Step 1 - Borrow to invest
BORROWING to invest is the key to serious wealth accumulation, whether it be through investment property or geared shares.
That’s simply because it increases your exposure to investment markets (bringing market risk) but also more rewards (sharemarkets have always gone up in the long term). How much risk you take should be in proportion to how secure your income flow is and economic conditions.
Step 2 - Choose shares wisely
The best companies listed on the sharemarket are currently growing and paying dividends at around 17 per cent a year.
It makes sense to borrow when interest rates are 7 per cent to invest in, say, the banks. While some choices like BHP are obvious for the long term, most investors are not good at picking stocks and do well to take advice of stockbrokers or professionals, such as by investing in listed investment companies such as Argo, Australian Foundation Investment, Milton Corp or unlisted managed investment funds (which carry higher fees and have tax traps).
Step 3 - Think quality and long term
Successful long-term investing is about buying quality assets that pay income, which is the key to its value as a stock and wealth creation.
Share prices might go up or down and even occasionally ‘crash’, but the best companies still make profits and pay dividends.
With investments, look forward to prospects, not to past performance, consider the merits of the investment not the tax breaks. diversify your holdings and keep an eye on the economy at home and abroad (China is currently a major factor in investment horizons now)
Step 4 - Time your run
It makes sense to buy blue chip shares when the market dips, when shares are going cheap. Investors soon get the hang of the market's boom and bust cycles - but are often slow to take advantage of opportunities because they focus on the falling share price and don’t take a long term view of the value of a company.
Investors are more inclined to buy shares in a bull market when prices are high, as they don't want to miss out, but this is often the worst time to buy.
Step 5 - Tax deductible borrowing
Tax deductible borrowing against your home, shares or other investment allows you to build wealth while reducing your overall tax bill.
Australian share investments often pay imputation credits for tax already paid at the company level; 12 months’ interest can be paid in advance. This is a good way to offset one-off income that could push your overall tax rate up; and borrowing against an existing portfolio unlocks cash without creating a capital gains tax (CGT) liability.
Sunday, January 6, 2008
Where do I start? Working your way up the property ladder
I think i'm putting any interesting article that may be useful for reference in the future in this blog :)
The question that I am frequently asked at seminars when it comes to investing in property is...exactly where do I start? Do I buy my home first or should I start with an investment property?
Well, let me try to answer this simply yet provide you with some easy tools to begin your property investment career and create a successful portfolio.
First things first – buy your own home
Owning your own home is the first step most Australians should take on the property ladder.
I know that with the market the way it is today some readers will be concerned as to whether they can even afford this baby step.
The key to making this happen is to keep it realistic! Okay, perhaps you can’t afford the new, luxury house you had in mind, but we all need to start somewhere. And you may be able to get there a bit sooner than you think by taking advantage of the first home owners grant.
Keeping your first home goal realistic and within budget is possible – you may just have to lower your expectations a little. Perhaps you could consider a property that needs a bit of work done to it or buying in a suburb adjoining the suburb you first thought of buying in if your ideal location is a little too pricey.
Often by buying a property to which you can add value or by buying in an upcoming area, you can get your foot in the door at a good price. You may then find that within a year or two, you’re sitting on a property that has earned you equity. Equity is the amount of home you own outright less the mortgage.
So if your home increases in value because you’ve made some improvements or the area it’s in has experienced good growth and at the same time you’ve been making repayments to your mortgage, your home will be worth more and therefore you will have extra equity to fund your first investment property!
Stepping out as a first timer
Not many of us are easily able to save the deposit for that first investment property, so chances are you will have to re-mortgage, in other words borrow against the increasing equity in your own home.
You should not do what the majority of us were taught by our parents and just keep paying off our home.
The reason many people never get started with property investment is because they are too scared to take on more debt and borrow against their home. They often think - “I’ll pay off my mortgage before I take on more debt.”
This is a thought process that will sabotage you if you let it!
Again, the key is to be realistic about what you can afford and when you can afford it. I would never suggest that first time investors get in over their heads, but you have to make a start and leap frog off this new equity you have built up.
Servicing the debt on your first investment will be easier than paying off your home loan because if you structure it right both the tenant and the tax man will help you make your mortgage payments. The tenant does it by paying rent and the tax man hlps through depreciation tax benefits.
The criteria you use to buy an investment property are different to those used when buying your home. You choose your home with your “heart” and its natural to make some emotional decisions. But you should choose your investment with your “calculator” based on sound financial considerations. And if you if you feel stuck seek professional advice. Consider using a buyer’s agent who is specializes in property investment.
Consider buying your first investment in an area that has good capital growth and perhaps something that needs minor cosmetic improvements that will be attractive to tenants, near all the right amenities and will therefore always rent and re-sell well. It doesn’t have to be a house. You could consider buying an apartment in a great location that tenants will be scrambling to rent from you.
With these key ingredients you can’t go wrong. Again, just make sure the numbers stack up, you can afford the commitment and you’ve done the necessary research to pick a winner!
Just remember the ingredients to success – good location, scarcity value of the property itself and popularity of the property and the area to both tenants and owner occupiers.
Of course, once you’ve spruced up your renovation project and added substantially to its value, it’s time to step onto the next rung of the property ladder and re-finance this investment. This may be easier than you think as you will now have increasing equity on two properties – your own home and your first investment.
Don’t stop there – keep moving on up!
Now that you have a mini portfolio, your options suddenly increase. With a few properties working for you and producing equity the key is to keep the momentum going and take more steps up the property ladder.
The big problem for many of us is servicing the loans on these investment properties. If you buy well located properties in areas of sound capital growth, even in today’s markets where rentals are rising, the mortgage payments and outgoings will add up to more then your rental income.
This is where some smart financing helps. Many smart investors access the equity in their home or investment properties to help pay for the deposit for the next property as well as to service the debts on their loans.
