Smart strategies

Most of us do what we can, when we can to save money, pay off debt and ensure life is as comfortable as possible for ourselves and our family.

The little things do count — cost-cutting measures can add up to significant savings over the years.

But are there smarter ways to achieve more without having to spend more?

We can help you decide which of these strategies, or others, will help you and your family.

1. Pay off your home loan sooner

You can reduce your mortgage by having your salary paid into a 100% offset account linked to your mortgage. You can still access the money for everyday transactions. Any money you put in the offset account is deducted from your loan balance before interest is calculated, meaning you get a better return rather a regular cash account, save interest and pay off the home loan sooner.

2. Use debt to grow your wealth

While most of us have some degree of debt, we tend to see this as a burden. But by harnessing the power of ‘good’ debt – borrowed capital used to invest in assets like shares – you can grow wealth and generate an income. What’s more, unlike your home loan, the interest on an investment loan is generally tax deductible.

One example of this is drawing on the equity in your home to establish an investment loan, and investing this money in shares. By doing this you’re building an income producing asset apart from your home and you can use the income from this additional investment (and any tax advantages) to reduce the outstanding mortgage.

Before you use a gearing strategy, you should ensure you have a suitable investment timeframe (seven years or longer) and understand the risks. For example, if your investments fall in value, your financial situation could be significantly worse than if you hadn’t used a gearing strategy.

3. Protect your family

As your life and family change it’s important to make sure you and your loved ones are protected by the right insurance for your situation.

There are ways of setting up this protection so it’s affordable and tax‑effective. The most common strategy is to purchase insurance through your super fund.

If you pay using level rather than stepped premiums, you can significantly reduce the long-term cost of your insurance. Over time the level premiums become cheaper than stepped premiums and often at a stage in life when you need the cover the most.

In some cases, you may be eligible for a discount if you pay your premiums annually, rather than monthly and holding all your personal insurances in the one policy can reduce fees. Savings can also be made by consolidating the insurances held by yourself and family members into the one policy.

To find out more about these strategies and whether they’re suitable please contact us on 02 9299 7044.

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