How to fake a pay rise

Would you like to increase your disposable income by 5 to 10 percent, but can't convince your employer that you deserve a pay rise? There may be another way to beef up your spending (or saving) money without having to wrestle the extra money from your boss, and the solution involves shopping!

For the average Australian, the answer could be as simple as shopping for more suitable financial products to suit your circumstances. All you need to work out is the interest rates and fees you're currently paying on various products and determine how they stack up with others on the market. Switching to cheaper alternatives could save you thousands of dollars each year – potentially more than a pay rise!

Take a home loan, for example. A $400,000 mortgage paid at a rate of 7.3 percent interest (the average of the big four's standard variable rate as at February 15) will cost you around $2900 per month to service and you'll end up forking out more than $471,000 in interest over 25 years.

By switching to one of the best rates in the market at around 6.14 percent you could cut your monthly repayments by about $290 – or a whopping $87,800 over 25 years. This is equivalent to a 6 percent pay increase per annum for guys and 9 percent rise for ladies earning the median national wage, Australian Bureau of Statistics figures show.

Go one step further and maintain higher repayments – reinvesting your 'pay rise' back into your home loan – and you could shave 5 years off your loan term, further reducing your interest bill by almost $90,000.

Granted, there are switching costs to consider when refinancing with another lender – not to mention the time it takes to complete the paperwork for your new mortgage. But financial costs are typically recouped within the first year of paying a lower interest rate, so it's time and money well spent.

When applied to other financial products; such as credit cards; car or personal loans; and even savings and everyday accounts, these simple steps can result in big savings. But for even bigger savings, try implementing these money management tips:

• Devise a budget – the government's MoneySmart website offers a comprehensive budgeting tool
• Do your research – compare home loans and other financial products online and then go back to your lender, most will be willing to negotiate rates to keep your business
• Consider opening an offset account linked to your home loan – you could save thousands of dollars in interest by doing so
• Balance transfer cards can be a great way to clear credit card debt, but beware the traps – read the terms and conditions before signing on the dotted line.

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