There are many loan products on the market investors often choose a ‘line of credit’, which is a bit like having a big credit card. They have the capacity to borrow up to its limit and just like a credit card; they would only pay interest on any money they have borrowed on their line of credit, but not on the unborrowed limit.
But unlike a credit card, they don’t have to find money for interest payments. Any interest due each month can come out of their unused credit limit. So at the end of the month they pay their interest bill by increasing their loan amount to pay off the interest and the next month they pay interest on the new larger loan amount. This means they don’t need to find any spare cash to pay the interest until they reach their credit limit.
Effectively they are borrowing 100 per cent of the purchase price of their first investment property.
The sky’s the limit – building your portfolio
By now you have nothing to fear. You know the rules of the game, you’ve successfully bought a handful of properties that are all gaining value for you year in, year out and there’s no stopping you!
Just remember to always work within the realms of financial reality, do your research, focus on the rules of investment and you should be the proud owner of a successful property portfolio before you know it.
It’s also important to get your tax structure right. Make sure you know exactly how you will hold the properties (eg. as an individual investor, in a trust, etc), how you will organise finance, legal aspects, taxation and the like.
Remember – take it step by step up the property ladder and you‘ll make it to the top…without falling off!
http://www.realestate.com.au/review/nov07/where-to-start.html
The question that I am frequently asked at seminars when it comes to investing in property is...exactly where do I start? Do I buy my home first or should I start with an investment property?
Well, let me try to answer this simply yet provide you with some easy tools to begin your property investment career and create a successful portfolio.
First things first – buy your own home
Owning your own home is the first step most Australians should take on the property ladder.
I know that with the market the way it is today some readers will be concerned as to whether they can even afford this baby step.
The key to making this happen is to keep it realistic! Okay, perhaps you can’t afford the new, luxury house you had in mind, but we all need to start somewhere. And you may be able to get there a bit sooner than you think by taking advantage of the first home owners grant.
Keeping your first home goal realistic and within budget is possible – you may just have to lower your expectations a little. Perhaps you could consider a property that needs a bit of work done to it or buying in a suburb adjoining the suburb you first thought of buying in if your ideal location is a little too pricey.
Often by buying a property to which you can add value or by buying in an upcoming area, you can get your foot in the door at a good price. You may then find that within a year or two, you’re sitting on a property that has earned you equity. Equity is the amount of home you own outright less the mortgage.
So if your home increases in value because you’ve made some improvements or the area it’s in has experienced good growth and at the same time you’ve been making repayments to your mortgage, your home will be worth more and therefore you will have extra equity to fund your first investment property!
Stepping out as a first timer
Not many of us are easily able to save the deposit for that first investment property, so chances are you will have to re-mortgage, in other words borrow against the increasing equity in your own home.
You should not do what the majority of us were taught by our parents and just keep paying off our home.
The reason many people never get started with property investment is because they are too scared to take on more debt and borrow against their home. They often think - “I’ll pay off my mortgage before I take on more debt.”
This is a thought process that will sabotage you if you let it!
Again, the key is to be realistic about what you can afford and when you can afford it. I would never suggest that first time investors get in over their heads, but you have to make a start and leap frog off this new equity you have built up.
Servicing the debt on your first investment will be easier than paying off your home loan because if you structure it right both the tenant and the tax man will help you make your mortgage payments. The tenant does it by paying rent and the tax man hlps through depreciation tax benefits.
The criteria you use to buy an investment property are different to those used when buying your home. You choose your home with your “heart” and its natural to make some emotional decisions. But you should choose your investment with your “calculator” based on sound financial considerations. And if you if you feel stuck seek professional advice. Consider using a buyer’s agent who is specializes in property investment.
Consider buying your first investment in an area that has good capital growth and perhaps something that needs minor cosmetic improvements that will be attractive to tenants, near all the right amenities and will therefore always rent and re-sell well. It doesn’t have to be a house. You could consider buying an apartment in a great location that tenants will be scrambling to rent from you.
With these key ingredients you can’t go wrong. Again, just make sure the numbers stack up, you can afford the commitment and you’ve done the necessary research to pick a winner!
Just remember the ingredients to success – good location, scarcity value of the property itself and popularity of the property and the area to both tenants and owner occupiers.
Of course, once you’ve spruced up your renovation project and added substantially to its value, it’s time to step onto the next rung of the property ladder and re-finance this investment. This may be easier than you think as you will now have increasing equity on two properties – your own home and your first investment.
Don’t stop there – keep moving on up!
Now that you have a mini portfolio, your options suddenly increase. With a few properties working for you and producing equity the key is to keep the momentum going and take more steps up the property ladder.
The big problem for many of us is servicing the loans on these investment properties. If you buy well located properties in areas of sound capital growth, even in today’s markets where rentals are rising, the mortgage payments and outgoings will add up to more then your rental income.
This is where some smart financing helps. Many smart investors access the equity in their home or investment properties to help pay for the deposit for the next property as well as to service the debts on their loans.
There are many loan products on the market investors often choose a ‘line of credit’, which is a bit like having a big credit card. They have the capacity to borrow up to its limit and just like a credit card; they would only pay interest on any money they have borrowed on their line of credit, but not on the unborrowed limit.
But unlike a credit card, they don’t have to find money for interest payments. Any interest due each month can come out of their unused credit limit. So at the end of the month they pay their interest bill by increasing their loan amount to pay off the interest and the next month they pay interest on the new larger loan amount. This means they don’t need to find any spare cash to pay the interest until they reach their credit limit.
Effectively they are borrowing 100 per cent of the purchase price of their first investment property.
The sky’s the limit – building your portfolio
By now you have nothing to fear. You know the rules of the game, you’ve successfully bought a handful of properties that are all gaining value for you year in, year out and there’s no stopping you!
Just remember to always work within the realms of financial reality, do your research, focus on the rules of investment and you should be the proud owner of a successful property portfolio before you know it.
