So, what does a financial advisor do? It’s a common question we get, and the answer usually surprises people!

Managing your finances can feel overwhelming, especially when juggling life’s many responsibilities. That’s where a financial advisor steps in. A financial advisor helps individuals, families, and couples make informed financial decisions, guiding them toward achieving their financial goals with confidence and clarity.

The Role of a Financial Advisor

A financial advisor is more than just someone who helps with investments—they provide strategic financial guidance tailored to your personal circumstances and aspirations. In Australia, financial advisors operate under strict regulations & guideline set by ASIC (Australian Securities and Investments Commission) to ensure they act in their clients’ best interests.

What does a Financial Advisor do – the Key Services

Financial advisors offer a broad range of services designed to support your financial well-being, including:

1. Goals Planning

• Help articulate what you want out of life, both financially and personally.
• Define short-term and long-term goals to create a clear financial roadmap.
• Align financial strategies with your values and aspirations.

2. Strategy Development and Modelling

• Utilise detailed financial modelling to illustrate different pathways to achieving your goals. This could be thing like should you keep your current home when we upgrade, or should you invest in shares, property or through super? A detailed strategy is like a financial blueprint that will outline the right path for you based on what you want to achieve.
• Provide tools to adapt your financial plan as life circumstances change.
• Ensure ongoing adjustments to optimise financial success over time.

3. Wealth Creation and Investment Advice

• Develop personalised investment strategies aligned with your risk tolerance and goals.
• Provide insights into shares, managed funds, property investment, and other asset classes.
• Monitor and adjust your investment portfolio to maximise returns over time.

4. Superannuation and Retirement Planning

• Help optimise your superannuation to ensure a comfortable retirement.
• Advise on the different types of super funds & contribution options and how they fit into your wealth strategy.
• Create retirement income strategies that provide financial security.

5. Personal Insurance and Risk Management

• Assess your insurance needs, including life, total and permanent disability (TPD), trauma, and income protection insurance.
• Ensure you and your family are financially protected in case of unexpected events.

6. Debt Management and Cash Flow Planning

• Develop strategies to reduce debt faster and more efficiently.
• Help structure loans and mortgages to improve financial flexibility.
• Create a cash flow plan to ensure you’re living within your means while still growing your wealth.

7. Estate Planning and Wealth Transfer

• Work with legal professionals to ensure your assets are distributed according to your wishes.
• Provide strategies to minimise tax implications and protect your family’s financial future.

The Outcomes of Working with a Financial Advisor

Partnering with a financial advisor can lead to several long-term benefits, such as:

• Peace of mind: Knowing you have a structured financial plan gives you confidence in your financial future.
• Increased wealth: Strategic investment and tax-effective planning help grow your assets over time.
• Financial security: Proper insurance coverage and estate planning protect your loved ones.
• More free time: With an expert handling your finances, you can focus on what truly matters—your family, career, and passions.

Is It Time to Speak with a Financial Advisor?

Whether you’re starting out, building wealth, or preparing for retirement, a financial advisor can provide valuable guidance tailored to your needs. At New Era Financial Planning, we work with clients across Australia to create personalised strategies that help them achieve financial success.

If you’re ready to take control of your financial future, get in touch with our team today. Let’s build a roadmap to your financial goals—together.

Get Ready to Level Up Your Finances with the 5-Step Financial Health Check!

Did you know that 90% of Australians have no clue how to measure their financial health? Don’t worry, we’ve got you covered! Based on our research and analysis, we’ve identified 5 key areas that will help you take control of your money and boost your financial status. Find out the key areas to get on top of below, and conduct your own financial health check. We go through these with our members when they first come to see us and on a regular basis as well (they are that important)!

Income

Make sure you’re getting what you’re worth and set yourself up for future success! Your income not only impacts your borrowing capacity but also determines your ability to cover expenses and have some extra cash left over. Income isn’t the most important area on this list, but Australia has a high cost of living so you need to make sure you are earning an income that can cover the necessities and leave some money left for the areas below.

