#Isofinance Tips – Debt Review, Subscriptions Stocktake, Budgeting & Unclaimed Money

Royal Commission: Our side of the story
February 8, 2019

#Isofinance Tips – Debt Review, Subscriptions Stocktake, Budgeting & Unclaimed Money

We have all been affected in some way by this virus, some more so than others. For those who have found themselves financially affected or out of employment we truly do feel for you. We hope that economically we rebound from this sooner rather than later as I personally can relate to the toll financial stress can have on someone.
This blog has been written to try and help everyone, no matter what their current circumstances. Those who need to adjust to lower income levels (hopefully temporarily) and those who haven’t been financially impacted but could use this ‘iso’ time to get their finances in order. Perhaps this downtime gives us a chance at starting new, money smart, behaviours to help us weather the next economic storm.
Covid-19 has really caught us ‘off-guard’ with many people and businesses having little or no savings for the proverbial ‘rainy day’ that is now very much upon us. We put so much time and effort into our jobs (most of us more than 8 hours a day!), but when it comes to managing the money we earn we don’t put in nearly as much effort. We are very much guilty of working IN the business and not ON the business, even if that business is your household income and expenses.

Budgeting

We all know we should have a budget (which includes savings) but not many do. Thankfully there are now loads of apps, some free, that can help you do this. So, whether you need to adjust to a lower income level or you just need to start budgeting, here are my picks:
Pocketbook is my favourite and it’s free. It links up to your bank accounts and credit cards so you can easily see where all your money is going and set saving goals.
The Money Smart government website also has some good free budgeting tools (and many other financial tools, tips and advice) available to you.

Saving

How much should you be saving? That is a hard question to answer as it depends on so many factors - employment, debt levels, short and long term goals and timeframes/life stage. However in saying that here are a couple of budgeting models.
50/30/20 - According to the model, you should divide your after-tax income into three parts: 50% for needs (like rent, food, utilities and transport), 30% for wants (think new clothes or dining out) and 20% for your savings.
3-6-9 - This model recommends that you aim to have either three months (if you’re a renter with no kids), six months (if you’re married with kids) or nine months (if you’re self-employed or a freelancer) worth of living expenses in your savings.

Subscription Audit

There is an old fable that says if a frog is put suddenly into boiling water, it will jump out, but if the frog is put in warm water which is then brought to a boil slowly, it will not perceive the danger and will be cooked to death. Extreme example I know but this is effectively what happens with all the subscription services we sign up to. We don’t really feel the $10 a month here or there for Netflix or Spotify but then you add on the Foxtel Now subscription from when you signed up to for the free trial to Watch Game of Thrones but then never cancelled, your gym membership (would you believe Australians have around $1.8billion dollars’ worth of unused gym memberships according to the Uno Household Financial Waste Report July 2019), a $5 photo editing app for the Gram, your wine subscription (which to be fair is pretty much a basic need) and the next thing you know your subscriptions are costing you $1000’s per year! It is worth conducting a subscription audit and cancelling anything you don’t think you need.

Debt Audit

Most people don’t know what interest rate they pay on their credit cards, personal loans and mortgages which means this is your ‘low hanging fruit’ or easy win in terms of saving money. According to the same Uno Household Financial Waste Report July 2019, Aussies waste $4.2b on mortgage interest they are unnecessarily paying (i.e. they are on a higher interest rate then they should be because they haven’t reviewed their mortgage) and $621m on credit card interest. Your broker will be able to help you with all of this so you don’t even need to do it yourself - easy!

Balance Transfer (BT)

You will see many lenders advertise a tempting 0% BT offer but unless you are extremely disciplined and use the 0% period to knock down the debt, you will likely be in the same position you started in (not to mention the annual fee or once off transfer fee they will have charged you). The other scenario we see all the time (if this is you, you are definitely not the only one) is people go through with the BT but don’t close the original card. The original card becomes too tempting and before you know it that one has crept back up to the limit and you end up in a worse position.

If you are disciplined enough this is an awesome and cheap option! You will find a comparison of current BT offers here.

Debt Consolidation 

Depending on how much unsecured debt you have you could consolidate it all into a single loan. In most circumstances, especially if you are consolidating credit cards, this will save you a ton of interest. Some lenders will offer you a reduced interest rate (and a higher maximum loan amount) if you can offer them your vehicle as security.

If you are a home owner there is also the option of rolling your unsecured debts into your home loan.
If you are feeling overwhelmed by your credit card debt or you would like more detail on consolidating debt please have a read of one of our previous blogs (I promise it isn’t as long as this one!).
Speak to us or your broker about this as we can do all the hard work for you.

Home Loan Refinance

I’m sure anyone who has a home loan knows they have the option of refinancing but many feel like it’s too much effort to go through the process. Yes, you will be asked to provide bank statements, payslips and various other documents but ten minutes taken to do this could save you thousands!

On a loan size of $500K, reducing your interest rate by 0.50% will save you $2,500 a year, not to mention the cash back offer which many lenders have at the moment. Sourcing the best deal is what we specialise in.
The kind of things we would need to know to do a review are; loan balance, whether the loan is fixed or variable, owner occupied or investment, principle and interest or interest only and what the interest rates are.

Unclaimed Money

This is a fun one! Unclaimed money is money from lost bank accounts, shares, investments and life insurance policies. This money becomes lost when you move house and forget to update your details with a financial institution or company. There is around $1.1 billion in lost shares, bank accounts and life insurance so follow this link to see if any of this is yours!

You can search for other types of unclaimed money on other government websites:
Australian Taxation Office - Search for lost superannuation by registering for the Australian Taxation Office's online services via myGov.
State Government - Search State government websites for deceased estates, lost share dividends, salaries and wages, cheques, over-payments, proceeds of sale and more.
Fair Work Ombudsman - Search the Fair Work Ombudsman website for unpaid wages.
This pandemic has demonstrated just how fragile the economy is and how quickly it can all go downhill. We are lucky we live in a country where we are wealthy enough for bail out packages and significant government intervention. However, it has highlighted we likely need to do more individually to make sure we aren’t putting ourselves in a more vulnerable position than we need to. Invest this time in making sure the money you are working so hard to earn is being spent in the best possible way, not being wasted on unnecessary bank interest or unused subscriptions and that you are putting an amount (even if only small) away for the next rainy day.

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