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Your Budget And Rising Petrol Prices
If you have a mortgage and are not struggling with the
increasing cost of petrol ... you are in the minority. And if
you aren't struggling now, how will you fare when the flow on
effect of high petrol costs starts to increase the cost of
living across the board. For many Australians the question of
how to cover all their bills and maintain a decent standard of
living for their families will soon become a pressing one.
As you struggle with this challenge, you may discover that your
mortgage is actually the solution.
In recent months, oil prices have skyrocketed to $65 a barrel.
This has resulted in the price of petrol rising above $1.30 a
litre. This increase has been blamed on the recent hurricanes in
the Gulf of Mexico and the resulting production delays.
Already this is beginning to bite the budgets of Australian
families. In a BRW report, McDonalds chief executive Peter Bush
revealed that McDonalds sales growth had dropped 5 % in just
weeks. He attributes this sudden decline to Australians
tightening their belts to afford the extra $30 to $40 a week to
fill the family car. The same article cited a recent NRMA
survey, which stated that 25% of NSW and ACT motorists have cut
their spending on food and groceries as a result of the petrol
hike.
Petrol prices have risen 30% this year; the cost of petrol being
a major expense for most Australian families. In a media release
from the University of Newcastle, Dr. Abbas Valadkhani said,
"You don't necessarily have to use a lot of petrol to be
affected by the price rise."
Apart from the direct effect we have already experienced, we
will soon begin to suffer the flow on effects of the petrol
hike. The cost of milk has already increased and a range of
other industries such as transport, storage, forestry, fishing,
agriculture and meat and all dairy products will have their
costs increase due to the rising price of petrol. It is only a
matter of time before these costs are passed on to us. If you
think about it, there are few goods and services in the economy
that don't have fuel costs somewhere in their production and
distribution chain.
Well, that's the bad news. The good news is that many experts
believe that this spike in petrol prices is temporary. It is a
result of diminished production, due to natural disasters.
Eventually, the damage will be repaired, supply will return to
normal levels and the price will drop. However, that could be
six months or a year from now and until then you need to keep
paying for the petrol, pay your bills, budget for Christmas and
pay your mortgage.
But are you paying the right mortgage? Are you using your
mortgage to its fullest potential? With interest rates so low
and the cost of living experiencing an unexpected and temporary
spike, a logical means of maintaining your lifestyle, during
this time, is to use your mortgage to offset this temporary
fluctuation.
This may be the time to either take advantage of your home loans
features, or change to a more flexible mortgage. For example,
you can switch to a loan that has a redraw facility. This allows
you to draw back extra payments you have made and use them to
help you through this particularly stressful time.
If rising costs are getting on top of you, perhaps refinancing
is the solution. You can roll all your debts into your home
loan; car payments, credit cards etc., consolidating your debt
and reducing your regular repayments, leaving more cash each
week to combat this sudden increase in expenses. Instead of
running up the credit cards, refinancing your home loan may be
the most cost-effective and cheapest way to raise that extra
money to help you through the next turbulent 6-12 months.
Using a mortgage-offset feature is another way to have that
extra cash handy, but still minimise your interest. Let's say
you refinance and leave yourself $10,000 to help pay the bills
for the next few months. If your loan is $100,000 and you have
$10,000 in the offset account, the interest on your loan is only
calculated on $90,000.
The current petrol crisis will eventually pass, but in the
interim, why struggle to care for yourself and your family when
the solution to your short term budget problems is sitting right
there ... in your home?
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