Debt

Understand your debts and their impact. Whether it’s a home loan, car loan, personal loan, or credit card, learn how much of your income goes towards paying off your debts and keep track of your debt repayments as a percentage of your income.

If you have little or no debt currently that is great, however it is good to understand this area for future requirements (such as a home loan). There are two measures to be aware of here:

1. How much of your take home pay is going towards paying off your debts (plus the interest that they accrue); and
2. The amount of debts you have as a percent of your total assets.

Borrowing will provide you with more money now to purchase what you want, however will leave you with less cash in the future as you pay back the loan. Utilising debt effectively is a major factor in building your wealth, so it is extremely important to understand these key ratios and stay within healthy bounds.

Savings Rate

The first step to financial freedom! Saving money is essential for investing and achieving your dreams. Start small and gradually increase your savings rate to build an emergency fund and secure your future.

We spoke about how your income impacts things above, however if you spend more than you earn you will be broke quickly. Improving your savings rate will help build your emergency buffer, get a deposit for your home and get you on the path to becoming truly wealthy. A good rule of thumb is to aim to save 10% of what you take home each pay (20% is ideal).

An easy way to get there is to start small (even a few percent) and increase this gradually as you get used to living on less. You can also increase this rate when you get pay rises so you don’t actually dip into what you currently earn. For example, if you get a 3% pay rise you can put an extra 2% aside, still have some extra to spend and know that you are boosting your bottom line!

Prepare for Emergencies

Lay the foundation of financial security by having enough savings to survive without income for a period of time.

Ideally, we want to get to have 6 months of your expenses sitting in savings that can be used for emergencies, however 3 months is a good start. There are also things you can do to reduce the risk of certain things happening – for example healthy people tend to get sick less – and you can take out certain insurances to protect against the things that you can’t control, such as bushfires, floods and cancer.

Any insurances should be looked at as part of an overall plan – what are the high risks, what is the potential impact of these and what is the cost to insure them? Spending 3-5% of your total income to protect yourself, as well as building up your emergency fund, will ensure your financial foundations are in place and you can build your dream life on top.

Net Worth

The ultimate goal – increasing your net worth and achieving financial independence.  This is the area that everyone wants to nail – it’s the one that people talk about and gets heads turning.

In reality, this only comes about by doing the other things well. You want to be steadily increasing your net worth – after taking out the debts you owe – as this is what will ultimately provide you with a passive income in the future and allow you to achieve financial independence. The income from your investments will be able to fund your holidays, your business venture, charity work and anything else you want to do in your life.

As you successfully manage the previous steps, you’ll be on your way to generating passive income and living the life you’ve always dreamed of.

Conclusion – Your Financial Health Check

There are so many things being written about money and finance these days that it can be hard to know what to focus on without becoming overwhelmed. We have found that the 5 areas of the financial health check is the key to improving your finances, feeling in control of your money and ultimately getting on the path to financial freedom.

If you want to work with us and see where you are on the scales, book a call here.

One of the first questions people think about when it comes to financial advice is ‘how much does a financial advisor cost?’ That’s usually followed by ‘is it worth it?’ I’ll help answer the first question in this article, and explain the different pricing options that advisors use.

So just how much does a financial advisor cost these days?

In short, the cost can range quite a lot depending on your circumstance. The average initial/upfront cost is around $3,500 (based on a survey by Adviser Ratings), with the average ongoing costs being $3,000-$4,000 per year. Many advisers will also have minimum costs or asset values to take on a client.

For those of you that want to delve deeper, we will go through the pricing methods that financial advisors use so you can get a bit of an idea of the costs for you. The cost of working with a financial advisor is usually based on:

• The types of services & advice being sought
• How simple or complex your situation is
• The type of fee structure that the advisor uses

Let’s go through these points in more detail!

Types of Financial Advice Services

The services that financial advisers offer generally fall into the below:

• Strategy Analysis & Scenario Comparisons – this is where an adviser will compare a number of different strategies & scenarios to help achieve your goals. This could be things like paying more off your home loan vs investing, whilst also factoring in holidays & having a family.
• Financial, Retirement & Investment Planning – sometimes called ‘financial product advice’, this is where the rubber hits the road. An advisor will compare & recommend the right investments, funds & accounts to achieve the outcome you desire.
• Investment Management: once your investments are up an running, many advisors offer the service to man age the investment, make sure it remains aligned with your goals & preferences, and course correct if things start to veer off.

