Having the financial commitment of a mortgage really makes you think about the value of your money. It forces you to watch your dollars a lot closer and brings into question the opportunity cost of doing one thing over another. It is surprising to see the impact that small financial habits, like your morning coffee, make over the long term.
If you’re a one-a-day coffee drinker, that is an annual cost of around $1,300. On a $500k mortgage over a 30 year period, if you were to forgo your coffee and put these funds towards paying back your loan, this would cut 2 years and 4 months off the length of your mortgage and save $30k+ of interest repayments.
As a Melbourne based broker, I know telling clients to give up coffee isn’t going to win me many friends… but… its more about the power of your dollars over the longer term. Do you have a regular financial outgoing that you could reduce or get rid of that could assist you in repaying your mortgage quicker?
- Bring your lunch from home
- Cancel your gym membership that you never use
- Shop around for a cheaper health/life/car insurance product
- Go out drinking only once per weekend
- Book smarter holiday options
- Do you really need that expensive car with large monthly repayments?
It may not be one thing in particular but the sum of multiple ‘sacrifices’ that can create financial gain in the long term.
Maybe you will think twice before ordering that second coffee for the day…
