I read an article recently which stated that…
“Australia has been titled one of the most indebted countries for household debt in the world… and there is a growing comfort with housing debt from current home buyers compared with previous generations.”*
These sobering statistics had me thinking, because as you know, I love finding practical and easy to use life hacks to fast track my clients’ results in the areas of financial management, wealth creation and debt reduction. So if you are one of the millions of Australian homeowners who already have an existing mortgage and are looking for ways to fast track your debt reduction plan, why not try some of these simple budgeting tips? Remember when it comes to paying down your mortgage over the life of your loan, every little bit extra that you can pay off now will repay you big rewards into the future.
- If you have multiple loans and types of debt, ensure that as one debt is paid off, designate those regular existing payments straight onto your mortgage to reduce your loan more quickly.
- Try not to let household bills get on top of you or build up over time. Instead, pay them out as they’re received or at least on a monthly basis.
- Pay off loans according to your budget. Don’t pay just the minimum amount required if your budget allows for more.
- Try to reserve credit for major purchases or genuine emergencies and always pay out your credit card debt in full each month to avoid costly interest.
- Minimise borrowing for items that depreciate in value, such as electronic equipment, cars, boats and white goods. Try to use credit only to purchase value-appreciating items, such as investments.
- Use your tax refund to help reduce your mortgage with a lump sum payment each year. The online Mortgage Calculators provided by your bank will show you how effective this can be over the life of your loan.
- If you are a working couple, live on one wage and use the other for paying off your mortgage years sooner and clearing any other debts you have.
- Avoid getting trapped into recurring rental agreements, high ongoing interest bearing contracts and avoidable easy credit schemes. (eg. furniture rentals, mobile phone purchase plans and going into debt to pay for living expenses).
- Avoid tempting sales, which offer “no down payment and no interest”. You can start these purchases with all the best intentions, but the commitment can so easily get on top of you – which is what the finance companies hope will happen!
- If you can afford it, pay your bills annually not half-yearly or quarterly. Many insurance companies, for instance, offer a discount for full payment of your premium up front, as it saves on their bookkeeping costs. You can negotiate with many different businesses for a similar arrangement.
- Don’t forget your savings plan as the money you pay yourself out of your earnings is the foundation of your wealth. Savings enable us to buy better, savings enable us to invest and savings reduce our interest bill. In the cashless digital economy, money in the bank and cash in hand can still be king.
If you are interested in any further ways to fast track your budget and reduce your mortgage sooner, feel free to come in and sit down with a qualified mortgage broker to assess your specific situation. Perhaps a refinancing option will be the best solution for your circumstances?
To your mortgage success,