Now that we’ve started a new financial year, this is a good time to do a money health check, to ensure you’re maximising your financial position. Here are 5 steps to get started.
1. Review your home loan
Your home loan is a logical place to start. It is a good idea to review this each year. The mortgage market can move a lot in 12 months, so even if you got a great deal at the time, it’s possible you might be able to find a comparable loan with a lower interest rate.
Also, if your financial position has improved since then, you might be able to qualify for more favourable borrowing terms, either with your current lender or a new one.
Alternatively, if your financial position has or is about to change – perhaps because one member of your household is about to leave their job to have a baby or start a business – you might want to restructure your loan. Or perhaps you have received a pay increase and want to switch to a home loan with an offset account or redraw facility to help you pay it down faster.
During the home loan review, we’ll discuss any other debts you might have, such as credit card, personal loan or car loan debt. Depending on your situation, it might be a good idea to consolidate these other debts into your home loan, as a way of reducing your overall interest rate and simplifying your finances. This strategy isn’t for everyone, so we’ll look at your particular situation to determine the right move for you.
2. Review your budget
It’s good to review your budget at least once per year. As part of the process, review your expenses over the past 12 months, by checking your credit card and bank statements. Most people are surprised to discover how much unnecessary spending they do, from clothing they rarely wear to subscriptions they no longer use. If you’re able to identify ways to reduce your spending, you could then adjust your budget accordingly – you might decide to use the extra money for investment purposes or to get ahead on your mortgage.
3. Review your investments
Speaking of investments, this is another thing to review during your annual money health check. Think about how much money you want to pay into superannuation (from 1 July, the concessional contributions cap increased from $27,500 to $30,000) and how much you want to allocate to shares and property. It is also a good idea to review how diverse your investments are – whether you have cash, stocks, property or another investment. If you’re unsure, it is a good idea to speak to a financial adviser.
4. Review insurances
It’s also good to think about whether you’re properly insured. Some of the most common insurances Australians take out are car, health, home and contents, life, trauma, total and permanent disability, income protection and pet insurance. There are two questions to ask yourself. First, do you have all the insurances you need? And, second, do you have the right amount of cover for each of those insurances? Again, this is something a financial adviser could help you with.
5. Forward planning
Finally, as part of your annual money health check, give some thought to your career, because your current and future earnings are likely to be the main foundation of your long-term wealth. By understanding your goals, you can determine how much you need coming in to enable you to achieve them. Things to consider are whether you are in a position to ask for a raise, apply for more hours, change jobs, change careers, get a second job, get more education or start a business.
If you would like to review your home loan, your Loan Market broker can calculate your borrowing power and manage your mortgage application.
