As published in The Q Review Summer/Autumn 2021 Magazine. Follow the link to Subscribe and receive your FREE copy each quarter!
Did you know you can cut 10 years off your 25-year mortgage by using $192 per week the right way?
While we know a lot of people (maybe even you) are already doing some of the right things, like paying extra off their mortgage.
We also know that a lot of these people probably aren’t using the most effective strategies to make the most out of their money.
“But I don’t have any financial goals.”
This is something we hear daily, often followed by a resounding “Yes” to this next question.
“Would you like to pay your mortgage off quicker, retire earlier or have money there for your kid’s school fees and expenses?”
I am still yet to understand why there is a disconnect between the word “goals”, and people’s actions, but what I do know is that the psychological benefit of “doing a bit more” is significant to people.
Going above and beyond to provide not only security for themselves, but for future generations really resonates with everyone I speak to. To look back years later and know you made solid decisions that benefited you and your family will be something to be proud of.
If you don’t want to create an empire, or you don’t earn hundreds of thousands of dollars each year, that doesn’t mean that you can’t create opportunities to pay your mortgage off quicker. Or even have ongoing income outside of your wages for things like school fees or family holidays. Just think of the flexibility this would afford you!
Here are the four things that you need to do, check them off one by one:
- Start with SMART goals – what do you want to achieve, and when. Be as descriptive as you can, attach some emotion to it. This process will help bring your dreams to life.
- Build good habits – it is no different to dropping a couple of kilos or improving your fitness. Start small and build momentum.
- Have ways to stay accountable – I have said to countless clients that half the benefit of having an adviser is that you know your homework will get checked at least once a year
- Use the right strategies – the right strategies and best home loans are the icing on the cake.
It’s a bit like getting new sneakers before taking on a marathon – they only help if you have already put in the hard yards.
A great financial plan with the right strategies will mean that you are absolutely set for success, but it’s not yet guaranteed. Without the right behaviors built around that game plan, you’re all fluff and no results, a bit like my new golf clubs sitting in the garage.
Our team can help you to build out your goals, create some structure so that the habits become easier (although you still need to do the work) and help to keep you accountable. Plus, we know the right strategies that will connect your habits with your goals.
Check out our case study below on how that $192 per week can cut off up to 10 years from your home loan term.
Alright here’s the scenario – $600,000 mortgage, 25-year term – 3.00% p.a. interest, P&I.
- You pay minimum repayments ($2,845 per month), it takes you 25 years to clear.
- You add $192 per week to your repayments ($832 per month extra), you pay your mortgage off in 17.5 years (saving 7.5 years).
- You add $192 per week into an investment strategy ($832 per month), you pay your mortgage off in 15 years (saving 10 years).
(Other assumptions: $2,000 initial contribution to investment, 100% high growth strategy.)
So, as you can see, just by changing your strategy, you could save an additional 2.5 years off your mortgage and have about $110,000 spare. Um, yes please.