Example: 
Emma, a young professional, sought advice on managing her superannuation. A few focused sessions provided her with a clear plan to maximize her contributions, costing her less than more comprehensive services. 

Are your finances simple or complex?

The complexity of your financial situation significantly impacts the cost of advice. 

• Simple Situations: If your finances are straightforward—think single income, minimal debt, and basic investments—you’ll likely pay less. Advisors can address your needs efficiently in less time than more complex scenarios. 

• Complex Situations: On the other hand, if you own multiple properties, run a business, or manage international investments, your advisor will need to dedicate more time and expertise, which increases costs. 

Example: 
James, a self-employed consultant with diverse income streams, needed help navigating tax obligations, super contributions, and an investment strategy. His advisor developed a customised plan, but the detailed analysis came with a higher price tag. 

Fee Structures

Advisors typically charge fees in one of three ways: 

Fixed Fees 

Fixed fees offer clarity, and can range from $3,000 to $15,000 annually. This model works well for those seeking a comprehensive financial plan with no surprises. 

Asset-Based Fees 

Under this structure, advisors charge a percentage of the assets they manage, usually 0.5% to 1% annually. This model aligns the advisor’s interests with your investment growth but can become expensive as your portfolio grows. 

Hourly Rates 

For clients needing targeted advice, hourly rates (usually between $220 to $550 per hour) provide flexibility. This is ideal for one-off consultations or addressing specific financial challenges. 

Example: 
Tom, a startup founder, opted for hourly advice when structuring his business assets. He received expert guidance without committing to ongoing fees. 

How to choose the right advisor

Finding the right financial advisor is as important as understanding the costs. Here are some tips: 

1. Check Qualifications and Experience 
   Make sure the advisor is at a minimum degree qualified, ideally with a Masters or is a Certified Financial Planner (CFP). 

2. Ask About Their Fee Structure 
   Make sure the advisor is transparent about their pricing. There are no right or wrong ways for an advisor to charge for their professional services, however you want to know everything that is involved, what it will cost you and when payments are required. 

3. Assess Compatibility 
   Your advisor should understand your goals and communicate in a way that resonates with you. You may end up working together for many years, so you want to gel & enjoy your time together. 

4. See what professional associations they are part of 
   The main association in Australia is the Financial Advice Association Australia (FAAA). Subscription to these associations show the adviser is at the forefront of the profession. 

Conclusion – How much does a Financial Advisor cost?

So in summary, how much does a financial advisor cost? Most advisors will charge $3,000-$5,000 for the initial advice, and a similar amount each year for ongoing advice. At New Era we do things a little differently – we have a monthly membership where most people pay between $149 & $199/mth out of pocket, and an initial Financial Blueprint plan for $1,400.

Hiring a financial advisor isn’t just about managing your money; it’s about building a secure future. Whether you’re navigating life’s milestones or optimising a complex portfolio, the right advice can deliver returns far beyond the initial cost. I believe everyone should have a financial plan, but not everyone necessarily needs a financial advisor. Use the information in this article to assess different ones and when you are ready choose the right advisor for you!

FAQs – How much does a Financial Advisor cost?

Money—it’s something we all deal with daily, yet so many of us struggle to feel truly in control of it. Have you ever wondered why your financial goals feel just out of reach, no matter how hard you try? Chances are, some sneaky money habits are holding you back. These are money habits keeping you poor! The good news? A few small changes can make a massive difference.

At New Era Financial Planning, we’ve worked with countless individuals and families to help them identify these roadblocks and create a clear path to financial independence. Let’s dive into the 7 most common money habits that might be keeping you stuck—and how to turn them around.

1. Paying Yourself Last
Imagine this: You’ve worked hard all month, paid the bills, bought groceries, and splurged a little on the weekend. By the time you think about saving, there’s nothing left. Sound familiar?

