How to beat your biggest money worries
Calls to the National Debt Helpline have trebled in the past five years, with more than 162,000 financially stressed Australians having dialled in during the last recorded 12-month period.
From recent research commissioned by Australian Unity, it could be inferred that a sizeable portion of the callers may well be retirees. Conducted by Empirica Research, a survey of older Australians found that 22 per cent of them felt uncomfortable about their current financial state.
The findings revealed that the top three financial worries keeping older Australians awake at night are mortgage repayments, living costs and affordable healthcare.
Reputable comparison site Canstar.com reports that there is a 2.34 percentage point difference between the highest and lowest home-loan interest rates in its database. On a $250,000 loan that is a whopping $5000 a year extra you could be paying if you haven’t shopped around for a lower interest rate.
If you are still paying your bank a gold-plated rate and you have no need for the extra $400 a month it costs you, then do nothing. But if mortgage repayments are stressing you out, jump onto a comparison site and look for a better deal.
Barefoot Investor Scott Pape recommends that borrowers call their bank and ask for a cheaper rate to be matched. If they won’t oblige, he suggests: “Don’t bitch, switch.”
Studies have shown that putting blind faith in your bank to look after you is a costly illusion. If your banker is not going to take care of you, just walk out the door, because there will be plenty of other lenders which want your business.
In a worst-case scenario, if your mortgage repayments are still crippling, perhaps you should talk to a bank about a reverse mortgage. This product will allow you to hang onto more of your cash. The catch is, that when your house is eventually sold, the bank will need to be repaid any money and interest it has extended. It is important to seek professional (and independent) advice before contemplating this option.
If your daily, weekly, or monthly expenditure feels like it is out of control, then it is time to measure it to see where your money is going. The MoneySmart website has a number of tools, calculators and apps to help you outline the cost of your lifestyle.
A good starting point is to use the budget tool to plot your expenses. Armed with this you now have much of the detail you need to go comparison shopping for cheaper phone services, electricity, loan interest rates, insurance and other unavoidable costs.
However, MoneySmart warns that before you switch services to a cheaper alternative it is important to read the fine print and ensure you are comparing ‘apples with apples’.
Not much can prepare you for the financial shock of a sudden accident or illness that will require unsubsidised medical care and lead to a pile of doctors’ bills. Even those with private health insurance can be left out of pocket, thanks to many treatments and services that insurers do not cover.
Once again, it is a good idea to understand the fine print of any policy you may have and then compare with others. Be warned that many comparison sites are not independent and will only showcase selected insurers. For the most impartial overview of health insurance, it is best to visit www.privatehealth.gov.au.
If you cannot afford private health care, and let’s admit it, it isn’t inexpensive, then at least try to regularly put some of your income or Age Pension into a high-interest account for any emergencies.
Quoting from Scott Pape once more, everyone should have a “mojo” account. He recommends opening an account at a different institution so that it cannot be linked to your transactional accounts. This removes the temptation to dip into it for anything other than an emergency.
Try to open the account with as much as you can afford, Pape suggests $2000, and then a good rule of thumb is to allow 10 per cent of your regular earnings to go straight to your emergency fund, then sit back and watch compounding interest do its job.
Anyone struggling with finances should consider speaking to a no-obligation adviser. Peak body Financial Counselling Australia offers a free financial counselling phone line – 1800 007 007 – from 9.30am to 4.30pm, Monday to Friday). The organisation’s website has further consumer resources and tools to help you find a face-to-face counsellor.
The Department of Human Services also offers free advice for those who find themselves worrying about major money problems.
What tips can you share for getting out of a financial crisis? Are you afraid you won’t have enough money to last through retirement?
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