Building an emergency savings fund is a crucial step in achieving financial security and peace of mind.
Here are some strategies to assist with building an emergency savings fund:
1. SET CLEAR GOALS
Determine how much you want to save in your emergency fund. It is often recommended to have at least three to six months’ worth of living expenses, but you can start with a smaller goal and work your way up.
2. CREATE A BUDGET
Develop a detailed monthly budget to track your income and expenses. This will help you identify areas where you can cut back and allocate more money to savings.
3. PAY YOURSELF FIRST
Think of the money you save for an emergency fund as a must-have expense. Set up transfers from your regular account, where your pay goes, to your savings account when you get paid. This makes sure that you always save.
4. REDUCE UNNECESSARY COSTS
Review how you spend your money and see if there are any expenses you can temporarily cut back on or stop. Put the money you save into your emergency fund.
5. INCREASE YOUR INCOME
Look for opportunities to boost your income, such as taking on a part-time job, freelancing, or selling items you no longer need around your home. All and any extra income can then be put into your emergency fund.
6. USE BONUSES AND UNEXPECTED MONEY/WINDFALLS
Any unexpected windfalls, such as tax refunds, work bonuses, or cash gifts, can be a great way to jumpstart your emergency fund. Instead of spending this money, save it.
7. OPEN A SEPARATE SAVINGS ACCOUNT
Consider opening a separate savings account specifically for your emergency fund. Look for a savings account that offers a better interest rate than a regular savings account, allowing your money to grow faster.
8. BUILD GRADUALLY
Do not feel like you have to hit your savings goal right away. It takes time to build up an emergency fund. Celebrate small steps along the way to stay motivated.
9. AVOID USING THE FUND FOR NON-EMERGENCIES
Define what you think of as an emergency and promise to only use your emergency fund for real emergencies, like medical bills, car repairs you did not plan for, or losing your job.
10. REVIEW AND ADJUST
Check in on your budget and savings progress. Change your savings goals and how much you put in as your finances change.
11. CONSIDER THE WINDFALL STRATEGY
If you get a big bonus, like an inheritance or money from a legal settlement, you might want to put some of it in your emergency fund to save money faster.
12. SEEK PROFESSIONAL ADVICE AND HELP
If you’re struggling to save or need some help, consider consulting a financial advisor or financial educator who can help you create a savings plan tailored to your specific situation.
Remember that building an emergency savings fund takes time, and it is fine to start small. The key is to develop a consistent savings habit and stick to your plan over time.
Having an emergency fund can give you peace of mind and financial security when unplanned expenses come up.
You can immediately begin decreasing what you owe and increasing what you own by following the information below.
There a several commonly recommended strategies for paying off debt efficiently, including the “Debt Snowball” or the “Debt Avalanche” method.
Here’s an explanation of both strategies:
DEBT SNOWBALL METHOD
How It Works: This method involves paying off debts from the smallest to the largest balance, regardless of interest rates. The idea is to gain momentum and motivation by quickly eliminating smaller debts.
Steps for the Debt Snowball Method:
List all debts, starting with the smallest balance and ending with the largest.
Pay the minimum on all debts except the smallest one.
Allocate any extra money in your budget toward paying off the smallest debt as quickly as possible.
Once the smallest debt is paid off, roll the money you were using for that debt into paying off the next smallest debt.
Repeat this process until all debts are paid off.
Advantages: This method can provide a psychological boost as you see smaller debts disappear quickly, which can motivate you to keep going.
DEBT AVALANCHE METHOD
How It Works: This method involves paying off debts in order of highest to lowest interest rates. You focus on paying off the debt with the highest interest rate first to save the most on interest charges over time.
Steps for the Debt Avalanche Method:
List all debts, starting with the one carrying the highest interest rate and ending with the lowest.
Pay the minimum on all debts except the one with the highest interest rate.
Allocate any extra money in your budget toward paying off the debt with the highest interest rate as quickly as possible.
Once the highest-interest debt is paid off, roll the money you were using for that debt into paying off the debt with the next highest interest rate.
Continue this process until all debts are paid off.
Advantages: This method saves you the most money on interest charges over time, as you tackle high-interest debts first.
The Debt Avalanche Method is my preferred method and the one that I teach in my programs, as I want to save you as much money, as you can.
Choosing between the Debt Snowball and Debt Avalanche methods depends on your personal preference and financial situation.
The Debt Snowball may provide quicker wins and motivate you, while the Debt Avalanche can save you more money in the long run. Whichever method you choose, it’s essential to stick to a budget, avoid taking on new debt, and consider increasing your income, if possible, to accelerate your debt payoff efforts.
Additionally, seeking guidance from a financial advisor can provide valuable insights and personalised strategies to help you get out of debt faster.
At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire. Join ourLEARNING HUB today!