This is what happens when you pay yourself last. Instead, flip the script and pay yourself first.

Think of saving as planting seeds for your financial future. By prioritizing your savings and investments before covering other expenses, you’re setting yourself up for long-term growth. Start small if you need to—automating just 10% of your income into a savings or investment account can make a world of difference over time.

2. Carrying Bad Debt
Bad debt is like carrying a heavy backpack on a long hike—it slows you down and drains your energy. This includes high-interest credit card balances and buy-now-pay-later services like Afterpay. While these options may seem convenient, the interest and fees can quickly pile up, keeping you in a cycle of payments.

To break free, start by paying off high-interest debt first (the “avalanche” method) or tackle smaller debts to build momentum (the “snowball” method). And remember, not all debt is bad—borrowing to invest in your education or a home can be a smart move, but it’s essential to keep it manageable.

3. Not Having a Cash Reserve
Life is full of surprises. Whether it’s an unexpected car repair or a sudden job loss, not having a financial safety net can lead to stress and additional debt.

That’s why building a cash reserve is so important. Aim for 3-6 months of living expenses tucked away in an easily accessible account. Think of it as your financial umbrella—it doesn’t stop the rain, but it keeps you from getting soaked.

If saving that much feels overwhelming, start with a smaller goal, like $1,000, and build from there. Every little bit helps.

4. Not Knowing Your Financial Position
Do you know exactly where your money goes each month? If not, you’re not alone. Many people feel in the dark about their finances, which makes it hard to take control.

Start by tracking your income and expenses. Use an app, a spreadsheet, or even a notebook—it doesn’t matter how, as long as you do it. Think of this as creating a roadmap. If you don’t know where you are, it’s impossible to plan how to get where you want to go.

Once you understand your spending habits, you’ll be able to make informed decisions about where to cut back and where to allocate more funds.

5. Having High Fixed Costs
Fixed costs—like rent, car payments, and subscriptions—are the financial equivalent of being locked into a treadmill. They keep you running in place, leaving little room to save or invest.

Take a close look at your fixed expenses. Are there areas where you can cut back? For example:
Could you downsize your living space?
Can you refinance a loan for a better rate?
Are you paying for subscriptions you don’t use?

Reducing these costs can free up funds to focus on your financial goals. Remember, every dollar you save on fixed expenses is a dollar you can redirect toward building wealth.

6. Not Increasing Your Income
While cutting costs is essential, increasing your income can supercharge your financial progress. Many people overlook this side of the equation, but it’s one of the most effective ways to create financial freedom.

Consider ways to boost your income:
Ask for a raise or promotion at work.
Take on a side hustle, like freelancing or tutoring.
Invest in skills or education that can lead to higher-paying opportunities.
Think of increasing your income as adding fuel to your financial engine—it gets you where you want to go faster. Just make sure to channel that extra cash into savings, investments, or debt repayment, rather than lifestyle upgrades.

7. Waiting to Invest
One of the biggest myths about investing is that you need a lot of money to start. The truth? The earlier you begin, the more time your money has to grow.

Think of investing like planting a tree. The sooner you plant, the longer it has to grow and the more shade it will provide in the future. Even small contributions can grow significantly over time thanks to compound interest.

Start with what you can, even if it’s just $50 a month. The key is to get started. Over time, you can increase your contributions as your financial situation improves.

Breaking Free from Bad Money Habits
Here’s the thing—everyone makes financial mistakes. The important part is recognizing these habits and taking steps to change them. At New Era Financial Planning, we’re here to help you do just that.

By addressing these seven money habits, you’ll not only free yourself from financial stress but also set yourself on a path to achieving your goals—whether it’s buying a home, starting a family, or retiring comfortably.

Remember, financial independence isn’t about perfection; it’s about progress. Take it one step at a time, and celebrate every small win along the way.

When it comes to planning for retirement, your superannuation is one of the most valuable assets you’ll ever own. Despite this, many Australians miss out on tens of thousands of dollars by making avoidable super mistakes. These oversights can have a significant impact on your retirement savings, and understanding how to sidestep them can make all the difference to your financial future.

