mr home budget on money

“A Credit card funeral and you’re invited”

2010-08-21T08:41:00.001+09:30

Adelaide-based anti-credit card campaigner Adam Goulding (a.k.a Mr Home Budget) will be urging Australians to get rid of their cards for good when he hosts a public funeral service on the 8th of October 2010.

Attendees at the funeral service will line up to shred their credit cards into a coffin, which will later be carried by pallbearers down the aisle so the contained plastic remains can be laid to rest in peace.

When: 8th October 2010
Time: 8:30am
Where: South Road Funeral Home
Address: 151 South Road, Ridleyton South Australia 5008

“This service is aimed at spurring ordinary Australians, many of whom are deep in debt, to get rid of their credit cards so they can finally take active steps to pay off their debts,” says Adam, who achieved national prominence last year with the launch of his book “How to cut your debt to zero in five simple steps, the keep it simple stupid home budget”.

“We are inviting people to turn over a new leaf in their life and get rid of their credit cards for good. I’m expecting a large turn-out of people who are already primed to get rid of their cards, but anyone is welcome to attend the service and cut up their cards as well.”

Adam says that credit cards are a unnecessary evil, and if more people were educated about them he believes they would become socially unacceptable over time.

For people who are unable to attent the funeral we will be publishing the video on this website shortly after the event.

“Australia’s on sale and we love it”

2010-03-20T15:08:00.002+10:30

Australians I’m happy with you. Give yourselves a pat on the back.

Most of the time when I read a newspaper article about Australians it refers to how much debt we are in, or how unaffordable our houses are compared to the rest of the world, or how much our sky rocketing credit card debt is costing us. This sometimes comes across as a really negative view of this country.

However recently, there has been some good news concerning the land down under. A report last month said that Australians no longer open their wallets unless there is a sale happening. In fact some of the big retailers have seen a 30% to 50% drop off in spending until they bring the sales back.

All this has come about due to the Global Financial Crisis. We as a nation have taken a mind shift away from the let’s get it now policy. We are now thinking about whether we can get it cheaper in the future?

This is a totally refreshing change in Australians’ attitudes towards their money issues. Well done, well done, well done!

And why shouldn’t we want to save money on everyday items. We have had the fastest growing food prices in the world since Jan. 2000. We have seen petrol prices move from 89 cents a litre to $1.35 a litre between 2000 and 2010. We have seen home prices move up like a plane taking off right through to the end of 2009. We are getting the squeeze from every which way on our home budget.

Now we are starting to understand as a country that we need to push back. We need to count every cent and make every cent count. As a country we are finding that the smart thing to do is what we used to laugh at other people doing in times gone past.

And that is to put off purchasing something until it goes on sale. Become like our grandmothers and only buy when they have slashed the price.

We must have all of a sudden gained some extra collective willpower. And the retail stores are taking notice. Our buying patterns have changed, so the way they sell their stock must change as well. They have been put on notice. They can no longer mark up their prices to ridiculous levels. They can no longer expect people to price shop. And most importantly, they can no longer expect to make their record profits year after year. Those profits will be smaller as we the consumers, take a percentage off due to the lower prices.

I invite all Australians who still do not shop this way to try it. Start counting down to the sales. Price match your products with two or three stores. Do some research into your product and when it’s likely to be cut in price? But don’t stop at retail stores. We can start looking at our services such as home phone, internet, mobile phone, electricity, gas and insurance. Let’s extend our frugal ways to all of our spending. Once again well done Australia.

Thanks
Adam Goulding (Also known as Mr Home Budget)
www.mrhomebudget.com.au

“Does your bank have crazy fees?”

2010-02-09T12:21:00.002+10:30

What the hell is a cash handling fee? Or how about an overdrawn fee? Even a fee if someone else’s cheque bounces (inward cheque dishonour fees).

Yes, the banks have been doing it for years. Looking at ways to increase their revenue and profits and screw us the consumer. I’m sure they have meetings where they discuss ways to add fees to their products while trying not to upset consumers.

In fact in 2009, banks were paid just under $1 billion from fees. That’s around $45 per every man, woman and child. This does not include building societies or credit unions.

What really got me interested in this subject was something that happened around a month ago. I walked into my local branch and deposited $6000 cash into my business account. This total transaction with the teller took less than 2 minutes.

However then I received my statement which showed that I was charged a cash handling fee. Yes you read correctly, a cash handling fee. Calling my bank for an explanation they informed me that: If you deposit any amount over $5000 of physical money you get charged 0.25% of the total amount.

For example if you deposited:
$5000 it would be $12.50
$10,000 it would be $25.00
$15,000 it would be $37.50
$20,000 it would be $50.00

I was informed this fee is to cover the wages of the teller and the costs of running the branch. This does not sound right to me. Surely they make enough money to cover these costs on the interest they earn on my deposited money. What about the monthly $10 fee that I have to pay just to keep my bank account open? Or the interest on the home loan that they have lent to me? Why do they need extra money on top of the money they are making?

