Melbourne couple’s simple strategy to beat financial stress – realestate.com.au

Ben Garrard and his partner Ola are reaping the benefits after revamping their approach to saving money just two years ago.

The couple, who live in Melbourne’s south-east with their seven-year-old daughter Sophie, hope to move to a new home in the next 12 months.

Mr Garrard said he and Ola had introduced a system about 24 months ago where they allocated their savings to different categories such as future bills, insurance and holiday funds during each payment cycle.

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They even started putting money into stocks as a long-term investment.

“We started a few years ago, probably after we got annoyed because we didn’t know where everything was going and we created a better system,” he said.

Mr Garrard said he had educated himself about finances using books and podcasts before he and Ola redesigned the way they budgeted and saved money.

“I think it’s quite simple and obviously you have to do it as a family,” he said.

But he noted that it’s important to be disciplined and not constantly dip into savings.

The Commonwealth Bank, Westpac, NAB and ANZ all expect Australia’s cash rate to be raised to 3.85 percent when the Reserve Bank meets next week.

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Mr Garrard added that it is important to put money aside for the future before it is earmarked for other everyday costs, and to try to avoid consumer debt such as car loans.

“Try to avoid consumer debt – for example, you get a car loan and you probably end up paying $90,000 for a $30,000 car,” he said.

“I don’t think it’s worth it.

“But if you’re borrowing to finance an investment, I think that’s smart, depending on your age and as long as you can maintain it.”

Canstar analysis shows that a typical mortgage payment of $600,000 would increase by $90 per month if interest rates were increased by 0.25 percentage points, while a $1 million mortgage would increase by $150 per month. Photo: NewsWire/Gaye Gerard.

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A new report from research firm Digital Finance Analytics (DFA) shows that borrowing Victorian households have an average debt of more than $306,000.

The typical Victorian debt of $306,548 includes an average mortgage payment of $147,907, $128,142 in property-related debt and $23,416 in other consumer loans.

DFA director Martin North said the research company has conducted surveys of Australian households on topics such as average outstanding debts related to mortgages, credit cards, loans and other information.

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Based on these figures, DFA estimates financial stress down to individual zip codes.

Victorian postcodes with the highest average debts included Pakenham, Melbourne, Mordialloc and Brighton, with debts of more than $1.4 million per borrowing household.

The data took into account all homeowners, including those who have owned their properties for a long time and have little remaining debt.

DFA chief executive Martin North said small rate increases would not have a significant impact on the majority of Australian households if they were employed.

But he added that recent first-time buyers who had cashed in to buy on the city’s urban fringe and high-rises were “at the front of the queue”.

DFA chief executive Martin North said even small interest rate increases could be “disastrous” for young families and first-time buyers in Melbourne’s suburbs and high-rise buildings.

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Buxton Bentleigh director Simon Pintado said while some buyers would be unaffected by interest rate rises, such as those who have paid off their mortgages, others would see their borrowing capacity severely reduced.

“Generally, in my experience, there hasn’t been a crazy amount of interest rate movement in the last 17 years,” he said.

“But when interest rates rise, people are just a little more hesitant, a little more gun-shy, so to speak – they don’t necessarily want to overpay or pull the trigger on the next purchase, for fear of uncertainty from the RBA.”

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