Kin’s Money

No, not the Australian budget, I’m afraid that’s even beyond me at the moment.

However as a result of the budget we are going to have to make some changes. What we get in one hand, will be gone in the other, but I suspect we will have to make some changes.

I’m reluctant to cancel our private health insurance with all the changes going on around it. We aren’t getting stung yet, but I imagine it won’t be long until we are, and keeping that, even at minimum levels, seems like the most sensible option at this stage.

But the biggest, and by far the best part to come out of last nights budget, as far as our family is concerned (because let’s face it, it’s all about me ) is that Hubby’s job looks secure for a few years, as funding for projects his company is planning for has been approved and should keep him busy at work for a good 5 years or so.

But does it annoy anyone else the “I won’t speculate on that” and miraculously the next morning “someone” has leaked the “that” so that after all the hype the budget is really a bit of a let down? Or maybe that’s just me ….

With Hubby now out of work, our Emergency Fund is getting a workout. In a big way. In fact as we’re now waiting on Centrelink assistance in the form of Newstart allowance, it’s pretty much all we have.

We’re very lucky in Australia. Our social security system is, on the whole, effective and allows people to stay off the streets.

Until now we’ve been using the money Hubby received before the company closed down to live off. Now, we’re dipping into our emergency fund, and while I know that’s what it’s there for, it fills me with fear that we’ll get to the end of it and have nothing.

The worst part of dealing with centrelink is the time it takes. It has now been 2 weeks since we first contacted them, and we are dragging ourselves in to see them and hand in the forms this week.

What’s making this even worse is that even if it is approved, the amounts we’ll receive won’t even cover our rent. Which means moving. Which means more $$$.

While at the moment things are ok, I can see the time coming soon when it won’t be. And I’m doing what I can to cut our expenses, but there’s only so much you can cut. I am canceling our health insurance this week. We took it out at the beginning of last year as we were close to the threshold, but now the goal posts have changed we’re going to be nowhere near it and that’s $45 a week I can’t spare.

Beyond that I’m at a loss. All our phone/mobiles/internet are fixed and very good for what we get. Food is doing well and very low. I am only using the car for shopping and job interviews so I have only done 60km in the last 7 days, so that will save us a bit of money.

But at this point, I’m glad for our emergency fund. It’s going to keep us going for a few more weeks. After that, who knows?

Superannuation, or Super, is the most common retirement savings vehicle for Australians. It is funded by what is called the “Superannuation Guarantee” that means employers must pay contributions to your super fund, generally 9% of your gross salary.

This is required for all eligible employees, that is, employees who are over 18 years, but under 70 years, paid at least $450 gross in a calender month, and, if under 18 years, work at least 30 hours a week.

There is a slight caveat though, that stipulates this is only payable on “ordinary” hours. What are “ordinary hours”? Generally it includes ordinary pay, shift loadings and commission.

There are many other rules and regulations regarding super. Your employer is required to pay it by law, and if they don’t can be subject to fines or charges. Your super fund has its own strict set of guidelines it must adhere to, and it is in your best interest to know what those are.

And yes, that is experience speaking.

Financial planning is tricky at the best of times. None of us have a crystal ball. If we did we would all be millionaires, and that wouldn’t work out at all, because someone would still have to pack the shelves at the supermarket.

Those that did predict this economic downturn might be doing ok. Those that couldn’t do much about it might be suffering.

Right now that’s us.

I’ve been watching the “crisis” (can a crisis last a couple of years?) unfold and wondering when it would hit us. With Hubby in the construction industry, it was more of a when not if scenario.

And it turns out, the when was this week. Yes, the week before Christmas.

Still, the stars have somehow aligned, we have sold a car, Mr Rudd’s Christmas bonus arrived, and the company managed to pay out the employees and their leave entitlements. Combined with our plans in place for just this eventuality and we may be able to survive for 3 months without work.

Of course we are taking steps so this is not necessary. Hubby is on the ball with looking for work, and we have a few creative ideas to bring money in in the meantime. There is even a “worst case” plan in case things are worse than we thought and in 3 months time neither of us have any work. It’s drastic, but a plan none the less.