It’s like if you order a pizza to pick up. Once paying you have to pay an extra 0.25%of the total cost to help pay for the staff and rent. Pizza places don’t do this because their price for pizzas covers this cost. Just like 99% of all businesses; however not banks.

Just to recap, this fee is to deposit your own money INTO the bank! You like me probably thought that the banks wanted you to deposit as much money as possible into their bank. This fee suggests otherwise.

Inward cheque dishonour fees are another even crazier example of a ridiculous fee. This fee no longer exists, however it worked like this. You sell a boat to a friend for $5000. Your friend writes a cheque to pay for the boat. You deposit it into your account and the cheque bounces due to a lack of funds in your friend’s account. Guess what, you incur a fee and so does your friend.

I can understand your friend getting a fee, as it was his responsibility to make sure the money was there to cover the cheque. But why are you getting charged? You had no knowledge of what is going on in your friend’s bank account. You have taken the cheque in good faith.

This is just one more example of banks pushing the envelope.

What really upsets me more than anything, are the fees that are too high for things that banks pay very little to solve. For example, you can pay as much as $40 for being one day late on a credit card payment.

$40 is a huge amount to pay to miss a deadline by 24 hours. What has this cost the bank by you missing this deadline? Absolutely zero. They have not lost a cent. However you are out of pocket by $40. The funny thing is you might owe less than $40 on the entire card.

It’s in the bank’s interest that you miss this deadline. They want you to be late; it’s money in their pocket each time you are late.

Believe me banks don’t budge on any fee. If you cop a late fee, cash handling fee or any other crazy fee, try and get it reversed. This can be as hard as trying to swim the English Channel. They fight tooth and nail not to give you back your money. Sometimes you will have a victory in fighting it. However, most times you will just have to learn your lesson and move on.

My advice is to learn your bank fees inside and out. And then get organised to avoid them.

Thanks
Adam Goulding (Also known as Mr Home Budget)
www.mrhomebudget.com.au

“When will median houses in Australia hit the one million dollar mark?”

2010-02-01T09:54:00.003+10:30

It is an interesting question. I think that everyone would agree that median house prices will hit $1million sometime in the future. However what none of us will agree on is the year this will occur. Will it be 5 years, 10 years, 20 years or 50 years? No one can say for sure.

The Age newspaper recently had an article saying that “$1million homes will be the norm in a decade”. They predict that before 2020, a regular home in Australia will cost $1million dollars.

Peter Boehm, a real estate expert, looked at this scenario. He came up with a spreadsheet to show what has happened between 1999 and 2009 to get to our current house prices. And a second spreadsheet showing what would have to happen to get to $1million dollars by 2020.

Median House Prices October 2009
Capital City X Oct 1999 X Oct 2009 X Change X %Change X Compound Growth

Sydney X $315,000 X $615,000 X $300,000 X 95.0% X 6.9%

Melbourne X $199,000 X $519,000 X $320,000 X 160.0% X 10.0%

Brisbane X $150,000 X $459,000 X $309,000 X 207.0% X 11.9%

Median House Prices at $1 million October 2019
Capital City X Oct 2009 X Oct 2019 X Change X %Change X Compound Growth

Sydney X $615,000 X $1,000,000 X $385,000 X 62.6% X 5.0%

Melbourne X $519,000 X $1,000,000 X $481,000 X 93.1% X 6.8%

Brisbane X $459,000 X $1,000,000 X $541,000 X 117.8%X 8.1%

He then suggests that $1million dollar median house prices are fairly likely. This is due to the fact that the growth only needs to increase between 5 and 8 per cent per year. And that is well under what was achieved over the last decade.

There is one thing that I don’t think Peter Boehm takes into account. He leaves no room to suggest that property prices are already overvalued. This is the strong position that I take. Look at what property has done between 99 and 09. In Melbourne, there was a 10% compound growth. This is not a small percentage, this is a huge percentage.

In fact, if prices keep moving this way in Melbourne for the next ten years, by October 2019 house prices would not be $1million dollars, they would be $1,346,152.

Let’s look at a story about shares which could help explain my overvalued scenario (I will use the Melbourne price rise as the figures here). Pretend you bought $5000 dollars worth of ACME company shares on Oct 1999. Each share is worth $5.00, so you get 1000 shares. Over the next ten years to Oct 2009, your shares go up 10% a year. Now you still have 1000 shares, however they are worth $12.96 a share or $12,968 in total. You think if they only go up 6.8% over the next ten years, I will have $25,000. You think wow, 6.8% is such a small amount compared to 10%. This must be very likely.

However you never take in the fact that the rise between Oct 1999 and Oct 2009 might be over done. People might have been dazzled by the company’s prospects and paid too much for their shares. Making them worth more than the intrinsic value of the company. This happens all the time in the share market. So what happens is either the shares go backwards or they don’t move anywhere for a number of years.