If you have multiple high-interest debts, such as credit card balances or payday loans, you may choose to get a personal loan to consolidate them. By doing so, you can simplify your finances and potentially secure a lower interest rate, reducing your overall debt burden.
2. FINANCING A LARGE PURCHASE
A personal loan can provide the funds you need to make a large purchase, such as buying a car, renovating your home, or paying for a wedding. Rather than depleting your savings or relying on high-interest credit cards, a personal loan provides a structured repayment plan and a potentially lower interest rate.
3. COVERING UNEXPECTED EXPENSES
Life is unpredictable, and unexpected expenses can arise, such as medical bills, home repairs, or emergency travel. In such situations, a personal loan can provide immediate funds to cover these unexpected costs without disrupting your financial stability.
4. FUNDING EDUCATIONAL EXPENSES
If you’re considering furthering your education or pursuing a degree, a personal loan can be a viable option for covering tuition fees, purchasing textbooks, or paying for other education-related expenses. Personal loans can offer more favourable terms compared to student loans, especially for non-traditional students or those attending part-time.
5. IMPROVING CREDIT SCORE
If you have a limited credit history or a low credit score, managing a personal loan responsibly can help you improve your credit profile. Making consistent, on-time payments demonstrates creditworthiness, which may improve your credit score over time. A higher credit score can help you get better interest rates on future loans.
Remember that the decision to take out a personal loan should be based on careful consideration of your financial situation, repayment ability, and the terms offered by lenders. It’s important to compare loan options, understand the associated costs and fees, and ensure that borrowing fits within your overall financial plan.
At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire. Join our LEARNING HUB today!
1. Firstly, look at the reason why you want to switch your home loan
2. Lower interest rate
3. What is the new lender offering that is worth switching
4. Consider the features you’re looking for in your new home loan
5. Weigh up the pros versus cons of switching
6. Look at the costs of switching home loans
Deciding whether to switch your home loan to another lender is an important financial decision.
Here are some factors to consider when making that decision:
1. INTEREST RATES
Compare the interest rates offered by your current lender with those offered by other lenders. If you find significantly lower rates elsewhere, switching may be beneficial. However, consider any additional costs associated with the switch, such as application fees, exit fees, or ongoing charges.
2. LOAN FEATURES
Assess the features and benefits of your current loan and compare them to what other lenders are offering. Look for features like flexible repayment options, offset accounts, redraw facilities, or the ability to make additional repayments. Switching to a loan with better features could save money or provide more financial flexibility.
3. LOAN TERM
Consider the remaining term of your current loan. If you’re already several years into your mortgage, switching to a new lender could potentially reset the loan term, resulting in a longer repayment period. This may not be ideal if your goal is to pay off your mortgage faster.
4. COSTS AND FEES
Determine the costs associated with switching lenders. These may include discharge fees from your current lender, application fees for the new loan, valuation fees, and legal costs. Calculate whether the potential savings from switching outweigh the expenses involved.
5. CUSTOMER SERVICE
Assess the level of customer service offered by your current lender and potential new lenders. Read reviews and talk to others who have experience with the lenders you’re considering. Good customer service can make a significant difference in your overall experience.
6. OVERALL SAVINGS
Calculate the potential savings over the life of the loan by switching to a new lender. Consider factors such as interest rate differentials, ongoing fees, and loan term changes. If the savings are substantial, it may be worth considering the switch.
Remember, before making any decisions, it’s essential to seek advice from a qualified mortgage broker or financial advisor who can provide personalised guidance based on your specific circumstances. They can help you analyse the costs and benefits and determine whether switching lenders is the right choice for you.
At Financial Management 101 – we are committed to providing YOU with excellent financial education, training and support so that you can live the life you truly desire. Join our LEARNING HUB today!
This blog is dedicated to my mentor and serial entrepreneur Mr Harry Bozin, who has taught me everything I know about paying down the biggest debt one will ever have THE MORTGAGE and in the quickest way possible.
Whenever I share anything about how to pay your mortgage down as quickly as possible, take note and put into action the strategies and tips I share that truly work.
So, one of the major purchases individuals and couples in their lifetime take on, is when they decide to put a deposit down to buy their very own piece of paradise.
Having a mortgage is one of the biggest debts most people embark on when owning a home.
It can be one of the most stressful and worrying times in their life, often concerned how they’ll make the monthly mortgage repayments when unexpected events come up.
What a lot of people aren’t aware of when borrowing the money to buy their home, is the overall cost for paying down this debt if they don’t pay it down as quickly as possible.
Because the first 10 years of the term of the loan whether it be a 25 or 30 year loan, is paid in interest payments to their banking institution. During this time there isn’t a lot of principal paid off (the original amount borrowed) as most of it goes to paying interest payments, unless the new home owner is consciously paying extra into their home loan.
Do you know what the total cost of your mortgage is if you do not pay it down well before the end of the term of the loan?
