Between paying the rent or mortgage, and the various bills you have to cover such as electricity, phone, internet and medical bills, it’s easy to lose track of where your money is going.
But taking stock could actually save you thousands. And according to financial experts, there are common mistakes people make time and time again – and it’s easy to sidestep them.
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Here are the ways you’re losing money without even realising, and what you can do to avoid them:
1. Neglecting your debts: $1,000
“When was the last time you had a close look at your mortgage, car loan and other debts to see if you’re getting the best deal?” said financial adviser Helen Baker.
While it doesn’t sound like much fun, it could save you thousands.
Go over your debts and restructure them to minimise interest, she advised. Pick up the phone to your bank or mortgage broker to see what your options are.
“If you have a home loan of $500,000 at an interest rate of 4.5 per cent, you’ll pay $412,034 in interest over 30 years. Reduce it by 0.25 per cent and you’ll save $26,452 over the life of the loan. That’s almost $1,000 a year,” Baker said.
2. Paying your home loan monthly rather than weekly: $1,400
In the same vein, financial adviser James Gerrard told Yahoo Finance that paying your mortgage off more frequently – for example, weekly payments of $250 rather than monthly payments of $1,000 – can actually make a big difference.
“The reason is that interest from the banks is calculated on a daily basis, so the more regular your repayments, the lower the interest incurred between repayments,” he explained.
“Based on a $350,000 home loan over a 25 year term, at current interest rates, making repayments opposed to monthly would save approximately $35,000 in interest and mean you pay off the loan 3 years earlier.”
3. Ignoring your superannuation: $3,500
For many Aussies, superannuation is a far-off concept that isn’t thought about until retirement creeps closer.
“[Young people] ignore it, resulting in minimum savings, multiple super accounts and money eaten up in excess fees. But superannuation is one of the most tax effective investments you can make,” said Baker.
The reality is far from the misconception that super is only something to think about when you’re older.
“Your age actually allows you to take advantage of strategies younger people can’t.”
And consider salary sacrificing into your super. “If you take just $20 a week from your pre-tax salary and put it into your superannuation, that’s $1,040 and a tax saving of $239 each year,” Baker said.
“Doing this for just one year, your $1,040 could become $4,538 by the time you reach retirement, making you an extra $3,500.” So that means if you start when you’re 30, that’s an extra $122, 500 you’ll see at retirement.
And don’t forget to consolidate any multiple superannuation accounts you have, Gerrard said: ATO stats show 40 per cent of Aussies have 2 or more accounts.
“Many super accounts have default levels of insurance cover and flat dollar account fees. By having multiple super accounts, it could be costing hundreds of dollars per year in unnecessary fees by doubling up on benefits and features,” Gerrard said.
“So look to review your super and consolidate into one account.”
4. Failing to compare prices whenever you renew your rego
This ‘loyalty tax’ just seems inherently unfair: customers who have stayed with their insurance or service provider end up paying more than new customers. Shopping around for your insurance is something that both Baker and Gerrard are adamant about.
“Insurance companies bank on the laziness of their customers, hiking their premiums each year knowing full well most customers won’t bat an eyelid,” said Baker.
So next time your renewal notice arrives in the mail, think twice before you just pay it without a second thought.
Instead, “Work out how much you’re paying each insurance provider and give them a call,” Baker said.
“Let them know you’re looking for a better deal and ask what they can do for you. If they won’t budge, jump online, get a quote from a competitor and ask them to match it. You’ll be surprised how fast they respond once they know you’re ready to part ways.” You could save hundreds by getting yourself a better deal.
And if they’re not willing to offer you a fair deal, switch to an insurance provider offering something more competitive.
5. Falling for the credit card points trap: $250
Points are not free, no matter what people tell you, and several rewards programs are just aimed at having you spend more than you need to, according to Baker.
“Rewards credit cards usually have higher interest rates and annual fees, too. Consider switching to a lower rate card with no annual fee and you could save $250 a year.”
6. Not making the most of your benefits
Are you paying for services or subscriptions that are available at your local council or library? There might be newspapers and magazines you’re paying for but that are available for free locally, said Gerrard.
And in some instances, you might be paying more than you need to. “If you have private health insurance with extras cover, check what benefits are covered and start to utilise them, especially if there is no gap payment,” he added.
“If you find that you wouldn’t use any of them, consider changing to a cheaper level of cover.
“Lastly, many life insurance companies provide benefits in the form of lower premiums to customers who meet certain health requirements (such as a healthy BMI or walking a certain amount of steps per day).”
Check in with your insurance company to see if there’s a program you can sign up to to reap those benefits.
7. Failing to save a little every month
Saving isn’t easy, and you may be tempted to take a loan out – and incur mounting interest costs along the way – to go on holiday or afford that new car.
“But by being disciplined and putting a little bit of money aside each pay, if invested wisely it will compound in value and grow to something quite large over time,” said Gerrard.
Easy-to-use investing apps like Raiz or Clover help you invest small amounts in the share market that tends to grow faster than interest in the bank, he said.
How much should you save? A good rule of thumb is a minimum of 15 per cent of their wages after tax, according to the financial adviser.
8. Forgetting the little things: $1,700
Are there apps that you pay for, but you no longer use? Are you spending a painful amount of money on lunch every day? Both of these don’t seem like much, but they add up, said Baker: every year, they could be costing you $200 and $1,500 a year respectively.
“The more you pay attention to your expenses, the better you’ll get at avoiding costly mistakes. It’s your money – hang onto it!”
The inaugural Yahoo Finance All Markets Summit will be held on the 26th of September 2019 in the Shangri-La, Sydney. Check out the full line-up of speakers and agenda for this groundbreaking event here and buy tickets here.