Continuing from last week, in part 2 John Lowe of MoneyDoctors.ie looks at an area where savings can be achieved – the field of discretionary spending .. but this also requires discipline.
Consider this …You go to the ATM on Friday afternoon and withdraw, say, € 300. Monday morning check your pocket to see how much, if any, remains. How much of this spending can be accounted for, or has it just fallen through a hole in the pocket ? This is where the diary or a track your spending APP will help ( you can download the Money Doctors APP for free from the App store or Playstore ). Find out what you are spending and where. Then you will know whether it was frivolous and unnecessary. You may have more important things to do with your money. Prioritise, as the amount of casual and probably valueless spending can be frightening.
I once worked with a newly married couple who had recently bought a house and earned relatively modest salaries. They had their spending mapped out to such an extent that they operated a daily budget and anything more than the cost of a daily newspaper required a council of war. However, they lived comfortably within their means and managed a very good holiday each year. They are still together !
KNOW YOUR POSITION
By now you will know your position and whether meeting your monthly commitments is causing or is likely to cause you problems. You should be totally honest with yourself because the early acceptance of difficulties can be crucial. Remember also that life can also throw up mini financial crises on a regular basis so factor some unexpected outgoings into your calculations. It is after all, about obtaining the best value for your hard earned money.
EXAMINE YOUR OPTIONS
Mortgages – your mortgage repayments are likely to be your biggest commitment but in terms of interest rate they are also the cheapest. If you are fortunate enough to have a Tracker Mortgage (tracked to the European Central Bank – ECB – rate, currently 0.0%), do not be tempted to switch to any other product. If however you are on a Standard Variable Rate Mortgage, some of these vary from lender to lender. The average standard variable interest rate on a new mortgage in Ireland 2.76% while in the eurozone it is 1.31% – a disgrace in itself – BUT there are some decent FIXED interest rates around .. e.g.
- Best 3,5 or 7 year fixed rate 1.95% ( under 60% loan to value )
Check your interest rate and certainly if on the high side, you should first of all consider switching to a cheaper rate but contact your own lender first to see if they are willing to match. Some lenders do not offer the same attractive fixed rates to existing customers – watch out for this too. If you are not offered the attractive rate, you could shop around if you qualify
- Less than 80% loan to value ( so no negative equity switches )
- Have sufficient earning to justify such a switch ( generally 3.5 times your annual income for BOTH applicants unless you have professional status )
- Most lenders will now approve a mortgage up to age 68/70 – this has to be borne in mind if switching.
- You have a good savings record and a good credit history – no missed payments or judgments. Check your record with the credit agency The Central Credit Register (www.centralcreditregister.ie – it’s free to do a check on yourself ) They track all loans, record missed payments – the record stays there for 5 years if you miss one payment, judgments – the record stays there for life.
Email me for any clarifications. Next week in part 3, we look at all the other credit facilities and how to utilise them.