Speaker 1: Attention and intention, how to use these interest rate cuts
Speaker 1: to your financial advantage, both today and well into the
Speaker 1: long run. This is Sugar Mama's Fireplay. Hello, and welcome
Speaker 1: back to another episode of Sugar Mamma's Fireplay. I just
Speaker 1: want to take a quick moment to say how grateful
Speaker 1: I am that you are here, how happy it makes
Speaker 1: me knowing that you're listening to this episode every single
Speaker 1: Monday morning, and that I get the opportunity and the
Speaker 1: honor to be able to guide you, to give you
Speaker 1: great financial information and education, but also to empower you
Speaker 1: to work on your financial wellbeing, to build passive income,
Speaker 1: to reduce the debt, to build up those emergency savings,
Speaker 1: and to feel so much relief and financial harmony in
Speaker 1: your life as you look at all those exciting financial
Speaker 1: goals that you might be working on now, but also
Speaker 1: the new ones that you are ready to launch and
Speaker 1: start working on in your financial future. So thank you
Speaker 1: so much for being here and allowing me to be
Speaker 1: a part of your Monday morning routine. Now, today, I
Speaker 1: want to talk to you about the interest rate cuts,
Speaker 1: what they mean for you, and how to make them
Speaker 1: most of them, not just today, but well into the future,
Speaker 1: because I don't want to just be a quick fix
Speaker 1: when it comes to financial stresses in your life. I
Speaker 1: want to be able to give you solutions, ideas, inspiration,
Speaker 1: and strategies so you can go from strength to strength.
Speaker 1: It's not just about paying off debt, but it's perhaps
Speaker 1: about investing, or it's about preparing to have a wonderful retirement,
Speaker 1: or all the other various investment strategies that we talk about,
Speaker 1: like debt recycling. It's a journey. It's not about quick
Speaker 1: fixes and short stories. It's about really allowing the financial
Speaker 1: well being to infiltrate in your life in so many
Speaker 1: different areas and obviously reap all the wonderful benefits that
Speaker 1: come from this. Now, as you know, we recently had
Speaker 1: a very much welcomed interest rate cut of twenty five
Speaker 1: basis points, and thank goodness, most of the banks have
Speaker 1: passed this on, and of course there is talk that
Speaker 1: there may be another interest rate cut just around the corner,
Speaker 1: in fact, in just a matter of days, that is
Speaker 1: the twentieth of May. Now, as we look at these
Speaker 1: particular cuts, I just want to sort of point something
Speaker 1: out to you if you didn't know this about me,
Speaker 1: I'm actually really protective of you. I want to make
Speaker 1: sure that you were getting the best general advice, that
Speaker 1: you understand all the different options that are available, and
Speaker 1: it's easy to work out what is good for you
Speaker 1: or what is right for you and your loved ones.
Speaker 1: So I want to talk about what happens in what
Speaker 1: to do with the cut that we just had, but
Speaker 1: also what to do if we get more cuts. So
Speaker 1: this is the big thing for me, and I really
Speaker 1: want to make sure that you understand this so you
Speaker 1: can have the attention, the awareness, and of course you
Speaker 1: make some great decisions and choices with intention and precision.
Speaker 1: Because I don't want this interest rate cut just to be,
Speaker 1: you know, a sense of financial relief. I want to
Speaker 1: flick the switch and actually go deeper and wider with this.
Speaker 1: I want to just to see this interest rate cut
Speaker 1: and future interest rate cuts as an opportunity to really
Speaker 1: get ahead financially, proactively reduce the financial stress in our
Speaker 1: lives today, but also feel well into the future, to
Speaker 1: realize how many options out there now exist to improve
Speaker 1: our financial wellbeing, and of course to make a serious
Speaker 1: dent on our debt. So we're going to talk exactly
Speaker 1: about this right now today, and I want you to
Speaker 1: look back in say, five years time, going, gosh, I'm
Speaker 1: so glad I listened to that particular episode on Sugar
Speaker 1: Mama's Fireplay because the things I learned from that episode applied,
Speaker 1: and I am so glad I did. So let's get started,
Speaker 1: all right. First of all, what to do when interest
Speaker 1: rates drop? Now, the first thing is to find out
Speaker 1: whether your lender actually passed on the full rate cut.
Speaker 1: Often people you know will see on the headline's interest
Speaker 1: rates have been cut, and they assume that their banks
Speaker 1: will apply that cut in full to their mortgage. But
Speaker 1: it's not necessarily the case. There's often a delay as
Speaker 1: the banks you make a decision and obviously make that announcement,
Speaker 1: and then the rate is actually applied, but then they
Speaker 1: may not necessarily apply it in full. They might maybe
Speaker 1: apply half of the interest rate cut. So you want
Speaker 1: to know exactly what your bank have done, how have
Speaker 1: they passed that on to you? If they kept that
Speaker 1: interest rate cut for them for themselves. Now, once you've
Speaker 1: found out what they've done, I want you to go
Speaker 1: and check the rate that they're offering new customers. Now,
Speaker 1: this is an important thing to do because if you're
Speaker 1: if they're offering a lower interest rate to new customers
Speaker 1: than what you are paying, that is a sign there
Speaker 1: is a bit of a wiggle room for you to
Speaker 1: contact the bank and ask that they beat that rate
Speaker 1: or as an absolute minimum, match that rate. So whilst
Speaker 1: we've recently had a cut, then potentially might be a
Speaker 1: second cut just by making this phone call to your bank. Now,
Speaker 1: if your bank says, sorry, no, we can't match the
Speaker 1: same rate as what we're offering you customers, you need
Speaker 1: to ask them why, because that is simply not good enough.
Speaker 1: And once they've given you that answer, you can politely
Speaker 1: and obviously respectfully let them know that you'll be shopping
Speaker 1: around for a better deal. And that is your sign
Speaker 1: to go and reach out to a mortgage broker and
Speaker 1: let them do all the heavy lifting and shopping around
Speaker 1: for you to get you a better interest rate. Loyalty
Speaker 1: tax is expensive, don't get complacent because there are serious
Speaker 1: savings to be had in this. Now, you want to
Speaker 1: make sure whilst you're doing all of this work, is
Speaker 1: that the interest rate obviously has been applied, but more importantly,
Speaker 1: how has this interest rate been applied? Now? Some banks
Speaker 1: will pass on that reduced rate, but keep your repayments
Speaker 1: exactly as they were prior to the cut. Now, this
Speaker 1: is really important because it actually helps you get ahead
Speaker 1: faster without having to lift a finger, whilst others might
Speaker 1: actually automatically lower your monthly or fortnightly repayments in alignment
Speaker 1: to that cut. Regardless, it is absolutely crucial to know
Speaker 1: what is happening to your repayments because obviously that impacts
Speaker 1: your cash flow. Now, depending on when you signed your
Speaker 1: mortgage papers, quite often there was a little box that
Speaker 1: you may have ticked and it would have been a
Speaker 1: question as to how you want interest rate cuts applied
Speaker 1: to your homelands, and you would have selected one or
Speaker 1: the other. Now that is where they would have applied
Speaker 1: that particular rule. But for most people they can't actually
Speaker 1: remember which box they ticked, and most people will actually
Speaker 1: automatically select the option to lower their monthly payments. But
Speaker 1: you must find out exactly how the bank have passed
Speaker 1: on that cut, because that will then indicate how they're
Speaker 1: going to be applying future cuts as well. Now, this
Speaker 1: is the challenge they have for you, and I say
Speaker 1: this with a complete respect, compassionate understanding of the rising
Speaker 1: cost of the bin and how tight everyone including my
Speaker 1: own family are doing right now with just trying to
Speaker 1: keep your head above water. Now, let's just all take
Speaker 1: a big step back as well. We've had thirteen interest
Speaker 1: rate rises, so the fact we are still hanging in
Speaker 1: there is admirable and we should really feel proud of
Speaker 1: ourselves and just give ourselves a much needed pat on
Speaker 1: the back. But he's also the other thing. It shows
Speaker 1: us how strong we are. We're so much stronger than
Speaker 1: what we realize. So if you've been coping with higher repayments,
Speaker 1: try your very best to keep them at the same
Speaker 1: amount if you can, even though the bank may have
Speaker 1: reduced your minimum repayments automatically. And of course if you
Speaker 1: can only meet halfway, that's okay, that's still amazing. Just
Speaker 1: as much as you can try and reduce sitting on
Speaker 1: the minimum repayments when it comes to your mortgage. Now,
Speaker 1: to help give you some information will obviously fuel your motivation.