Peter Boehm in his article doesn’t consider this fact. He has looked at the last ten years and made an assumption that house prices are not overvalued.

He has not taken into account that Australians are in debt up to their eyeballs. $56,000 per every man, woman and child. And this amount is up 71% from 5 years ago. In my opinion house prices have gone up because there has been a bigger fool principle going on. There has always been a bigger fool who borrows more to buy a house.

People seem to have this belief with housing (unlike shares and stocks) that house prices can never fall. That they will continue to move ever higher for years to come. In this case, Peter Boehm has taken that view. As he uses the words in describing house prices moving to 1million dollars before 2020 as fairly likely.

Sure prices could be at $1million dollars in 10 years time. Maybe if we had high inflation or hyper inflation. But in that case you would be paying $5 for a can of coke. So $1million dollars wouldn’t have anywhere near the same purchasing power as it does today.

Please, in reading any article about housing prices, do understand that they can go up and down. Just because they have had a miracle run in 10 years does not mean we will get even half of that in the next ten.

Thanks for reading
Adam Goulding (Also known as Mr Home Budget)
For more information go to www.mrhomebudget.com.au

“Westpac are greedy and guess what, you do care”

2010-01-18T13:44:00.001+10:30

“Westpac are greedy and guess what, you do care”

Earlier this month, Australia’s largest mortgage broker reported that a “large proportion” of its home loan business in December, came from Westpac customers switching to other lenders in protest at the banks oversized rate boost.

In case you missed it, Westpac put up their home loan rates by .45% where the Reserve Bank of Australia only put it up by 0.25%. You might remember the banana smoothie advert/ email that they sent to their customers.

We in Australia have been taking so much flack from our banks over the years. High bank fees, ludicrous bank fees (e.g. a cash handling fee), home loan rates that go up two days after a lift in interest rates but then taking 11 days to come down after a fall in interest rates. ATM fees of $2.00 a transaction, monthly bank account keeping fees, credit card interest above 20% and credit card fees that you need to be a rocket scientist to work out. Normally they have done this with impunity. People being lazy or not caring have not put these banks in their place. And because of our silence as a nation, we have let them steamroll us into untold revenue for their shareholders.

So when I first heard about Westpac doing this, it is just something else we will have to deal with and pay. I was convinced that people would huff and puff but not much would happen or change.

I’m so happy that it seems that people are standing up to Westpac. Changing their home loan over to a different bank is sending them a message. Believe me this does not just send Westpac a message; it sends all banks a message. There are customers willing to do the hard yards to change to a different bank if their bank pushes them too far. And in this case it does seem that Westpac has pushed them too far.

What this action does is keep the banks honest. It keeps them in line and shows them that you can only treat people like numbers instead of customers for so long.

What I like most about this situation is that people are switching their home loans. Home loans are probably the most difficult product to switch. Credit cards, savings accounts and personal loans are difficult; however home loans take the most time, paperwork and possible fees to switch. These customers have all endured some time and pain to send a clear cut message.

The biggest secret that all four banks don’t want you to know is that while there are four of them, they operate in a relative duopoly. This means if you leave one you simply join with one of the other three. So the banks, as long as they do everything as a foursome (e.g. putting up rates together at once) you could leave your current bank but more than likely you would be going to a bank that is doing the same thing.

In this case, Westpac went out and did it alone. None of the other banks followed and that’s why people have chosen to move. Congratulations again to the people that changed from their Westpac home loan.

Thanks
Adam Goulding (Also known as Mr Home Budget)
www.mrhomebudget.com.au

“What planet are you on? Property prices to surge; I don’t think so.”

2010-01-13T15:02:00.001+10:30

“Buy a house before property prices are beyond your reach,” was the message from a recent Yahoo article on money. The article says in no uncertain terms that property prices are heading upwards again. In fact to quote directly from the article, “Property buyers are being urged to take the plunge early in 2010 to avoid missing out on purchasing their dream property at a price they can afford”.

Someone called Meighan Hetherington, managing director of Property Pursuit in Brisbane said, “Buyers need to realise that the peaks and troughs of the property market are shortening; so we are now seeing the start of a property market surge, reminiscent of 2007."

Then the article says in bold writing “Don’t wait until it’s too late”

I’m not sure what planet these people are on. With Australia having 100.4 debts to GDP, why in God’s name would there be a rise in property prices? People are struggling to pay for their houses right now.

House prices in Australia are hugely inflated and expensive compared to the rest of the world. Yet for some reason these people who can’t see that we are already in a property bubble are acting like cheerleaders trying to work the property market up higher. And worst of all, reporters with national audiences like the Yahoo article believe them. That we need to pump more air into this already overinflated bubble.

USA, England and New Zealand have had big falls in their home prices. Not to mention most of Europe. But for some strange reason Australia has avoided this bubble popping. Yet people believe that there is still room for the market to move upwards.

