The Reserve Bank of Australia (RBA) has again this week cut interest rates to a record low of 1%. The basis for the interest rate cut is to spur on consumer spending, bank lending and employment growth. The RBA is hoping that everyday Australians will do their share of the heavy lifting by spending to re-ignite the fledging economy. However, this may not be the best decision financially for a lot of people. Here are five ways you can make good use of the interest rate cuts instead of simply spending it.
- Continue to pay the same amount off your loans. This will help you reduce the principle on your mortgage quicker. Use the interest rate cut as a little bonus to help you become debt free sooner.
- Boost your emergency fund. With inflation and interest rates so low, keeping cash is a more attractive and competitive option. If you haven’t got an emergency fund, use this interest saving to start one.
- Renovate. The interest rate cut will certainly not deliver enough savings to put another level on the house. This may be a good time, however, to do some minor renovations. Not only will you be helping the economy through buying goods and services, your adding value to your asset.
- Pay down credit card debt. While the interest rate cuts are a win for mortgages, the rates of interest on credit cards do not receive the same reduction. In addition, the rates are a lot higher on credit cards. Using your mortgage savings to pay down credit card debt will compound your interest savings significantly.
- Start a savings account for the kids. What better way to use your savings responsibly then by teaching exactly that to your children. Learning good savings habits from a young age will be one of the best gifts you can give your kids.
There is no doubt that the RBA wants you out in the market place, spending your interest savings and driving inflation and employment. You also have a responsibility to yourself to use these additional funds in ways which add value to your personal wealth.
To discuss how you can make the most of the interest rate cuts, give the team a call and start a conversation today.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
