Prioritising your finances

Ongoing low interest rates in the Australian economy have given many households a chance to draw breath. At the same time, this freedom may have left you wondering what you should do to make the most of the economic conditions in 2014 and beyond.

Will you open up a savings account and place extra money there? Perhaps you'd like to take the opportunity to branch out into property investment? Or maybe you'd like to pay down your debt while interest rates are low?

As rates can change quite rapidly, it's best you make a decision sooner rather than later. Just make sure you base your decision on your financial and lifestyle goals.

Pay down your debt

Your near and long-term goals will influence your decision to pay down debt. If it's an option you'd like to consider whilst rates are low, then pay the debt with the highest interest rates first. Making increased payments to reduce your personal debt can result in you paying less interest in the long run.

If you have several credit card debts and/or a personal loan it may be worth consolidating your debt into your mortgage. This can not only save you in interest but can also make repayments more manageable.


Instead of spending the extra cash in your back pocket, think about investing it. There are many investment opportunities to choose from, but you'll need to find one that suits you. For instance, you could look into using the equity stored in your current home loan to purchase an investment property. This can provide you with a secondary source of income through rent. Another benefit is that you'll have a long-term, physical and profitable investment under your belt.

All types of investment, whether it's shares or property, contain a degree of risk. If property is an option you'd like to pursue, then it's a good idea to survey the market to ensure you're making a wise decision. Factors such as vacancy rates, house prices and property value growth are all things you need to consider.

Save, save, save

You may have some goals you'd like to achieve in the short term. Well, now is the time to get on track with accomplishing them. For example, saving for a new car, some home renovations, or an extended holiday.

It's important to note the level of inflation may eat into your savings over the long term. And as interest rates are low, the level of return on your savings mightn’t be as much as you'd like. To avoid this, look into opening a term deposit. They can offer a fixed interest rate for a fixed term, allowing you a degree of risk protection. But do note that the funds can’t be accessed so you might want to start an emergency fund. This can help you to cover unexpected costs and give peace of mind.