Speaker 1: I want to give you some examples to see really
Speaker 1: what savings can be had by paying more than the minimum.
Speaker 1: Say you've got an eight hundred thousand dollars mortgage, and
Speaker 1: say you're on a thirty year term that you just
Speaker 1: recently took out, if your interest rate drops from say
Speaker 1: six point two five percent per annum to six percent,
Speaker 1: assuming that the full twenty five basis points was passed
Speaker 1: on by your bank and its entirety and your payments,
Speaker 1: assuming again that they have automatically reduced an alignment to
Speaker 1: that interest rate cart they'll be going from four nine
Speaker 1: hundred and thirty down to four thousand, eight hundred, So
Speaker 1: technically you're saving about one hundred and thirty dollars per month.
Speaker 1: But here's the thing. If you can find a happy
Speaker 1: medium balance where you decide to I guess, meet halfway
Speaker 1: and keep your repayments that say four thousand, eight hundred
Speaker 1: and sixty five, and obviously that meaning that the other
Speaker 1: half of that interest rate cut gets put back into
Speaker 1: your budget, I guess create some relief and a layer
Speaker 1: to get back on top of things. You potentially save
Speaker 1: thirty nine thousand, nine hundred dollars in interest over the
Speaker 1: life of that loan and pay off your home loan
Speaker 1: just over one year sooner. Now, that's just assuming that
Speaker 1: we have no more interest rate rises and of course
Speaker 1: no more interest rate cuts. That's almost forty thousand dollars
Speaker 1: with after tax money that gets to stay in your
Speaker 1: pocket by doing this, and that is just by meeting halfway,
Speaker 1: that's an extra sixty five dollars per month on the
Speaker 1: home loan. So please know that this isn't actually about
Speaker 1: punishing yourself or depriving yourself. It's actually about attention, being
Speaker 1: aware of interest rate cuts and how they're being applied
Speaker 1: or not to your payments, and then taking an intentional
Speaker 1: decision and action as to how you're going to use
Speaker 1: these to your financial advantage. So it's very much about
Speaker 1: discipline here and avoiding that sneaky thing that we all
Speaker 1: know is called the lifestyle creep. No, these small changes
Speaker 1: matter way more than you realize, So I really want
Speaker 1: you to use this to your financial advantage and use
Speaker 1: this as an opportunity to sit down review your budget
Speaker 1: and see what you can safely afford and how you
Speaker 1: can actually increase your mortgage repayments above those minimum repayments,
Speaker 1: and ideally make sure that you try and have this
Speaker 1: applied in an automatic repayment, and that might be just
Speaker 1: going into your Internet banking and adjusting the minimum repayment
Speaker 1: to bring it up to what it previously was. Before
Speaker 1: or perhaps setting up an additional automatic extra repayment so
Speaker 1: has the same impact on your cash flow. As I said,
Speaker 1: this is just a simple example of just an extra
Speaker 1: sixty five dollars per month. Break that down over a week,
Speaker 1: it's not even twenty dollars. So this is money that
Speaker 1: is really being used wisely. Now to help you stay
Speaker 1: really motivated, I'm gonna share with you one of my
Speaker 1: absolute favorite tools I personally built myself, and yes it
Speaker 1: is free. So when you're reviewing your budget and you
Speaker 1: actually can sort of see what's possible, I recommend jumping
Speaker 1: onto the Sugar Mama website, go to the calculator section
Speaker 1: and go to extra repayments calculator. I'll go and link
Speaker 1: it in the podcast notes. You Now, what this tool
