Three money tips for every income

Three money tips for every income

Money is tight, you’re busy and tackling money issues isn’t fun. But if you wish you could once and for all get your financial house in order, then the time to act is now.

Research by Prudential Financial revealed that less than 25 percent of us feel very well prepared to handle financial matters, while almost 80 percent think it’s very important not to become a financial burden to loved ones. But less than a quarter of us feel confident that we can pull that off – and who needs that kind of stress?

No matter how much you earn or what you do for a living, following three simple philosophies can help everyone to more effectively manage their money. Post this list on your fridge, the bathroom mirror or your desk at work and take it on in little chunks and make 2013 the year you find your financial confidence.

Tip 1: Get a grip

Ignorance is not bliss. You may be able to cite many of the big-ticket expenses in your life such as your mortgage or car loan repayments. But it’s the smaller sums of money you spend each week that can bring the most “yikes, I had no idea” moments, when you begin to track outgoing money.

First, gather all of your bank statements, credit card bills, utility bills and insurance premiums then plug these in to a budgeting tool – try the federal government’s MoneySmart website for a simple and free option, and be honest when entering the figures!

Tip 2: Limit your overheads

If you want to have money enough to pay off debt, save for the future and still have a little fun today, it’s important to limit your expenses.

Once you input your income and outflow into a budget sheet, print it out and circle every expense that is a “want”, not a need, then figure out how to reduce or eliminate it.

Then take that money and put it straight back into paying down debt, insists Alex Parsons, CEO of RateCity.

“Accelerating you your mortgage repayments and credit card repayments can potentially save you tens of thousands of dollars over the long term,” he said.

“One of the easiest ways to further save money is to compare financial products using a site like RateCity and switch to more suitable or cheaper options. Switching your home loan could free up more than $1000 per year – where else can you free up that kind of money in your budget without changing your lifestyle?”

Tip 3: Build security

When it comes to building wealth, no amount is too small to start. Whether it’s $50, $100 or $1000, every single dollar can be put to good use and, hopefully, be the start of regular disciplined program of stashing away other small lump sums.

One option is to open a high-interest online savings account to keep your savings separate, and transfer money as soon as you get paid – don’t wait until the end of the month!

Otherwise, consider paying down debts or making a personal contribution to a superannuation fund.

And finally, when building security don’t forget to protect your greatest money-earning asset – you!

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Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

What is a draw down?

The transfer of money from a lending institution to a borrower. In a typical home loan, the funds are drawn down all at once in order to buy the property. In a construction loan, the money is drawn down in several stages to pay the builders as they progress through each phase of the project. In a line of credit loan, you can draw down money up to a limit based on your loan’s available equity.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time.