Paul's Insights: Five steps to save $5,000 this year
Let's take a look at five ways to save over $5,000 in 2019.
1. Pay less than 4% on your home loan
The average home loan is worth $386,000 – a big chunk of money, so there’s plenty of scope to save. Not so long ago, if your mortgage interest rate doesn’t start with a ‘4’ you were paying too much. But shop around and you’ll find smaller lenders like Move Bank (3.59%) and Reduce Home Loans (3.44%) are charging even less. The thing is, home owners are still paying an average rate of 4.65%. Yes, refinancing can come with costs but here’s a chance to cut close to 1% off your loan rate, potentially saving around $3,860 in interest this year alone.
2. Clear the credit card
Australians owe an average of $3,220 per credit card. Scary thing is, plenty of us have more than one card, and even among what the Reserve Bank describes as ‘low rate’ cards, the rate is typically 13%. Aim to pay off your card in 2019 – on a debt of $3,200 you could pocket interest savings of $400.
3. Use unit pricing
Consumer group Choice estimates we could save $1,600 on groceries in a 12-month period just by looking at unit prices. You’ll find these displayed on supermarket shelves just below the ticketed price. It’s an easy way to see which products really offer the best value.
4. Drop your biggest money waster
We all tend to have at least one habit that sees us waste valuable cash. Even something healthy like buying a bottle of water each day can set you back about $700 annually. Think of just one habit you could drop to boost your savings.
5. Cut investment costs
I’m a big fan of investing. However, I’m not so keen on paying than necessary to keep my money working hard. Canstar research found the annual fee on a ‘balanced’ investment fund can be up to 2.42%. It’s possible to pay far less.
For instance, InvestSMART’s fee on a balanced portfolio is 0.99% annually capped at $451. That’s a fee saving of almost $150 on a $10,000 investment. Sure, you might not have $10,000 to invest today, but stick with these savings hacks and you’ll be well on your way.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Frequently Asked Questions about this Article…
To save money on your home loan interest rate, consider refinancing with smaller lenders like Move Bank or Reduce Home Loans, which offer rates as low as 3.44%. This could potentially save you around $3,860 in interest this year alone.
The average credit card debt in Australia is $3,220. To reduce this debt, aim to pay off your credit card balance in full. Doing so could save you approximately $400 in interest over the year.
Unit pricing allows you to compare the cost of products based on a standard unit of measure, helping you identify the best value. By using unit pricing, you could save up to $1,600 on groceries annually.
Identify and drop your biggest money-wasting habit. For example, cutting out a daily purchase like bottled water could save you about $700 annually.
To reduce investment costs, look for funds with lower annual fees. For instance, InvestSMART offers a balanced portfolio with a fee of 0.99% annually, capped at $451, which could save you almost $150 on a $10,000 investment.
Refinancing your home loan can significantly lower your interest rate, potentially saving you thousands of dollars in interest payments each year.
Paying off credit card debt quickly is important because it reduces the amount of interest you pay, freeing up more money for savings or other expenses.
Paul Clitheroe is the Chairman of InvestSMART and the Australian Government Financial Literacy Board, as well as the chief commentator for Money Magazine, providing insights and advice on financial literacy.
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