July heralds a new financial year and this is always a good time to do a financial health check. However, current economic factors, including record low-interest rates, improving housing affordability and property cycle positioning, mean that this financial year may offer a unique opportunity to really forge a path towards financial success. Here are a few things to consider investigating this month.
Pay down your mortgage
With interest rates at record lows, now is a great time to pay off your mortgage more quickly. If you are on a variable rate, your mortgage repayments may already have come down, leaving you with some extra cash up your sleeve. Assuming you weren’t struggling to make repayments before the recent rate cuts, it’s a good idea to keep making repayments at pre-cut levels. This will help you pay off your loan more quickly, reducing the total interest you’ll pay over the life of your loan. If you are in a position to make additional repayments, this will supercharge the reduction of your debt.
Speak with your Smartline Adviser to ensure you are on a competitive rate for your home or investment loan. There has been a considerable amount of rate movement from most lenders so the loans available now are different to what was on the table six months ago. If you can’t get a competitive deal from your current lender, you may want to discuss the possibility of a loan restructure with your Adviser.
Consider a property investment
The national property slowdown combined with income growth (albeit slow) has improved affordability conditions in many regions over the last quarter including Sydney, regional NSW, Melbourne, Brisbane, regional Queensland, Perth, regional Tasmania, Darwin and regional NT.1 A recent ANZ-CoreLogic Housing Affordability report found that at a national level, housing affordability is at its best in three years, and in some cities it is better than it has been for decades.2
Over the past 12 months, we saw the Wages Price Index (WPI) rise by 2.3 per cent and the Consumer Price Index (CPI) go up by just 1.8 per cent, amounting to a real wage increase of 0.5 per cent, the highest real wages growth since September 2016.3 Added to this, a number of regions are now at, or approaching, the bottom of the property cycle, including Sydney, Melbourne, Perth, Brisbane, Darwin, and some areas in regional Queensland.1 Therefore, it could be a very good time to consider a property investment, if your personal financial situation can accommodate it.
Audit your expenditure
The beginning of the financial year is the perfect time to check all is well with your spending. Look carefully at your account transactions to make sure you are not wasting money on things you don’t need. Online subscriptions, in particular, are frequently set up only to be forgotten and go unused. You should also check for any fraudulent payments.
It’s financially savvy to regularly check you are on a good deal for your insurances (health, car, home) and utilities (electricity, gas, water, phone and internet), as prices and deals change over time. You can use price comparison sites such as www.finder.com.au to help you compare the prices currently available.
Finally, ensure you have an automatic minimum repayment set up on your credit card so that you are never hit with exorbitant interest fees. Better yet, get rid of your credit card and only use money you actually have.
Use technology to track your expenditure
There are a plethora of great banking and budgeting apps available nowadays and that means there’s no excuse for not keeping on top of your finances. Make use of these new technologies and find a budgeting app that works for you such as Pocketbook, TrackMySPEND and so on. You can easily keep track of your spending, income, loan repayments and savings. Think about what you want to do over the next 12 months (such as holidays, renovations or any other major spends) and put together a budget – including paying off as much of your mortgage as you can. Then use the technology to stick to it.
Call your accountant and get your 2018/19 tax over and done with early, especially if you are expecting a refund. Better in your pocket than anywhere else!