At New Era Financial Planning, we’re dedicated to helping you make informed decisions that set you up for the retirement you’ve always dreamed of. In this article, we’ll explore five crucial super mistakes that many Australians make – and, importantly, how you can avoid them.

1. Ignoring or Not Knowing: The Most Common of the Super Mistakes!

One of the most common super mistakes is simply not knowing the details of your super fund. Many Australians have little idea of which fund they’re with, how their super is invested, or what their current balance is. This lack of knowledge often leads to missed opportunities to grow your savings, reduce fees, or increase your returns.

Why This Mistake Costs You

Without awareness of your super, you miss out on potential returns and may even face unintended fees or poor investment outcomes. Not knowing your balance or investment strategy could also mean that your fund isn’t aligned with your goals, leaving your retirement planning to chance.

How to Avoid This Mistake

• Check Your Balance Regularly: Set up online access with your super provider to easily check your balance, investment options, and performance.
• Review Investment Options Annually: Super funds often offer a range of investment options, from conservative to aggressive. Make sure your chosen option reflects your risk tolerance and long-term goals.
• Engage with Your Super Fund: Most funds provide annual statements that outline your balance, fees, and performance. Taking the time to read these statements can make a huge difference in keeping your super on track.

2. Having Multiple Super Funds

Many Australians have multiple super accounts from different jobs over the years, resulting in duplication of fees and sometimes even underperforming funds. Every extra super account means additional fees, often with no added benefit.

Why This Mistake Costs You

When you hold multiple super funds, each one charges fees. These fees might seem small on their own, but over time they can erode your retirement savings. Plus, multiple accounts make it harder to keep track of your superannuation, leaving you open to mismanagement.

How to Avoid This Mistake

• Consolidate Your Super Accounts: Using the Australian Taxation Office’s (ATO) online services, you can easily consolidate your super into a single account. This saves you from unnecessary fees and simplifies the management of your super.
• Choose Your Best Fund: When consolidating, pick the fund that best aligns with your goals, has a strong performance history, and reasonable fees.
• Seek Advice if Needed: If you’re not sure which fund to choose, a financial planner can help you assess your options and make a choice that’s best for your future.

3. Having an Underperforming Super Fund – The Cardinal Sin of Super Mistakes!

Not all super funds are created equal, and some consistently underperform compared to others. An underperforming fund can cost you tens of thousands of dollars over the life of your investment, leaving you with less money in retirement.

Why This Mistake Costs You

If your super fund underperforms, you miss out on the compounding returns that can significantly boost your retirement savings. Over time, even a small difference in annual returns can add up to thousands of dollars.

How to Avoid This Mistake

• Compare Fund Performance: Use resources like the ATO’s MySuper comparison tool or independent financial research platforms to see how your fund’s performance stacks up.
• Switch to a Better Fund if Necessary: If your current fund consistently underperforms, consider switching to one with a proven track record. Remember to weigh performance against fees – the two go hand-in-hand.
• Review Performance Annually: Superannuation is a long-term investment, so an occasional dip in performance is normal. However, if your fund underperforms year after year, it might be time to switch.

4. Being in a Fund with Overly High Costs

All super funds charge fees, but some charge much more than others. High fees can eat into your investment returns and reduce the money you have available for retirement.

Why This Mistake Costs You

While fees are necessary for the administration and management of your super fund, excessive fees can erode your investment growth. These fees might be for management, insurance, or other hidden costs that add up over time.

How to Avoid This Mistake

• Understand All Fees Involved: Check your annual super statement for details on fees. Look for administration fees, investment management fees, and any hidden charges.
• Compare Funds Based on Fees and Performance: When choosing or reviewing your super fund, look for one with a reasonable balance of performance and fees. The right combination can maximize your returns over the long term.
• Consider Moving to a Low-Fee Fund: Some funds, like industry super funds, tend to have lower fees. If you’re paying high fees for poor performance, it may be time to switch.

5. Not Making Extra Contributions

Relying solely on employer contributions might not be enough to provide the retirement lifestyle you desire. Failing to make additional contributions, even modest ones, can leave you short of your retirement goals.

