Why you should have a budget!

Why you should have a budget!

Without a budget your future financial security could get lost.

Brendan Barker - Home Financing Specialist - Home Loans - Car Loans - Personal Loans

I still remember the joys of my first job.  It was the mid 90’s and I had just started as a graduate mining engineer in Broken Hill.

I had spent the previous 6 years at university between undergraduate and post graduate studies.  Having a regular income, of was that wonderful.

I could afford to enjoy life.  Enjoy it I did, while I was never a party animal, I enjoyed going out with the mates each weekend.

Bought myself a new car, a red Ford Futura.  Plus, one or two new gadgets, TV, computer etc.

Throw in a holiday or two. Not having to worry about money because I was earning a good income.

Life was good.

Or so I thought.

It was a Christmas a couple of years after I started my working career.  I was in Melbourne having a holiday.  Trying to work out how I had ended up in financial difficulty.

I wasn’t helping things with the holiday itself going on to the credit card.

I had a car loan I was paying off.

A credit card with a steadily growing balance.

A debt with the ATO, my employer had taken out the wrong amount of tax.  Not that it was their problem.

Here I was earning great money (for someone who was only starting their career) and I had nothing to show for it.  I was living pay cheque to pay cheque.

Something had to change.  But first I had to admit to myself what I was doing wrong.

I didn’t have a budget.  I had no plan for my future.  I was earning money and spending money and hoping that everything would be wonderful at the end of the day.

I had to change.

By the end of the Christmas holiday I had a plan in place.  A budget which would allow me to have some financial security.


4 steps to create your budget

  1. Work out what I was earning – easy I just looked at my last payslip. It was consistent pay to pay.
  2. Work out my living expenses – no this wasn’t what I was spending each week, but what I had to spend each week. Fuel for the car, electricity, phone, food, rent, insurances etc.  All the stuff that must be paid for each week.
  3. What did I owe – what where the debts owing, car loan, credit card and ATO and what the repayments for each were.
  4. Put the plan together – this was the fun bit
Putting the plan together

First step was to take my monthly income and subtract my living expenses and my debt repayments.

What was left was the money I had available to create the future I wanted.

The second step was to allocate this money to work for me.  I allocated some to reducing my debt, some to saving for the future and what was left I could spend as I pleased.

I can’t remember what the actual numbers, but for illustrative purposes let say I was earning $4,000 per month.  My monthly living expenses were $2,000 and I had $750 per month in repayments on my debts.

That meant I had $1,250 I could allocate at step 2.  I may have put $500 a month into savings, paid an additional $250 a month off my debts and that would have left me with $500 to do with as I pleased each month.

No guilt or restrictions on what I spent that money on.  If I didn’t spend it, I either added it to my savings or spent it the next month.

I just had a simple plan I followed each month.  When I got paid, I would put my money for living expenses aside in one account, my savings into another and pay off some debts.  I knew how much and where it was going.  The rest I got to spend.

It was simple and straight forward.

A budget doesn’t have to be complex and it does not have to be a rigid document which doesn’t allow you to enjoy life.  It must be a plan which will allow you to get ahead in life.

Uncertain whether you should have a budget?  Don’t know where to start?  Click here to get your free budget planner to help you get under way.

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7 Tips to Save you Money on your next New Car Purchase

7 Tips to Save you Money on your next New Car Purchase

Brendan Barker - Home Financing Specialist - Home Loan - Car Loan - Personal Loan

Buying a new car, for some of us we get excited about the prospect of haggling with the car dealership to get the best price. For others, it just fills us with dread.

After the family home, the car is most likely going to be the largest purchase we ever make.

Whenever you walk into a car dealership, there is this nagging suspicion that you are going to be taken advantage of. This doesn’t have to be the case, especially in today’s market.

In preparation for your next ‘battle’ with the local Car Dealership, here are 7 helpful tips to give you an advantage.

1) Educate Yourself

To ensure that you are prepared to get the best deal possible from the dealer, you first need to know what a good deal looks like.

