25 October 2021

Not Ready to Travel? Here are 7 Smart Ways to use Your Unspent Holiday Budget

By: Shaun Lordan, Chief Product Officer

not-ready-to-travel-here-are-7-smart-ways-to-use-your-unspent-holiday-budget

Thousands of Australians will be dusting off their suitcases this month as the international travel ban is lifted. But before you spend all of your COVID-19 savings in one blow, it’s worth weighing up the pros and cons.  

While there’s no doubt some people will be rightly eager to be reunited with family overseas, the rest of us may reap more long-term benefits by putting that money toward our financial goals. Investing your savings now may even turn your week-long Fiji getaway into a European summer down the track. 

Let’s take a look at how being smart with your money can make your savings work harder for you and benefit you in the long run.  

1. Pay more into your home loan 

Is putting your extra cash into your home loan a good idea? It varies from person to person, but in general, lump-sum payments are a great way to get ahead. Even the smallest amount can help shorten the life of your loan and reduce how much interest you pay overall. This is because lump sum payments reduce the principal on your loan, which is the amount due before interest. This has a flow-on effect of paying less interest on a smaller principal.  

2. Put your savings into an offset sub account 

If you are not ready to commit to paying $10,000 to your home loan, there is another clever option for homeowners — an offset sub account.  

Offset sub accounts, just like the one provided by Nano, act to reduce the principal on your loan, so you’re paying less interest without the commitment of putting your hard-earned money straight into your home loan. 

Not only does putting money into an offset sub account help to consolidate your finances and reduce the interest on your loan, with Nano you’ll have easy access to your funds with a Nano Visa debit card with unlimited extra payments and withdrawals.  

If you like the sound of that but are still resolved to spend that money on travel eventually, Nano vaults may be just the solution for you. Much like Nano’s offset sub account, anything you put into vaults helps reduce your home loan interest, however, the added benefit is you can bucket your finances towards specific goals such as ‘holiday’ while still offsetting and reducing the interest you pay on your loan.  

3. Pay off short-term expensive debts first 

From personal loans to high-interest credit cards, Australians aren’t unfamiliar with debt. New RBA figures show that credit card debt accruing interest has sat at $20 billion for close to a year.  So, prioritising paying off your old debts — particularly high-interest debts — is one of the best money moves you can make. 

Saying goodbye to credit cards and personal loan interest will not only be great for your savings but also strengthen your financial credit position. Having a good credit score indicates to lenders that you can make monthly repayments and manage your finances well. 

Whether you’re a first home buyer or looking for an investment property, shaking off bad debt with your unspent travel money is a great way to ensure you’ll have extra lying around when travel is on the cards again. 

4. Move it to super 

If you were one of the 4.9 million applications to the Covid-19 Superannuation Early Release Scheme in 2020, it could be time to return some of that $37.3 billion to your superannuation.  

Boost your earnings from your year or two spent at home by putting it into your super. Set yourself up for a healthy retirement by paying regular lump sums into your super. Even an extra $1000 per year can add tens of thousands of dollars onto your super balance when retirement rolls around. 

Some good options are to pay a lump sum and then claim a refund when tax time rolls around or pay a lump sum and gain a government co-contribution. 

5. Renovate your home 

Home renovations can be expensive. The average cost of a home renovation in Australia is $63,118, which is close to how much the amount an average Nano homeowner saves when refinancing — around $74,000.1 

If you’ve been talking about renovating the kitchen or bathroom for years, now could be your time. Use your savings as a jumping-off point and supplement with the cash you pocket from refinancing. Our home loan refinance calculator compares your current loan against one with Nano, so you can see how your old loan stacks up to Nano’s low rates, with no Nano fees.2 See how much you could save in monthly repayments and over the life of the loan.  

If you’ve still got a decade or more of repayments ahead of you and our calculator suggests serious savings, refinancing to fund your home renovations could be worth considering. 

Putting this money into renovations could also help to increase the value of the home — but not all renovations are made equal. Upgrading your kitchen, adding bathrooms and repainting are the most lucrative home investments come auction day, at least according to Domain

6. Put a deposit down on an investment property or upscale to a new home 

When it comes to buying a home, 41% of Australians agree that saving money for a deposit is the biggest challenge. If you’re choosing to wait to travel abroad, why not downsize your holiday plans and upsize your home deposit savings? 

If your unspent holiday budget can help you reach 80% LVR, you’ll avoid paying Lenders Mortgage Insurance (LMI) which is expensive and may help you access lower rates.  

7. Start or add to an emergency fund 

Moneysmart recommends that Australians accumulate an emergency fund that will cover three months of living expenses. The 50/30/20 rule is a budgeting tool that allocates half of your income to needs, 30% to wants and 20% to savings, which includes your emergency fund. In these financially unpredictable times, having money stored away for a rainy day is more than just a thought — it is essential. 

If you’ve had a savings boost since the start of COVID-19, why not redirect it to a good cause? Homeowners can also take advantage of Nano’s vaults to pay less interest on their home loan. Stay organised by naming the vault ‘Emergency fund’ and adding to it until you’ve achieved your savings goals. If you’d prefer to see all your money in one place, Nano’s sub offset account performs in the same way, allowing you to use your rainy day fund to reduce the interest on your home loan. 

The choice is yours 

When life gives you lemons, make lemonade. Making good financial decisions in the wake of a global pandemic is no easy task. There’s nothing wrong with spending your hard-earned money on a much-needed holiday, but if you can wait, making smart money choices may be an even better idea. 

What that looks like will be different for everyone, so use your best judgement to decide where to put your bucks.  

If refinancing with Nano fits in with your plans, you’ll be pleased to know that you can apply online and get approval within minutes, not weeks.  

At Nano, we believe home loans should be simple, fast and fair. To see more on our fair rates with no Nano fees go to nano.com.au.  

Click here to refinance your home loan with Nano.   

Important  
 

  1. This is the weighted average of savings of Nano customers as at May 2021 and is based on the information provided on their previous home loan and interest rate.  
  1. While Nano does not charge any fees, government fees and charges still apply.