Well I guess as long as there is a bigger fool to lend more money from the bank, the property market will continue to keep going up. Remember that in Victoria the medium house price has just passed the half a million dollar mark to $520,000. No this is not for a mansion. This is the price for a medium house. If Meighan Hetherington is correct and she talks of a surge, what could that mean for a medium house price in Victoria?

Well let’s say it goes up by 5% per year over the next three years, this house would now be worth $601,966.

Up by 7% per year over the next three years, this house would now be worth $637,022.

Up by 10% per year over the next three years, this house would now be worth $692,120.

Up by 12% per year over the next three years, this house would now be worth $730,562.

However, let’s look at the words Meighan Hetherington uses, “surge, reminiscent of 2007”. When I think of the word surge, that makes me think of 15% to 20% a year; not 1% to 14%. In fact the dictionary describes the word surge as the following, a strong, wavelike, forward movement, rush, or sweep. That definition of the word definitely describes prices moving above 15%.

Well 15% per year over the next three years, this house would now be worth $790,855.

And 20% per year over the next three years, this house would now be worth $898,560.

And this is for the medium priced house. Can you see what I mean by this?

What scares me is someone reading the Yahoo article might just decide to buy a house that they can’t afford based on the predictions from someone else. The article and language including the title made it seem as if you are not in the housing market right now, forget about getting into it in the future. Some people might purchase a house thinking, “Sure I can’t afford it now, however with property going to SURGE, it’s like money in the bank”.

Any research of the property market will soon show you this is probably not the case. However in being fair and balanced, I would like to say that this is only my opinion. I have been known to be wrong in the past and I’m sure that I will be wrong in the future. You need to make up your own mind.

Thanks Adam Goulding (Also know as Mr Home Budget)
www.mrhomebudget.com.au

“Australians’ debt is about to bubble over”.

2010-01-04T12:33:00.002+10:30

“Australians’ debt is about to bubble over”.
Just imagine a nearly boiling pot of water seconds away from hitting boiling point. The water is still quite calm and not moving much. However within about 30 seconds all hell breaks loose. The water starts moving, bubbling and frothing in an uncontrollable, unpredictable manner.

There is a sense in my bones that this analogy is similar to Australians’ debt issue. Right now all is still calm, however any month now an uncontrollable and unpredictable economy might take shape. With Australians finally hitting breaking point with all the debt we are in. Is there going to be a straw that will break the camel’s back?

And we are in debt, tons of it; right up to our eyeballs. In fact on Dec the 27th Australians now owe 1.2 trillion dollars. Yes that’s right I said trillion with a “t”. This is our debt on credit cards, personal loans and mortgages.

In fact this is on average, $56,000 for every man, woman and child in the country; up 71 percent from just 5 years ago.

Let’s do the sums. So if it is up 71 per cent from 5 years ago what does this mean? Well by my calculations, in Dec 04 as a nation, we owed $33,000 per every man, woman and child. This has climbed by an average of 11.2% each year, every year since then.

On average our debt has gone up by 11.2%. This is not a small percentage; this is a huge percentage. Especially, when you consider most people are only getting a 3 to 4% pay rise each year.

Did you know at 11.2% our debt doubles every 6 years and 3 months. If it keeps going this way we will be at $105,880 by Dec 31st 2015... Only six years away.

In fact Australians’ debt now totals 100.4 percent of our total yearly GDP. In case you don’t know what GDP is: It is all the money spent in the country for the whole year. (Please note this is a basic one sentence explanation of GDP). Plus this 100.4 is one of the highest ratios in the developed world.

Will Australia hit a debt wall? Will people all of a sudden not be able to pay back loans? This figure shows that there is trouble ahead. People are talking as if the GFC is already over. However, these figures in my opinion at least, show that Australia is maybe just getting started.

I’m not 100% sure of all the reasons of how we got to this situation. But we must start changing and quickly.

There seems to be this undercurrent of worry out there. Most people seem to be putting on a brave face, however there are people really struggling.

We can’t as Aussies keep going along as if everything is fine; purchasing overpriced houses, using our credit cards and taking holidays on personal loans. We seem to keep doing these things as a whole because everyone else is doing it. We seem to feel safer in numbers doing stupid things than going it alone. I heard this story many years ago. I’m not sure where it came from, however I will tell it with my best recollection as I believe it describes this debt problem perfectly.

A man walks by a frozen river. He sees a bridge 500 metres into the distance that he must walk over to cross the river. He has no intention of crossing on the ice as he does not know how thin it is. However just in the corner of his eye he notices people; 2 or 3 people walking across the river. Then some children come and start iceskating. He watches further as people start going on the frozen water and having snow ball fights. Soon half the town is on the ice having a good time. As each person steps onto the ice it gives other people the confidence to step on the ice. Each person on the ice reassures the other people that the ice is 100% safe. The man seeing that the ice now looks very safe decides to cross the river. However he gets half way across and he hears a crack. The ice is breaking and everybody is screaming. They all fall into the freezing cold water.