This means doing some research before you head out to look around the car yards. Work out what exactly are you looking for, list out what are must haves and what are nice to haves. No good getting a great looking car, if the baby seat doesn’t fit in.

Find out what incentives the car manufacturers are offering. Always good to have a check out R.A.C.Q’s or Red Book reviews. Check the local paper to see what the current advertised prices are.

2) Decide What Car You Really Want

Make sure you get the car you actually want, it’s easy to get tempted by a ‘great deal’ but it doesn’t matter how cheap the car is if it doesn’t meet your needs.

Can you see yourself driving it for the next 3 or 5 years. Does it take it in account your future plans, no good getting a car which only can fit two children in the back seat if you are planning on having a third. Will the boot be able to fit the pram plus the groceries?

This will help prevent you from making an impulse buy and a very expensive regret or mistake.

3) Buy at the Right Time

If you don’t need to replace your current car urgently, wait until the next year’s model have been announced. Typically, the new models come out around September, which means that from August to October is typically a good time to get a deal on this year’s model.

Sales staffs are also usually trying to hit a quota at the end of the month, so this is a good time to buy as well.

4) Remember RRP is just that – “Recommended”

Keep in mind there’s no such thing as a “fixed cost.” You can negotiate the price of everything from the car or delivery charges to the dealer add-ons.

Keep in mind the worse that can happen is the salesman says no.

5) Make Dealers Compete for Your Business

You know what car you want, and you have a good idea what a reasonable price. Now it is time to make the dealerships work for your business.

Always contact a handful of dealerships and ask each one for their best price. Lett them know you’re talking to other dealers, get them to start a bidding war against each other, which will drive the price of the car down.

Just make sure each car you’re looking at has the same features so they are comparable.

6) Have a budget

Always know exactly what you can afford before you go into the dealership. Have a budget and stick to it, that way it will be easier to say no and walk away from a dealer who is trying to pack unwanted extras onto the purchase.

If you have savings, it’s easy just work out how much you are willing to spend. If you must finance the car, talk to a professional before you go to the dealership. That way you know how much you can borrow and what it is going to cost you to repay the loan.

7) Get a least two quotes on Your Trade-In

A dealership may give you a great deal on a new car but offer you a low-ball price on the trade-in.

Before you buy, shop around and find out what the best price you can get for your trade-in.

If your finances will allow you to do it, instead of trading in your current car sell it privately. You will find that you will get a better price this way.

Now that you know how to save money on you next New Car Purchase, if you are interested in learning how to avoid four car financing rip-offs, six common car financing misconceptions, and 8 costly mistakes with car financing the get a copy of my Consumers Guide to Car Financing.

Links to R.A.C.Q’s website is https://www.racq.com.au/cars-and-driving/cars/car-… Or the link to Red Book is http://www.redbook.com.au

Using the equity in your home to purchase new car

Using the equity in your home to purchase new car

Brendan Barker - Home Financing Specialist - Home Loans - Car Loans - Personal Loans

Have you ever had the pleasure of being stuck at home with 2 children under 3 and not being able to leave the house? My friend Debbie recently faced this problem, their car had broken down and it was going to cost more to repair it than the car was worth.

What would you do if you were faced with not being able to get out of the house for weeks on end?

Having to ask family and friends to give you a lift to the shops so that you can buy the necessities for the family.

You have to purchase a new car, but how? The most common options would be:

  1. If you have the savings just go and buy a new car,
  2. Get a personal or car loan to buy a new car, or
  3. Us the equity in the home loan to purchase the new car

The first option wasn’t possible, while Debbie and her husband had some savings it wasn’t enough for the new car. Hence let’s have a look at the other two options.

To keep things simple lets assume the new car is worth $30,000 and Debbie was going to borrow the whole amount. Since their home was valued at $400,000 and the home loan balance was $220,000. They had plenty of equity which can be used to purchase the new car.

Car Loan

Assuming an Interest rate of 10% and a loan term of 5 years.

The Monthly repayments on a loan of $30,000 would be $637.50

Cost over the life of the loan would be $8,245 in interest.

Home Loan

Interest rate of 5% over 25 years

The monthly repayments on the home loan would increase by $175.5 to cover the car.

Cost over the life of the loan would be $22,615 in interest.

From this you can see that taking out the car loan is the better option. However there is another option.

Home Loan with Car Loan repayments

If we redo the home loan scenario, but instead of just paying the minimum repayments we increase the repayments by what the car loan repayment would be.

The monthly repayments on the home loan would now increase to $637.50

The cost in interest until the car was paid off would now be $3,460, a saving of almost $5,000. The car would now be paid off in full in 4 and a half years.

Furthermore if we continued paying off the home loan at the higher repayments the home loan would be paid off 9 years sooner. Thus saving a whopping $75,000 over the life of the loan.

Consequently by using the equity available in the home loan, not only can they save money but they would own their home sooner.

Back to Debbie and her family. In the end, Debbie’s mother-in-law came to the rescue and lent them the money to buy a new car.

Interested in learning more about your options around car financing?  In learning how to avoid four car financing rip-offs, six common car financing misconceptions, and 8 costly mistakes with car financing the get a copy of my free Consumers Guide to Car Financing.

4 Steps To Stress Free Financing Of Your New Car

4 Steps To Stress Free Financing Of Your New Car

Are you thinking about financing your new car purchase? Found the car that you want to buy, but don’t know where to start with arranging finance?

Choosing how to finance your car isn’t easy.

Why?  Because you’re bombarded with numerous options, confusing claims and simply bad advice. From 0% loans and high-pressure sales – to unsuitable loans and near-worthless advice – how do you ever find someone who is qualified, competent and professional to provide you with unbiased advice and quality service?

Follow these four steps to have stress free financing of your new car:

STEP #1:  Make a commitment to yourself to get quality advice around your car financing.  Find a broker, bank lender or dealership finance manager who will invest the time to ensure that they understand your financial situation, needs and requirements.  This way you will ensure that you have all the relevant information to make an informed decision.

STEP #2:  List your objectives. What do you want to achieve with your car financing?

  • Do you want a car loan, with a low headline interest rate and not too many questions?
  • Do you want a car loan which meets your needs, that is suitable for you and that will not cause you hardship?
  • Do you want to work with a fair, ethical and professional Finance Broker?
  • Are you willing to risk working with a car dealership that offers 0% dealer finance – knowing that you are most likely paying an inflated price for your car?

STEP #3:  Ask questions.  The best way you learn about the finance business you are working with is to ask specific questions and listen carefully to the answers. Here are ten tough questions to ask your financer before he begins developing the advice for you:

  1. How much does the service cost and when do I have to pay?
  2. Do you belong to an industry association such as the Mortgage and Finance Association of Australia (MFAA)?
  3. How do you identify the best solution?
  4. How many lenders (and which lenders) do you represent?
  5. How do you get paid?
  6. Can you provide comparisons of any loans recommended, including upfront and ongoing fees?
  7. Can you clarify the actual cost of the loan, including and excluding interest, fees and ongoing costs?
  8. Do you comply with the Privacy Act?
  9. Do you have professional indemnity insurance?
  10. How long have you been in the industry and can I read your testimonials from previous clients?

STEP #4:  Once you’re satisfied that you’re working with a fair, ethical and professional finance professional, engage them to provide you with a written recommendation for your car financing.  A written recommendation gives you the assurance that you know exactly what your car finance will cost – no surprises.

By following these four steps, you’ll gain all the information you need to make an informed, intelligent decision. If all you want is car loan, with a low headline interest rate and not too many questions, any finance manager at the car dealership can help you. Or you can walk into your local bank and get sold their car loan product.

But if you want good advice – if you’re looking for someone who will invest the time to understand your financial situation, needs and requirements – to find a great deal on your car finance, then follow the 4 steps outlined above.

If you are interested in learning how to avoid four car financing rip-offs, six common car financing misconceptions, and 8 costly mistakes with car financing the get a copy of my Consumers Guide to Car Financing.

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