September 02, 2014
Top tips to help mortgage holders avoid budget blowouts!
School holidays often put pressure on Australian families, seeing them juggle additional entertainment costs with their usual financial commitments. Many parents rely on credit for unplanned expenses and may not be aware of simple ways to take control of holiday cash flow headaches.
Various home loan features can offer clever ways to stay on top of spending.
Borrowers can be unaware their mortgage may allow them to stash extra funds for cash-heavy periods such as holidays and save on interest owed. Some still put funds away into a savings account instead, even if they are aware they can utilise this option.
I question why a borrower who can contribute additional funds into their home loan to create a buffer, and redraw without penalty when money is needed for unexpected expenses, would store the funds in a savings account where the interest accrued is taxable.
Every extra dollar above the minimum loan repayment reduces the principal amount that interest is calculated on. If kept in the account, this also reduces the loan term. The same theory applies to funds held in an offset account attached to the home loan, which acts as a savings account of sorts that offsets, or uses, those funds to reduce the daily interest accumulated on the loan while still being available to withdraw.
Of course, redraw and offset account usage charges, if any must be considered.
Consider these other tips:
Utilise your home loan features as regularly as possible to build a healthy festivities fund or, if it’s better financially for you, deposit those dollars in a high interest savings account. Review your fund creation strategy often.
Involve the kids in creating a holiday agenda with a budget attached. Your children may be more appreciative if they are involved in the process of deciding what outings the family can afford.
Keep activity costs down and excitement up. With so many children armed with toys and game consoles, invite your children’s friends over for a games night where everyone brings some food.
Research multi-passes and other discount offers. If pre-purchasing tickets, ask for multi-park or ride passes as well as family or student discounts. Also monitor group buying sites for deals.
Calculate what you want to spend next holiday season. Divide the total spending of the most recent holiday period by 12 (if you are paid monthly or by 26 and 52 for fortnightly and weekly) and add a little inflation to help calculate how much you need to save for the next holiday season.
Spring school holiday ideas
Spring is one of the best seasons for school holidays in Australia. From September through to October it's often warm enough to hit the beach in the southern states. It is still cool enough to tour Uluru; the humidity and rains have not yet arrived in Cairns and the Top End; and the wildflowers are in full bloom in Western Australia. Wildlife is most active at this time of year as Australia’s native animals give birth and raise their young. It’s an excellent time for walking or driving vacations, especially in the Australian Outback. Spring is also a great season to surf, sail and kayak in Australia.