Tips, Tricks, & Bank Negotiations!

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1 FINANCIAL SUCCESS CAN BE YOURS! Money Flow Tips, Tricks, & Bank Negotiations! Tracey Munns B.Comm Cloud-based financial tools you can access 24/7, to achieve your financial goals faster.

2 ABOUT MONEY By cutting up the eft-pos card to the bank account that your pay is deposited to, you will stop wasting money through multiple $10.00 spending transactions. This one tip could save you (and/or your partner) over $2,000 per year! (based on 2 x $10 transactions each per week) Without boundaries, you will very likely spend more than you should. To achieve this, simply set up a bank account with ATM access. Transfer your spending limit to this bank account each week, and only spend what is in the bank account. Set up a bank account with a weekly spending limit to cover all spending and activities for your children. Ensure you only spend what is in the bank account. If your children are old enough, tell them the spending limit, let them decide what to spend the money on.once the money is gone, they will need to wait until the next deposit. If you insist on using a credit card, you must be very clear about your spending boundaries. Spend from your credit as you would a bank account BUT when you monthly bill comes in make sure you spent NO MORE than your calculated weekly spending limit x 4. If you spend more, cease from using the credit card! To ensure you stay on top of your financial commitments, set up the payments to go out the day after your pay is deposited. If you are paid fortnightly, set payments up fortnightly if you are paid monthly, make your payments monthly. With the introduction of Kiwisaver many have learned that if we don t see the money, we don t miss it. Each pay day put a % of your pay into (via an automatic payment) into a savings account. This could be 2%, 5%, 10% or higher and try to increase it over time. You may find you just don t miss it! We will all experience a financially changing event in our lives, and yes we may have insurance to help, but what if you don t, or there is a delay in receiving the insurance? You should have the equivalent of 3 months pay in an emergency bank account, you can nick name this your sleep fund, so you can sleep at night!

3 ABOUT DEBT If you have a home and home loan you may have enough equity to seek a top up on your mortgage. This is a new loan at home loan rates that you can then use to pay off all your higher interest consumer debt. Be aware if you set the consolidated loan onto a standard 30 year home loan term you could end up paying a significant amount of interest, so choose to set a short term try to keep under 5 years. If you don t have a home but would still like to amalgamate all consumer debts into one easy to manage loan you can do so through a purpose built debt consolidation loan, accessible through many lending institutions. This type of loan is at a higher rate than a home loan but can be a much lower rate than some debts.normally at 12-13%. Plus the loan term is generally 5 years or less, so the debt will be paid off in full over time. Low Interest Credit Cards and debt balance transfers can be an interest rate s low as 0%. There are terms to be aware of; The low interest is only be for the balance transfer not new purchases AND only for a set period of time (say 6 months). Try to find a credit card with an interest rate for the life of the balance transfer. Beware you need to pay more than the minimum payment to pay the debt off within 5 years. Interest free terms are great it allows you to use someone else s money at no cost. Just be aware of the cost once the interest only term expires. ALWAYS have the debt paid off in full before this happens to remove any chance of high interest cost. For instance a $1,500 cost that reverts to 24% will be a cost of $360 per annum, if you take 3 years to pay it off that is a total cost of $620 more interest.40% more!! This means that you buy an item and pay nothing for a set period of time. It could be a card that requires no payment for 3 months to a Hire Purchase with 48 month deferred. As above, pay the sent off before the deferred payment time stops as it will revert to a high interest rate debt. Credit cards allow you to purchase on credit or with debt. They invariable provide 55 days free interest (or similar) and after that time frame you are charged interest on what you owe. NOTE: If you withdraw CASH on a credit card you pay interest from the first day! Using credit cards does give you some form of protection and can allow you to cancel the charge Debit cards allow you to have similar purchase ability that credit cards such as online/internet purchasing. The main difference is you are using your own funds for the purchase NOT debt. You would have a debit card linked to a particular bank account which allows for the deduction. As it is you money you are not in the position of paying interest (unless you have an overdraft attached to the bank account)

4 An offset loan is available at some banks. To explain if you have $200,000 home loan but $20,000 in your bank account(s) you will only be charged interest on the net amount or $180,000. On the face of it a great way to have interest savings, but be aware this is a variable rate product. For other variable type loans you can get a discount on the variable rate but for offset loans you may not which may defeat the so called savings you get. A Redraw Facility is a variable rate type loan.it is reducing the debt balance which means if you only pay the minimum payment you will have the loan paid off over 30 years. Any payment you make over and above the minimum loan payment can be withdrawn again. You can use this to deposit your salaries into, or make lump sum payments. All deposits reduce your interest cost. This loan can provide an interest rate discount. The same as a Redraw Facility but the debt balance does not reduce. If you loan limit is $50,000 you can at any time withdraw funds up to $50,000 limit. It requires discipline not to take funds out. If you do use this type of loan, we would recommend that you have NO ATM access to the loan to reduce the ability to take funds out.use it like your Household Expense Account (#1:) credit your salaries and pay your bills but don t spend! ABOUT BANK NEGOTIATIONS At present you should be able to negotiate a discount on the variable rate of your home loan. The discount will increase depending on your total borrowings but can be 0.40% and higher. When banks are competitive and in a market boom the discount will be more than if the lending market was tight. Always negotiate and remember some negotiations have an expiry date, so remember to renegotiate again! As with variable rate loans you can negotiate the fixed interest rate you pay. You don t have to just pay the advertised price you can pay less! There are times where the bank may bring out special rates and these may not be discountable, but all other rates go for it! The discount can be significant and will again relate to the amount of lending you have with the bank. As the banks are in a highly charged competitive lending environment at present they are giving away cash for new loan business. This can be $1,000 for loans of $100,000, $2,000 for loans of $200,000, and $3,000 or loans above $250,000 (or more). The cash is deposited to your bank account within a few days after the loan settlement takes place. When you have a fixed rate loan you will have an expiry date for sometime in the future from 6 months to 5 years. The bank will send you a letter to remind you when this is going to take place. However to note is, when the market has interest rates rising, you don t need to wait until your expiry rate to negotiate the new rate you can do this for up to 60 days out. That is lock in the rate today for 60 days time save interest! If you have a variable rate loan or a fixed rate loan due to expire, the fine print of loan documents may require that you pay an administration fee to complete the review. Always try to negotiate this and pay nothing. Most banks will not charge for this in a competitive environment.

5 When you lock in for a fixed rate period you are contracting to pay the rate for that set period of time. If you break the contract you may be charged a penalty. In very general terms if you have a rate at 6.50% and you break with rates at 5.50% the bank may lose and charge you the fee However when rates higher than your rate you could break and incur no fee. If rates are rising you may break a rate due to expire in 6 months now. There are times when you may take an interest only loan. The banks will only approve of this for a fixed period of time. When that time expires your loan will revert to a principal & interest loan, increasing your loan payment. When this occurs you can negotiate to renew the interest only term of the loan they will generally agree to this if your loan is at 80% or less of the value of the property. Historically the banks have charged monthly bank account fees and transactions fees. But with the change to internet based banking the monthly charges to the accounts can be nil if you receive your bank statements electronically. Very rarely should you pay a monthly charge. Financial Success Can Be Yours! Need Help? Sign up for a free VerdiPlus trial at: