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Finance advice? - Suffering From Elation
A Survivor's Tale
tania
tania
Finance advice?
I should probably just bite the bullet and speak to a financial advisor, but I don't think I'm dealing with large enough amounts of moneys to make that a worthwhile expense. So I'm hoping there's a couple of people on here who have better fiscal smarts than yours truly and can advise.

I've been paying my land mortgage off at a higher rate than necessary. It's at the point where I'm five grand ahead of where my balance should be. This is good; it means smaller amounts of interest coming off the account. It also means that, should money get tight while I'm re-establishing myself as a freelancer, I can legitimately skip payments without repurcussion. I haven't done the exact math but with how far ahead I am I could potentially skip repayments for a year.

My question is this: In my last six weeks of work I'll be putting aside a lot of pay. Should I:

1) Load as much of this as possible into the mortgage to lower the principal so that when I do make repayments, the minimum repayments will be smaller (as is they're currently ~$90/week), or;

2) Cancel mortgage repayments altogether as discussed above, and instead load the moneys into my savings account so I have a nice fat cushion of savings to fall back on. This would be good but at the same time, shouldn't I be paying down the Big M while the interest rates are low?

What is the smartest plan? I don't think I'll be too hard pressed for income right off the bat as I'm already getting freelance project offers. I probably don't NEED the savings. I'm retaining my health extras cover - won't save me if I need hospitalisation, but it'll cover anything else like toothaches, etc, so savings are not uber-necessary... That said, as I won't be able to sell my block for a good long while yet (recession and all) I don't want to suffer in the here and now for the sake of paying it down. I dunno... I'm torn.

I've always got winning lotto as a fallback plan. ;D

I spoke with my doctor and I'll be able to go straight from work to Newstart Allowance despite quitting, so that's sorted. I spoke to Centerlink and I'll be able to go straight from Newstart to NEIS small business funding/training, so that's better still. I spoke to Damo and he might be interested in going into this with me, which is the best of all - our skills meld well and I prefer running a business with someone else (especially someone as driven as he is; it means I only have to steer, not PUSH). I have to talk with him on the weekend to see if he's serious though; I don't want to start this with him only to have him vanish off to the US in two months' time. If he wants to go to the US I am wildly happy for him, but we need to establish that from the outset, haha. Less paperwork that way! This sort of business we can easily run from different parts of Australia, but I think running something together from different continents is a bit beyond us!

Lots of plans, lots of plans. Must book in some Adobe Illustrator training. Must get Mark's logo done, and the two freelance illo jobs I've picked up. Oh my god you guys I'm so excited you have no idea.

Work's put me onto busywork - making brochures from existing artwork. The next six weeks are going to be a wee bit mind-numbing, but at least it's not stressful work
15 have fought ~ fight the power!
Comments
(Deleted comment)
tania From: tania Date: July 29th, 2009 03:10 am (UTC) (Link)
That's a really good idea, splitting it in two - I tend to be a bit all-or-nothing so that actually did not occur to me!
sigmoidal_suseq From: sigmoidal_suseq Date: July 29th, 2009 02:29 am (UTC) (Link)
Talk to your bank.

Depending on your current relationship/history with the bank will depend on how willing they are to let you skip or whether it's a big no-no in their books.

Personally, I would repay it as fast as possible, as interest rates are forecast to go back up in the next year/two years. Plus I would be more inclined to maintain a clean record with the bank in case of future need?

Sorry my words are being slightly retarded due to hunger.
tania From: tania Date: July 29th, 2009 03:13 am (UTC) (Link)
Oh that's right, blame the hunger. :D

I've talked to the bank already, they're always fine with me skipping payments so long as I'm ahead of where I'm projected to be if I'd been making min repayments all along. I quite liked Cooner's idea above of splitting the moneys, saving half and using the other half for repayments. Can't believe I didn't think of that... I'm a bit all-or-nothing sometimes.
master_haakon From: master_haakon Date: July 29th, 2009 02:57 am (UTC) (Link)
Can you redraw excess funds from your mortgage?

Also a dollar saved in loan interest, is worth a dollar.

