Property is not the only ‘nest egg’ worth protecting

March 23, 2016

For many Australians, the Easter long weekend provides the opportunity to have some much needed down time.

But with interest rates sitting at record lows, and ongoing speculation that superannuation changes are afoot, the Easter long weekend also opens up the perfect opportunity for borrowers to spend some time focusing on their financial situation and looking for ways to protect their nest egg.

Mortgage Choice chief executive officer John Flavell said one ‘nest egg' that Australians should focus on this Easter long weekend is their property.

“Given that interest rates are currently sitting at record lows, there has never been a better time for homeowners to pay down their property debt,” he said.

“Making additional home loan contributions not only gives borrowers the chance to reduce the interest they will pay on their loan, but it helps them to own their property and improve their financial position faster.”

Of course property isn't the only nest egg Australians should be looking to protect this Easter.

“When we talk about the need for Australians to protect their nest egg, we aren't solely referring to property,” Mr Flavell said.

“It is also important for Australians to review their broader financial situation - including their superannuation - on a regular basis.

“At the end of the day, a person's superannuation is the money they will live on in retirement, so it is important for them to take the appropriate steps to give their super a boost.

For any Australian who wants to use the Easter long weekend to review their financial situation and make sure their nest egg – including their home and superannuation – is not only well protected, but has the ability to grow and flourish, Mortgage Choice offers the following tips.

Overpay the mortgage

One of the best ways for Australians to protect their home is to pay off their debt faster. And, with interest rates sitting at historical lows, now is the perfect time to contribute additional funds to a mortgage. Contributing an additional $100 a month can not only help a homeowner save thousands of dollars in interest over the life of their loan, but it can significantly slash the loan term period. Even one-off extra repayments can make a significant difference to the length and overall cost of a home loan.

Give super a boost

In addition to borrowers overpaying their mortgage where possible, making salary sacrificed super contributions offers Australians a simple way to save on tax and build wealth. Salary scarified super contributions allows Australians to pay part of their before-tax salary into their super rather than taking the money as cash in hand.  These contributions are taxed at 15%, which is likely to be below a person's marginal tax rate (which could be as high as 46.5%), so more money goes towards growing their super rather than paying the tax man. Up to $30,000 annually can be added to super through pre-tax contributions ($35,000 if aged 60-plus). This limit includes an employer's compulsory contributions.

Insure major assets

Finally, given that a person's income is their biggest asset, it makes sense to protect it. While the majority of superannuation funds offer some level of income protection cover, this cover is often not adequate. According to Mr Flavell, it is important for Australians to do their due diligence and make sure whatever income protection insurance they currently have is adequate. If it isn't, it is vital that they do something about it, before it is too late.

“In the same way that it is important for Australians to properly insure their vehicle in the event that unforeseen circumstances arise, it is also vital for Australians to properly insure their income,” Mr Flavell said.

“Over this Easter long weekend, Australians should take the time to review their financial situation. A local mortgage broker or financial planner can help people make their money work harder and ultimately achieve their financial goals sooner.”