Why This Mistake Costs You

Employer contributions alone may not be enough to grow your super balance significantly, especially when you consider inflation and rising life expectancies. Without extra contributions, you might need to work longer or adjust your retirement plans.

How to Avoid This Mistake

• Make Voluntary Contributions: Adding to your super via salary sacrifice or after-tax contributions can help boost your balance. Even small amounts can grow substantially over time.
• Consider Spouse Contributions: If you have a spouse with a low super balance, making contributions on their behalf can increase your household’s overall retirement savings.
• Set a Target and Plan Regular Contributions: Setting aside a portion of your income each month can make a big difference in the long run.

Conclusion

Your superannuation is one of the most important assets you’ll have in retirement. Avoiding these common super mistakes can help you maximize your super, reduce unnecessary costs, and ultimately achieve a more comfortable retirement. At New Era Financial Planning, we’re here to provide the guidance and expertise you need to navigate your super with confidence.

For personalized advice on how to optimize your super, reach out to us today. It’s never too early – or too late – to take control of your financial future.

FAQs – Super Mistakes & How to Avoid Them

Q: How often should I review my superannuation fund?

A: Ideally, review your super annually or whenever there are major life changes, like a new job. Regular reviews help ensure your fund is performing well and remains aligned with your goals.

Q: Can I have more than one superannuation fund?

A: Yes, you can, but having multiple funds often leads to extra fees and complexity. Consolidating into one well-chosen fund can simplify your super and reduce costs.

Q: How can I compare super funds effectively?

A: There are online comparison tools provided by the ATO and other financial platforms. Look for funds that have a good balance of performance, fees, and alignment with your risk tolerance.

Q: What is the benefit of making extra contributions to my super?

A: Extra contributions, whether through salary sacrifice or personal contributions, can significantly boost your retirement savings over time due to the power of compound interest.

Q: What happens if I choose an underperforming fund?

A: If your super fund consistently underperforms, it can reduce your retirement savings. Comparing funds and switching to a better-performing option can help you avoid this loss.

Ever wondered exactly how an offset account works? As housing prices rise and interest rates fluctuate, homeowners everywhere are looking for effective ways to manage their mortgage and save on interest. One powerful tool at your disposal is the offset account. But how does it actually work, and why should you consider it? In this article, we’ll break down everything you need to know about offset accounts, from the basics of how they function to real strategies for using one to pay down your mortgage faster. Let’s dive in and explore how an offset account can make a massive difference to your financial future.

What Is an Offset Account?

An offset account is a special type of bank account that’s linked to your mortgage. It works by offsetting the amount of money you owe on your home loan with the balance in your offset account, helping to reduce the interest charged on your loan. In simple terms, the more money you have in your offset account, the less interest you’ll pay.

How an offset account works

Suppose you have a $500,000 mortgage and an offset account with a $20,000 balance. Instead of calculating interest on the full $500,000 loan balance, the bank only charges interest on $480,000 ($500,000 minus $20,000). This reduces the amount of interest you’re paying every month, allowing you to pay off your mortgage faster and save thousands in interest.

Benefits of Using an Offset Account

Offset accounts come with several key advantages that make them an attractive option for homeowners:

1. Interest Savings: The main appeal of an offset account is its potential to reduce the amount of interest you pay over the life of your mortgage. Every dollar in your offset account counts against your mortgage balance, reducing your interest charges.
2. Faster Mortgage Repayment: Lower interest payments mean that a larger portion of your monthly repayments goes toward the principal loan amount, helping you pay down your mortgage faster.
3. Tax-Free Savings: Unlike a savings account, the “earnings” (or savings) from an offset account are tax-free because they aren’t technically income – they’re just reducing your loan’s interest charges. This can make offset accounts an even more attractive alternative to regular savings accounts.
4. Easy Access to Your Funds: Offset accounts are similar to everyday transaction accounts. You can withdraw and deposit money as you wish, providing easy access to your funds when you need them.