It’s also important to get your tax structure right. Make sure you know exactly how you will hold the properties (eg. as an individual investor, in a trust, etc), how you will organise finance, legal aspects, taxation and the like.
Remember – take it step by step up the property ladder and you‘ll make it to the top…without falling off!
http://www.realestate.com.au/review/nov07/where-to-start.html
Rents likely to increase in 2008
oh no...... please quickly build more new houses... I'm eyeing a 3-bedroom townhouse near my friend's place (20km away from city) at $420/week. I'm torn between renting an apartment nearer to the city or renting a townhouse (with garden for my FIL and pool for me) further away from city.
INCREASING demand and lower vacancy rates will cause rents to increase during 2008, the Real Estate Institute of Australia predicts.
High demand for rental properties - caused by population growth and declining investor interest - suggests vacancy rates, running at an average 1.7 per cent, are unlikely to improve, it says. Increases in median rents can be expected in all states, the institute says in its 2008 real estate market outlook released today.
The likely increases follow across-the-country increases last year with rents for three-bedroom houses increasing by an average of 12.6 per cent to September 2007.
The institute says rental affordability is already a significant issue in several cities, notably in Darwin where the median rent for houses is $440 per week and for other dwellings $340 per week.
Darwin is now the most expensive rental location in Australia, although Sydney and Canberra renters also pay $340 median weekly rent for two-bedroom other dwellings.
The cheapest rental location is Adelaide at $255 per week for a three-bedroom house and $205 per week for a two-bedroom dwelling. But even there rents rose more than eight per cent in the year to September 2007.
The institute says investors have shied away from the housing market as interest rates have risen and to take advantage of other investment opportunities which have more favourable taxation treatment.
The slower transition from renting to buying, caused by the lowest first-home affordability rate in 22 years, was also impacting on the number of properties available for rental
INCREASING demand and lower vacancy rates will cause rents to increase during 2008, the Real Estate Institute of Australia predicts.
High demand for rental properties - caused by population growth and declining investor interest - suggests vacancy rates, running at an average 1.7 per cent, are unlikely to improve, it says. Increases in median rents can be expected in all states, the institute says in its 2008 real estate market outlook released today.
The likely increases follow across-the-country increases last year with rents for three-bedroom houses increasing by an average of 12.6 per cent to September 2007.
The institute says rental affordability is already a significant issue in several cities, notably in Darwin where the median rent for houses is $440 per week and for other dwellings $340 per week.
Darwin is now the most expensive rental location in Australia, although Sydney and Canberra renters also pay $340 median weekly rent for two-bedroom other dwellings.
The cheapest rental location is Adelaide at $255 per week for a three-bedroom house and $205 per week for a two-bedroom dwelling. But even there rents rose more than eight per cent in the year to September 2007.
The institute says investors have shied away from the housing market as interest rates have risen and to take advantage of other investment opportunities which have more favourable taxation treatment.
The slower transition from renting to buying, caused by the lowest first-home affordability rate in 22 years, was also impacting on the number of properties available for rental
A simple salary sacrifice
We may need to explore this when we got our job there. Do we have to decide what we want to 'salary sacrifice' before we sign our employment contract? hmm... not sure yet... gotta do more reading...
Discussions about the salary-sacrifice of non-cash employment benefits typically revolve around such big-ticket items as superannuation and cars. But wait a minute.
One of the fastest-growing benefits is the packaging of lunches and accompanying drinks – the tax benefits of packaging do not extent to salary-sacrificed alcohol.
In short, employers can enter arrangements that allow so-called in-house catering to be provided as an FBT-exempt benefit in their employees’ packages. This means that you pay for your lunch on pre-tax terms.
Under the tax rules, the food must be provided by your employer, and eaten on its premises. In practice, employers are increasingly entering arrangements for local shops to deliver the lunches of their employees’ choice from the shops of their choice. And the cost is charged against the employees’ salary packages.
Astute large employers are sending the daily orders through to selected shops electronically, and then the costs are electronically charged against the employees’ packages.
Just think that if your tax-rate is 31.5% a year, including Medicare, you would save almost a third of your lunch costs. This means a typical savings of hundreds of dollars a year for those who buy their lunches each day.
In a tight labour market – unemployment is at a 33-year low – employers have a big incentive to make such benefits readily available to their staff. And from an employee’s perspective, this is smart personal budgeting at one of its most simple levels.
Personal budgeting can begin in saving money in small ways. And slicing the cost of your lunch by almost a third – or more if you pay tax at a higher marginal tax rate – makes much sense.
Here’s to a cheap lunch.
(taken from: http://blogs.news.com.au/news/smartinvesting/index.php/news/comments/a_simple_salary_sacrifice/)
Discussions about the salary-sacrifice of non-cash employment benefits typically revolve around such big-ticket items as superannuation and cars. But wait a minute.
One of the fastest-growing benefits is the packaging of lunches and accompanying drinks – the tax benefits of packaging do not extent to salary-sacrificed alcohol.
In short, employers can enter arrangements that allow so-called in-house catering to be provided as an FBT-exempt benefit in their employees’ packages. This means that you pay for your lunch on pre-tax terms.
Under the tax rules, the food must be provided by your employer, and eaten on its premises. In practice, employers are increasingly entering arrangements for local shops to deliver the lunches of their employees’ choice from the shops of their choice. And the cost is charged against the employees’ salary packages.
Astute large employers are sending the daily orders through to selected shops electronically, and then the costs are electronically charged against the employees’ packages.
Just think that if your tax-rate is 31.5% a year, including Medicare, you would save almost a third of your lunch costs. This means a typical savings of hundreds of dollars a year for those who buy their lunches each day.
In a tight labour market – unemployment is at a 33-year low – employers have a big incentive to make such benefits readily available to their staff. And from an employee’s perspective, this is smart personal budgeting at one of its most simple levels.
Personal budgeting can begin in saving money in small ways. And slicing the cost of your lunch by almost a third – or more if you pay tax at a higher marginal tax rate – makes much sense.
