In­ter­est­ing times ahead, so start a mini-bud­get


THE Chi­nese “curse” is “may you live in in­ter­est­ing times” and the com­ing year prom­ises to be just as in­ter­est­ing as last year. In Aus­tralia, a change of govern­ment is a strong pos­si­bil­ity, which opens up the pos­si­bil­ity of sig­nif­i­cant changes to frank­ing cred­its, neg­a­tive gear­ing, and cap­i­tal gains tax. On the in­ter­na­tional scene, the big ques­tion is will the cur­rent volatil­ity con­tinue.

What can an or­di­nary per­son do when it seems that the year is go­ing to be dom­i­nated by events out­side one’s con­trol? Sim­ple, you fo­cus on do­ing those things that you can con­trol. For starters, you can start do­ing a mini-bud­get so you won’t spend 2019 liv­ing in fear of bills ar­riv­ing. Add up your re­cur­ring ex­penses such as rates, school fees, loan re­pay­ments, elec­tric­ity, and car regis­tra­tion and bank a pro-rata sum each pay­day into a spe­cial bank ac­count.

For ex­am­ple, if they come to $26,000 a year, and you are paid fort­nightly, bank $1000 each pay. This will en­sure that the money to pay th­ese bills is al­ways avail­able and wait­ing to be spent. While you are at it, start a hol­i­day ac­count, and a Christ­mas ac­count, and pay an ap­pro­pri­ate sum there as well.

If you are still pay­ing off your home re­mind your­self of the enor­mous sav­ings that can come from mak­ing ex­tra pay­ments. Sup­pose you owe $300,000, at 5% and are pay­ing it back over 30 years at $1610 a month. Just in­vest­ing $200 a month into your loan will cut the term by six years, and save you $70,000 in in­ter­est.

Those of you with your

Add up your re­cur­ring ex­penses ... and bank a pro-rata sum each pay­day.

home paid off should be talk­ing to a fi­nan­cial ad­viser about in­vest­ing the equiv­a­lent of the mort­gage pay­ments into a share trust. That $1610 a month pay­ment I men­tioned be­fore would grow to over $1.6 mil­lion in just 25 years if the trust av­er­aged 9 per cent per an­num (in­come and growth com­bined).

Here’s to a won­der­ful Christ­mas and a healthy and pros­per­ous 2019.


IT ALL ADDS UP: Mak­ing small ad­di­tional pay­ments off your mort­gage will save you big time in the long run.

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