Finance News

Your morning coffee adds 154 minutes to your mortgage

Your ritual of grabbing a coffee on the way to work, at lunch or as an afternoon pick me up is adding 154 minutes a day to your mortgage and may be keeping you in debt far longer than necessary.

To highlight the impact of this purchase, its assumed that you pay $4 per coffee a day, 365 days a year, which comes to a $1460-a-year habit. It’s also assumed you hold the average Aussie 25-year home loan of $376,200 at the Mozo-calculated average rate of 4.9 per cent. If you redirected this money  to your mortgage, you'd slash your interest bill by almost $31,000, and more importantly get out of debt two years and five months early.

That reduction in time, produced by your no-coffee commitment for the remaining 22 years and 7 months, equates to a saving of 154 minutes a day – or more than 2.5 hours. Even making cuts to spending on bought lunch can stop you paying potentially a net $10 each weekday;  $2600 a year  for a bought lunch. That's an additional 274 minutes (or 4.5 hours) a day to your debt. You could instead get mortgage-free four years early and save $50,349 in the process.

We'll assume four bottles of wine a week are shared in your household, allowing for slightly more on the weekend, at $15 a bottle. Or it could be the same amount in beer or other alcohol. That $60-a-week or $3120-a-year luxury is extending your loan by 323 minutes; almost 5.5 hours a day.

Striving to put yourself in a superior financial position by cutting back on life’s luxuries can be a difficult goal. However, think about your regular indulgences not in terms of potential money savings but time savings, and you may well find the motivation to reduce them. For this to be true these savings have to go directly on the mortgage not be allocated to other expenditures.

There are often stories about a ominous mortgage crisis and coming at people with home loans. But reducing your debt can get you out of danger – and with rates reaching record lows, currently it's never been cheaper.


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