Types of Offset Accounts

Understanding the different types of offset accounts can help you make an informed decision:

• 100% Offset Accounts: The entire balance in your offset account is used to offset your mortgage. This type of account provides the highest interest savings and is ideal for those with a higher balance in their offset account.
• Partial Offset Accounts: In these accounts, only a portion of your balance is used to offset the mortgage (e.g., 40% or 50%). While this may still reduce your interest charges, it doesn’t offer as much savings as a 100% offset account.
• Fixed vs. Variable Rate Loans: Offset accounts are generally more common with variable-rate mortgages, but some lenders do offer them with fixed-rate loans. Check with your lender to see if you can benefit from an offset account on your loan type.

How to Maximise Savings with an Offset Account

To make the most of an offset account, follow these tried-and-true strategies:

1. Deposit Your Income into the Offset Account

Directly deposit your salary or income into your offset account. Every dollar you add helps reduce the mortgage balance, meaning you pay less in interest each month. By treating your offset account like a regular transaction account, you can easily cover your daily expenses while also keeping your mortgage interest as low as possible.

2. Use Lump Sums or Bonuses

If you receive a tax refund, bonus, or other windfall, consider depositing it into your offset account. These lump sums can make a significant impact on the total interest savings over the life of your loan.

3. Use Your Offset Account Like a Savings Account

Many homeowners like to treat their offset account as a secondary savings account. By maintaining a higher balance, you benefit from more significant interest savings, effectively allowing your “savings” to work for you without paying tax on interest income.

4. Budget Wisely and Minimise Withdrawals

While you can access your money in an offset account, it’s essential to budget wisely and avoid unnecessary withdrawals. The longer your money stays in the account, the more interest you save on your mortgage. Aim to keep your balance as high as possible, even as you use the account for regular expenses.

Example: How an Offset Account Works – How Much Can it Save You?

Let’s look at a quick example to understand the real impact of an offset account.

• Loan Amount: $500,000
• Interest Rate: 6%
• Loan Term: 30 years
• Offset Account Balance: $100,000

With this setup, the offset account could save you around $180,000 in interest and shave off nearly 6 years from your mortgage term. That’s the power of an offset account!

Offset Account vs. Redraw Facility: What’s the Difference?

Both offset accounts and redraw facilities allow you to save on mortgage interest, but they work in different ways. Here’s a quick comparison:

• Offset Account: Operates like a regular transaction account, allowing you to withdraw and deposit funds freely. Reduces interest by offsetting your loan balance with the account balance.
• Redraw Facility: Allows you to make extra repayments directly onto your loan, which you can later “redraw” if needed. Unlike an offset account, funds may take longer to access, and there may be limitations on withdrawal amounts or frequency.

Which One Should You Choose?
An offset account is often more flexible, offering easy access to your funds. However, redraw facilities can also be valuable, especially if you don’t need immediate access to your extra repayments. Both options reduce interest, but an offset account tends to be the preferred choice for people looking for a convenient savings vehicle with full access to their funds.

Frequently Asked Questions (FAQs)

Final Thoughts: Is an Offset Account Right for You?

Now that you know more about how an offset account works, the question becomes is it right for you? For many Australians, an offset account is a powerful tool for saving interest and speeding up mortgage repayment. However, it’s essential to weigh the benefits based on your financial goals and lifestyle. If you prefer having easy access to your funds while also chipping away at your mortgage, an offset account could be ideal.

In contrast, if you don’t need frequent access to extra repayments, a redraw facility might be a more suitable choice. Either way, reducing the interest you pay can make a significant difference to your long-term finances, helping you achieve your goals sooner.

Offset accounts can be a game-changer when used strategically. By maintaining a healthy balance, depositing your income, and using lump sums wisely, you can save thousands on interest and shave years off your mortgage. And in today’s uncertain financial landscape, every saving counts.

Ready to Learn More?

Looking to optimise your finances and unlock the full potential of your mortgage strategy? At New Era Financial Planning, we specialise in personalised advice to help you reach your financial goals. Whether you’re interested in learning more about offset accounts, mortgage strategies, or other tools to strengthen your financial future, we’re here to help.

Contact us today and let’s build a financial future you can look forward to!