It’s January, and all over Australia people are making resolutions and setting goals for the new year, vowing to get fit, break bad habits or take on a new challenge for 2020.
And while some New Year’s Resolutions never make it past January 1, the start of a new year can be a great opportunity to tick off one important but achievable task - to review your financial situation and set yourself up for success in the twelve months to come.
But where do you start? Even the most noble goals fail without a plan - so here’s a few steps you can take to get a health check on your finances.
Review your lender
There’s a concept called the ‘lazy tax.’ Somewhat crudely, it refers to the extra premium consumers pay by being complacent with their current providers and failing to shop around. It serves as an important reminder to regularly review long-term arrangements to ensure your finances are continuing to work for you.
Even if you’re intending to remain with your lender, there are a number of factors that might prompt updates to your loan structure. Do you have a fixed rate expiring soon? Is your interest-only period expiring, and do you need to apply to roll this over? Each of these events can be a great opportunity to review your lender and make sure your finance arrangements are keeping you on the right path.
Do some rate research
How long has it been since you looked at whether your interest rates are competitive? Having some basic knowledge up your sleeves about news and trends in the sector can assist in understanding whether you’re getting the best deal possible - or if you could be taking advantage of a more competitive rate.
The Reserve Bank of Australia cut interest rates multiple times throughout 2019, reducing the official cash rate to a record low of 0.75 percent in October. Major lenders have responded to these cuts in varying ways, so taking the time to look at which banks are passing on the cuts and which aren’t can be good ammunition if it comes time to negotiate.
In addition, the Australian Prudential Regulation Authority (APRA) has amended restrictions on interest-only loans, narrowing the gap between these loans, favoured by investors, and those mortgages offered to owner-occupier buyers. This may in turn bring more opportunities for those looking to buy a new home rather than an investment property.
Having a basic understanding of how the market has moved since you last reviewed your finances can increase your confidence and your ability to advocate for your own interests when it comes to reviewing your financial position.
Just like any New Year’s Resolution, deciding on your financial goals at the start of the year can be a good way to set an agenda for how you’ll approach your finances in 2020.
Are you looking to upgrade your house - by renovating or buying a new home? Do you hope to buy your first investment property, or perhaps add another to your portfolio?
By determining the end goal, you can more clearly put logical, achievable steps in place to reach it; from savings targets, to committing to re-evaluating your borrowing capacity.
Consider where you want to be in 12 months time and then set the necessary wheels in motion to get you there.
As with any New Year’s Resolution, having support and guidance can help make the task less daunting and help you hold yourself accountable to your goals. Like the personal trainer you hire to whip you into shape, getting advice from an experienced, specialised finance professional can help you reach your goals faster through a targeted plan of action. If you’re a medical or dental professional and are looking to review your finances and set goals for the New Year, reach out to the team at BFD Finance today.