16 Tips To Protect Yourself Financially

Post by Carly on August 18, 2014 · Under Hints and Tips, News · Comments Off on 16 Tips To Protect Yourself Financially 

In the event you suffer major illness, lose your job or encounter some other life setback, how long do you think you would be able to survive financially?

How high would interest rates have to increase before you needed to start worrying about your loans? Would you be able to raise finance if you came across a wonderful investment opportunity?

If you don’t know the answer to these questions, then it’s time to have a chat with a financial advisor and figure out how to build your financial resiliency. Here are a few tips to maximise your cash flow so that you can protect yourself financially against unplanned events.

  1. Instead of paying extra on your mortgage, why not use an offset bank account and build a cash buffer that will get you through any hard times and cut down on your mortgage’s non deductible interest.
  2. Keep track of the interest rates you pay on debt and make sure they stay competitive. If they are not you should talk to your lender about obtaining a rate reduction.
  3. If you are geared negatively then arrange to cut the amount you pay in tax every week instead of waiting for a big refund at the end of the year. The form for tax withholding variation is available online.
  4. Australia has a credit reporting regime which means it is critical to ensure your bills are paid on time, however there is no bonus if you pay your bills early. You should establish a reminder system so that you only pay your bills just a few days before they are due instead of paying them as soon as you get them.
  5. Make sure you claim depreciation even if your property is an old one.
  6. Stay organised. When tax time arrivers and you are unable to find your receipts you won’t be able to claim the expense. An easy way out is to have your property manager to pay your land tax bills, rates and other such items which means they will be included in your end of financial year statement.
  7. If you have an investment property that is partially paid off, do the math and work out whether there is an incentive to refinance the loan. Whilst you may find that monthly payments might fall you could end up having to pay more interest over the life of the loan.
  8. Think about the pros and cons of converting from principal and interest loans to an interest only loan, especially if you hold a mortgage on an investment property.
  9. Make sure you check regularly that the rent you obtain is the market rate and consider whether you have the ability to raise it.
  10. If you have tenants ask them whether there are any additions to your property that they would be happy to pay additional rent for. This could be anything from installing a dishwater to adding airconditioners.
  11. Another method to increase cash flow can be to include a granny flat, allow pets or rent by the room. If you are thinking about doing any of these make sure to do the sums.
  12. Some people think a great way to add value and increase rental returns is to renovate their property. Many people however fail to recover their initial outlay so you should carefully consider this before going down this road.
  13. The easiest thing you can do to protect yourself is to cut spending which will increase your cash flow and let you build assets faster. To do this you could get rid of the gym membership, make your own lunch, etc etc.
  14. Look for easy ways to add to your income by taking a room mate or boarder, alternatively you could take a second job.
  15. Make sure you have income protection and appropriate life insurance so you can avoid either yourself or a loved one having to sell assets quickly.
  16. Use an experienced property manager to protect your investment and rental income and take out high quality landlord insurance. Look for good value and don’t base your decision purely on price since policy inclusions and standards vary quite considerably.

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