LIFE

3 Scary-Sounding Financial Things You Actually Need To Do

You could save thousands.

19/10/2017 11:20 AM AEDT | Updated 19/10/2017 11:28 AM AEDT
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Finances: one of the few things that manage to be boring and scary at the same time.

Almost nobody gets a kick out of doing their finances. They're scary, they're difficult and there seems to be altogether too much red tape and paperwork.

It's much easier to go with the flow. For example, signing up to the superannuation fund recommended by your employer than actually doing the homework yourself.

We get it. Finances suck. You don't want to think about them unless it's how much money you're getting back in your tax return and even that's a hassle.

BUT. What if we told you there's a chance you could save thousands of dollars? What if a few hours of pain resulted in financial reward?

HuffPost Australia spoke to financial adviser and mortgage broker Steve Greatrex who recommended three "easy" (his words, not ours) things you can do to change your financial situation.

They may sound scary, but they're worth it.

1. Review your super

"A lot of people are in default super funds and may not really know what they've got," Greatrex told HuffPost Australia.

"In many cases, especially with younger people, they could be a in a fund that's not as aggressive as it could be. To determine that, there are various questionnaires and calculators you can find, or of course you can see a financial advisor.

"Basically you need to work out what your risk profile is on your super. A lot of younger people in balance portfolios with a long time until retirement, it can be better for them to take a more aggressive stance.

"We're talking a long time frame, because they can't access the money [until retirement] and they should consider going more aggressive if it suits them."

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2. Review your home loan

Okay, so not all of us are lucky enough to own our own homes. But if you did manage to get your foot in the property door, a) congratulations and b) when did you last take a look at your mortgage?

"Reviewing your home loan is really important, because often interest rates are going up and you may not be aware of it," Greatrex said. "A lot of people have interest-only loans, but what we're seeing at the moment is the difference between interest only and principal and interest is widening.

"It could be worth converting your interest only loan to principal and interest, subject of course to your situation."

Even if you get 80 percent of what you ask for, it's going to make a difference of thousands.

If you're thinking, 'But why would I pay principal and interest when I could get away with only paying interest?'. Greatrex has this to say:

"The regulatory authorities are pushing hard on the banks to limit their interest only loans. A lot of banks have caps on the percentage of loans they can have which are interest only. I head the other day about a big bank that can only have 10 percent of loans as interest only.

"So, what this means is they are putting up the rates on their interest-only loans. Now it can be something like a one percent difference or worse.

"When it comes to interest-only loans, of course for many people it's been a way of managing their cashflow. But if you look at the numbers, you may be better off to go principal and interest.

"A lot of people aren't really aware of the fact their rates have gone up. I definitely think it's worth contacting a mortgage broker to look around and see if you can get a better deal. You don't even have to go through the rigmarole of getting a whole new loan, though you have to make it clear [to your bank] that you will if you have to. Even if you get 80 percent of what you ask for, it's going to make a difference of thousands."

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Switching to solar power could save you money in the long run.

3. Review your power bill

Like your super, your power bill is something people tend to 'go with the flow' with rather than shop around for. This means you could be missing out on huge savings every year, just because you went with the more convenient option.

"A lot of people will shop around to get the best dress or TV but what is really hurting us is our home loan rate or our power bills or poor returns on our super fund," Greatrex said.

"I think the number one issue right now in Australia is the cost of power. It's particularly topical for us because we are in South Australia and our power bills here are absolutely rocketing. In our case, I knew we had the best possible deal and I checked and confirmed that, but a lot of people haven't.

"Something else to think about is, in some cases, there are opportunities in which you get your lights changed over. So we are currently looking at getting our downlights changed to LED.

"Finally I think it's worthwhile to look at solar. I think a lot of people should look at what they can do in terms of installing solar for themselves as it does offset the costs over time. In fact, the payback periods seem to be very short.

"If you can afford it or get into a scheme where it's being funded by the provider, it's a good thing to look at."

Switching is really easy. This is how to get the best deal from your energy provider.

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