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Interest rates and cost of living expenses are rising again, but many Aussies are ill-equipped to handle their finances properly.
A Household, Income and Labour Dynamics in Australia (HILDA) survey on financial literacy found that fewer than half of Australians were able to correctly answer five basic financial questions, and women, in particular, are lagging behind.
Contrary to popular belief, being good with money isn’t something that only a few of us are born with. Like any skill or muscle, money management is strengthened with practice, and financial education is crucial for filling in the knowledge gaps.
As a mortgage broker, I see the money mistakes that families make on a daily basis.
When at least 40 per cent of Aussies regard dealing with money as stressful and overwhelming, it’s no surprise that it’s a subject that they would rather avoid.
The truth is, gaining enough confidence to manage your finances has nothing to do with who you are as a person, and there is no right or wrong way to prioritise spending.
We all have different goals and directions in life, and this applies to money goals as well.
But there are some fundamental “dos” and “don’t” when it comes to managing money, especially in times of high-interest rates stress.
Some of the “don’t” include failing to run a household budget, failing to check discretionary spending on a regular basis, taking on large car loans, overspending on children, taking out loans for things that should have been saved for and failing to build financial literacy skills.
Despite the fact that as many as 94 per cent of women are actively involved in household money management, management of investments and retirement planning, many families are being held back by their household CFO’s lack of financial know-how.
It’s a tough act to rein in finances when there’s so much at stake, but there are several areas which families can easily target to enable them to stay in control of their budgets during these tough times.
The first step to regaining control of your finances begins with an audit of spending.
Households should start with big ticket items such as mortgage repayments and assess whether repayment is feasible if rates rise to as high as 5.5 per cent.
You’ll need to start a conversation with your broker or bank if you can’t because it may mean you’ll have to restructure your mortgage over a longer term or switch to paying interest only on part or all of your mortgage for the time being.
Next, consider any debt you may have and look at consolidating it into a single lump sum.
This can then be attached to your mortgage in a split loan to be paid over a shorter term with more competitive rates.
The advantage to this is that it eliminates the high-interest rates you are likely paying on credit cards or personal loans and gives you more leeway to budget for regular repayments for one loan instead of juggling several different loans at the same time.
In terms of discretionary spending, cut back on things such as Uber Eats and streaming services as well as things you won’t miss or don’t use all that much like gym memberships and other subscription services.
For all the essentials, take advantage of consumer comparison sites to find the best value deals. Many retailers offer price matching for products so don’t be afraid to ask for discounts, especially for more expensive items like electricals and white.
Last of all, ring up your utility providers and ask for a better deal.
Consumer comparison sites are excellent for this and will help you find smaller companies with great offerings for a better price.
Amaysim and Boost are brilliant options for phone plans and use the same lines as Telstra and Optus.
For the internet, there’s Tangerine, Superloop and Exetel.
From electricity and gas to insurance, it only takes a few minutes of research and a phone call to nab a bargain.
Financial knowledge is an essential skill that is key to achieving many common life goals be it home ownership or financial security, but too many Australians lack confidence when it comes to dealing with their finances.
The silver lining to the mortgage price hikes and cost of living increases is that it puts financial education on the radar of those who may not yet feel confident in their ability to manage money and gives them the opportunity to change that.
Anyone can learn financial literacy and no matter where you are in life, the payoff to this newfound knowledge is often immediate, and results in good financial foundations that will set you up for life.
All it takes is a few gradual changes and a willingness to learn.
Mum CFOs Money Masterclass tips
– Look at your mortgage now and look if you can repay it at say 5.5 per cent. If you can’t, you need to visit your broker or bank and plan how you are going to afford these rates which may mean restructuring your mortgage over a longer term or moving onto interest only on part or all of their mortgage for a while
– Look at all your discretionary spending and cut back on things such as Uber Eats and streaming services etc
– You need to shop around for things. Compare prices, buy online, and look for the best prices. Don’t be scared to ask for a discount in some shops like for electricals etc.
– Reprice your bills – electricity, gas, phones, insurance etc. Look where you can cut back on all your essential spending phone companies like Amaysim and Boost have great cheap deals and they use Optus and Telstra lines too.
– Consolidate any debt you have and get rid of the high-interest rates you are paying on credit cards etc. You can add this onto your mortgage on a separate split over a short term to repay it all at mortgage interest rates
About the author: Louisa Sanghera (pictured above) is the mortgage broker expert in the Mum CFOs Money Masterclass. This is an opinion column. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of this publication.
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