Speaker 1: does is it helps you visualize the impact of very
Speaker 1: small extra repayments. Now, unlike standard extra lump sum extra
Speaker 1: payment sorry, this one actually allows you to combine the
Speaker 1: impact of an additional lump sum repayment on top of
Speaker 1: those extra repayments. So for example, you know, say you
Speaker 1: get a tax refund or a bonus, you can actually
Speaker 1: add this in on top of increasing your extra repayments,
Speaker 1: so you can see exactly how much time and money
Speaker 1: you can save by actually applying this advice to your budget,
Speaker 1: to your cash slow, to your financial goals, and of
Speaker 1: course your mortgage. And when you see the impact and
Speaker 1: see how much money you can potentially say it is
Speaker 1: beyond motivating. You get so excited and every fact you're
Speaker 1: actually you inspires you to go back to your budget
Speaker 1: and see what other money you can come up with,
Speaker 1: do you know, take out of your budget to put
Speaker 1: towards you know, enjoying a mortgage free life, which we
Speaker 1: know would be fabulous. So when those numbers are in
Speaker 1: front of you, it's really hard to actually ignore the
Speaker 1: power these facts and figures actually have over you in
Speaker 1: improving your financial wellbeing. And as I said, you know
Speaker 1: yet this another public casted before the average Australian gets
Speaker 1: back about two and a half thousand dollars a year.
Speaker 1: So if we go back to that example of you know,
Speaker 1: the mortgage, the eight hundred thousand dollars mortgage, and applied
Speaker 1: a two and a half thousand dollar lump sum repayment
Speaker 1: on top of the extra sixty five dollars per month repayments,
Speaker 1: that actually will save you not just thirty nine thousand
Speaker 1: dollars a year, but actually close to fifty one thousand
Speaker 1: dollars a year, and you'll have your homelan paid off
Speaker 1: fifteen months sooner. Now, again keeping in mind that's just
Speaker 1: one tax refund in one year, imagine if you do
Speaker 1: that every single year, it's going to have an incredible
Speaker 1: impact and really shaving off tens of thousands of dollars
Speaker 1: off your home loan on top of what we've already shown,
Speaker 1: and potentially save you years off your homeland. Imagine being
Speaker 1: having your homeland paid off and save ten, fifteen, twenty years.
Speaker 1: That would be unbelievable and something I highly doubt you'd
Speaker 1: ever regret. Now you really so you can really see
Speaker 1: now these numbers really do matter. And if I look
Speaker 1: at the average Australian mortgage, which is round about six
Speaker 1: hundred and forty two thousand dollars at an interest rate
Speaker 1: of six point twenty five percent, those repayments are just
Speaker 1: just under four thousand dollars per month. Now, assuming you
Speaker 1: know that rate of twenty five percent basis points get
Speaker 1: supplied to the loan, and that person was to keep
Speaker 1: the mortgage of payments the same, they would actually save
Speaker 1: comfortably fifty three thousand dollars interest over the home loan
Speaker 1: of the life of the loan, and actually have that
Speaker 1: mortgage paid off twenty months sooner. Again, this is just
Speaker 1: the impact of a simple one hundred dollars per month.
Speaker 1: Now again that can one hundred dollars is a lot,
Speaker 1: and I don't mean to turn my nose up at
Speaker 1: that at all. But if you think about that again,
Speaker 1: per day or per week, it's a couple of coffees
Speaker 1: during the week, or it's saying no to uber ey
Speaker 1: it's say two times per month, or no to buying,
Speaker 1: say a new pair of jeens, you know for the season.
