The four numbers you need to know in your life

Numbers are a big part of our personal finances, and getting it right is vital for our financial wellbeing.

But many Australians are not across some of the most important numbers in their lives, which can have serious financial implications on their finances, particularly in a recession.

By understanding these key numbers, such as the interest rates you’re paying, you can expect to make a more well-informed comparison of different financial product options to make the best decision for you and your family.

Here are some numbers in your life that are important to know (and you don’t have to be a maths whiz to get on top of it).

1. Home loan rate

The largest debt you might hold in your lifetime is likely to be your home loan. The interest you’re facing on this debt could be hundreds of thousands of dollars over the life of the loan.

Despite this, three quarters of mortgage holders aren’t aware of the interest rate they’re paying on their home loan, according to UBank’s 2019 Know Your Numbers Index.

If you’re on a variable rate mortgage, it could make even more sense for you to know your rate as it is more susceptible to changes, depending on factors including the Reserve Bank of Australia’s cash rate movements and competition in the market.

You may think that if you’re on a fixed rate mortgage, you can set and forget your rate as it’s locked in for at least a year. While this is true to some extent, the time will eventually come when your fixed rate period ends. When this happens, your bank will likely revert your home loan rate to its standard variable rate, which is usually much higher than rates you’d otherwise manage to secure through negotiating or through a promotion. This is why it’s important to pay attention to not only your interest rate, but also when your fixed rate term ends. That way, you won’t be caught off-guard when it happens and you’ll be well-prepared to either negotiate with your lender or refinance.

2. Credit card purchase rate

Credit card debt is a problem for many Australians, yet only one in five of those who use the plastic know the interest rate their card is charging them, a 2019 CUA survey found.

Not knowing your credit card purchase rate can be expensive, as it’s common for many to put their everyday expenses onto their plastic. Yet credit card debts often incur high interest charges, sometimes up to 20 per cent, if not paid off in full every month. This is often how many people end up racking large credit card debts without realising.

And it’s not just the interest from your credit card purchases that can snowball. 

If you’ve ever needed to take out cash from your credit card, you may remember the shock when you received your bill. Credit card providers charge interest on cash withdrawals at a different rate, known as the cash advance rate, which is often higher than the purchase rate. On top of this, cash advances don’t have interest-free days, so it’s likely you’ll be charged interest on the withdrawal from day one.

3. Savings rate

As home loan rates fall for borrowers, so is the interest rate you earn from your life savings.

While savings interest rates are remarkably low, many people are keeping their cash close to them as they ride out the bumpy recovery from the recession.

If you have cash to spare, you may be looking to stash your money into your existing savings account or term deposit. Or, you may even be on the hunt for a savings or term deposit account with higher interest.

It should be a priority for savers to find out what interest rate your savings and term deposits are on, and compare it with other potential options, as this can have an impact on what you earn from your savings.

4. Superannuation rate

While your superannuation may not necessarily be at the front of your mind, chances are your nest egg is one of your most important assets. 

What you end up with at retirement is going to depend in part on your super fund’s return rate. It could be a good idea to look at the return rates over a longer term, such as five or 10 years.

Fees also have a major impact on the balance in your super. Even the best performing super fund may not mean much if a big chunk of it is being eaten away at by high fees,

So if your super fund isn’t working as hard as it should be for you, it may well be time to consider switching.

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