Here’s to a cheap lunch.
(taken from: http://blogs.news.com.au/news/smartinvesting/index.php/news/comments/a_simple_salary_sacrifice/)
Don't think 'first home', think 'first investment'
I read this article in Domain and been discussing it with my hubby as another possible route to getting our 'dream' house. Of course, it won't happen overnight as we need to build 'credit history' to even borrow from bank.
If you believed everything you read about the housing affordability crunch, you'd be forgiven for thinking there's only one choice: struggle like mad to buy a house to live in, or rent for the rest of your life.
If you're continually missing out at auctions or private sales because other buyers have more money to spend, there is an alternative. You can't stop the market, so instead of running after your dream home and watching it get further out of your reach, it may be better to face reality and direct your energies into something more productive. All it requires is a change in your thinking.
Instead of thinking "first home", think "first investment". Keep renting a place to live - and buy an investment property instead.
If you focus on buying purely for investment, you don't have to factor in your lifestyle wish list during the search process. If the property has fewer bedrooms or a smaller backyard than one that you'd want to live in, it won't matter. It may be less expensive than a larger property, making it easier for you to break the cycle of disappointment and get a foothold in the market.
In other words, the savviest way to approach the property market may be to purchase something that you wouldn't live in yourself, knowing that other people will. When it comes to investing, time should work for you, not against you. It's far better to be in the market and allow capital growth to do the work than stuck outside the market and unable to save as quickly as the market is moving.
If this sounds like a viable option to you, it's essential to choose a property that meets the criteria for a high-quality investment. First and foremost, this means buying an asset with strong capital growth potential. Look for locations where demand from buyers has consistently outstripped supply for a long period.
You can research this by looking at median house price movements, which are usually published by organisations such as Australian Property Monitors and the Real Estate Institute of Victoria. If the median price for a particular suburb has increased at a faster rate than the rest of the Melbourne market over at least five years, it could be an indication of strong capital growth potential.
Auctions are also a good indicator of capital growth potential. Have a look in this newspaper to track the location of auctions each week. Auctions work best in areas where demand from buyers outstrips the number of properties available for sale. If there are consistently more auctions than private sales, it's a sign that capital growth is likely to be strong.
You should also attend as many auctions as possible before buying to get a feel for the market in your chosen location. If there are several bidders competing strongly and driving up the purchase price, it's another indicator that demand is outpacing supply and capital growth should be strong.
Capital growth compounds - the longer you hold the investment asset, the greater the rate of growth. Once you've bought an investment property, it's wise to hold it for at least seven to 10 years to let compounding work its magic.
I
f you can afford it, it's also a good idea to make extra repayments to reduce the loan balance. This will increase your equity (the amount you own, as distinct from the amount you owe the lender) more quickly than capital growth alone.
As an investor, you have access to a tax benefit that homeowners don't. You can claim holding costs like interest on the loan, repairs, council rates, insurance and property management fees against the rental income.
If the holding expenses are greater than the interest payments, you can use the difference to reduce your tax liability. This keeps more money in your pocket and makes it easier to hold on to the property.
Dos and don'ts
- If you can't buy a house to live in, an investment property may be a better bet.
- Forget your lifestyle wish list; focus on capital growth potential.
- Buy where demand consistently outpaces supply.
- Hold long-term to maximise the effects of compounding.
- Use tax breaks to minimise holding costs.
If you believed everything you read about the housing affordability crunch, you'd be forgiven for thinking there's only one choice: struggle like mad to buy a house to live in, or rent for the rest of your life.
If you're continually missing out at auctions or private sales because other buyers have more money to spend, there is an alternative. You can't stop the market, so instead of running after your dream home and watching it get further out of your reach, it may be better to face reality and direct your energies into something more productive. All it requires is a change in your thinking.
Instead of thinking "first home", think "first investment". Keep renting a place to live - and buy an investment property instead.
If you focus on buying purely for investment, you don't have to factor in your lifestyle wish list during the search process. If the property has fewer bedrooms or a smaller backyard than one that you'd want to live in, it won't matter. It may be less expensive than a larger property, making it easier for you to break the cycle of disappointment and get a foothold in the market.
In other words, the savviest way to approach the property market may be to purchase something that you wouldn't live in yourself, knowing that other people will. When it comes to investing, time should work for you, not against you. It's far better to be in the market and allow capital growth to do the work than stuck outside the market and unable to save as quickly as the market is moving.
If this sounds like a viable option to you, it's essential to choose a property that meets the criteria for a high-quality investment. First and foremost, this means buying an asset with strong capital growth potential. Look for locations where demand from buyers has consistently outstripped supply for a long period.
You can research this by looking at median house price movements, which are usually published by organisations such as Australian Property Monitors and the Real Estate Institute of Victoria. If the median price for a particular suburb has increased at a faster rate than the rest of the Melbourne market over at least five years, it could be an indication of strong capital growth potential.
Auctions are also a good indicator of capital growth potential. Have a look in this newspaper to track the location of auctions each week. Auctions work best in areas where demand from buyers outstrips the number of properties available for sale. If there are consistently more auctions than private sales, it's a sign that capital growth is likely to be strong.
You should also attend as many auctions as possible before buying to get a feel for the market in your chosen location. If there are several bidders competing strongly and driving up the purchase price, it's another indicator that demand is outpacing supply and capital growth should be strong.
Capital growth compounds - the longer you hold the investment asset, the greater the rate of growth. Once you've bought an investment property, it's wise to hold it for at least seven to 10 years to let compounding work its magic.
I
f you can afford it, it's also a good idea to make extra repayments to reduce the loan balance. This will increase your equity (the amount you own, as distinct from the amount you owe the lender) more quickly than capital growth alone.
As an investor, you have access to a tax benefit that homeowners don't. You can claim holding costs like interest on the loan, repairs, council rates, insurance and property management fees against the rental income.
