Having a solid budget is crucial to building financial resilience and as rising rates continue to put pressure on household finances, it could help to look at ways to save more and spend less.
With Australia being one of the most highly leveraged countries in the world1 and the average mortgage for owner-occupied properties is just over $600,0002 – any increase in home loan repayments could see millions of householders scrambling to pay the bills.
Fortunately, there are ways you can help to relieve the stress on the household budget and build financial resilience.
If you have the flexibility, you could adjust your home loan – either by fixing part of your mortgage to reduce the impact of further rate increases or by reducing your repayments if you’re paying more than the minimum required (although bear in mind this means you’ll take longer to pay the loan off and pay more interest over the life of the loan – so, in the long run, this may not benefit you).
Or you could look at where you might be able to make other savings in your household and personal budget.
Three steps to creating a budget
Spend less, save more. It sounds easy but it can be tough to find ways to cut back, particularly when you need to allocate more of your income to mortgage repayments.
The best way to start is creating a budget.
A budget is a great way to set down how much you’re spending (your outgoings) and how much you’re getting in income (your incomings).
Ways to cut your spending
You could divide your spending into different buckets – essentials like home loan repayments, grocery bills, utilities, transport and medical expenses – and discretionary spending like eating out, travelling and leisure activities.
Whether it’s regular payments or your entertainment spend, there could be ways to save more as interest rate rises start to bite.
Instead of looking at your budget and feeling overwhelmed, see it as an opportunity to help shape a happier future and keep you on track to reach your financial goals.
Other items to consider
It’s a good idea to set up direct debits and digital payments, so you have an electronic record of spending. Setting this up the day you get paid from work means you won’t default on your regular repayments.
Reviewing your budget
Make sure you review your budget regularly, there are always other expenses that creep up and changes in circumstances such as
When reviewing, take note that you may find that some seasons there are more expenses than others and there are irregular expenses that you didn’t initially consider.
We’re here to help
If you’re worried about your home loan repayments increasing or experiencing financial stress, please let us know. The best thing you can do is to reach out early, as soon as you’re able. We will listen, take the time to understand your situation, and support you to sort through the challenges.
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