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Aaron Alston

4 Helpful Tips to Increase Your Cashflow in 2024

Written by Aaron Alston

Tip 1 – Negotiate with your bank a better interest rate and/or refinance your home loan to a longer loan term.

PS – if you would like your home loan reviewed by Hudson Finance, please contact us as we would be happy to assist!!

Negotiate with your bank a lower interest rate – It is unnecessary to pay more interest than you need to.  If you can lower your interest rate, you may be able to pay off your home loan sooner which will save you thousands in interest over the longer term!  Banks generally won’t proactively contact you and offer you a better interest rate, hence it is your responsibility to ask for one.  Asking for a lower interest rate doesn’t mean you’ll get one, however most banks are willing to review your interest rates at least once year.  This is on the provision you are a responsible borrower and have good credit history, make payments on time, have stable employment etc.

How do I ask my bank to lower my interest rate?  Simply call them.  Here are some helpful things to know before calling them:

1) Know what your current interest rate is.

2) Compare your interest rate with other lenders in the market.

3) Ask for the rate that new customers get.

4) Take advantage of the fact that you’re a loyal customer.

Remember – Always be friendly and courteous to whomever you are speaking with over the phone, because it is not their fault your interest rate has risen.  These decisions are made by the executives much higher above.

Refinancing your home loan to a longer loan term – Generally we won’t recommended this if you are looking to repay off your home loan as sooner rather than later, however it may be an option if you are really struggling with your repayments and cashflow.

Remember – Irrespective whether you change your loan term or not, you can still maintain your existing repayment structure.  Changing your loan term however will provide peace of mind you have the option to revert to minimum repayments if required to assist with cashflow concerns.  See below table.

Example – $600 000 loan at 6.5% interest rate

Home Loan $600,000 $600,000 $600,000
Interest Rate 6.5% 6.5% 6.5%
Loan term 20 years 25 years 30 years
Minimum Repayments $4,474 p/m $4,052 p/m $3,793 p/m

Outcome – By refinancing from a 20-year loan term to a 25 or 30 year loan term, you may have freed up $259 p/m or $681 p/m.

Source – https://www.commbank.com.au/digital/home-buying/calculator/home-loan-repayments

Tip 2 – Negotiate with your Electricity provider.

Do your own research and contact your electricity company to see if you can get a better deal.  Be mindful that the electricity market is a regulated market and there may be little variation in pricing depending on which state you live in.   Again, you may not be entitled/eligible for a discount; however, there is no harm in asking. 😊

My own experience – A couple of years ago I contacted my electricity provider and asked for a review in pricing and the representative over the phone gave me a 15% discount on the spot!!

Tip 3 – Review your discretionary spending.

A discretionary expense is simply an expense that you can survive without.  This may include takeaways, alcohol and tobacco, coffee, drinks etc.   A financial planner will never tell you how or where you should spend your money, however it is certaintly worth reviewing for your own benefit.

Helpful Tip

  • Tally up your regular bills such as mortgage repayments, rates, electricity, gas, mobile etc and calculate what the annual expenses are for these necessity items. You can then review your bank statements from 12 months prior to now and subtract the difference between your income over that period less bills and surplus to determine your spending on discretionary items.
  • Alternatively, you can keep track via a written budget (via excel or an app), however I generally find over the longer term, most people will stick to an excel budget 3 months and then revert to old habits. I personally prefer to manage day to day spending via my bank accounts and have money for a specific purpose in each account.  Ultimately do whatever works for you!!

Example – Bob and Mary earn a combined $150 000 p/a after tax.  They calculate that for their basic needs they require $60 000 p/a (mortgage repayments, electricity etc).  They review their bank statements from 12 months ago and identify they had $30 000 in savings.  12 months on they have $50 000 in savings.   Based on these figures they have estimated they have spent $70 000 ($5 833 p/m) on discretionary items.  Bob and Mary put a realistic goal in place to reduce their discretionary spending to $4,000 p/m.  They do this by creating a separate account and deposit $4,000 each month into this account after they get paid to spend on whatever they like.  This way they can easily track month to month their discretionary spending and they both feel they can easily stick to this long term.

Outcome – Bob and Mary will increase their cashflow by approx. $22 000 p/a ($5 833 less $4 000 x 12 months).

Tip 4 – Review your personal loans, car loans and general insurance products.

Review any other loans or general insurance product see if there are better deals out there. You may have enough equity in your home loan to refinance your personal loans and car loans into 1 loan.   A great starting point is Canstar which is Australia’s largest financial comparison website.  Canstar research thousands of products from over 730 brands across 30 different categories.  You can review your home loan rates here as well for comparison; however, it would generally be recommended to contact your lender or mortgage broker (Hudson) first as these rates may not be available based on your current position.

Link to Canstar is here – https://www.canstar.com.au

TIP – It is suggested you review any personal insurance policies (Life, TPD, Income Protection and  Trauma) with a financial adviser.  Unlike general insurance where your physical/mental health is not assessed, with personal insurance your medical disclosures may have materially changed since you applied for your personal insurance policy.  If you switch policies, you may be unaware you are substituting price (i.e a cheaper insurance policy) for an inferior insurance policy with medical exclusions.  If your personal insurance policies are managed by Hudson, request an appointment if you are concerned about the rising cost of your insurance premiums.

Summary

  • Reviewing your home loan, electricity, discretionary spending, and general insurance products could save you thousands of dollars annually!!
  • There are many things you could be doing to increasing your cashflow which may include asking for a payrise, working a 2nd job, establishing a business etc however hopefully the tips provided in this article can get you kick started to increasing your cashflow!!

 

 

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