With the cost of living continuing to soar, not many of us can afford to make money mistakes right now. But, a new money quiz – by Australian comparison site Canstar – reveals the holes in your financial knowledge… and scarily, 46 per cent of people fail.
Here are the three trickiest questions, and my cheat sheet to make sure these mistakes never cost you money.
Read more from Nicole Pedersen-McKinnon:
1. Are your extra mortgage repayments safe?
Consider this question around redraw and offset accounts. And it can get even trickier because many non-bank lenders have called their ‘redraw accounts’ offset accounts, but that’s a lie. An offset account is safe but redraw facility – it may come as a shock – is plain dangerous.
Answer: Well and truly “false”.
For it to be a genuine offset account – one that is separate from and only linked to your mortgage – it has to be offered by an authorised deposit-taking institution (ADI). But when you instead use a redraw facility from any lender, it can ‘raid’ it. This could happen if the lender has miscalculated your loan repayments so you are accidentally behind schedule… or you have fallen on hard financial times. It is always at your lender’s discretion as to whether they give you your money back via redraw.
Should your lender go bust, there is also no Commonwealth government deposit guarantee of up to $250,000.
And I explain a huge related mistake I have seen far too many people make, in this fast video.
2. Are you cashing in on the fortnightly hack?
The next important question to answer is around the genius home loan hack: fortnightly payments. The trick with fortnightly repayments is to trick yourself into paying extra, by simply halving your monthly repayments.
Answer: Splitting her repayment into two and paying $750 per fortnight.
Don’t let your lender trick you into staying in debt for the whole oppressive loan contract. Instead, ask to calculate a new, more frequent repayment or adjust it. The reason ‘fortnightly’ works is because of the Gregorian calendar - there are 12 months in a year, but there are 26 fortnights, not 24. So, if you halve your required monthly repayment and make it fortnightly, you get a whole month ahead, every year.
Watch the quick number crunching below to see just how much money this could save, and time you could shave, off your loan:
And here’s Aussies’ third typical, terrible failing…
3. Are you inadvertently sinking your credit score?
We have had a US-style, one-number credit score for many years. You know you have to pay your bills and make your debt repayments to keep it high. But what if you’re a little late? How fast will it hurt you?
The acid test:
Answer: Yes, because it is more than 14 days late.
This is all the lee-way you get with any credit repayment while with a regular bill, you have 60 days. My next quick video shows you just how dangerous this is to your money life and for just how long for how long your score will suffer.
You can take the full Canstar Money IQ quiz here to see how you score. Good luck!