December 5, 2018 Paula Benson

Everything Stays the Same, But for How Long?

Gareth Daniels is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Interest rates are staying on hold again.

An interesting article on the 9 News finance webpage https://finance.nine.com.au/2018/12/04/12/05/ross-greenwood-analysis-why-interest-rates-have-been-on-hold-for-28-month provides some commentary and thoughts as to why this might be the case.

It suggests that rates will remain on hold, to a greater extent, until the end of 2020 whilst acknowledging that this is an oddity given certain factors including a well performing economy and low(ish) unemployment.

The reason that the article sights for the RBA not raising rates is falling house prices. It also notes that general rising living costs (fuel, power bills etc) means that households are under pressure to juggle all of their outgoings.

Overall the piece links intertwined economic factors to paint a picture that some uncertainty lies ahead.

Ever the optimist I can’t help but see a common-sense opportunity here…

We know that genuinely having an understanding of where your money goes is an incredibly powerful tool to help you feel confident about your current financial position and to enable you to make informed decisions about how to build for your future.

In the past I have pulled my punches a little in encouraging people to put time and effort into a writing a budget and most importantly sticking to it. I’ve possibly even let them off the hook when they don’t engage with the task but most people dread the exercise. Well no more.

Just do it.

You have to do it.

There is no excuse not to do it.

It isn’t even that hard.

Consider two basic approaches. You can use historic information pulled from your bank and credit card statements to understand where the money has been going or you can consider yourself as a business and set a budget for the year ahead.

The first approach can be a little time consuming, daunting and even painful (count the number of times Dan Murphy’s pops up on your statement and you will know what I mean)! It can allow you to take stock and adjust spending habits. It can even vindicate some of the discretionary spending that you have made as perhaps it wasn’t as bad as you feared! You are allowed to enjoy life, budgeting is not about restricting it’s about being honest with yourself and putting yourself in control.

If you take the second approach you need to do some planning. Take a moment, it may only be a couple of hours, to run through some of your non-negotiable costs such as power, phone and other utilities and ensure you are getting the best deal. Also set yourself a goal of where you would like

your debt to be come the end of the year; don’t simply settle for the minimum repayment that will satisfy the banks thirty year timeline. Again, include the fun stuff too so when you do have that dinner out or go to your friends birthday it can be enjoyed guilt free. Just be very clear on how much money is allocated to go where.

The final component regardless of the approach you take is monitoring and tracking. This can be manual through regular engagement with your online banking or via one of the numerous apps that exist to help you do this efficiently and accurately. As I said early though;

Just do it.

You have to do it.

There is no excuse not to do it.

It isn’t even that hard.

It may be that I am an optimist, I like to not think blindly. There are genuine trials and tribulations in life and significant challenges that are thrown at us. It is fair though to think that we might develop the fortitude, and lean on available support where needed, to give us the capacity to step back and find the opportunity that exists within these challenges.

A great client of mine lives with the mantra “everything is temporary”.

I have no doubt that rates will rise again at some point, when and by how much I am not game to say.

I am happy to say though that practical steps including setting a budget, tracking it and therefore sticking to it will go a long way to enabling you to get ahead on the repayments to your single largest barrier to creating meaningful wealth; your mortgage.

Far from being restrictive, understanding your budget will provide you the chance to make the most of this current opportunity.

These low rates, in the greater scheme of things, may well only be temporary. The cash rate has remained the same for “twenty-eight months straight” (a long time as the article intermates). However, put another way that’s just over 2 years or about one twentieth of your thirty-year loan term. To me low rates mean one thing, time to take control and time to get ahead!

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.
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