If the holding expenses are greater than the interest payments, you can use the difference to reduce your tax liability. This keeps more money in your pocket and makes it easier to hold on to the property.
Dos and don'ts
- If you can't buy a house to live in, an investment property may be a better bet.
- Forget your lifestyle wish list; focus on capital growth potential.
- Buy where demand consistently outpaces supply.
- Hold long-term to maximise the effects of compounding.
- Use tax breaks to minimise holding costs.
TOP 20 TIPS TO CUT REGULAR EXPENSES
1. Top up the car on Tuesdays, or Monday nights at a pinch - the cheapest time to buy petrol.
2. Join a car pool for work or use public transport.
3. Swap, don't buy - exchange books, DVDs and the like with friends.
4. Hunt for presents all year - so you can buy when they're on sale.
5. Put new soles on shoes - they'll last a lot longer.
6. Shop on the net - it's an easy way to compare prices and is often cheaper.
7. Drink tapwater - filtered if need be, instead of buying bottles or, worse, softdrinks.
8. Buy in bulk - especially fruit and vegies, even take it in turns with friends.
9. Scratch the Scratchie or Lotto ticket - unless you're super lucky you'll pay more than you win. Ditto for the pokies.
10. Cut back on takeaways.
11. Check the auctions in your newspaper - there could be a bargain couch lurking. Pay for the newspaper with a cheap subscription offer.
12. Hire a DVD instead of going out to the movies - or if you do want to see a new flick, take your own snacks with you.
13. Shop in one go - so you're not dashing off to a shop when you run out of something.
14. Cut out a packet of cigarettes or a drink a week.
15. Take your lunch to work more often.
16. Cook more than you need - and freeze the rest for future meals.
17. Don't take the kids with you to the supermarket - then they can't nag you for goodies.
18. Get the pets to tighten their collars - give them scraps and offcuts from the butcher rather than cans.
19. Pay cash only at the supermarket - then you're forced to stick to your budget
20 If you've got this far, well done - give yourself a treat.
2. Join a car pool for work or use public transport.
3. Swap, don't buy - exchange books, DVDs and the like with friends.
4. Hunt for presents all year - so you can buy when they're on sale.
5. Put new soles on shoes - they'll last a lot longer.
6. Shop on the net - it's an easy way to compare prices and is often cheaper.
7. Drink tapwater - filtered if need be, instead of buying bottles or, worse, softdrinks.
8. Buy in bulk - especially fruit and vegies, even take it in turns with friends.
9. Scratch the Scratchie or Lotto ticket - unless you're super lucky you'll pay more than you win. Ditto for the pokies.
10. Cut back on takeaways.
11. Check the auctions in your newspaper - there could be a bargain couch lurking. Pay for the newspaper with a cheap subscription offer.
12. Hire a DVD instead of going out to the movies - or if you do want to see a new flick, take your own snacks with you.
13. Shop in one go - so you're not dashing off to a shop when you run out of something.
14. Cut out a packet of cigarettes or a drink a week.
15. Take your lunch to work more often.
16. Cook more than you need - and freeze the rest for future meals.
17. Don't take the kids with you to the supermarket - then they can't nag you for goodies.
18. Get the pets to tighten their collars - give them scraps and offcuts from the butcher rather than cans.
19. Pay cash only at the supermarket - then you're forced to stick to your budget
20 If you've got this far, well done - give yourself a treat.
How to save $10,000 on your current income
I might need to refer to this reading later there, so I'm saving it as an article first. It's taken from Essential Baby website.
SO it's not in the true spirit of the season but I'm going to tell you how to save $10,000. Besides nobody says you have to start right now. Although just between us, I would if I were you - after all Christmas is perfect for getting your priorities in order. But don't let me stop you writing out your gift list, since it'll be handy practice for what comes next. Oh dear, you're flagging already. Remember $10,000 is at stake here. There, that's better.
Christmas is one of the biggest expenses of the year but you can still enjoy it without going over the top. Ask people to bring a plate, says Lisa Montgomery, head of consumer advocacy at Resi Mortgage Corporation. "And consider introducing a Kris Kringle-style Christmas," she says. That's where everybody in the family buys one present. Um, yes, you only get one too. "The emphasis is then on spending time together, rather than simply spending money." Let's be conservative - and I take it as read you're normally very generous - and say this will cut your Christmas costs by $100. You can save this for next year, or how about donating it to charity?
EVERYDAY SAVERS ($1000)
Back to the list. You should draw one up for the supermarket as well if you don't already. The easiest way to stick to it is to leave the kids and the credit card at home. One's inconvenient in wanting stuff you don't need and the other's too convenient for the same reason.
Paying cash, after all, restricts you somewhat to your budget.
Once inside the supermarket, watch out for booby traps all over the place. Never go there on an empty stomach (for obvious reasons) and wear something warm (supermarkets are cooled slightly below comfort level because apparently this makes you hungry). Have you noticed the milk is always at the back? So are other essentials so you have to pass through aisles of temptation to get there.
"The end-of-aisle racks in supermarkets often given the impression of offering bargains. This is not always the case. The cheapest goods are often found on the top or bottom shelves," says Citibank in its http://www.usecreditwisely.com.au/ website of handy hints, though you might care to scan Investor's 20 tips (opposite) as well.
For basics such as sugar and flour Citibank says you can safely use cheaper house brands as well. Along with our 20 tips that's, say, a saving of $300 a year at least. Cut out the daily cappuccino on the way to work and don't hide the snack to go with it, so that's another $700. There, you've saved your first $1000 without having to do a thing. Well, going without having a thing or two perhaps but nothing you can't manage. And so to the heavy hitters.