Speaker 1: You know, these are the choices that you have within you.
Speaker 1: So if you can have that awareness and then intentionally
Speaker 1: apply them, you know you're going to be making some
Speaker 1: really wise decisions and it becomes a really powerful wealth
Speaker 1: building tool to have in your toolkit. Now, another great
Speaker 1: tool that I recommend or I guess tactic is to
Speaker 1: understand your why. Tapping into your why is going to
Speaker 1: be a powerful, endless source of motivation. If you are
Speaker 1: like me and you're dreaming of a life with a
Speaker 1: lot less financial stress, a lot more breathing room, greater
Speaker 1: freedom or holidays, you know, maybe switching to part time
Speaker 1: work or an earlier retirement. Then one of the smartest
Speaker 1: financial moves that you can make for yourself is to
Speaker 1: have a go at beating the bank and paying off
Speaker 1: your mortgage faster than the thirty year prescription that they
Speaker 1: have given you. Yes, the banks put us on a
Speaker 1: thirty year term. It's how we get our loans, you know,
Speaker 1: approved in the first place. Is what we often need
Speaker 1: to have that serviceability box ticked in our loan application.
Speaker 1: But just because they put you on a thirty year
Speaker 1: term does not mean that you need to follow it.
Speaker 1: You really are perfectly capable of paying that off so
Speaker 1: much sooner. But again, it's about having that attention, being
Speaker 1: aware of it, and applying it with intention. So every
Speaker 1: dollar above your minimum mortgage repayment significantly reduces your interest,
Speaker 1: your risk, and your anxiety, and it buys you way
Speaker 1: more control, so much more peace of mind and obviously
Speaker 1: a greater sense of future flexibility. And for the record,
Speaker 1: you want to try and do this as soon as later,
Speaker 1: Please don't get into the headspace where you start procrastinating
Speaker 1: and making excuses and think, you know, let me just
Speaker 1: enjoy three months of having a smaller mortgage repayment, and
Speaker 1: then I'll coe back and apply it because I can
Speaker 1: pretty much guarantee it that there'll be another excuse in
Speaker 1: three months time, and maybe there'll be more cuts applied
Speaker 1: in the meantime, and you know that lifestyle creep is
Speaker 1: kicked in, and then you're scratching your head, going, hang on,
Speaker 1: why am I struggling so much? We've had four interest
Speaker 1: rate cuts and I'm still struggling to make ends made
Speaker 1: and I'm still living paycheck to paycheck. Don't become a
Speaker 1: victim to the lifestyle creep. Get in there quick, automate
Speaker 1: everything as much as possible, and aim for as much
Speaker 1: as you can safely afford within the boundaries of your
Speaker 1: budget to see what extra repayments you can apply, and
Speaker 1: of course, even better, make sure you contact the bank
Speaker 1: and let them know that any further interest rate rises, sorry, no,
Speaker 1: any further interest rate cuts are applied where they automatically
Speaker 1: maintain your mortgage payments regardless of how much interest rates
Speaker 1: come down, and you will start to feel so much
Speaker 1: better as every time you log into into banking you'll
Speaker 1: see that your mortgage is finally going in the direction
Speaker 1: that you would like down so much sooner and again,
Speaker 1: it becomes your source of motivation, especially when you've tapped
Speaker 1: into your why and what that means. So what I
Speaker 1: recommend you do as a quick fun exercise is to
Speaker 1: write down three to five points as to why you
Speaker 1: would like a mortgage free life, as I mentioned before,
Speaker 1: things like more holidays, being able to cut down to
Speaker 1: part time work, be able to maybe start to invest in,
Speaker 1: or looking at like a debt recycling strategy you can
Speaker 1: now afford to because you have that cash flow, or
Speaker 1: perhaps it means you can start putting more money into superannuation,
Speaker 1: or perhaps it means you can start helping more people
Speaker 1: around you, whether it be helping your kids out financially,
