Ben Garrard, his partner Ola and their seven-year-old daughter Sophie hope to expand their home in Melbourne within the next 12 months. Photo: Provided.
Ben Garrard and his partner Ola are reaping the benefits after revamping their savings strategy just two years ago.
The couple, who live in Melbourne’s south-east with their seven-year-old daughter Sophie, hope to build a new home in the next 12 months.
Mr Garrard said that about 24 months ago, he and Ola implemented a system where they put savings into different areas such as future loans, insurance and holiday funds every pay cycle.
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They even started investing in stocks as a long-term investment.
“We started a few years ago, maybe after we got angry because we didn’t know where everything was going and we made a better plan,” he said.
Mr Garrard said he taught himself about finances using books and podcasts before he and Ola restructured their budgeting and saving practices.
“I think it’s very simple and obvious, you have to do it as a family,” she said.
But he noted that it is important to be disciplined and not to keep on saving.
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The Commonwealth Bank, Westpac, NAB and ANZ all expect the Australian cash rate to be raised to 3.85 percent when the Reserve Bank meets next week.
Mr Garrard added that it is important to put money aside for the future before saving for other day-to-day expenses and trying to avoid consumer debt such as car loans.
“Try and avoid consumer debt – for example you get a car loan and you’ll probably end up paying $90,000 on a $30,000 car,” he said.
“I don’t think that’s right.
“But if you’re borrowing for investment I think that’s wise depending on your age and as long as you can service it.”
Canstar analysis shows that a typical $600,000 mortgage payment would increase by $90 a month if rates rose by 0.25 per cent, while a $1m mortgage would increase by $150 a month. Photo: NewsWire/Gaye Gerard.
A new report from research firm Digital Finance Analytics (DFA) shows that Victorian households with mortgages have an average debt of more than $306,000.
The average Victorian debt of $306,548 includes mortgage costs of $147,907, $128,142 in investment-related debt and $23,416 in other consumer debt.
DFA director Martin North said the research firm conducted a survey of Australian households on topics such as average outstanding debt related to housing, credit cards, mortgages and other information.
From these figures, DFA estimates financial stress down to individual zip codes.
Victorian postcodes with the highest average debt include Pakenham, Melbourne, Mordialloc and Brighton, with $1.4m-plus of debt per household borrower.
The data takes into account all homeowners including those who have owned their property for a long time and have little outstanding debt.
DFA director Martin North said the rise in the minimum interest rate would not have a major impact on most Australian families, if they had jobs.
But he added that first-time buyers who have recently bought on the outskirts of the city and in the suburbs are “at the front of the pain line”.
DFA director Martin North said even small price increases could be “catastrophic” for young families and first-time buyers in Melbourne’s suburbs and high-rises.
The director of Buxton Bentleigh, Simon Pintado, said that although some buyers will not be affected by the increase in interest rates, such as those who have already paid off the mortgage, others will see their borrowing capacity hit hard.
“In general, in my experience, over the last 17 years, there hasn’t been a crazy amount of price movement,” he said.
“But when rates go up, people are a bit hesitant, a bit gun shy – they don’t want to overpay or pull the trigger on the next purchase for fear of uncertainty from the RBA.”
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