MORTGAGE MAKEOVER (UP TO $10,000)
Giving the mortgage a makeover will do wonders for your finances and it doesn't necessarily mean paying it off faster though that is a help. Check what your interest rate is. My bet is you can do better and your lender knows it. The banks, for example, will knock up to 0.5 per cent off the standard variable rate for customers who threaten to take their debts elsewhere. On a $250,000 mortgage, that'll save you $84 a month, or a bit more than $1000 a year - $10,000 in about nine years. Wow, we're there already. Even if, like most borrowers, you're not paying the bank standard rate, there are still possible savings. For example, you might fix some or even all of your loan for five years at the best going rate which is a smidgin less than 8 per cent. Even after allowing for exit or switching costs, that's still potentially thousands over five years.
Making fortnightly instead of monthly repayments is another great way to save interest. But since that really means you're making one extra repayment a year (26 fortnights works out at 13 monthlies) that doesn't count on a technicality since the idea is to cut spending, not add to it no matter how great the reward.
CREDIT WHERE IT ISN'T DUE ($300)
The next target is the credit card. Forget the reward points if you don't pay off the card each month. You're better off ditching the fee and making sure you pay it off each month. The interest you save can then go toward a discount airfare. Check the zero or low-interest honeymoons as well. "Swapping a $2000 balance on a card with a rate of 18 per cent to a new card with a 12-month introductory rate of, say, 6 per cent could see you save $240 in interest for the first year," Citibank says.
A zero fee with zero interest - at least for a while - would have to be the credit card jackpot. The Coles Myer Source MasterCard has no annual fee and no interest for six months on transfers from other credit cards. That brings credit card savings to about $300 a year. Oh, one other thing. You can slash the interest on your credit card by re-financing it with a home equity line of credit. But there's a trap.
Pay it off with the same amount as you were before, otherwise you're switching from high-cost short-term to low-cost long-term debt - and could eventually finish up worse off.
BANK ON IT ($1500)
Don't mess with the bank. There's a fee lurking around every corner, from dishonoured cheques to penalty interest for going over your limit.
But the most common and easiest to avoid fee would have to be using another bank's ATM which will cost up to $2 a pop.
If there's one of those a week, just walking down the street would save you about $100 a year.
Often accounts have a withdrawal limit which if you exceed it racks up more fees. The best way to cut the number of withdrawals is to take more out each time, especially at a check-out because the extra cash out doesn't count as another withdrawal. That should be worth another $100 a year, shouldn't it? Alternatively, choose an account with a flat monthly fee of $5 such as Citibank's which has no limits, plus the bonus of no ATM fees if you use another bank's.
There are also big savings to be made if you make the mortgage your banking hub. Pay your salary into the mortgage and draw it down as you need it, or link a fee-free credit card to it which you pay off once a month. "We found consumers can save over $1300 a year by using a package of mortgage, transaction account and credit card, compared with stand-alone products within the same institution," says financial analyst Harry Senlitonga of Cannex.
POWER IT UP ($250)
Merging electricity and gas with one supplier, or signing a contract for a fixed period, will save about $100 a year.
Unfortunately this won't bring lower gas or electricity prices, but it will take most of the sting out of future increases.
That's the easy part. There are ways of saving as much if not more but they require some, er, energy. You'll have to switch off all the stand-by modes on the DVD-VCR player, TV, stereo, CD player and computer. This might mean waiting an extra, oh let's say three seconds for the thing to warm up when you switch it on, or in the case of my computer a good 10 minutes, but you'll save $150 a year on average, a survey by the Greenhouse Office found.
TALK ISN'T CHEAP (UP TO $500)
The key to working out the best phone deal is to look at the rate charged per call, rather than how many free ones you get or the rental. Also check out the flagfall - this can be the cost of a couple of calls before you even get a line.
Fortunately it's not too hard comparing packages as http://www.phonechoice.com.au/ has done it all for you. The website also has some useful tips about mobiles. Such as: the phone companies are phasing out free handsets from their plans.
And choose the same provider as your friends - calls to the same network are a lot cheaper. Unless you're in the bush, that is, where you'll just have to choose whatever works.
For capped plans, the traps are whether SMS and voicemail count in the cap, the high call rate if you exceed the limit and the 30-second timed calling blocks which can result in a 31-second call being charged at one minute.
Speaking of timed calls, remember the most expensive calls you can make are from the home phone to a mobile.
If you make a lot of interstate or overseas calls on your home phone, look out for specials and find out the so-called override four digit code of other phone providers. That way you can get onto another network's special rates without losing your normal discounts.
Even without teenagers in the house, you should save at least $100 a year with the right phone plan. With teenagers make that at least $500.
Using the internet for phone calls, known as VOIP, will save even more but you need a broadband connection. Then again sending emails would be cheaper. Which reminds me, if you link your internet service with the home phone and mobile, you'll get discounts for all three.
DRIVE AWAY (UP TO $5000)
You don't need me to tell you one of your biggest expenses is the car and that's not counting the price you paid for it.
Motoring groups estimate the average weekly running cost of a car when you take registration fees, fuel, insurance, interest and repairs into account is $200.
That's more than $10,000 a year and shows what a drain having a second car must be.
Even if you add in the cost of using public transport, getting rid of a car would be a net gain of about $5000 a year. Or form a car pool with friends and workmates.
THE TALLY
So fat that's more than $10,000 saved and I'll even throw in washing your clothes in cold water which will apparently save about $400 a year though the price of a cold shower is, I'm sure you'll agree, not worth it. And don't get me started on private health or home insurance, broadband, vet fees, holidays, the grog fridge in the garage or air-conditioning.
One last thing. Don't forget if you, um, save the savings, compound interest will kick in.
Saving $10 a week and investing it in a balanced fund earning 9 per cent a year would grow to $7289 after 10 years, MLC calculates.
If you cut spending by $30 a week and re-invest it, you'll have $21,866 in 10 years.
SO it's not in the true spirit of the season but I'm going to tell you how to save $10,000. Besides nobody says you have to start right now. Although just between us, I would if I were you - after all Christmas is perfect for getting your priorities in order. But don't let me stop you writing out your gift list, since it'll be handy practice for what comes next. Oh dear, you're flagging already. Remember $10,000 is at stake here. There, that's better.
