Are your finances feeling a bit all over the place? Do you struggle to monitor your spending and savings? Well, the good news is being in control of your finances is not as hard as it seems. Here are four simple tricks to get you started.
1. Create a budget and set a savings goal
Rule number one when taking control of your finances is having a plan. Look at your payslips, debit and credit card transaction history, bills, and any loan repayments. It’s important to assess how much money is coming in and out, and see where you can make adjustments in your spending.
Don’t stress if math isn’t your strong suit or spreadsheets fill you with dread, as there are plenty of free money management apps and budgeting tools available that do the hard work for you, so tap into these.
Next, set yourself a savings goal. Say you want to save an extra $100 per week. Consider your weekly expenses and see what you can cut down on or maybe even get rid of. It could be eating out less or wearing the clothes you own instead of buying new or switching to a bank account that doesn’t charge fees—whatever works best. Just make sure your goal is attainable in the timeframe you set. Just like dieting, the worst thing you can do in budgeting is not being realistic and allowing for a treat every now and again.
2. Shop around for a new mortgage
A great way to make an improvement to your personal finances is switching to a more competitive mortgage option. If you are currently paying back a home loan, it’s worth shopping around, as switching could save you thousands of dollars.
Wondering if it would really be worth it? Let’s look at this example which shows that just by switching from a rate 0.50% lower, you’d save $61,230 in interest over the life of your mortgage.
Loan amount: $750,000
Loan term: 25 years
4.0% interest rate: $3,959 per month
3.5% interest rate: $3,755 per month
Savings per month: $204
Savings over 25 years: $61,230
Imagine if you scored an even lower rate!
3. Prioritize your personal debts
Got credit card or personal/car loan debt? Make sure you prioritize your repayments, starting with the highest-interest-earning debt first!
If you have multiple debts across a range of credit card or loan products, maybe consider a debt consolidation loan. These loans roll all your repayments into one and generally offer a lower interest rate. Just be mindful to not combine a debt consolidation loan with your mortgage, as this can stretch out your debt and end up costing you more.
Alternatively, if you only have credit card debt, finding a balance transfer offer is a great way to pay back what you owe and save on interest repayments. Some credit cards will have a 0% interest rate for a certain period of time (generally between 3 months and 30 months), which means that you can use this time to ensure that all of your repayments go towards paying back debt, instead of interest charges.
4. Consider where to put your savings
Whatever you do, do not keep your savings in an everyday account. One, it is too easy to eat into the balance unwittingly, and two, you don’t earn interest. The best two options for your savings is either a high-interest savings account or a term deposit.
If you need flexibility with how much and how often you put away and withdraw, a high-interest savings account is the option for you. These accounts reward customers for their regular saving efforts with bonus interest rates. The downfall is that you are able to withdraw the cash whenever you like. Thus, a good tactic is to set up this account with a different bank to your regular account so that you are less tempted to transfer your money.
On the other hand, if you like the idea of “out of mind, out of sight”, locking away your savings in a term deposit might suit you better. Unlike a savings account, you cannot access your money until the term deposit reaches maturity, unless you want to pay high fees, but in return you’ll usually get a better interest rate.