16 ways to maximise your cash flow and protect yourself financially

GUEST OBSERVATION

How long could you survive financially if you lost your job, suffered a major illness or encountered some other life set-back?

How high could interest rates rise before your loans became a worry? If you saw a great investment opportunity, would you be in a position to raise the finance to buy it?

Now is the ideal time to talk to your financial advisors about how to build your financial resiliency. There are a number of ways you can maximise your cash flow to hedge against unplanned events and it is important to get the right advice about strategies that best suit your specific circumstances. 

Here are some ideas to explore:

1. You can often build a cash buffer to tide you through hard times and reduce non-deductible interest on your mortgage by using an offset bank account instead of paying extra on your mortgage.
   
   
2. Keep an eye on the interest you’re paying on your debts. Make sure your interest rates are competitive. If they’re not, speak to your bank’s customer team about a discount.
   
   
3. If you’re negatively geared, you can arrange to reduce the amount of tax that is taken out of your pay each week rather than waiting for a big end-of-year refund. You can find the tax withholding variation form online.
   
   
4. While Australia’s new credit reporting regime means it’s more important than ever to pay your bills on time, you don’t get any bonus for paying them early. Set up a reminder system so that you pay accounts a few days before the deadline, rather than as soon as you receive them.
   
   
5. Don’t forget to claim depreciation even if you own an older property. 
   
   
6. Be organised – if you can’t find receipts at tax time, you can’t claim the expenses. One way to make this easier is to get your property manager to pay your rates, land tax bills etc so they’ll be included in the statement you receive at the end of each financial year.
   
   
7. If you have a partially paid-off investment property, do the sums to see if there is any benefit in refinancing to a fresh 30-year term. Although your monthly repayments could fall, you will end up paying more interest over the life of the property.
   
   
8. Consider the pros and cons of going from principal and interest loans to interest only, particularly for mortgages on investment property.
   
   
9. Regularly check the rent you’re receiving against the market and consider whether there is scope to raise it.
   
   
10. Ask tenants if there’s anything you could add to the property that they would be happy to pay more rent for – there could be a win-win improvement to be made such as the addition of a dishwasher or air conditioner.
    
    
11. Creative ways to increase cash flow can include adding a granny flat, allowing pets, furnishing a property or renting “by the room”. If you’re considering going down one of these paths, it’s essential to do the maths, check with the local council as different regulations apply, and make sure you take out appropriate insurance.
    
    
12. While it’s tempting to renovate a property to add value and rental returns – especially if you can do so cheaply – many fail to recoup their investment so careful consideration is worthwhile.
    
    
13. It’s not rocket science but, by cutting your spending, you will have greater cash flow and build assets more quickly. All the usual savings tips come into play, from making your own lunch to ditching the gym membership in favour of a pair of jogging shoes.
    
    
14. Similarly, look for ways to increase your income by taking in a housemate or boarder or taking on a second job.
    
    
15. Make sure you have appropriate life and income protection insurance, to avoid yourself or a loved one being forced to sell assets quickly. This is even more critical when you don’t have much of a cash buffer.
    
    
16. Protect your property investment and rental income by using an experienced property manager and taking out quality landlord insurance – shop for value not just price as standards and inclusions vary significantly. Don’t forget to regularly raise your sum insured to account for rising building costs, and to cover any renovations or improvements you have made. 

Sharon Fox-Slater is the General Manager of EBM Insurance Brokers’ RentCover landlord insurance division.