The ice could only take so much weight before it gave way. I wonder what the weight of debt Australians can take before our ice gives way? Are we there now or do we have a few years to go? Who can say? What I do know is that with debt moving up 11.2% a year it can’t be too long before we hit the wall.

Thanks from Adam Goulding (Also known as Mr Home Budget)
For more information go to

www.mrhomebudget.com.au

“The National Credit Card Debt on an elevator to the moon”

2009-12-16T10:20:00.000+10:30

At www.debtclock.com.au a thirteen digit number ticks over 24 hours a day getting higher and higher as each minute passes. Currently as I look at it on the 11th of Dec at 9:30am 2009, it is sitting at $46,331,720,564.00. And it is moving up at a rate of $5000 per minute or $7,200,000.00 a day!

A big number in anyone’s terms. But what does it represent? It is Australia’s ballooning credit card debt. It is every dollar we owe as a nation to the credit card companies right now.

In fact with 22,073,280 people currently living in Australia that means that this number divided is $3,551.00 for every man, woman and child in the country.

However due to the fact that some people don’t have credit cards and children don’t have credit cards this is likely to be much higher for every credit card holder.

With a number as big as $46 billion, it can be hard to get your head around it. So I have put down some things you could purchase with this money.

Every single person in Australia could purchase one Big Mac meal from McDonalds every day for 302 days.

You could pay off the New South Wales and Victorian State governments’ debt completely and still have $8.1 billion in change.

You could pay out 132376 home mortgages in full if they owed $350,000 each.

You could fill up a car on empty with a 60 litre tank at $1.25 per litre 617,756,274 times.

It is enough money for everyone in Australia to have a $1.00 can of Coke for breakfast, lunch and dinner for 699 days in a row.

Now some of this $46,331,720,564.00 is not earning interest as card holders will pay it back before their interest payments kick in. However a big portion of this money is earning interest. But not just interest, but incredibly high interest above 12% pa.

Readers of my blog, are you still included in this number? Or have you rid yourself of credit cards? I know not one dollar of this amounts to any money that I owe. Try and make it so that not one dollar is next to your name.

This number bothers me. It bothers me because of the rate it keeps going up. There is no reason for it to keep going up. All people have to do is get rid of their cards; one person and one household at a time.

Don’t be part of the problem, be part of the solution.

Have a great christmas, and I will catch you in the new year.

Thanks Adam Goulding (Also known as Mr Home Budget)

For more information please go to www.mrhomebudget.com.au

“Banks are ripping us off? You bet they are!”

2009-11-28T13:52:00.001+10:30

Well, Melbourne Cup has been and gone. I would like to congratulate the “Shocking” team on their good ride to victory.

However, something interesting happened that day as well that concerns every person with a mortgage. The RBA put up their interest rate by 0.25 per cent. This was to lift the overall cash rate to 3.5 per cent.

However I want to talk about the 7th of Oct. You see the RBA on the 7th of October decided to put up their rates on that date. And my home mortgage company increased their interest rate by 0.25 per cent on the 9th of Oct.

It got me thinking. Wow, that was quick, only 2 days to take full effect on my home loan payments. My mind worked overtime as I thought back to when the RBA was putting down interest rates, was my bank following the trend and putting down rates as quickly as two days? I decided to do some investigation on the matter.

I took out my home loan in July of 2005. Between July 2005 and Oct 2009 there have been 14 changes by the RBA to the cash interest rate. Each change has been followed by the bank.

Six of the changes have been putting the interest rates down and 8 have been putting them up. I worked out that on average the bank has taken 3.25 days to put them up. However when putting them down, it has taken on average 11.33 days!

That’s 11.33 days that you are paying additional interest. What is their excuse for taking so long?

It has taken them nearly 2 weeks to get the home loan down. Why would this be the case? Could it be that banks make millions of dollars by keeping the rate as high as possible for as long as possible?

Now this is just my bank and I am yet to look into any of the other banks. But I can assure you that I’m with one of the big four banks.

Now I’m not a banking expert, however to change the rate don’t you just punch some numbers in on a computer? Wouldn’t this be the same as putting it up; except you are taking it down?

You might not think this is very much money. However, let’s pretend a bank has 1000 home loans and each home loan is worth $350,000. This means they have $350,000,000 owed to them.

Let’s pretend that they are earning 5% per year on this money. That means each year they are earning $17,500,000 on their money or $47,945 a day in interest.

If all of a sudden they start getting 4.75% on this $350,000,000 now they are only earning $16,625,000 on their money or $45,547 a day in interest or $2398 less per day.

So if this bank could not change the interest rates for an extra 9 days they would save themselves $21,582. So the amount adds up. Also, if they could do this a couple of times a year, well you have to add that amount to the $21,582.

But this bank is a made up bank with only 1000 home loan customers. However, the big banks have ten of thousands of home loan customers, possibly even hundreds of thousands of home loan customers. This is not small amounts of money with that many customers.

