Melanie Hearse - 21 Feb, 2020

Smarter ways to budget on your home loan (and still have fun)

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Personal spending is continuing to stay low while we are spending up on home loan products, but with smarter spending (and saving habits), you can make your ‘fun’ money go further for the things you enjoy.

ANZ figures show while we are kicking off the new century with continued low personal spending, we are still spending more on home lending products – meaning we’re putting more money into homeownership and property investing than into consumer goods and or services. While property is a savvy (and significant) budget item, spending helps the economy tick over and done right, can bring us some of our best experiences and add meaning to day to day living.

Here’s how to walk the balance of splashing some cash without wasting it.

Take a close look at your outgoings – regularly

Much like it’s wise to regularly reassess your home loan products to ensure you’re still getting the best deal, so too is getting out your bank statements and looking at where your money goes. Do you have direct deposits for services you no longer use (or no longer consider a priority) – if so, cancel them. Are you spending more than you realised on discretionary items; for example, making several trips to the supermarket a week when a big shop and food prep session would save you money – or vice versa; for some, buying every couple of days means less food waste and therefore lower food costs.

Spend cash

Trite but true, it’s a lot easier to spend money on cards – even debit – than it is cash. It makes sense, tapping your card doesn’t give you an instant visual of what you’ve got left the way a diminishing stack of notes does. Once you’ve assigned a budget to the various areas in your life, work out which are best paid for in cash (tip: entertainment and food shopping are excellent candidates) and withdraw your weekly allowance – once it is gone, it’s gone.

Smarter ways to budget on your home loan (and still have fun)

Let your phone keep you updated

If spending cash doesn’t suit your lifestyle, there are apps that will do the work for you, for example, PocketBook can sync with your bank to provide data about where you are spending, predict upcoming payments based on regular spend and alert you when you’re over your pre-set budget (yep – it’ll guilt you when you have an Uber Eats blow out!)

Look for interest and fee-free options

Most financial products offer an interest-free period, so ensure you are aware of the terms and conditions on every card you own and use and pay off any balances before the interest kicks in. Likewise, most institutions offer fee-free products, so if you’re not sure what your bank has to offer and how it compares to your current product, schedule an appointment and talk through your best options.

You can also avoid fees on your bills by setting up auto-debit arrangements – if you prefer to make manual payments, set an alert of your phone noting any bills due so you don’t get slugged with late fees. If you have been hit with one, it’s always worth getting in touch with the service provider to see what you can negotiate with an upfront payment.

Related: What to do with your savings when interest rates are low

Choose where to spend and save

You can enjoy extra luxuries in life if you identify where you are willing to save and where you prefer to spend. For some, it’s going alcohol-free all week in order to spend more on a luxe bottle of wine, for others, it’s home brand staples being a happy trade-off to allow for spending more on organic veggies or top-end steak or seafood.  Likewise, some are happy to fill their downtime with free leisure activities to save up for more regular travel. In short, identifying where you are happy to sacrifice some spending can see you enjoy the more expensive luxuries you love more frequently. That said, also ensure you are popping some away in savings for a rainy day!

Smarter ways to budget on your home loan (and still have fun)

Consider the benefits of an offset account

When choosing a home loan, ask your lender about including an offset account – tied to your loan account, any money you park in this savings or transaction account is subtracted from the remaining principal prior to interest calculation on a daily basis, meaning you save on interest.  While not touching the money in this type of account is the only way to maximise the interest saved tally, it’s still likely to save you some coin if you use it for long term savings – such as renovations or even the end of year family trip. One word of warning, offset accounts can come with additional fees, so chat to your lender about your spending and saving habits to ensure it’s a suitable choice for your circumstances.

When it comes to having a little extra to spend on the luxuries you love, most methods come back to the principle of awareness – the more acquainted you are with what you spend and what your priorities are, and the more mindful you are when you do spend money, the less you’ll waste.

Words by Melanie Hearse

Related: How you could be mortgage-free in less than ten-years

Looking for a better home loan deal? Consider contacting an eChoice broker. With access to 100s of home loan products from over 25 lenders, we have access to some of the best mortgage deals.

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