Planning for the future

What you need to know, whether it is your personal finances or your business on the line, your actions now will impact your future. Taking a few measures today may ease future implications.

Consideration of the following matters will provide a better platform to work from.

A few keys areas to look at:

1.Review your budget

What non-essential spending can be reduced right now?

Look to see what luxuries you currently have and see if anything can be minimised (eg. multiple streaming services, subscriptions, entertainment etc). Whatever can be put on hold or cancelled, do so. If you do not already have a budget, review your current spending and make note of all incoming/outgoings. At the very least, make a list of all spending. Begin with looking at what expenses are essential to the survival of you and your business. Can these be reduced?

2. Review your debts

a. Personal debts such as credit cards, personal loans, interest free spending are all something that need to be reviewed.

b. Home Loans/Business Loans/Commercial Loans

Check your rates and loan terms. Talk to your broker or bank about reducing rates. Some debts will have interest built into the amount such as leases and some personal/car loans. These debts, if paid out early, will actually cost more in the long run (eg. If you refinance the debt, the remaining interest for the life of the loan you have paid out may be added to the new loan which means you are paying interest on the new loan as well as the one you just refinance/consolidated). However, you may need to look at doing something like this to increase cashflow. The key here is to ensure you have all options on the table and know the terms and conditions before committing to something new.

3. Make extra repayments/build a savings buffer via an offset account

If you can, making additional loan repayments will reduce your debt and help prepare you should your financial position worsen due to Covid-19. You can put the extra repayments directly into your mortgage offset account, reducing the total you are paying interest on.

The offset also gives you flexibility to use the repayments later.

4. Restructure/Refinance/extend your loan term

We can look at restructuring/refinancing now whilst you are in a position to do so. Having options now may provide you security down the road.

There is also the possibility to extend your loan term to:

  • reduce payments
  • and/or continue to make higher payment amounts giving you a buffer to redraw at a later time.

Example- If you have 15 years on your home loan, we can look to extend this to 30 years, essentially halving repayments. However, the aim here is not to make these lower repayments straight away. Whilst your payments have halved per month, we want you to continue to pay the full amount you were paying for as long as possible. This means that if you do come to a period where you need to tighten the belt you will have done two things:

a) Already reduced your official monthly repayments. This is easier to do now whilst you have the cashflow and income to service. Meaning that if you do fall on tough times you can automatically make the reduced payment amounts.

b) As you will be making extra repayments per month, these funds will be available in redraw if need be. You can redraw these funds to assist with paying your mortgage or other bills.

Contact Broker Ryan Summers at Amalis for more information