $115 per year on average to own a bird, while fish are even cheaper at $50 per year.
As you can see, purchasing a pet is unlikely to cost you an arm or a leg (so long as they have adequate play toys!).
However, you can minimise the impact it has on your bottom line by including the monthly amount in your family budget, and protecting against vet cost blow-outs with pet insurance.
If you’d like to know more about budgeting, get in touch. We’d be happy to help out.
By Dave Fleming : 20 March, 2019
Most of us roll our eyes when we start seeing shopping centres spruik Christmas merchandise in November. While it’s important not to get caught up in the festivities too early, now’s actually a great time to start prepping to ensure your budget doesn’t blow out over the silly season.
The best bit? By following some of the below tips, you can turn the retailers’ early mind games against them and save money instead!
1. Buy food ahead of time
Christmas time tends to lead to a lot of socialising. Even if you aren’t the one catering, requests to bring a plate can add up over time.
Make a point of keeping an eye out for food and drinks specials ahead of time and buy items like boxes of chocolates, long life snacks and drinks when they are on special. That will make it much easier to stretch the food budget over Christmas.
2. Opt for Secret Santas
For people who have a large family or friendship circle, Christmas can lead to a long list of presents to buy. Many people prefer not to get extra clutter for their kids, so suggest a Secret Santa arrangement instead of buying for every person.
This way you can put more thought into each gift as well as not creating more stress.
3. Homemade wrapping paper
If the end of term results in your kids bringing home sheets of artwork, why not recycle these and use them for wrapping paper for the extended family?
Not only does this mean that the kids get to see their artwork being passed on to loved ones, but it also saves you money on buying wrapping paper that will be in the bin by Christmas morning.
4. Shift the focus
Rather than dwelling on social media posts of the perfect Christmas morning with matching pyjamas, shift your focus to the true meaning of Christmas: helping others who are less fortunate.
For instance, instead of getting new books for Christmas Eve story time you could choose books from the library and make a donation to charity that helps literacy in at-need communities.
5. Keep a track of your spending
With a large percentage of Australians overspending at Christmas (and feeling guilty about it), it’s important to keep a budget for Christmas and any associated events – like holidays – over that time.
By following a budget, and starting now, you can spread out your spending – $200 a week over five weeks is much better than $1000 in the week before Christmas.
6. A final few tips
– Create a list of who you need to buy for and brainstorm present ideas before you go shopping.
– Make your own gifts.
– Buy online when sales specials are on. This can help you avoid pressure from sales staff and impulse purchases.
– If hosting a Christmas day event, organise it early so attendees can help out with the food and drinks.
Want some extra help?
If you’re struggling with your budget and don’t know how you’re going to make the money stretch over Christmas, give us a call.
We’d love to help you come up with some strategies to ensure that you and your family get to make the most of the silly season ahead.