Are You Money Smart?
22nd OF September 2012
Sure, you earn money and spend money, you take out loans and manage your mortgage, but are you really money savvy?
by Anna McDougall, Money Maven
While you’re spring cleaning the house this season, why not spring clean your bank account? Ask yourself, where is your hard-earned money really going and how can you get it to stick around for a little longer?
Knowledge about money matters provides a sound basis for making decisions about purchases, saving, investing, working and future payments like school fees and mortagage repayments.
Check out these top 5 ways to be money smart and take advantage of your dollars.
Your Short and Long Term Goals
Meeting short-term as compared to long-term goals is a constant battle when it comes to money. To defy your ‘here and now’ money status and make it something substantial for the future, develop your skills in saving and investing to meet your long-term goals. See the big picture to get the willpower to work towards your long-term goals.
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. Any money you put in the offset account is deducted from your loan balance before interest is calculated, meaning you get a better return, save interest and pay off the home loan sooner. And you can still access the money for everyday transactions.
Use debt to grow your wealth.
Debt doesn’t always have to be seen as a burden. Take advantage of the power of ‘good’ debt (borrowed capital used to invest in assets like shares) to grow wealth and generate an income. One example of this is drawing on the equity in your home to establish an investment loan, and investing this money in shares.
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.
You may associate being frugal as being “cheap” or “tight” or a right old Ebonezer Scrooge. The dictionary defines "frugal" as "reflecting economy in the expenditure of resources." It simply means being a little bit more money savvy, becoming a more conscious shopper and consumer and looking for ways to save money and not throwing all your saving away on an impulsive night of online shopping (you’ve been there). Buying generic brands at the supermarket for example, could free you up for decent night out with the girls.
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