we buy things with the hours from our life

26 Feb we buy things with the hours from our life

Every year I write to the bank seeking an interest rate review on the mortgage.

Each time the bank has come back with a reduced rate of anywhere from 0.2% to 0.25%.

With the average mortgage in Australia hitting $500,000 this is a saving of $84 per month. It doesn’t sound like a lot, after all you could spend this on one meal out, however when we times this by 12 (months) it comes to $1,008 per year. Don’t forget the $8 ….

If you are on a salary of $65,000 in Australia after tax $1,000 is a week’s wages or $200 per day.

A reduction of 0.20% and I have just saved myself having to work for a week to simply pay the interest on my mortgage.

I apply this formula to everything I purchase or save.

It is a great way to think about what happens each time we make a saving through a reduction in an interest rate, a cheaper mobile plan or cancelling a subscription we no longer use.

Not only are we saving money but also the time we had to spend to make the money.

I was recently on Facebook on a budgeting page and there was a post regarding the same bank I was with and the poster advised “their interest rate was 0.75% higher than mine and looking to move banks”.

On a mortgage of $500,000 a rate of 0.75% higher is $3,750 per year. This person, if they had the same mortgage, would have to work for nearly 4 weeks a year to pay the extra interest. Ouch! Fortunately their mortgage was only $200,000 so $1,500 a year more but still 1.5 work weeks.

I schedule all my financial review tasks each year around November. Something about the end of year and wanting to get tidied up. Bit like when the baby is coming and it is important the whole house gets repainted because what kind of parent will the baby think I am! I digress.

Anyway it is a small task (15 minutes) to send an email off once a year, advise the bank you have been a long time and loyal customer and would like to seek a rate review. What is the worst that can happen? the bank is unable to assist. The best: you have saved a week or two each year of your life not having to work to pay the interest.