5 budget-busting hacks to set yourself financially free

1. LOOK AT YOUR MONEY HOLISTICALLY

It’s easy to look at our money in different silos: this is what we owe, this is what we have and this is what we expect to come in. But you have to consider all your money as a single pool to work out what represents the best overall value for you financially.

For example, tax deductions for extra superannuation contributions may be bigger than the low home loan interest rate you’re currently paying, meaning you could be better off by beefing up your retirement earnings than paying down the mortgage a bit faster.

2. TACKLE THE MOST EXPENSIVE DEBTS FIRST

We often think of debt as the mortgage, but it may also be personal loans, car loans, credit cards, store cards and repayment plans, and each will have different interest rates. You’ll downsize your debt much faster by tackling the most expensive – that is, the ones with the highest interest rates – first. Depending on your circumstances, it may even be worthwhile consolidating some or all of your debts into one larger debt, particularly one with a much lower interest rate.

3. MAKE YOUR MORTGAGE WORK HARDER FOR YOU

Over time, you’ll build more and more equity in your home, as property prices increase and as you pay down the loan. And that equity can be used to make more money than the interest it would attract by being withdrawn. As such, look at whether your mortgage has an offset account or redraw facility you could tap into. If not, it may be time to refinance to one that does. Consider whether to go for a fixed or variable rate or a combination of both. Fixed will give you budget certainty, but variable offers more flexibility.

4. BOOST YOUR INCOME THROUGH INVESTMENTS

We often focus on paying down debt without building other investments. Consider whether you could be doing both simultaneously – investing for the future and paying down existing debt. You may even find the proceeds of one will help you pay down the other much faster, too.

5. GET YOUR KIDS TO PAY THEIR WAY

By the time you’re in your 40s and 50s, your kids – if you have any – are likely in their late teens or 20s. A variety of factors, including full-time study, high house prices and more recently the COVID-19 crisis, mean that many young adults are still living at home.

You may or may not be happy to still have them in your nest, but they can be a substantial drag on your finances if you let them. When they’re earning money of their own, get them to contribute to household bills, insurances and grocery costs. They’d pay more if they were out on their own anyway.

If they’re not working, they can still contribute in other ways – cleaning the house and mowing the lawn won’t cost them a cent, but will save you from having to hire a cleaner and gardener. Either way, you’re freeing up extra cash to help pay down your debts!

This article was originally published in Woman’s Day magazine