Whether you’re saving for something special or a home deposit, want to shave some cash off your mortgage payments or simply budget better, these five-point plans will set you on the right path.
Money savings tips
- Set a goal to know what you’re saving for. Setting a goal will help you focus on the benefit you will receive from savings. Whether it’s for a deposit for a home, a holiday, retirement, or piece of mind, setting a goal helps you remain focused.
- Make a budget. One of the best ways to take control of your finances is to do a budget. It helps you work out where your money is going, and where you can redirect money to help you save towards your future goal.
- Give yourself a goal of how much money you can afford to live on and stick to it. For example the Barefoot Investor recommends you live on 60% of your income. This leaves you 40% for savings, and emergency money.
- Keep track of your spending. This will help you to make sure you don’t live beyond your set target.
- Select a high interest savings account that will reward you for your savings.
Ways to save for a home deposit
- Work out the total amount you need to save, how long it will take, and how much you’ll need to save each month to reach your goal. Working towards a concrete figure gives you something specific to aim for.
- Work on paying off your credit cards and personal loans. Once these debts are reduced, you’ll be able to increase the amount of money you are able to borrow.
- Pay yourself. Open a high interest savings account, then set up a direct debit so you make a deposit in to your savings every payday. If you have extra money left at the end of each month, put that in the savings account too.
- Downsize. Rent is a big monthly outlay so try and reduce it; could you live somewhere smaller or further out of town for a while? Could you get a lodger to help with costs? Downsizing will also help reduce household bills.
- Know what you’re entitled to. The First Home Super Saver (FHSS) scheme allows first home buyers to save a home deposit within their super fund. You can make voluntary super contributions up to $15,000, either through a salary sacrifice scheme or after-tax payments. When you withdraw the funds, you’ll pay a reduced tax rate, making your money go further. For more details visit ato.gov.au
Ways to save on your mortgage
- Depending on what your needs and requirements are the following tips could help you save money off your mortgage. Think about what is best for you, and remember you can always call your adviser for help.
- Put your income in an offset account. The amount in your offset account is deducted from the amount you owe on your mortgage, so you pay interest on a smaller amount. If you have $5,000 in an offset account on a $300,000 loan at 4.00% p.a. this could save you over $11,000 in interest over a 30-year loan term.
- Make fortnightly instead of monthly repayments. You’ll pay off slightly more than is required each month, equating to an extra payment per year. If you have a $300,000 loan at 4.00% p.a., paying fortnightly would save you over $33,0001 in interest and take over four years of the term of the loan
- Round up what you’re paying. If you have a $300,000 mortgage with a 4.00% p.a. interest rate and 30-year term, your monthly payments will be $1,432.251. Round each payment up to $1,440 – just $7.75 more a month – and you’ll save over $2,500 in interest and reduce your mortgage term by three months.
- Get a redraw facility. This allows you to make extra mortgage payments but still withdraw the money if you need quick access to funds.
- Don’t let refinancing costs necessarily put you off. If you find a significantly better rate at a different bank, it can save you thousands over the term of the mortgage. Get a breakdown of all fees to work out if it’s worth your while.
Ways to save on your household budget
- Change one habit. Don’t want to give up your morning coffee? That’s completely fine; but limit the UberEats or pub meals you have per week to only one. Changing just one aspect of your spending can make a significant impact
- Shop around. If you find a better deal on your gas, electricity, phone or television contract then either change suppliers or ask your current provider if they can match it.
- Find alternative things to do – there are great free events on weekends around your city. Plan ahead and have fun, while adding to your savings!
- Start a lunch club. The average Australian spends nearly $900 a year on buying lunch, so you’ll save big bucks by making your own at home. Make it a social occasion by finding a few colleagues who are keen to join you, setting up a regular lunch club day, and taking it in turns to make and bring in lunch for each other.
- Don’t pay high interest. If you’re paying a high credit card interest each month, consider a 0% p.a. balance transfer card or a low interest credit card so you can reduce your monthly interest payments. Remember to keep an eye on the rate when the 0% interest period is over so you’re not paying over the odds.
1Assumptions: This assumes the interest rate does not change, the repayments remain the same, and you do not make additional repayments.
Disclaimer: Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every reasonable care has been taken in distributing this article, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information contained within it. Any views expressed are those of the author(s) and do not represent the views of Australian Unity Personal Financial Services Ltd. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Taxation Information in this document should not be relied upon without seeking specialist advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459. This document produced in July 2019.