If you’re like most Australians, you’re likely to be feeling financial pressure.
First COVID-19 turned the world on its head, and while we got some reprieve through government initiatives and a booming housing market, we’re facing the costly reality of inflation and interest rises.
On top of the mortgage, there’s school fees and other debts and responsibilities that are becoming crippling for many.
But you’re not out of options.
Most people are not aware of three simple solutions that could free up $18,000 to $38,000 a year, without any more sweat or debt.
Free up finance with the 3 R’s
The ‘3 R’s’ are quick and easy ways to save thousands of dollars a year and take the pressure off you and your family.
Refinance your home loan(s)
Refinance, renegotiate and restructure your home loan(s)
You may have got a great deal when you signed off on that home loan a couple of years ago. But things change quickly in the world of finance.
Many home owners don’t realise that banks often incrementally increase their interest rates and fees or don’t pass on full rate reductions on existing home loans over time. In my experience running a property finance firm, I have found that most borrowers who have had their home loan, credit cards and car or personal loans for more than two years are paying between $400 and $1200 a month too much.
By simply renegotiating and/or consolidating with your existing bank, or refinancing your home loan and restructuring your lending, it is easy to ‘earn’ the gross equivalent of an extra $7000 to over $21000 a year when an average marginal tax rate is applied. What an easy win!
What’s more, if you’re busy or confused by the process, just track down a good mortgage broker and they will handle this process for you.
Create an automatic saver system
Most people understand the importance of saving, but let’s take that thinking to a new level and help put thousands of dollars back in your pocket.
Your money management can be automated, remote control, from your mobile phone. You just need three simple, interlinked accounts – A ‘Freedom’ offset account (money held here will reduce the amount of interest charged on your home loan), an ‘Essentials’ credit card and a ‘Living’ debit card.
Here’s how to make it work. All of your income is directed into your Freedom offset account with 50 percent going towards the Essentials credit card to cover all of your regular bills, while 30 percent goes to your living debit card for discretionary spend. Transfers and complete balance payments are all automated – just set and forget and you will never again pay a cent of high interest or late payment fees on your credit card while your income sits in your offset for longer.
Better still, use a bank that offers multiple offset accounts against your home loan and just set up the same three freedom, essentials and living accounts. This ‘Automatic Saver System’ (helping get you off your A.S.S, as I like to say), combined with offset benefits and weekly loan repayments, means you have effectively earned yourself another $4000 per year when the tax is grossed up.
On an average home loan of $400,000 over 30 years, channelling all of your income into your ‘freedom’ offset accounts creates savings of more $28,000. Change your repayments to weekly, instead of monthly, and you’ll retain another $52,000 in your pocket (I explain this in more detail in my book The Freedom Formula).
Build an investment property
I know what you are thinking – spending more money on an investment property is not going to help my cash flow problems! While it seems counterintuitive, due to generous ongoing tax depreciation on new build homes, combined with clever structuring, it is not difficult to use lazy equity in your home to fund the construction of a $500,000 rental property that will keep between $7500 and $13,000 a year of your hard earned salary in your pocket over the first 10 years.
And even better news, the right property can be positive cash flow so that it doesn’t eat into your salary or lifestyle, enabling you to channel the tax savings into offset accounts to pay off your loans years earlier.
There’s another R too – Rocket science. But this isn’t it! As long as you get the right advice.
To successfully roll out the ‘3 R’s’, you’ll need to work with an experienced professional team including an investment savvy mortgage broker, and if an investment property is on the agenda, you’ll also need a property investment advisor, buyer’s agent, project manager, property manager and an accountant by your side.
So, no more complaining – start the journey, earn the equivalent of thousands of dollars more a year, but more importantly, set yourself up with a new financial approach that is sure to change your life.
Want to explore your options? Start with a no obligation chat with the experts at KnowHow Property. Get in touch.
Bushy Martin is an award winning finance broker and founder of KnowHow Property Finance, and recognised as one of Australia’s Top 10 Property Specialists. He is the author of ‘The Freedom Formula’ and ‘Get Invested’ (get it for free now), helping you live more and work less through clever finance and property.