A STORM IS BREWING
With uncertain financial times, one would almost suspect that a storm is upon us.
With the RBA increasing the cash rate over 11 times in the last 12 months, and a prediction that June 2023 will see another, it has left many mortgage holders scared, stressed and fearful for the future.
The key in current economic times is so flip from fear into empowerment by understanding what is within your power to change or implement in your life to give you the greatest of success and not remain at the mercy of fixed rate lending ending, and future rate rises from the RBA.
The only way you can move from fear into empowerment is easy, but it takes time. You need to have a solid understanding of your current position; where you are, and a solid understanding of where you want to be. A rock solid plan is necessary.
Pictured above: A rock-solid plan.
To develop your own rock-solid plan, start by mapping out your current debts and commitments such as your mortgage, credit cards, car loans and other personal debts and gain clarity on what these items are costing you each week, month and year. Determine: Is there an opportunity to clear these debts in full to free up cashflow?
If not, move to your lifestyle expenses. Are you a user of buy now-pay later products? If so, you might want to consider closing these facilities as they can skew your cashflow if used inappropriately and can often be a gateway into higher levels of consumer debt (meaning more of your hard-earned money goes out on debt repayments each week).
Only you can know what makes you happy when it comes to weekly spending. It may be a trip to the shops for take out once a week, or that fancy restaurant once per fortnight. Whatever it may be, consider that if these things are important to you that you INCLUDE them in your plans going forward to keep your sanity, but NOT at the detriment of your mortgage.
Once you have looked at your debts and commitments, and your lifestyle (the things that bring you happiness), turn your eye to your longer-term bills and commitments such as your insurance policies, your mobile phone plan and research better offers on the market. Even consider if that new handset is worthy of the additional monthly repayments.
Whilst we strongly recommend that you always talk to your mortgage broker about the best mortgage rate for you, just by listing the examples above there is so much more you COULD be doing.
If you are currently locked into a fixed rate at less than 2% and you are now looking at that term ending with a new rate beginning in the vicinity of a 6%. How can your mortgage broker help you with this? Well, they can get you the best rate available for you at a set point of time, but if at that set point of time the rate is 4% greater to what you are currently paying then guess what? Your repayments will go up.
Now when it comes to what you could be doing, we covered just some of that above. Additional to the little steps above you could also consider:
- Getting on the same page with your partner with your goals.
- Not having arguments around spending money and allowing open “blame-free” conversations to be had around money on a regular basis.
- Rearranging your bank accounts for simplicity of overview and cashflow management.
- Setting a capped weekly spending limit (maybe even in cash) that supports your other goals.
- Stop using your card (debit and credit) for everyday spending.
- Being across your long-term commitments and negotiating better rates with your providers.
And lots of other things…
But there is something else you could be doing that we haven’t even mentioned yet. In fact, it’s the first thing you should be doing every single week – saving!
If you know ahead of time that your fixed rate is ending and that your repayments are going to rise $1,000 or $1,500 per month, and you haven’t got a savings strategy, well NOW is the time to have one.
Take the time now to prepare. Get your bank accounts flowing, set a regular savings plan, cap your weekly spending and soar to your success!
The key is to take the action and set a plan, and if you need help to reach out. You do not need to go through this alone.
Please, please, please – whatever you do… don’t just get the best rate on your mortgage and think ‘she’ll be right’ because if ‘she aint’ then you and your family are in for a world of hurt.