Understanding how you can benefit financially in a low interest rate environment is a great way to strategise for your financial future. Below we have put together seven ways you can benefit from low interest rates.
- Rule out credit card debt – This is simple, yet effective. If you have money available to drawdown, pay off your credit cards because the interest payments are higher on these than currently on your home loan.
- Be interest rate savvy with your term deposits – Just because the rate of return on term deposits may be lower in a low interest rate environment, doesn’t mean they should be excluded from your wealth management strategy. Let’s say you believe interest rates may go up in three months, why not take out a three month term deposit. That way, on maturity or the half way point, you have the option to roll over the term deposit and make the most of the high rate.
- Use freed up cash flow to build wealth – Got some spare cash leftover from your mortgage repayments? Why not use it to build an investment portfolio. For as little as $100 a month, you can contribute to an investment portfolio that invests in a range of asset classes, which over time will grow your wealth.
- Use the money set aside for mortgage repayments to pay off some principal on your loans – It’s always great being ahead on your mortgage, and easy to do if you are already in the habit of paying more than your required repayments. So keep your repayments at their existing higher level while interest rates are steady or dropping and you could knock years off your mortgage.
- Consider fixing your loan – If you choose a fixed home loan, you are likely to pay a higher rate than your current variable level. However, in doing so you can extend the lifespan of the existing low interest rate environment.
- Improve diversification and protect yourself when interest rates move – Investing into other asset classes, can help you improve the exposure you have to interest rate movements and improve the diversification in your investment portfolio.
- Consider fixed interest managed funds – These types of funds provide exposure to the full range of fixed interest environments, adding better diversification benefits to your investment portfolio.
If you are looking to update your wealth management strategies, or simply have any questions, get in touch with our Independent Financial Advisor today on 02 9299 7044 or at email@example.com.