So who pays for this ... the home loan customer? We get stuck with the extra interest each year. And while it might not be a lot for us individually as home loan customers, add up the amount and it’s a bucket load for the people lending it to us.

Should there be a law against this ... I believe so. I think the government should impose a time line after the RBA moves rates for the banks to move their rates by then. And when I say a time line, I mean a law that states: all interest rate movements must be made within 2 days of the RBA decision.

There it’s that easy, and the banks won’t be able to wait 8, 9 or even 12 days to change their rates down. Pass this on to your friends to get the word out!!!!

Thanks Adam Goulding (Also known as Mr Home Budget)

For more information please go to www.mrhomebudget.com.au

“Is Australia lazy with regard to saving money?”

2009-11-18T12:10:00.002+10:30

“Is Australia lazy with regard to saving money?”

There is a report that was put out by Info Choice that indicates that Australians as a whole are costing themselves around $6.1 billion a year by not shopping around for banking products.

This figure of 6.1 billion (and yes that’s billion with a “B”) is broken down as follows:

$5.4 billion on home loans

$257 million on credit cards

$482 million on other personal lending

Currently in Australia there are 22,046,871 people. So if we divide this $6.1 billion between each person that equals $276.68.

That is $276.68 between every man, woman and child. So if you took out the children (who are unlikely to have any debt) this figure would be much higher. This figure also includes people who have no debt. So take them out and the amount would jump up again.

Also remember this only takes into account debt with a bank; this $6.1 billion figure does not include money you might save in fees on savings accounts by shopping around.

So the question is, “Are you costing yourself money by not shopping around?” Where is the best place to start? How do you find savings in less than 20 mins?

Well, there are a huge number of websites that compare all sorts of Australian debt-related products. In fact, the company that did this report, Info Choice has a website www.infochoice.com.au that compares all sorts of bank products.

Start there and then google other websites that compare debt in Australia.

Remember you don’t have to change anything. You might just want to look at a good rate. Then call your own bank and see if they will drop their rate to the one you are looking at. You never know what they might say until you threaten to leave for a lower rate.

I suggest you do this right away. Find out if your deal is overpriced. Find out if your savings account fees are too high. Find out how much your home loan rate is compared to the cheapest you can find.

Do some phone calls and if necessary, change companies. You might find out that with 20 to 40 minutes of phone calls, paperwork and investigation, you could start saving yourself $500 a year. Also this is not just for this year but you will save a lot going. This might be some of the easiest money you have ever made.

Also I suggest that once a year you recheck that you are on the best deal. Mark it in your diary to do this. You might find that things have changed and there are even better offers than what you are currently on.

I don’t think Australians are lazy by nature however; we could be a touch more productive if $6.1 billion dollars is slipping through our fingers each year.

Thanks Adam Goulding (Also known as Mr Home Budget)

For more information please go to www.mrhomebudget.com.au

“How can you save yourself from skyrocketing food prices?”

2009-11-11T12:12:00.004+10:30

The OECD on the 9th of Nov. 2009 said that food prices in Australia have increased by 41.3 per cent since the start of the year 2000. News Limited papers reported this just a few days ago.

In fact at this rate, the OECD says that we have the fastest growing prices for groceries in the WORLD.

We are only second to Spain whose prices have grown by 41.2 percent.

So you think, 41.3 per cent big deal, what’s that in real terms?

OK what does this mean in terms of per year? It is around 4% each year. Meaning, if you purchased a shopping trolley of goods in 2000 for $100, in 2001 it would be $10. In 2009, that shopping trolley of goods would be $141.30 due to the increased prices.

So let me ask you a question, “Have you been earning 4% more each year since 2000?” If you have great, you are ahead of the curb on groceries. If not, that’s bad because you are behind in food payments.

You need to keep this in mind each year when talking pay rises. I know someone who works for a company that asked them not to take a pay rise this year because of the GFC. He agreed to this request. However, he soon worked out that since he started with the company in 2000 he had only been getting increases of 3.5per cent a year.

For example, if he started in Jan 2000 at $35,000 and got a 3.5% pay rise each Jan. from then on until 2008 he would be on $46,088. This is a total pay rise of 31.6% over that time. Due to the fact that he gave up his pay rise in 2009 he is still only earning 31.6% more now than when he started.

This is despite food prices rising at 41.2%. His pay is not keeping up with the increases in his shopping bill.

Not only is he behind the food curb already because his employer doesn’t value him over a 3.5% range, but he is going to get further behind due to no pay rise at all this year.

Will his employer give him a pay rise in 2010; the jury is still out? Plus it raises further questions; if his employer does give a pay rise in 2010 will it only be 3.5% or will it be more to cover the amount lost in 2009?

In a country like Australia with food prices moving like they are, can you afford not to get a pay rise each year? You need to understand this to protect yourself from the fastest moving food prices in the WORLD.

