When it comes to having an opportunity to save money, we all love to take advantage.
While research conducted by Heritage Bank in late 2016 highlighted that 76% of Australians describe themselves as deal hunters, there’s an awful lot of money being left on the table. The same research discovered that Australians are still wasting around $7.4billion each year by not shopping around effectively.
So What’s the Problem?
The big issue appears to be that many Australians are falling into the “instant gratification” trap of making purchases and saving a few dollars here and there. Making small savings isn’t a problem. In fact, most guides to saving money and budgeting will advise you to start with the small things. After all, this money all adds up, and you’ll often find that by being savvy with your budget you can save hundreds of dollars a month.
Looking at the bigger picture, these savings are somewhat trivial.
Sure, it feels good when your shopping bill saves you $20 a week, when you use a flight search engine to make your holiday cost $250 less, or when a price comparison site saves you $50 a year on your motor or private health insurance.
Again, it all adds up.
Savings on major life purchases and big ticket buys will add up even quicker, the trouble is Australians aren’t looking for them!
Shopping Around for Major Life Purchases
If you’ve already slashed your shopping bill, or joined the 55% of your fellow Australians that have changed a service provider to take advantage of a better deal being offered, it might be time to look at how you shop around for the other purchases in your life.
Why Don’t Australians Do This Already?
Bottom line…Australians are too lazy to do it.
Heritage Bank’s research highlighted almost a third of Australians consider changing mortgage providers to be “too much trouble,” while 28% on top of this said it wasn’t worth the time and effort.
Considering the potential to save thousands over the course of a home loan term, it is staggering that so many Australians think this.
What’s more, the fact that so many Australians admit to shopping around for deals – indicating they apply generally rational thinking and logic to their financial decisions – yet don’t try and save even more money on these big purchases, is something of a paradox.
“Living in the now” is a great attitude to have, and is one that we support, but it doesn’t mean you should only live for the savings you can make now. How much better or comfortable would your life be if you had an extra few hundred dollars a month in the bank because you’d made some serious savings?
Where are Your Opportunities to Save?
There are plenty of opportunities for you to save money on your next big purchase, as well as on financial products or services that you’re already using, by shopping around.
Let’s look at how you can take advantage of shopping around when it comes to your mortgage, a credit card, or a personal loan.
Buying for the First Time or Switching Mortgage Provider
There is a wide range of mortgage options out there in the market, and it pays to shop around before choosing which one to take out, whether you’re buying for the first time or feel like your mortgage provider isn’t rewarding you for your loyalty.
We’ve used an to highlight the differences in cost. For this comparison we have assumed a remaining mortgage balance of $100,000 to be repaid over 20-years. The two mortgage rates used for comparison are based on the lowest and highest rates provided by the website ratecity.com.au.
While your savings opportunity will depend on your current rate and market conditions, this small example gives you a great idea of the potential.
It can also pay to find a mortgage provider that allows you to pay weekly if you wish to. In the short term you’ll spend a little more as you’ll make more payments, you’ll save another few thousand dollars over the course of your loan, as demonstrated in the table below.
Shop around for the best interest rate as well as the best repayment option for you!
Shopping Around for Credit Cards
We all know the “must do” rules for credit cards:
- If you need to make a big ticket purchase, look for credit cards with 0% deals, and make sure you repay the balance in full before interest becomes payable, or take out a 0% balance transfer card to move the balance to (the problem with this option is you might find yourself needing a new credit card every 18-24 months!)
- When you regularly use your credit card, repay the full balance each month to avoid any interest charges at all
Not many Australians do this, while not many shop around for the best credit card deals, instead falling into the trap of thinking any credit is good credit, so why not open the account.
There are huge savings to be had by shopping around for a credit card, though depending on why you’re seeking credit there may be even more savings to be had – as well as avoiding the revolving debt cycle – by taking out a personal loan, particularly if you’re looking at making a big ticket purchase.
Remember that if you plan on repaying the balance in full each month, the interest rate on a credit card is irrelevant, as you’ll never accrue any interest.
The table below highlights the cost differences in taking out a credit and only making the minimum payments vs. taking out a personal loan.
Shopping Around for a Personal Loan
Finally, if you do choose to take out a personal loan to cover the cost of your next big ticket purchase, don’t just settle for a personal loan being cheaper in the long term than a credit card. Shop around for the personal loan, too! Even if you’ve banked with a specific provider all your life, don’t assume they’re going to give you the best deal on borrowing.
You don’t need to risk damaging your credit score by making repeated applications for credit, either. If you want to take out a personal loan from NOW FINANCE you can get your interest rate before you apply, so you know exactly where you are in terms of how much you’ll need to repay over your loan term.
The table below compares the cheapest NOW FINANCE personal loan with the equivalent from a bank to show you again just what you could save by shopping around.
Shop Around When Looking at Big Purchases
You have the opportunity to save yourself some dollars if you shop around when looking to make a big purchase. By reducing your spending here, you can free up extra money to spend on something else, while things like a cheaper mortgage will make a wider range of personal loans more affordable should you wish to take one out in the future.
Whatever way you look at it, you’re saving and unlocking more opportunities for the future!
Keep up the good work on saving money on clothes, food, and holidays, but remember also to unlock the potentially huge savings to be found elsewhere, and get your share of Australia’s wasted $7.4billion coming back into your pocket.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.