Many Australians generally believe that if they have paid off their home, have a substantial amount in super and can take a holiday overseas each year, then financially they have made it.
Research undertaken by comparison site Finder found that an overwhelming 74% of Australians believed that paying off the mortgage is the financial milestone they most value. At a close second, 59% said having enough super to comfortably retire, whilst one in three people said that the ability to holiday overseas each year is a sign of financial success.
Goals like these are all reasonable goals, and definitely worth pursuing. Unfortunately the research identified that 5% said owning a sports car indicates financial success – for the record, this is not a sensible goal as cars are a very bad investment.
However, regardless of what your financial goals are, you will have a greater chance of achieving your goals with a plan of action – the sports care included, if you must.
A great goal to start with is paying off your Mortgage. And it can be done! And once you have paid off your Mortgage, there will be plenty of cash to spare and to dedicate to those overseas holidays.
Planning and defining a strategy, with clear steps you can stick with over time, will be the fastest way to get there. Step number one – check what rate you are paying at the moment. Currently the average variable rate is 5.3% – which is a poor rate. If you are paying this, or more, then it is time to start talking about ‘re-financing’. There are an abundance of loans costing less than 4% currently on the market.
If your loan is competitive, then next most effective option to pay off your Mortgage sooner is to pay a bit extra each month.
For example, if your Mortgage is $400,000 with a rate of 4%, paying an extra $20 a week on the loan could see you mortgage free 18 month ahead of schedule whilst also saving $17,217 on interest. By simply being savvy about the process of paying off your mortgage, you can save yourself a lot of money.
Add to the mix paying off your Mortgage fortnightly or weekly, instead of monthly, and the savings will be considerably more and you will be able to potentially pay of your Mortgage years earlier.
If your goal is to grow your super, then a good starting place is talking to your Employer about contributing part of your before-tax wages or salary directly into your super fund. This is called Salary Sacrificing and a great way to save money for your retirement before it hits your bank account.
Before-tax contributions are taxed only 15% which is below the average tax rate for workers. This means salary sacrifice is a very tax-friendly way of increasing you retirement savings. It’s highly likely that after a few pay checks you won’t even feel the difference in your pay, and over time it can make a substantial difference in your final nest egg.
With the start of the new financial year still young, it is a perfect time to review your financial goals, to think about how you will be achieve them and start to putting those plans into action to make them a reality.
If you need a helping hand to get you started, a one hour advice consultation is usually all it takes. Let’s review together your Personal Balance Sheet and Personal Budget Statement so you can achieve your financial goals. Call us today on 08 9317 7300 to meet with Paul Baggetta, a qualified Taxation Accountant for over 36 years and a Financial Planner for almost 20 years.
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The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.