You can easily see what you have been earning each year by your group certificates. Dig them out of the closet and see how much you were earning from 2000 to now. You might find you are well behind the increases in food costs. If you don’t have your certificates, call the tax department, they should have your records on file.

Thanks Adam Goulding (Also known as Mr Home Budget)
For more information please go to www.mrhomebudget.com.au

"How Close Are You To Bankruptcy? The Lifestyles Of The Poor And Unknown"

2009-11-01T01:02:00.001+10:30

How close are you to bankruptcy?

If you or your family lost all your income tomorrow, how long could you survive? How long would your savings last? If you sold everything you own, how long would that add to your savings?

Really think about this question.

Would it be a month, two months, a year or the rest of your life? There was a report done by Dun and Bradstreets Consumer Credit Expectation Survey. It found that 39% of respondents would only survive 30 days on their current savings.

So as you walk out to your letterbox today, look around at the other houses. Thirty-nine percent means 4 out of every 10 houses you see would be struggling in 30 days to pay their bills if their source of income stopped tomorrow.

Are you part of the 39%, or could you hold out for a little longer? It’s an interesting question and I never really thought about it before. However, if Australia ever went into a depression (no not a recession but a depression with a “d”) things would get pretty ugly.

In our last depression in 1929, Australia got to a high unemployment rate of 28%. Now that is up there. While this might seem out of the question in 2009 who’s to say when tough times will come back to haunt us.

And I’m not just talking about the Global Financial Crisis; a depression might not be in the pipeline for 20 years.

I guess I have (and probably like you) have only grown up in good economic times. Sure I have been through a few recessions (including the one we are in now). However, I’ve never seen soup lines or people en masse begging in the street. (I hope I never will!)

There are people out there even some people I know, that have good jobs, who are intelligent and work hard, however they have no savings. None! They also have very few assets of any value. These people are 100% in the 39% range. Plus some of these people even have families to support.

They are flying very close to the sun; if a financial depression hits they will more than likely be the first to suffer. But they don’t even need a financial depression to come; what would happen if they had a disaster in their life.

What if they lose their job? They get sick and they can’t work; or a million other things that could kill you financially?

I was unaware that 39% of Australians lived this way. So what can be done about it? We need to start teaching kids in schools about money and credit. Give them a history lesson on the past and what they need to do to survive in the future.

When I went to school I spent quite alot of time doing science. Each year we learnt about electrons and microns. However, I have never used that once; not a day in my life. On the other hand, I was never taught how to run a home budget. However, I need to do that every day. I believe that kids in schools should learn how to run a home budget right from the start. This should help drop that 39% rate down in future years.

Stop telstra charging me $2.20 to pay my bill

2009-10-27T15:29:00.000+10:30

Stop telstra charging me $2.20 to pay my bill

"The Secret Banks Don't Want You To Know"

2009-10-16T17:47:00.003+10:30

Hello everybody. I would like to write about something that my wife Renee (my wife) pointed out to me. In the Oct 12th 2009 edition of Woman’s Day, there was a letter on page 94.

This letter was for a section in the magazine called “Ask the experts”. It had a subheading “No matter what your dilemma, Woman’s Day’s trusty team of experts can solve it.

There was a letter from a reader who was looking to purchase a house. I will write this letter word for word so you can see what I’m talking about.

Question: I am 24 and earn $34,000. My boyfriend is 22 and earns $36,000. The bank told us we could borrow $490,000 to buy a house. Should we go to the limit? We want to get married and have kids in a few years. SHARON, Bidwill, NSW.

Answer: I must admit that it is tempting to take all the money a bank throws at you, but taking on a mortgage is a huge commitment, and will impact on future decisions.

Twenty-one percent of home owners are currently under mortgage stress, and you need to make sure you don’t become one of them. That means not accepting the highest amount a bank will lend to you. I’m not a big fan of going to a bank’s borrowing limit, and prefer to be quite conservative.

I encourage taking a loan of only 70 percent of what they say. In your case, that would mean borrowing no more than $343,000. Sure you may need to forgo buying the mansion, but each journey of 1000 kilometres starts with the first step!

I’m also a big believer in putting down a 20 percent deposit on a place. It proves you can be disciplined and save, and it also provides a buffer, should things get tough.

By not extending yourselves too much, you will have more flexibility in the future.
The last thing you want to be told in a few years time is that you can’t afford to get married or, worse, can’t have a child because the monthly interest charged on your mortgage is so crippling. What would you do if interest rates rose by four percent?

Couples considering starting a family also need to factor in a reduction of income when it comes to paying a mortgage, so it’s advisable to lodge a loan application based on one income only.

Remember that it is always better to have a great night’s sleep in an average house than an average sleep in a great home.

