Picture this - you've completed tertiary study and have entered the workforce. Suddenly five, six or seven years have gone by and you're wondering, "what next?".
As you head out of your twenties and into your thirties, there are some large-scale expenses you should consider, including your home mortgage, debt and family commitments.
Finding the perfect house can be a very satisfying feeling, but you need to be aware of your financial obligations.
If you're paying off a home mortgage, have you considered whether you're getting the best deal?
Perhaps you've climbed the ladder at work and are earning more. If so, have you considered making larger weekly, fortnightly or monthly repayments so you can pay your loan off faster?
Before going down this path, make sure you check with your loan provider whether any penalties will apply if you pay off your loan earlier. Fixed-rate loans may not allow extra payments, so it pays to check.
Otherwise, you might consider a mortgage refinance to structure your repayments around your financial position.
According to the Australian Securities and Investments Commission, extra payments in the first five to eight years of a 25 year principal and interest loan will help cut your interest bill and shorten the loan period. If you can pay off more, sooner, it may well prove to be a smart financial move in the long run.
The Australian Taxation Office oversees student loan debts under the HELP scheme. You can call them to get a balance of your loan account - just make sure you have your tax file number.
Once your income goes over the compulsory repayment threshold, you must start paying off your student loan debt. Currently this threshold is $51,309, and depending on your exact income, you'll have to pay a certain proportion of your loan on a regular basis.
For example, if your repayment income is between $51,309 - $51,153, 4 per cent will be included on your income tax notice of assessment. By contrast, if you earn $95,288 or more per year, your repayment rate is 8 per cent.
HELP debts don't incur interest, but they are indexed on a yearly basis. This means their real value is adjusted against the cost of living (measured by the most recent Consumer Price Index Figure).
If you have debts with high interest rates (eg credit cards), it's often considered wise to pay these off first.
However, depending on how large your loan is, it could take a long time to pay off if you only stick to the minimum repayments. As you enter a new life stage, you might consider setting a personal deadline for paying off your loan.
You can pay off this debt faster by making voluntary repayments. These repayments can be made at any time in addition to your compulsory repayments, and they can be any amount. Even better, voluntary repayments of $500 or more will see your account accredited with an additional 5 per cent of the payment value.
Work out where you can afford to cut non-essential items so you can eliminate your student loan debt.
Starting a family is an exciting prospect - just be sure you are financially prepared.
You may be entitled to paid parental leave for up to 18 weeks. This is a government funded scheme.
However, if you intend to go back to work shortly after this time elapses, make sure you consider the potential cost of weekly childcare, as this can be one of the biggest costs of having children. Whether you enrol your children in a day care centre, workplace childcare or hire a nanny, it will require careful financial management.
Start saving now if you want to start a family, so you can enjoy the special moments that new additions bring!
Tags: home loan answers