12 months ago people looked at me funny when I said I was making plans in case Hubby got laid off. I remember the 2000/2001 dot com bust which left us in the same situation, though fortunately without 3 children to support.

This time there is a silver lining. Mr Rudd is planning to spend his way out of this “not-quite-recession”, and most of his money is going into construction. Now Hubby has a bit of experience in his new career, we can look at larger companies more suited to that type of work, and less likely to suffer the same fate.

Not of course we’d turn anything down. In fact part of our plan involves me working harder than was originally planned next year. It may delay both our study for twelve months, or perhaps only mine, as Hubby’s is more important for him to be able to get a job. That will be a decision we’ll have to make as the study expenses get closer.

Still, at least we have a plan.

Ah, that fun time of year. Last week my super statement arrived. I had been waiting for it and dreading it at the same time.

Both the hubby and I are in industry super funds which we find have lower fees and higher growth than retail funds. We’ve both had both, and much prefer the one’s we’re in now.

Still, I was relieved to find a loss for the year of 3.95%. I have heard of some super funds losing 18%. As super is the main retirement vehicle of many Australians, that will have some long term impact in terms of people staying longer in the workforce, and more people relying on pension payments in their retirement.

It pays to read your super statement carefully. These are the things I do when reading through my annual statement:

1. Check the payments into the fund. Sure, it’s compulsary to make payments into your fund, but some employers get slack, or lazy. Make sure your payments are going in.
2. Check the fees deducted. My fees for this year were $60.95, which isn’t too bad in the grand scheme of things. Less than 1% of my balance.
3. Check your insurance coverage. Do you have too much? Or too little? Our funds now offer Income Protection Insurance, but check the details carefully - some only pay for two years.
4. Assess your asset allocation. Are you spooked by the volatility lately? Getting older and not sure the growth/high risk options are right for you anymore? Now is the time to take a closer look. I looked at mine and decided that based on my age and the severe LACK of money in there, that I could probably stand to take on more risk. I note that despite the last year my average return for 10 years has been over 10%.
5. Decide whether you’re happy with your fund. With super choice most people can have their payments made to their choice of super funds. Take a look at the aspects above, and see if your fund is meeting your needs. If not, have a look around for an alternative.

Have you got your super statement yet? Were you happy with your funds performance?

Source: Flickr

Every Friday I sit down and attack the paperwork that has piled up on my desk through the week. Mail, catalogues, magazines, bills, printouts, kids drawings, notes from daycare, serviettes with email addresses and phone numbers on them.

Since we get paid on Friday, and I’m of the “if it’s in the bank I can spend it” mindset, Friday works out the best day for me to pay the bills. The sooner the money is gone from my account the less likely I am to spend it, and thus get behind on my bills.

I’d like to say that my desk looks like that when I pay my bills but in reality it’s a mess of papers that I try and sort into some kind of order. I usually work on 3 piles: to file, to pay, to do. The to file and to pay piles a self explanatory. The to do pile is things I need to do something with. Cheques to be banked, statements to chase up, forms to be filled in. I try and do this pile as soon as I can, but it doesn’t often work out and some things can sit there for months.

But after today, it’s nice to know all the bills are up to date at least. Now if someone could just file the filing pile for me, my desk would be looking halfway decent. No? Oh well, it shouldn’t take me long.

Today the Government’s Medicare Levy Surcharge Bill passed the senate, lifting the threshold at which the Medicare Levy Surcharge (an additional tax of 1% of your taxable income on those who do not have private hospital cover) is paid from $50,000 for singles to $70,000, and from $100,000 for couples and families to $140,000.

While this is undoubtably good for those who would likely have been slugged with the charge (and incidentally, unless you fill out a special form advising your employer to take out extra tax you will be slugged with the 1% in the form of a tax bill at the end of the financial year - yes, we’ve been caught out), it leaves me with a bit of a dilemma.