Well, I do and it may shock you to know that on a 25 year home loan borrowing an amount of say $350,000 not paid before the 25 year mark, will end up seeing you pay an additional $236,624 for the privilege of having a home loan.
Now that’s $236,624 better in your pocket earning you money, not the banks.
Let’s look at some rough numbers on how you could grow this money of $236,624 where it would compound over the next 15 years (because that’s the time period you saved on your mortgage by paying it down in 10 years).
You could put an additional $263,529 into your pocket seeing you at the end of 15 years your initial $236,624 growing to an enormous amount of $500,153.
Now that’s how having your money work for you and not your banking institutions benefit!
So what are some of the ways you can pay this debt down as quickly as possible and be mortgage free in 10 year or less?
There are 5 steps to becoming mortgage free faster and they are:
1 SET YOUR GOAL
It’s sounds crazy for some people to set a goal for this given they generally feel overwhelmed at the amount of money to be paid back, but it can be done.
This goal is just like any other you would set.
Let’s say for example that you have a $350,000 mortgage and would like to pay this off around the 10 year mark not 25 years as per the term of your loan agreement.
Then what you would do is look at ways you could do this by looking at your spending habits and talking to your mortgage specialist to find out whether your home loan is one that will enable you to pay it down without any penalties.
2 GET A COACH
There are two coaches you will need to ensure you stay on track and on target of paying your mortgage down within 10 years and the first is a financial coach like me.
A FINANCIAL COACH is critical to keeping you focussed on your goal and guide you in making sure you’re staying on track to paying your home loan goal down in the 10 year time frame you’ve set.
The goal of the financial coach is to ensure that every bit of extra money you have, goes towards paying this debt down as fast as possible.
A financial coach is not only there for financial encouragement, but is also there for your emotional wellbeing, when at times you may feel overwhelmed and stray off course thinking you’re never going to pay this down.
The second coach is A MORTGAGE COACH. Now the major benefit of a mortgage coach is to ensure that you have the most effective home loan for you that’s working in meeting your goal of becoming debt-free in 10 years or less.
A good mortgage coach would meet with you once or twice a year to ensure that your loan meets your current life circumstances, because as we know home loans change.
A mortgage coach will be able to advise whether you are best taking advantages of lower interest rates and whether you could fix that interest rate to maximise your debt reduction strategy.
3 LEARN HOW AND WHAT YOU CAN DO TO ACHIEVE YOUR GOAL OF BECOMING DEBT-FREE SOONER.
There are many strategies about how to pay your home loan down faster and I’m afraid to say that it’s not in the banking institutions’ best interests to share with you how to pay your debt down faster.
Why, because they have forecasted what they are going to do with your extra repayments right up to the 25-year mark. So you see they want you to keep paying so they can use your hard-earned money on other investment opportunities to help grow shareholder dividend returns.
This is why working with both your financial coach and mortgage coach will see you taking advantage of strategies that you may not be aware of yet.
4 CREATE A PLAN AND STICK TO IT!
With anything in life, when you have a plan and stick to it, you have a better chance of achieving what you’ve set out.
This is where your financial coach can help create a plan that meets your requirements and lifestyle. You see we all have different priorities in life so the plan needs to be tailored to suit our own circumstances.
5 TAKE ACTION. DO WHAT OTHERS WON’T DO AND YOU WILL SEE THE BENEFITS OF BECOMING DEBT FREE SOONER.
One of the best ways to become mortgage free is do what others aren’t prepared to do.
So often we follow the herd mentality and that sees us continuing to be poor and broke.
It’s about stepping out of our comfort zone for a short period of time while the adjustments are being made and then reaping the benefits long term.
When someone has the courage to step out and become their own person and do the things others aren’t prepared to do, then they soon become the ones who are debt free, happier and living life the way they’ve always dreamed.
So let’s recap what it may costing you by not getting a coach.
Firstly, you’ve seen that you are paying out good money that you’ve worked long and hard to the banking institutions for longer than you need to.
And secondly, your hard-earned money could be working for you and not your banks, as you’ve seen in the illustration above on the benefits of compound interest, making you richer not them.
Also, you’ve read about the benefits of getting yourself both a financial and mortgage coach and this enables you to become mortgage-free sooner
** As your financial coach, I’m one that works with you regularly to help you stay focussed and on track to achieving your financial goals. As your coach, I am also here to ensure that when life suddenly throws you a curveball as it often does – you have the tools and resources necessary to stay motivated and on track.
** The mortgage coach is the one that ensures your home loan is structured and set up correctly. Utilising the latest strategies available to maximise the full debt reduction potential. The mortgage coach’s responsibility is to ensure they are working with you to understand your home loan so you can work towards paying it down as quickly as possible.
NEXT STEPS:
Financial Coach – get in touch with me today to see how I can show you how to pay your mortgage down in half the time while supporting you in achieving your financial goals sooner.
