September 21, 2010
School holidays are often a struggle for Australian families trying to maintain a budget and keep on top of commitments such as a mortgage. Many parents have to cover additional childcare expenses or unpaid time off work, plus the wide-ranging costs for entertaining children during a peak period.
With home loan repayments lingering, how can you avoid a blow out and stay ahead?
Australia's largest independently-owned mortgage broker, Mortgage Choice recommends a return to budgeting basics.
Company spokesperson, Kristy Sheppard said, "Planning ahead for school holidays helps parents avoid falling into mortgage stress just as it helps them make the most of the days they spend with their children. Adjusting the budget earlier in the school term to save for upcoming holiday expenses should make maintaining repayments easier and see the whole family having a more relaxed time."
"When saving for any financial goal you need to set a target, work out how much you need to put away weekly or monthly and ensure the piggy bank still has enough to meet other commitments.
"In fact, getting a good head start on the holiday budget may put you in a better financial position for the entire year if you end up with leftover funds that can be contributed into your home loan and/or other long term debts. This helps to reduce the overall interest owed and the loan term.
"Building a financial buffer is particularly important as the economy gains steam and we head into a period of probable interest rate and living cost increases."
Consider Mortgage Choice's top tips to reduce debt, spend wisely and still enjoy these holidays:
Savvy shoppers save online
Discounts are often available if you book things in advance and/or purchase online. Prepare early for the break and shop online for accommodation discounts, cheap flights and bargain tickets to concerts, sports events and attractions. Saving money here means more money to spend elsewhere.
Make the most of savings
An offset account attached to your home loan or a home loan with a redraw facility can put to good use those new savings or dollars being accumulated for holidays. Rather than making deposits into a savings account, adding extra funds regularly or lump sums into a home loan in these ways can increase your savings while acting as contributions to the loan. This helps reduce the interest owing and your loan term. Plus, paying the mortgage is not taxable whereas money in a savings account is.
Do some lump sums
After the holidays, any money saved (big or small) from your budgeting efforts can be put back into your offset account or deposited into the loan account as a lump sum. Take a 30-year loan of $300K at 7.36%. $500 added at the three-year mark would reduce the term by one month and save over $3K in interest. Imagine the difference made by doing this at the end of every school holiday!
Budget for a feast
Holidays often lead to lazy snacking. Stay healthy and limit spending on takeaway and junk food by challenging kids to a junior master chef competition - an enjoyable way to eat well, spend quality time together, learn new skills and save money.
Redraw only if you need to
If you have been working hard to create a financial buffer in preparation for trying times, keep in mind that, as mentioned, some loans allow you the flexibility to withdraw extra payments made. However, some lenders have a minimum redraw amount and may charge you a fee each time.
For further information or to arrange an interview, please contact:
(02) 8907 0472 or 0407 416 124