Are your bank accounts set up correctly?
You’ve found the house, the mortgage has been approved and now the only thing you need to work out is if the sofa fit in the lounge. Right? Well, almost. Unless you want to be paying your home loan off over the next 30 years. If you would like to pay your loan off faster, then the work has just begun. The benefits of paying your loan off faster are well documented. The sense of being debt free can be a big driver for some. The tens or hundreds of thousands that you can save will certainly get most excited.
Many people stick with the bank account that came with the home loan. However if you want to keep track of multiple goals, you’ll probably need more than one account. Having everything paid from the mortgage can make budgeting a challenge. For example, if you’re saving for a holiday, it may be difficult to know where you’re up to with your mortgage payments since you’ve mentally pre-spent some of the money. Instead, see if you can set up an offset account to put the holiday savings into. That way you’re not tricking yourself into thinking that you’re further ahead of your mortgage than you really are.
Do you run a business as a sole trader? If so, you can store your tax payments against the mortgage in a separate offset account. The advantage of this is that you’re saving interest on your loan while the funds are sitting there, but you never have the false comfort of having a lower mortgage balance. When it’s time to pay the ATO, the money is there and ready to use.
Often couples have joint mortgage and savings accounts, but separate credit cards. It’s often a point of contention when we’re working with couples that one or both may occasionally overspend. You may want the privacy and control of your own account, but consider having debit cards instead of credit cards. That way, you’re only spending what you have.
Everyone treats money differently and has different needs. Some people need the simplicity of one account, whereas others need five. The most important thing to consider with your bank account structure is whether you can keep track of everything. You need to know, without any major effort, if you’re on track, ahead or behind. If you can’t do that now, you need to find a better way of handling your money.
Speak to our team today to see how you can achieve your financial goals.
One of our mortgage brokers will contact you to discuss the following:
- Get to know your financial objectives
- Help you to understand your borrowing capacity
- Take you through how we can assist you with your finances
We look forward to hearing from you – please enter your details and we’ll be in touch shortly