Christmas is one of the biggest expenses of the year but you can still enjoy it without going over the top. Ask people to bring a plate, says Lisa Montgomery, head of consumer advocacy at Resi Mortgage Corporation. "And consider introducing a Kris Kringle-style Christmas," she says. That's where everybody in the family buys one present. Um, yes, you only get one too. "The emphasis is then on spending time together, rather than simply spending money." Let's be conservative - and I take it as read you're normally very generous - and say this will cut your Christmas costs by $100. You can save this for next year, or how about donating it to charity?
EVERYDAY SAVERS ($1000)
Back to the list. You should draw one up for the supermarket as well if you don't already. The easiest way to stick to it is to leave the kids and the credit card at home. One's inconvenient in wanting stuff you don't need and the other's too convenient for the same reason.
Paying cash, after all, restricts you somewhat to your budget.
Once inside the supermarket, watch out for booby traps all over the place. Never go there on an empty stomach (for obvious reasons) and wear something warm (supermarkets are cooled slightly below comfort level because apparently this makes you hungry). Have you noticed the milk is always at the back? So are other essentials so you have to pass through aisles of temptation to get there.
"The end-of-aisle racks in supermarkets often given the impression of offering bargains. This is not always the case. The cheapest goods are often found on the top or bottom shelves," says Citibank in its http://www.usecreditwisely.com.au/ website of handy hints, though you might care to scan Investor's 20 tips (opposite) as well.
For basics such as sugar and flour Citibank says you can safely use cheaper house brands as well. Along with our 20 tips that's, say, a saving of $300 a year at least. Cut out the daily cappuccino on the way to work and don't hide the snack to go with it, so that's another $700. There, you've saved your first $1000 without having to do a thing. Well, going without having a thing or two perhaps but nothing you can't manage. And so to the heavy hitters.
MORTGAGE MAKEOVER (UP TO $10,000)
Giving the mortgage a makeover will do wonders for your finances and it doesn't necessarily mean paying it off faster though that is a help. Check what your interest rate is. My bet is you can do better and your lender knows it. The banks, for example, will knock up to 0.5 per cent off the standard variable rate for customers who threaten to take their debts elsewhere. On a $250,000 mortgage, that'll save you $84 a month, or a bit more than $1000 a year - $10,000 in about nine years. Wow, we're there already. Even if, like most borrowers, you're not paying the bank standard rate, there are still possible savings. For example, you might fix some or even all of your loan for five years at the best going rate which is a smidgin less than 8 per cent. Even after allowing for exit or switching costs, that's still potentially thousands over five years.
Making fortnightly instead of monthly repayments is another great way to save interest. But since that really means you're making one extra repayment a year (26 fortnights works out at 13 monthlies) that doesn't count on a technicality since the idea is to cut spending, not add to it no matter how great the reward.
CREDIT WHERE IT ISN'T DUE ($300)
The next target is the credit card. Forget the reward points if you don't pay off the card each month. You're better off ditching the fee and making sure you pay it off each month. The interest you save can then go toward a discount airfare. Check the zero or low-interest honeymoons as well. "Swapping a $2000 balance on a card with a rate of 18 per cent to a new card with a 12-month introductory rate of, say, 6 per cent could see you save $240 in interest for the first year," Citibank says.
A zero fee with zero interest - at least for a while - would have to be the credit card jackpot. The Coles Myer Source MasterCard has no annual fee and no interest for six months on transfers from other credit cards. That brings credit card savings to about $300 a year. Oh, one other thing. You can slash the interest on your credit card by re-financing it with a home equity line of credit. But there's a trap.
Pay it off with the same amount as you were before, otherwise you're switching from high-cost short-term to low-cost long-term debt - and could eventually finish up worse off.
BANK ON IT ($1500)
Don't mess with the bank. There's a fee lurking around every corner, from dishonoured cheques to penalty interest for going over your limit.
But the most common and easiest to avoid fee would have to be using another bank's ATM which will cost up to $2 a pop.
If there's one of those a week, just walking down the street would save you about $100 a year.
Often accounts have a withdrawal limit which if you exceed it racks up more fees. The best way to cut the number of withdrawals is to take more out each time, especially at a check-out because the extra cash out doesn't count as another withdrawal. That should be worth another $100 a year, shouldn't it? Alternatively, choose an account with a flat monthly fee of $5 such as Citibank's which has no limits, plus the bonus of no ATM fees if you use another bank's.
There are also big savings to be made if you make the mortgage your banking hub. Pay your salary into the mortgage and draw it down as you need it, or link a fee-free credit card to it which you pay off once a month. "We found consumers can save over $1300 a year by using a package of mortgage, transaction account and credit card, compared with stand-alone products within the same institution," says financial analyst Harry Senlitonga of Cannex.
POWER IT UP ($250)
Merging electricity and gas with one supplier, or signing a contract for a fixed period, will save about $100 a year.
Unfortunately this won't bring lower gas or electricity prices, but it will take most of the sting out of future increases.
That's the easy part. There are ways of saving as much if not more but they require some, er, energy. You'll have to switch off all the stand-by modes on the DVD-VCR player, TV, stereo, CD player and computer. This might mean waiting an extra, oh let's say three seconds for the thing to warm up when you switch it on, or in the case of my computer a good 10 minutes, but you'll save $150 a year on average, a survey by the Greenhouse Office found.
TALK ISN'T CHEAP (UP TO $500)
The key to working out the best phone deal is to look at the rate charged per call, rather than how many free ones you get or the rental. Also check out the flagfall - this can be the cost of a couple of calls before you even get a line.
Fortunately it's not too hard comparing packages as http://www.phonechoice.com.au/ has done it all for you. The website also has some useful tips about mobiles. Such as: the phone companies are phasing out free handsets from their plans.
And choose the same provider as your friends - calls to the same network are a lot cheaper. Unless you're in the bush, that is, where you'll just have to choose whatever works.
