How financial admin during your self-isolation could save you thousands
As businesses and offices shut down across the country, many Aussies are now wondering whether they'll be able to survive financially the next six months.
With our economy inching closer to a recession, it's become more crucial than ever to rein in spending and work out where to cut back and save. If you're self-isolating or taking social distancing seriously, take this time at home as an opportunity to catch up on your financial admin.
This goes beyond forgoing non-essentials and luxuries. You should also be thinking about where you can save on your financial products - things like your credit card, health insurance and mortgage. Here lies the biggest potential for savings.
According to Finder's Loyalty Tax Report, approximately 8 million Australians are paying more for financial products than they otherwise could be. How? By sticking with the same provider. The report found that Aussies could be saving up to $8496 per year across four common financial products - mortgages, savings, health insurance and credit cards - if they switched to a better offer.
Below are four financial products that are worth reviewing as part of your financial life admin.
Reduce your credit card interest
About 65% of Australian adults own a credit card, yet just one in five (22%) think they're getting good value for money. If you're struggling to meet your repayments each month, it might be time to switch.
Start by assessing your interest rate - this can make a huge difference to the amount you're charged each month. According to data from the Reserve Bank of Australia (RBA), the average credit card interest rate is 20%, while low-rate cards charge just 13% on average. If you were to switch from the highest available rate to the lowest, you would save $398 on a $10,000 purchase repaid over one year.
You should also consider your card type. If you have existing debt, a balance transfer may be a suitable option. This type of card offers a low or 0% interest rate for up to 26 months, which can help you to pay off your debt quicker. If the average credit card balance is $3271, this could see you save $253 on interest over a year if you switched to a 0% interest rate.
Save on health insurance
On April 1, health insurance premiums will increase by 2.93% on average. This means there's still time to switch your policy if you want to bag a better deal.
The most important thing is to make sure you're not overpaying for cover. A Finder analysis of $500-excess gold-level policies found an annual price difference of $635 between the cheapest and the most expensive policies, despite these policies providing a similar level of cover.
Boost your savings
According to RBA data, the average savings rate in Australia is a measly 0.40%, while the average bonus rate is a little higher at 1.5%. However, there are far better rates available.
New digital banks 86 400 and Xinja are offering ongoing rates of 2.25% with no withdrawal restrictions, while Up is offering 2%. If you prefer well-known brands, MyState Bank, BOQ, Suncorp and UBank, are offering 2%, 2%, 1.90% and 1.85% respectively - well above the market average.
Finder data shows that the average Aussie has $29,270 in savings and manages to save $660 per month. These numbers may be drastically reduced by the global pandemic, but based on these figures, the average Australian stands to make an extra $2346 in interest over three years by switching from a traditional savings account to one of the best rates on the market.
Save on your home loan
The current low-rate market isn't great news for your savings account, but it offers a major silver living on the mortgage front.
The average owner-occupier home loan in Australia is currently $494,414. If you were to switch from the average variable mortgage rate of 4.55% to one of the lowest rates available (2.49%), this could save you a whopping $6826 per year - or $204,793 over the life of your loan. Refinancing is often easier than you think, and your lender will handle the majority of the process.
Tackling financial admin may not sit at the top of your list of fun things to do but given social plans have been postponed for the near future it might be a good time to take a closer look and make some serious savings.
We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.