Interest Rate Rises Introduction
Due to interest rate rises and inflation, households are being stretched to live within their budget. With many households in Australia being highly leveraged this could impact their ability to meet repayments. Some tips to assist families with living within their means is outlined in the following article. Any topics that are financially related are not financial advice and you should consult with a licensed professional advisor.
1. Creating a Blog/ Website
One of the ways to improve the overall family budget is to start earning an additional income. This may not seem feasible if you have kids or you are a carer for another however there are ways you can start to earn a passive income stream. For instance, you could start by creating a blog or website that has the ability to have ads built in. Being rewarded for building an audience with regular traffic to your website can be a good way to increase your earning potential. Whilst it may require time and effort to create the blog ongoing base through social media and forums can build up a following over time. this is more of a longer term strategy if you are starting from scratch and you need grow your fan base over time.
2. Review you Variable / Fixed Rate
By going back to your bank or working with your broker you can look to lower the amount of the interest rate that you are paying. A rapid rate in interest rates from the reserve bank could cause some households to sell their house to meet repayments. The financial stability review offers an insight into the current economic climate and risks to financial stability. Avoiding the foreclosure of a property is paramount to ensure the economic stability of a household. This would not be an ideal situation as you would loose the asset that you have been working to create equity. Having a fixed term rate or a component that is fixed would hedge against the interest rate rises. This could come at a cost of a higher interest payment therefore it would be best first to consult a mortgage savvy investment broker. For those who are not homeowner selecting a share house or a house on the more fringe suburbs could offer a cheaper alternative. This would enable you to start saving and building up a deposit to ultimately get into a house of your own if that is what you desire.
3. Reducing your expenses
Aside from rent there is discretionary spending that can be reduced or cut out of the budget to improve your financial situation. For instance, entertainment and travel can be a large component of spending if not checked and monitored. The slippage through small shopping trips for retail spending, going to the movies and eating out whilst a great activity can place an additional strain on the budget. The idea is not to cut out the trips completely more allocated the necessary funds that are planned in advance you it doesn’t become an unexpected expenses where you question the money having left your account at the end of the month.
Interest Rate Rises Summary
I have only touched on a couple of key ideas to help improve the household budget in a climate of rising interest rates. By creating an additional income stream ,reviewing your rates and cutting back on discretionary spending you can help to improve the household budget. There are many other ways to boost your passive income and achieve financial independence. If you are wanting to learn more, have a read of the article on whether interest rates are good or bad for investors?