For capped plans, the traps are whether SMS and voicemail count in the cap, the high call rate if you exceed the limit and the 30-second timed calling blocks which can result in a 31-second call being charged at one minute.
Speaking of timed calls, remember the most expensive calls you can make are from the home phone to a mobile.
If you make a lot of interstate or overseas calls on your home phone, look out for specials and find out the so-called override four digit code of other phone providers. That way you can get onto another network's special rates without losing your normal discounts.
Even without teenagers in the house, you should save at least $100 a year with the right phone plan. With teenagers make that at least $500.
Using the internet for phone calls, known as VOIP, will save even more but you need a broadband connection. Then again sending emails would be cheaper. Which reminds me, if you link your internet service with the home phone and mobile, you'll get discounts for all three.
DRIVE AWAY (UP TO $5000)
You don't need me to tell you one of your biggest expenses is the car and that's not counting the price you paid for it.
Motoring groups estimate the average weekly running cost of a car when you take registration fees, fuel, insurance, interest and repairs into account is $200.
That's more than $10,000 a year and shows what a drain having a second car must be.
Even if you add in the cost of using public transport, getting rid of a car would be a net gain of about $5000 a year. Or form a car pool with friends and workmates.
THE TALLY
So fat that's more than $10,000 saved and I'll even throw in washing your clothes in cold water which will apparently save about $400 a year though the price of a cold shower is, I'm sure you'll agree, not worth it. And don't get me started on private health or home insurance, broadband, vet fees, holidays, the grog fridge in the garage or air-conditioning.
One last thing. Don't forget if you, um, save the savings, compound interest will kick in.
Saving $10 a week and investing it in a balanced fund earning 9 per cent a year would grow to $7289 after 10 years, MLC calculates.
If you cut spending by $30 a week and re-invest it, you'll have $21,866 in 10 years.
Saturday, January 5, 2008
New Year Resolutions
Here's a reading from ODB that I like. I shared Edward's resolutions for his life (see complete reading below)
• To do whatever is most to God’s glory.
• To do my duty, for the good of mankind in general.
• Never to do anything, which I should be afraid to do, if it were the last hour of my life.
• To study the Scriptures steadily, constantly, and frequently.
• To ask myself at the end of every day, week, month, and year if I could possibly have done better.
• Until I die, not to act as if I were my own, but entirely and altogether God’s.
My NY resolution is to read bible in 1 year and seriously, I have been lagging behind schedule Nevertheless, with God's help and my effort, I should catch up soon.
Also trying to change my daily routine and surf less internet, sleep early, and read more. I have signed up for aerobic and dance classes at my Bank's gym place so I would go for lunch time classes everyday, except Tuesday, and I'll have lunch at canteen. At night, I'd go for dance class every Wed and badminton practise every Tues (with hubby and my colleagues). On top of that, as a family we play badminton every Saturday (and catch up with good ol' friends, Kar and Yul, and hopefully Leny).
---------------------from ODB--------------------------------------------------------------
In 1722, Jonathan Edwards drew up a list of 70 resolutions, dedicating himself to live in harmony with God and others. The following resolutions give a picture of the serious purpose with which Edwards approached his relationship with God. He resolved:
• To do whatever is most to God’s glory.
• To do my duty, for the good of mankind in general.
• Never to do anything, which I should be afraid to do, if it were the last hour of my life.
• To study the Scriptures steadily, constantly, and frequently.
• To ask myself at the end of every day, week, month, and year if I could possibly have done better.
• Until I die, not to act as if I were my own, but entirely and altogether God’s.
In Nehemiah 10, God’s people made an oath, vowing to follow all the commands, laws, and regulations of the Lord. This oath was so serious that they were willing to accept the curse of God if they failed to keep these commands.
Our resolutions need not be so serious as that. But any resolution to follow God is not a casual promise. Rather, it is a solemn and serious declaration that—with the help of the Holy Spirit—we can renew every day. —Marvin Williams
• To do whatever is most to God’s glory.
• To do my duty, for the good of mankind in general.
• Never to do anything, which I should be afraid to do, if it were the last hour of my life.
• To study the Scriptures steadily, constantly, and frequently.
• To ask myself at the end of every day, week, month, and year if I could possibly have done better.
• Until I die, not to act as if I were my own, but entirely and altogether God’s.
My NY resolution is to read bible in 1 year and seriously, I have been lagging behind schedule Nevertheless, with God's help and my effort, I should catch up soon.
Also trying to change my daily routine and surf less internet, sleep early, and read more. I have signed up for aerobic and dance classes at my Bank's gym place so I would go for lunch time classes everyday, except Tuesday, and I'll have lunch at canteen. At night, I'd go for dance class every Wed and badminton practise every Tues (with hubby and my colleagues). On top of that, as a family we play badminton every Saturday (and catch up with good ol' friends, Kar and Yul, and hopefully Leny).
---------------------from ODB--------------------------------------------------------------
In 1722, Jonathan Edwards drew up a list of 70 resolutions, dedicating himself to live in harmony with God and others. The following resolutions give a picture of the serious purpose with which Edwards approached his relationship with God. He resolved:
• To do whatever is most to God’s glory.
• To do my duty, for the good of mankind in general.
• Never to do anything, which I should be afraid to do, if it were the last hour of my life.
• To study the Scriptures steadily, constantly, and frequently.
• To ask myself at the end of every day, week, month, and year if I could possibly have done better.
• Until I die, not to act as if I were my own, but entirely and altogether God’s.
In Nehemiah 10, God’s people made an oath, vowing to follow all the commands, laws, and regulations of the Lord. This oath was so serious that they were willing to accept the curse of God if they failed to keep these commands.
Our resolutions need not be so serious as that. But any resolution to follow God is not a casual promise. Rather, it is a solemn and serious declaration that—with the help of the Holy Spirit—we can renew every day. —Marvin Williams
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