Earlier this year we took out private hospital and extras cover as we were going to be walking a very fine line around the $100,000 mark this financial year and I didn’t want to be caught out - a $1,000 bill is not what I like to see at the end of the financial year. Now, having paid out $1620 in private health cover in anticipation (although not that much in hospital cover) I’m left wondering if it was worth it, and how long, given the state of the economy, I can afford to carry that cost.

To be honest, I didn’t consider leaving until I heard talk on the radio of premiums potentially rising 30% - particularly in light of the losses health funds have undoubtably felt with volatile investment markets and the andticpated loss of 492,000 members. In December 2005 approximately 10.12 million Australians were covered - just shy of 50%. A loss of the premiums for 1/10 of the health funds premiums combined with investment losses does not bode well for health insurers.

I wonder when we’ll see a “private health fund bailout”?

The reserve bank has cut interest rates by 0.25% to 7%.

The question is what do you do now? Do you lower your repayments on your mortgage? Or keep them at your current level? Is it worth it?

The difference it will make to a morgage payment is $17 a month per $100,000 of mortgage (so if you have a $200k mortgage it’s $34 a month). The average mortgage of $250k will have the repayments reduced by $42 a month. Will $10.50 make a difference to your weekly budget? If you’re truly struggling it might. If you’re coping well with increased interest rates, fuel, food and all the other expenses that continue to rise, is it worth it to pay the extra off your mortgage?

On a $250k mortgage at 7% for 25 years, that extra $10.50 a week will save you 1 year and 5 months, and nearly $20k in interest. On a 30 year mortgage it will save 2 years and 3 months and over $32k in interest.

Ultimately what you do is up to you, but if you don’t need that $10 a week you may be better off leaving your repayments as they are.

Our loan is hovering around $84k at the moment, so the $4 a week we would save by lowering our repayments wouldn’t do much for us even if we were struggling.

Today the Daily Telegraph is reporting Wizard Home Loans to be the first lender to drop it’s variable home loan rate by 0.25%.

The Reserve Bank’s meeting this Tuesday is expected to cut rates, and now several lenders have promised to pass on any cut in official interest rates.

Mr Bouris, Chairman of Wizard Home Loans said:

“It’s a risk,… while [other banks] were very quick to hike their rates independently to the RBA when funding costs were increasing earlier this year, they are now just stalling - waiting until an announcement by the RBA.”

Which begs the question, will wizard also drop their rates by the same amount as any cut on Tuesday? Or will it claim this as its cut, running the risk of appearing hypocritical.

This news is good for homeowners, but not so much for savers. While several banks have passed on interest rate rises as higher rates on savings accounts, they seem to be quick to cut them alongside Reserve Bank cuts, while rising loan rates independent of official rises and not raising savings rates. And it seems that this trend is set to continue with at least one bank already cutting fixed interest savings accounts in the last week.

On a personal note, I’m looking forward to any rate cut, as that will help us pay our mortgage on our block of land off quicker. We also have an offset situation, and redraw, so all our surplus funds sit there saving us interest every day.

What are your thoughts? Do you have mortgages or savings? Are you looking forward to rate cuts?

This week the National Australia Bank (NAB) have committed to matching any cut in official interest rates next month. So far they are the only bank to do so, despite continued warnings from the government. Apparently the banks see the government as a toothless tiger in this scenario, and feel (probably quite rightly) that there is nothing the government could actually do that would encourage them to follow the NAB’s lead.

If your bank does pass on any interest rate cuts made next month, it is important to remember that those cuts will not necessarily pass on to you unless you ask for it. From the Canberra Times today:

MORTGAGE holders struggling with the rising cost of living will have to apply individually to their bank to have their repayments reduced, even if the lender passes on an interest rate cut.

This is because most Australian mortgage holders choose to make repayments in excess of the minimum required and these repayments do not automatically change when interest rates do.

So if you’re holding your breath for next months expected interest rate cut, remember to contact your bank and apply to reduce your repayment. Or, you could leave your repayments as they are, and simply pay off your loan quicker.