There is some useful information on websites like the “sorted” website and mortgage brokers can offer some sensible advise.
These reviews do not need to take a lot of time; however it is well worth spending a bit of time reviewing your finances and you may be very pleased you did.
Look At All Your Finances
Too often people only review the most obvious and forget those things that may have the greatest impact over time.
You should take a look at all of your finances, review what you spend your money on (your budget) and even take a look at your income and see if there is anything you could do to improve that too.
Something To Think About
In life we tend to borrow money to get ahead, but we need to be careful with our finances and ensure that we manage any risks too.
A financial review needs to look at all of your financial costs in one session.
Financial costs include your mortgages, any other debts, credit cards, savings and insurances. You should also look at your income and the tax you pay to see if there are more efficient ways to manage your finances.
Try to avoid a quick-fix to just one part of your finances as invariably you will miss something and either miss out on some savings or have to redo things again which requires more effort and often comes at an additional cost.
Review Your Mortgage
For most of us the mortgage will be our biggest financial commitment.
When you are dealing with a large amount of money like a home loan, any small improvements that you can make will have a huge impact over the longer term of this type of loan. It is not the interest rate that matters most – it is the rate in which you pay off the mortgage.
If you had a $400,000 mortgage and were paying it of over 25-years, at an interest rate of ’say’ 6% would mean that your repayments would be close to $550 per week. By increasing your repayments by $50 each week you will shorten your mortgage by 6-years and save over $100,000 in what you pay the bank for interest.
Imagine what you could do with another $100,000!
Sure, interest rates make a difference too but a reduced interest rate of 5.50% and retaining the same repayments would only shave 9-months off your mortgage and save you just over $13,000. An improvement, but not as much impact as the increased repayments make.
Of course, a combination of a better interest rate and paying more will make the most difference so talk to your mortgage broker today and find out how to achieve this. Of course if your mortgage broker is not helpful (and some aren’t) then I would be happy to help as would any of the team at Mortgage Link throughout the country.
Check Your Other Debts
It is easy to get short-term loans, but many of these are expensive.
Check your statements and see what the interest rate is – you may be shocked!
It is not uncommon to see interest rates of 25% or 29% on many of the hire purchases and store cards and even personal loans with the banks are often at rates of 15% – 18% .
While some bank staff will convince you not to add this to the mortgage, it really does makes a lot of sense to consolidate any of these debts into a home loan or a lower cost personal loan. They key is not to extend the payments over a longer term.
Mortgage brokers can help you assess the option and show you how much you could save.
Most people have credit cards, but only a few people use them as they should be used.
The banks know that most people do not pay the credit cards off in full every month and therefore get charged the high interest rates – while you pay the banks make money.
One of the worse things we see is people who pay just the minimum repayment that is shown on the credit card statement. Most of the credit cards require you to pay between a 3% – 5% of the balance owing. A repayment of 3% on a $5,000 debt means you pay about $150 per month, but when you are paying 19% interest on a card balance the first $80 you pay each month just goes to pay the interest.
Have a look at your credit cards and decide if you really need them. The reality is most people do not need credit cards or could do a lot better if they had just one card and with a small limit.
Manage Your Savings & Investments
Any savings you have is better than not having savings at all, but we see people every week that have not considered where and how they save money and by default often have their savings and their retirement savings in KiwiSaver with their main bank which s often not the best thing to do.
Short-term savings is not as critical to get “right” as the interest that the savings earns and the fees applied to the account are not significantly compared to the amount you deposit; however the longer-term savings is very different – getting it right is essential to getting the best results.
Should you invest your KiwiSaver with your bank just so you can view your balances on your internet banking?
Of course you shouldn’t.
Over time your KiwiSaver will build into a very significant investment and therefore you should ensure that it is in the right fund with a good provider so that you can get the results that you deserve.
CLICK HERE to take the 4-question survey.
Always Review Your Insurances
People think about the cost of house and car insurance, but the most important risk to manage is the potential for the loss of your income.
Insurance costs can often seem to high, and often people are spending their money on the wrong cover and may be paying too much for out of date policies. Insurance policies change and if you do not regularly review your policies then you could find that your insurance planning is not going to provide the outcomes that you want, but furthermore you may be able to save a lot by getting the best policy.
Are you earning enough?
Too often we think that our level of income is all we are worth; however you should always reassess what you are doing to generate income as this can make a huge difference to how we think and more importantly how quickly we can achieve our goals.
If you are employed, ask yourself if you are being fairly rewarded for your efforts. What are other people in similar roles being paid, and what could you do to be worth more to your employer? Many employers would be happy to pay you more if they felt you were providing more value; however you need to have the conversation – you need to “prove” your value and discuss this with the people that pay your wages. If there is no opportunity within the business that you work for you could and maybe should look at something else.
If you are self-employed you need to set goals and look at the most efficient ways of achieving them. Business today is all about being efficient, about investing in the skills and tools that are required to make everything work well. There is so much automation that can help almost any business and especially in the marketing area. Remember also that things change, so you need to adapt your business model to ensure that your products or services remain relevant and that your processes provide the desired results.
You can always start a home based business to supplement or replace your current income. This is easier now with the internet that it ever has been and there are many different business models available depending on the investment that you are prepared to make – in both time and money. We talk about this on this website: CLICK HERE
Other people will look at some additional part-time work. You might want to consider this, but look at the alternatives first as often you will be better rewarded by working harder on what you do, or starting a home business.
Always Set Realistic Goals
We can all do a quick budget and establish what we can save or pay off debt, but the reality is it is harder than most people think to change spending habits.
Some budget advisers and mortgage brokers will spend time showing people how to save money or to pay their mortgage off sooner, but most people fail as they do not set a budget that they can stick too and cannot control their spending.
Always set realistic goals and try to make small incremental changes rather than trying to make huge changes.
Get Help With Your Financial Review
There are a number of people that you can turn to for help with a financial review, but if you have debt then a mortgage broker is probably going to be the person that has the best overall understanding of your finances, and they will know if you need to bring in specialist or specific help to look at tax, insurance or investment.
The best part is most mortgage brokers will review this with you at no charge.
I do this for a number of people on an ad-hoc or regular basis. It does not mean that I am always going to provide a magic solution; however I often help people see other ways of working through the issues that they may have and/or help them be realistic with their goals and time frames.
The main thing is to start doing something.