A dollar earned in savings interest is income, therefore taxable and worth a bit less than a dollar.
tania From: tania Date: July 29th, 2009 03:14 am (UTC) (Link)
Hmmmm, a very good point! If there is redraw on my home loan, it's not easy to access... I should probably talk to someone about that because if I can find a way to make my homeloan redraw-friendly and card-accessible I think I could really rock that system - have my pay put in there and then just draw out the amounts I use. It'd cut down on interest.
master_haakon From: master_haakon Date: July 29th, 2009 03:21 am (UTC) (Link)
An offset account might be a better option in that regard.
sigmoidal_suseq From: sigmoidal_suseq Date: July 29th, 2009 05:04 am (UTC) (Link)
Definitely - my offset account is my saviour.
tania From: tania Date: July 29th, 2009 06:50 am (UTC) (Link)
Right, that sounds awesome - I'm going to talk to Homeside tomorrow and see if I can't get my account switched over to one o' those puppies. I know they offer one but I'm not sure what the fees and charges for changing over are. It would definitely make life more convenient.
ameliabeare From: ameliabeare Date: July 29th, 2009 04:43 am (UTC) (Link)
When you're down here, you must show me how to use this wacom tablet I have before it gets so old it won't work at all. I'm no artist but I'd love to know more about colouring and such!
tania From: tania Date: July 29th, 2009 04:52 am (UTC) (Link)
For sure! What sort do you have? If it's an Intuous or a Graphire, it can be hard to get used to at first... you need to rewire your hand-eye co-ordination so you can draw down here but see it up there on the screen, you know? It's tough at first but you'll pick it up really quickly. :)
ameliabeare From: ameliabeare Date: July 29th, 2009 05:01 am (UTC) (Link)
Intuous I think.. at least that word is more familiar than the other. :D

I've had the thing since.. oh man, maybe 2003? I wanted to get back to my 'art' (I didn't do too badly back in high school and enjoyed it for the therapeutic distraction), but it's only really served for signing stuff when 'all else fails'.

It'd be so nice to do something with it to justify the cost (at the time).
From: haakonspet Date: July 29th, 2009 05:25 am (UTC) (Link)
Tanya if your mortgage has a redraw facility, having your savings sitting there would be the best of both worlds. You effectively earn the interest of your loan, your money is fairly readily available and your are reducing your overall interest, principle and length of the mortgage.

That equals win-win-win.

If however your mortgage doesn't have a redraw facility, putting into savings account with one of the groups like Rabobank, where it is linked to your account, but, you earn higher interest than your normal savings account and the money is readily available if you need to access it.
tania From: tania Date: July 29th, 2009 06:49 am (UTC) (Link)
That's very true. My mortgage has a redraw facility with a minimum of $2000 redraw. That's not ideal for me, so I'm going to talk to Homeside tomorrow and see if I can switch over to an offset account with a minimum of expense - being able to deposit my pays directly into my mortgage would really work for me, I feel. I have enough self-control not to mis-use my access to the money.

Thanks for the advice! :)
alby_lion From: alby_lion Date: July 29th, 2009 05:14 pm (UTC) (Link)
Seems either I missed an entry about starting a business, or you have it friends-locked where I couldn't see it.

To be honest, I'm not sure what good this block of land is doing you anyway. When it's paid off, will you still be paying property taxes for something you don't use? It's nice to have land, but from what I remember, it's not great land for developing a building or anything. Moreover, if you're moving to Tassie, what's the point in owning land in QLD (or wherever it is)? If I were in your shoes, I would see about selling the land and hopefully making a profit on it, seeing as you likely don't owe more than it's worth.

But if the land is something you're hell-bent on, then I would still stock away double-payments. That's the most cost-effective thing to do overall. Trust me $90 now is now the same as $90 next week is not the same as $90 next month.
tania From: tania Date: July 29th, 2009 11:22 pm (UTC) (Link)
I've already looked into selling the land; with the market the way it is at the moment I'd make a loss - that is, if I could even find a buyer. Believe me, I already looked into that - I'd rather offload it too. But not if I'm shooting myself in the foot to do so. ;)
15 have fought ~ fight the power!