Speaker 1: helping them, you know, save up their own deposits they
Speaker 1: can have their own place, or even just having that
Speaker 1: freedom and cash flow to spend and invest in you,
Speaker 1: whether it be doing further education, improving your health and wellbeing,
Speaker 1: or even just get to charity. And when you've written
Speaker 1: down your three to five benefits of having a mortgage
Speaker 1: free life, make sure you put it somewherehere you can
Speaker 1: see it every day, whether it be by your toothbrush
Speaker 1: for every time you brush your teeth twice a day,
Speaker 1: or one of my personal favorites is in the shower
Speaker 1: or perhaps in the car right near the ignition button. Now,
Speaker 1: as we work towards wrapping up today's episode, I also
Speaker 1: want to remind you to be cautious and also to
Speaker 1: be wise. I want us to all be very realistic
Speaker 1: about this current interest rate cut and of course future
Speaker 1: interest rate cuts, but we need to reride ourselves. Nothing
Speaker 1: is guaranteed. If inflation picks up again, rates could very
Speaker 1: easily change directions again and go back up again. So
Speaker 1: if we haven't used this window wisely, that is this
Speaker 1: opportunities wisely to get on top of us, mortgage your
Speaker 1: payments and reduce our debt, we may be actually feeling
Speaker 1: the pinch all over again. We could be looking at
Speaker 1: more interest rate rises just around the corner, and we'll
Speaker 1: be regretting that we didn't use this window wisely previously. So,
Speaker 1: as I said, let's use this moment to get ahead
Speaker 1: whilst we can. Let's use this an opportunity to reduce
Speaker 1: our debt as much as we can right now, and
Speaker 1: to make sure we obviously are far more protected for
Speaker 1: any future economic shocks and interest rate rises. Now, whilst
Speaker 1: we can't control what the RBA does or where inflation,
Speaker 1: of course is headed, we can control our response, both
Speaker 1: emotionally and financially. And of course we can be really
Speaker 1: grateful for this opportunity and step up as quickly as possible.
Speaker 1: We can say no to that lifestyle creep that so
Speaker 1: many of us very easily get caught up in, and
Speaker 1: we can stay consistent, focused and actually choose to act
Speaker 1: with intention with our mortgagure payments. So if you've ever asked,
Speaker 1: oh my goodness, how am I ever going to get ahead?
Speaker 1: Oh my goodness, how am I ever going to reduce
Speaker 1: this financial stress in my life? It feels like it
Speaker 1: never goes away, Or how can I actually start creating
Speaker 1: financial freedom in my life? Can I remind you this
Speaker 1: is one of those rare windows. Doing something really small
Speaker 1: like keeping your mortgagure payments steady could have a profound
Speaker 1: impact with the reverse compounding interest on your homeland. And
Speaker 1: this is something that could be life changing for you
Speaker 1: and of course something that your future self will thank
Speaker 1: you for. All Right, well that is it for today's episode. Again,
Speaker 1: thank you so much for tuning in this morning. It
Speaker 1: is always an honor to connect with you, and I'm
Speaker 1: so grateful that you are here. If you enjoyed this episode,
Speaker 1: it resonated with you. Can you please share it with
Speaker 1: someone that you care about, someone that has a mortgage
Speaker 1: And for anyone that wants to actually have a mortgage
Speaker 1: broker or is looking at negotiating a better deal with
Speaker 1: their existing lender, please feel free to reach out to
Speaker 1: me and I can give you the details of my
Speaker 1: own mortgage broker. As you know, this is Adam McCabe
Speaker 1: from Blue Lantern. He's a brilliant mortgage broker. I have
Speaker 1: absolutely no incentive to actually pass on his contact details
Speaker 1: other than knowing that he will do a great job
Speaker 1: for you now. In the meantime, please don't forget to
Speaker 1: follow this show so that you never miss an episode.
Speaker 1: And in the meantime, please keep that financial fire burning bright.
Speaker 1: I'll see you next Monday Morning Chow. For now,