Whether you already have a mortgage, are looking to grow a portfolio of investment properties, or you aspire to one day buy your first home, there are five things you can consider that will greatly improve your financial wellness.
Causes of financial stress
First, let’s explore some of the factors that hold people back from achieving financial wellness:
Not knowing your numbers.
We’re all super-busy… and let’s face it, dealing with your finances is boring at best. If you’re under financial pressure, it’s the last thing you want to focus on.
So it’s no surprise that 82% of Aussies don’t know their exact home loan rate – which makes it hard to know if you’re paying too much on your mortgage – and 86% don’t know their monthly expenses.
Mortgage out of date.
40% of Australians haven’t reviewed their loan in the last two years to make sure it is the most suitable product (and best rate) for their needs.
With record-low interest rates, these people may be paying much more interest than they need to (and potentially missing out on other benefits). It costs nothing to review your loan through a mortgage broker – so it really is a no-brainer.
If you haven’t got a clear understanding of the type of debt you hold – whether it is ‘good’ or ‘bad’ debt – you can focus on paying off the wrong type of debt and cost yourself even more interest.
Not having a plan for your finances.
Without a plan, you can feel like you’re not in control of your future. This can cause you to tread water financially: not going backwards, but not progressing either.
Five steps to financial wellness
The good news is that in many cases, anyone – whether a graduate or a CEO – can move towards financial wellness simply by having a better understanding of their current financial position, planning for what they want to achieve, and getting expert financial advice and support to help them get there safely. And those in the not-for-profit sector can take advantage of salary packaging benefits to fast-track your journey to financial wellness.
Here are five things you can do to move towards financial wellness:
1 Know your mortgage
The first step is to ensure you’re taking full advantage of record-low interest rates, and using additional mortgage features that boost your financial wellness.
Loan rates and features change all the time. You should review your mortgage every two years to ensure you get a great rate and enjoy features and benefits (such as overdraft and redraw facilities) that fit your current needs – not ten years ago when you took it out. Shopping around can be time-consuming, but it will mean you avoid the ‘loyalty tax’ of just sticking with your current provider. (Better still, a mortgage broker will do all the legwork for you.)
And make sure you know your repayment options so you can pay it off sooner and reduce the interest you pay.
2 Know your expenses
Take the time to review and understand your financial situation. Calculate your monthly expenses to know how much you can borrow (especially first home buyers), and to potentially find ways to save some cash.
Download our free Budgeting Tool to help you track and manage your expenses, and find hidden savings.
3 Know your salary packaging options
If you work in the not-for-profit sector, you are entitled to a range of special salary packaging benefits that can reduce your tax and increase your take-home pay. This can be a great way to fast-track your property dream – and it’s easier than you think.
4 Know your debts
Knowing the difference between your ‘good’ and ‘bad’ debts can help you to prioritise your repayments.
For some people, consolidating your debts is another great way to free up cash flow. You can also consider payment plans to take the sting out of regularly recurring debts. These options may not be right for everyone, so make sure you speak to a finance expert before making any changes.
5 Know your plan
If you don’t have a plan of where you want to be, it makes it very hard to get there!
A good plan will consider things like:
When you want to buy your first home or an investment property
How you can create and use equity in a current property
When you want to retire, and what lifestyle you want to live
How to start or grow a nest egg for your kids
If you do one thing…
If you only do one thing after reading this article, I urge you to review your mortgage with a mortgage broker or financial adviser. It’s easier than you think, won’t cost you a cent, and the savings can be significant.