It’s now the fourth month in a row we’ve seen an increase in the cash rate from the RBA and now sitting at 1.85%; it’s hard to believe it was only 0.10% four months ago. While RBA Governor Philip Lowe says, “The increase in interest rates over recent months has been required to bring inflation back to target and to create a more sustainable balance of demand and supply in the Australian economy,” it doesn’t make it any easier for us who have loans.
As “The (RBA) board expects to take further steps in the process of normalising monetary conditions over the months ahead,” now is the time to look at ways to alleviate the pressure on your household budget. Here are five things you can change this week to adjust to these (and future) increases.
1. Maximise your money with offset accounts.
It’s been made clear by the RBA to expect further steps to be taken to normalise monetary conditions over the coming months, with some predictions of 2% by December. This means it’s crucial to maximise your income.
Building up a buffer, no matter how big or small, using offset accounts attached to your mortgage loan account will help you keep the interest you pay down and funds easily accessible.
2. Take a look at your spending habits
Netflix, Spotify, Audible, Disney, Binge… They all add up. Taking a close look at your subscription costs each month could save you a lot of money. While they may have been a necessity during lockdowns are they as crucial for you now? How many can you cut out?
What about take away coffee? Even if you and your partner have one (or two) per week at $6.50 each, that’s an additional $55+ per month. Take a look at the cost of investing in your own coffee machine at home v’s buying it.
And who could forget buying lunch… The weekly treat of one or two lunches can add up. Making extra dinner each night and taking leftovers could save you around $1040 a year if you meal prep your lunches daily instead of buying a couple of $10 lunches each week.
3. It pays to shop around
Interestingly a recent study found Aldi to be the cheapest grocery store. In addition, an ING survey found the average Australian family saves $114 a month simply by grocery shopping online.
And don’t forget to review your insurances, energy, phone and internet to see if there is a better deal on offer.
4. Review your loans and finances for a better offer
If your loans are set as variable, or you haven’t reviewed what’s on offer, there is a chance you could get a better rate on your home loan.
It’s important to review your loans sooner rather than later. Lenders need to be sure that you can meet your repayments at an interest rate that is at least 3% higher than the loan product rate. By doing this, they can test your ability to handle stress and make sure that you are still able to make your payments on time. This means that as the interest rates rise, so too will the challenge you will need to pass the test.
Another thing to think about is consolidating your loans. If you have a car loan, a personal loan and credit cards you could be paying more interest compared to rolling it into one. This might mean you will also have more funds to save into an offset account to ease your cash flow.
All of these options have pros and cons, however, reviewing them and considering your financial position will ensure you are well adjusted before any more increases are announced.
5. With access to over 40 lenders, the team at Broad Finance can save you time and money with your research
We understand that everyone’s situation is different and we’ve seen it all. No matter what your financial position or amount of loans, credit cards or debts you have, we are here to help you with finding a solution. Give us a call, ask for a quote or apply online today.
Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal, nor to imply any recommendation or opinion about a financial product. It does not consider your personal situation and may not be relevant to circumstances. Before taking action, consider your 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.