Good Money Habits
Getting your personal finances on track is one of the popular New Year resolutions Australians often vow to keep through the year. If this has been one of your resolutions for 2012 we hope that you are meeting and exceeding it. However, if you have found that as the months pass by it has been hard to achieve this resolution here are some simple and practical tips that may be just what you need.
1. Start with a budget
Get into the habit of maintaining a household budget. Spending more than you earn can quickly land you on the rollercoaster of debt, so make a promise to start living within your means. Please click here to visit our website to access the Budget Planner or contact us to discuss your individual budget needs.
2. Separate your 'wants' from your 'needs'
Do you really need the $100 per month pay TV package? Or the latest model car? Knowing what suits your needs is key to managing your money better. Remember, it’s a trade-off between what you have today and your long-term wealth.
3. Use credit cards wisely
Interest rates on credit cards are sometimes as high as 20 per cent or more, so it's important to pay off credit card debt quickly and within the interest-free period. To do this you will need to make more than the minimum repayments each month. Also consider rolling different credit card debts into one low-interest bearing loan facility.
4. Have an emergency fund
As a contingency for life's unexpected expenses, it's vital to have an emergency fund or access to cash through a mortgage redraw facility or offset account. Try to have at least three months’ salary in savings
5. Get savvy with your super
AMP has introduced a simple service to consolidate your super online for free at amp.com.au/consolidate or you can also call 133 888. You may also consider topping up your superannuation through salary sacrifice. The benefit is more tax effective compounding of your retirement wealth. Lower income earners may also be eligible for the Government Co-contribution scheme.
6. Review your mortgage
An effective way to save interest on your home loan is to make extra repayments each month. The monthly repayment on a $300,000 mortgage over a 25-year term at 7.25 per cent is around $2,168. But you could pay off the loan 10 years earlier and save $158,277 in interest if you increased your monthly repayments by $575. You may also want to consider making fortnightly repayments as opposed to monthly repayments, as this may also save you interest in the long term.
7. Have a debt strategy
Pay off 'bad' debt like credit cards first, as they usually have the highest interest rates. As the interest rates on home loans are much lower than other loans, this type of debt should more aggressively reduced after your credit card and other high interest loans are under control.
8. Protect your family
Consider taking out life insurance and income protection through your superannuation. With changes in regulation, it’s now possible to obtain income protection insurance from some super funds until age 65, if cash flow is a problem.
Call us today if you would like to ensure you have the best strategy to improve your financial position and achieve long term prosperity. We are here to provide guidance and support to ensure you do stay on track with your financial goals.
SOURCE:
'Resolutions for a New Year' - AMP Financial PlanningAMP article
