This only applies to Australia and I only found this out after talking to a wise man at Swan River. Thank you Robert.
In Australia, if you earn less than AUD$31,920, any extra money you contribute per year (up to a max of AUD$1,000) to your superannuation fund, the Australian government will match it dollar for dollar up tp AUD$1,000.
They key point of this is that this extra money is taken out of your monthly salary before your employer taxes your salary.
If you’re a wine lover, then you might have heard of Wine Selectors. Wine Selectors is a reputable company that offers medium and high quality wine sent right to your doorstep.
If you’re a keen drinker, signing up for their Refer a Friend club allows you to get any of their gifts below if any of your friends purchase wine from them. This is a good way to profit while enjoying a good wine.
Deep in debt?
It’s so easy to ignore the situation and hope it will go away. You might think that you’ll skip a payment here and there and get through it. But this is very risky. Start by acknowledging that you have a serious debt problem.
Then list out all your debts. Prioritise by interest rate, not by amount. A credit card with 20% interest goes way above a $100,000 housing loan on 8% interest.
Then call your credit card company to negotiate for a lower interest rate. If this doesn’t work, tell them you’re looking to move to another company. Rather than losing you as a customer, they would give you a better rate. But, being the prudent customer you are, you will look around for an alternative credit card provider who can provide you with a better rate. Ask for a 0% interest rate for 12 months on your balance transfer. Remember, this is business, not a class on friendship. Every dollar counts.
But before you switch your credit card debt to another card, consider going to your housing loan provider and asking them if they cam merge your current debts to your housing loan. This may be done via another round of financing. Worst case scenario, take out a personal loan with them. Since you already have a housing loan with them, ask for a lower interest rate on the personal loan. Don’t be shy to ask. You have nothing to lose. And they will want you, trust me on this. It is much better to consolidate all your debts into a low interest Personal Loan than into a balance transfer credit card unless you’re sure you can clear the debt on the balance transfer credit card within the time frame.
Consider some financial counselling, if all else fails. It’s good to get some expert help. There are government agencies providing help without the need for any payments. Use these services. Don’t be shy or angry. It’s better to bite the bullet now than to sink deeper into debt. Schools don’t teach use financial planning, so its no surprise that most of us fail in it.
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My father used to tell me that credit card debt is the single most potent killer of any financial success you can ever dream of having. With interest rates in the region of 18~24% on outstanding balances, its no surprise why banks make it so easy for you get a card that is beyond what you can maintain. While some countries prevent this from happening (getting a card you cant afford to maintain), others countries don’t.
On the other hand, if you’re smart, you can use your credit card to make purchases and earn reward points, while dutifully paying back the full amount every month. At the end of the year, you can redeem your rewards points for vacations and gifts. How cool is that?
So, when looking out for a credit card, consider the following items:
Purchase Rate
This is the most important number you have to bear in mind. When you don’t pay the full amount back at the end of the purchase period, this is the interest rate imposed on your outstanding balance. So assuming you bought a laptop for $2000 and an expensive LED TV for $3000. But you only pay off $1000 at the end of the purchase period. This leaves you with a balance of $4000. If your purchase rate is 20%, your monthly interest is (annual interest / 12 months) x outstanding balance. So at the end of the month, the interest charged to your card is 20/12 = 1.67% x $4000 = $66.8. So the total balance of your card at the end of the month is $4066.8.
You are by law, required to pay off the minimum amount every month. Some institutions require you to pay a minimum of 5%, so check with your bank. Assuming you are required to pay a minimum of 5% at the end of the next purchase period. The interest charges will be $4066.8 x 1.67% = $67.9 or $4134.7. The minimum 5% repayment of $4134.7 would be $206.74. If you continue to make only the minimum payment every month, you would only finish paying only after 19 years and in the process, pay the bank a total interest of $1921.2.
However, if you paid $250 every month instead of the minimum payment, then you would have finished all the repayments within 1.5 years and only paid a total interest of $650.
