Isolation: A Great Time To Save
While we are all stuck indoors twiddling our thumbs because of COVID-19 and waiting for life to go back to normal. Now might just be a great time to boost your savings and investments. Now you might be thinking I’m crazy with so many people out of work. So here me out. Here’s a few reasons why you should turbocharge your savings and investments right now! Isolation really is a great time to save. Now let me note that this won’t be the case for every single person, but for most of us it will, here’s why!
No Usual Costs
I don’t know about you but right now I’m not spending on entertainment, no sport, no cinemas, no restaurants, no hotels. That’s a big chunk of usual spending that I can’t do even if I wanted to. I’m spending less on fuel, less on mortgage, less on things, less on everything bar food. Add to that no kids sport fees, no outside of school activities, no parties…… There’s lots of not doing anything and all that doing stuff usually costs money. I’m willing to wager that just about everybody is spending less than they usually do. That means there’s money to save.
For those of us who have lost our jobs or had our businesses reduced the government has come to the party with the job keeper and job seeker payments being introduced or doubled. Then there $1500 for lower paid folks too. For some that will be a pay cut for others a pay rise. But the point is the money will be coming in. Either you’ve still got a job with nothing to spend it on or you’re going to get a government payment with nothing to spend it on. But we all have something and nothing to spend it on! That means we will all have the opportunity to save. As I said, Isolation: A great time to save!
The official interest rate has been slashed to 0.25%, which means most of us should be paying less that 3% on our mortgages if you have a half decent mortgage deal. If you don’t, switch, now! All of us are paying off less on our mortgages, so that means more money in our pockets.
What To Do With Your Unspent Savings
Now that you have some extra cash you can’t spend, it’s time to think about saving and investing. What should you do with the doe? You can’t buy anything, so now what. Here’s the two things I think you should do right now. I’d split the extra unspent money between these two options.
1. Increase your payments into Your Home Loan
Instead of paying less off your home loan, now is the time to increase your payments even more and make a sizeable dent in the amount you owe the bank. The next 6 months is the time to channel those unspent dollars into your home loan and build long term wealth in your home. By paying a small amount off now, you will be saving tens of thousands over the next decade. So don’t let the opportunity slip. Start putting extra dollars into your home loan.
2. Make Additional Payments into Super
Are you crazy? My super balance has been decimated by 30% and may fall more. That’s right, that makes this the perfect time to invest into your super. Right now share prices are way down, meaning they are CHEAP. The more you can buy right now with your super the better off you will be. The share market will bounce back, it always does. But if you invest more than usual while it’s at the bottom, when it comes back up, and it will, you will have way, way more than when you started. This is not a time to flee super, it’s the best time to invest. So take some of that freed up cash and pour it into your super for long term wealth. Now is the best opportunity you’ll have for a long time to build wealth while the share market is cheap! See the opportunity here. And with nothing else to spend on, why not give your future self a comfortable retirement!
3. DON’T Withdraw SUPER or Get a Mortgage Freeze
Right now you can call up your mortgage provided for a a pause in payments for 6 months as well as taking out 10k from your super this financial year and next. Apparently thousands have already done this. It may be fine if you’re planning to put even more back with salary sacrifice, but it may not work out too. Why would you withdraw money from super when it’s at its lowest. That’s selling at the bottom, only to put more back in at the top. The $10k you withdraw from super will be tens of thousands of dollars off your future balance when it rebounds and grows. Unfortunately the government has given you a way to get poorer through this crises. Say NO! Unless you are absolutely desperate you should not take out your super or pause your mortgage payments. Do anything to avoid this. In fact, do the opposite as I’ve suggested. If you want to make the most of this season, put more money into super and your mortgage right now. Now is the time to invest for an amazing future. As I said, Isolation: A great time to save!