Annual Fee
Try to find a card with a low annual fee. Some cards have very high annual fee in return for a lower purchase rate. Dont get fooled. Find a good balance. And get a card that will allow you to offset your annual fees with points.
Interest Free Days
Your card should give you at least 45 days from your date of purchase to make a repayment. This should give you enough time to pony up the cash for repayment.
These 3 items should be at the top of your list when finding a credit card. Don’t be pressured to accept any credit card offers from banks without sitting down and comparing these offers to see which one suits you the best.
It’s your money and your life. Invest the time to find a card that will work with you.
Being new in Australia, I opened up an account with a local bank at the advise of my company. However, after being in this country for some time now, I realised that many other banks are offering better interest rates than my bank. At the time of writing, these are some of the banks and their rates. If you do got for any of them, do your homework by double checking the plans and rates before signing up as their rates might have changed by then.
I have listed them in this sequence – Bank Name, Product, Interest Rate
1. Bankwest, Regular Saver, 7%
2. UBank, USaver, 6.51%
3. ANZ, Progress Saver, 6.36%
4. Bankwest, Telenet Saver, 6.15%
5. AMP, EasySaver, 6.0%
If you’re living in Australia, you would have known by now that banks and other institutions might do a credit check on you before they decide to offer you their services. Also, if you intend to buy a car or a house, having a good credit report allows the financial institution to lend you money at a lower interest rate.
When an institution does a credit check on you, they will typically get the following information:
- Details of credit providers which have previously accessed your file
- Public record information such as bankruptcy acts, summons (AU only) and judgements
- Overdue payment information (default data)
- Identification details (full name, gender, current address, previous two addresses, date of birth, driver licence number and current employer).
- Political, social, or religious beliefs or affiliations
- Criminal records
- Medical history or physical handicaps
- Race, ethnic or national origins
- Sexual preferences or practices
- Lifestyle, character or reputation
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If you have ever tried finding the best prices for books and DVD’s in Australia, then you’ll be glad to know of BookO.
BookO is not a retail site. All it does is calculate the cost of buying books and DVD’s from the cheapest source, even if the source is Amazon.com. And it also calculates all the shipping cost involved.
So, try out BookO today.
Here’s a risky but ambitious way of owning 3 houses within 10 years.
Use this method with great care.
Assuming you want to buy a house worth $400,000. Assuming further that the downpayment is 10% plus additional cost, so you cough up $50,000. Once you buy this house in a location where the property value appreciates, wait for the end of the third year. By then, the property value would have appreciated. Refinance the house and use the additional money as downpayment for your second home. Repeat this after 3 years and in 10 years, you’ll end up with 3 houses.
But dont forget the monthly installments. You must be able to afford the monthly installments. Which means unless your monthly salary can absorb the 3 monthly payments, you will need to ensure that your house have tenants and their rent pays off your monthly repayment with any extra being kept aside for property maintenance.
And remember, if you’re in Australia, the interest portion of your loan is tax deductible for investment properties only, not applicable for your dwelling residence.
Check and see if your country allows salary packaging. I know Australia allows for it while Malaysia doesnt.
Salary packaging is buying or leasing an asset with pre-tax dollars. That is when your salary arrives at the end of the money, you can use it to buy certain things or make certain payments before the balance gets taxed by the government.
For example, in Australia, it used to be laptops, cars, mobile phones and education. But laptops were removed from it because rich individuals manipulated a loop hole in the system to get their laptops for free. What this means is that you pay your monthly mobile charges, your car loan repayment from your gross salary (before tax). Only the balance amount is then taxed.
Depending on the country you’re in, some allow additional superannuation, novated leases, airline lounge membership, computer software and home office equipment, development travel, professional memberships, newspaper and periodicals subscriptions, and salary packaging advice.
Consider using salary packaging if you’re in the high tax bracket. Every dollar saved is worth it.
This is another of Randy Pausch’s talk on time management.
Every second counts when you know you’re dying…
If the one-hour video is too long for you, or if you prefer to read what he wrote, check out his book, The Last Lecture
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