OK, there is the letter and the advice. There is one assumption that I am going to make about SHARON from Bidwill, NSW. This assumption is that she is not wealthy. I mean she is not taking out a loan just for the sake of taking out a loan. The assumption that I make is that she and her partner have limited savings. Maybe $10,000 to $20,000. It does not go into it in the article however; I will assume this is correct. And If I was a betting man I would suggest that this would be a good bet. I can’t be 100% sure, but in my mind this is correct.

There are two points that I want to bring up about this article.

Point Number One:

How can any bank in Australia lend out up to $490,000 to a couple earning a total of $70,000 pre tax and $61,152 after tax? In my mind this is criminal. It is plain criminal. It is irresponsible lending.

Let’s say Sharon takes out the full $490,000 over 25 years at a starting variable rate of 5.33% (This happens to be my current rate). Each week they would have a repayment of $682.40 or a yearly total of $35,484.80.

This is 58.02% of their total after tax salary. This is well beyond what I suggest at 33% maximum of your total after tax salary. This gives the couple $25,667.20 a year to live on or $493.60 a week.

This seems like a reasonable amount to live on except if Sharon gets pregnant (as she said she was looking forward to doing in the future). Now they will either drop to her boyfriend’s wage alone or have to pay extra for child care. But let’s say they have a nice relative that will look after the baby while both are at work; this doesn’t matter because either way their non mortgage expenses will go up from the cost of the child. This would eat into their $25,667.20.

If they dropped down to his wage alone, they would be $4134 down each year. This is 113.16% of his total wage going to pay the mortgage payments each year. This is before they paid one cent in food, electricity, gas, telephone, car expenses etc.
Even a 15-year-old understands that you can’t spend more than you earn day in day out before you have no money left.

However this is at the low interest rate of 5.33%. Let’s use the example from the answer person in the Woman’s Day. He said, “What would you do if interest rates rose by 4%”.

Now their home loan would have an interest rate of 9.33%. Now their weekly payment is $973.89. This is 82.81% of their total wage. This leaves them with $10,510 or $202.11 a week to live on.

Let me talk from experience. Living on $202.11 is nearly impossible for two people. Especially two people both working. There would be no room to move on anything at all. If your TV blows up, forget replacing it. If the hot water system breaks down, get used to cold showers. Forget going out to a restaurant, even once a month, if not for the whole year!

So Sharon would be walking a tightrope. No ifs, buts or maybes.

Plus I was paying 9.15% interest rates only 8 months ago. So to suggest that interest rates won’t go up again as quickly as they came down is being hopeful.
Point Number Two:

Never ask a bank what you can afford. This is like asking the barber if you need a haircut. The barber will always say yes. The bank will always lend you more than you should have.

You see the bank knows that if interest rates go up only 4%, this couple will be living on $10,000 a year. However, they don’t care. As long as they get their payment each month they are happy.

They will let their customers eat two minute noodles each night just to survive, as long as they are getting their money.

Take this advice away from this blog. Just because a big organisation (for example, Commonwealth Bank, ANZ, American Express, Visa, NAB etc.) offers you money, don’t take it as a compliment that these big companies are willing to lend you money. It does not mean you can afford it!

You need to do your figures and come up with your own conclusions.

Banks are full of salespeople (yes including tellers). I had a friend that worked for a Savings and Loans credit union as a teller. She was taught how to sell people into credit cards, personal loans, car loans and even home loans.

One of the things she was told was to look at what the customer was carrying. For example, if the customer came to the counter with a travel magazine, she was told to strike up a conversation about holidays. Then she was told to move the conversation to personal loans that could cover the cost of the holiday. In her sales training they did role plays exploring the above example.

Banks just like all businesses make money on sales. One of their biggest products is lending you money. The more money you owe them, the more they make. As long as you keep making the payments they get their profits.

So do you really think they care if you are struggling month to month just to put food on the table?

Thanks Adam Goulding (Also known as Mr Home Budget)
For more information go to
www.mrhomebudget.com.au

House Prices In Victoria; Are They Too High?

2009-10-08T14:14:00.003+10:30

House Prices In Victoria; Are They Too High?
I was interested to read on the 3rd of Oct that Victoria’s median house price had hit $520,000.
This article was posted on Yahoo’s website front page. Here is the article I copied for you to read:

Victoria's median house price has increased to more than $500,000 for the first time.

The Real Estate Institute of Victoria's September property update has found the average house price rose by 6.4% to $520,000 in the last month.

The institute's chief executive, Enzo Raimondo, says the rise has partly been caused by Melbourne's housing shortage, brought on by low interest rates, an increasing population and first-home-buyers’ incentives.

"We're certainly experiencing a housing stock shortage throughout most of metropolitan Melbourne, both for owner-occupiers and also for the rental market," he said.

"The demand at the moment is outstripping supply and that's leading to a significant increase in prices."

Mr Raimondo says the price rise is the biggest the institute has ever recorded.

"It's significant for a monthly increase, but over the year it's increased about 18 per cent from last September," he said.

Now I live in South Australia so $500,000 seems like quite a lot; as our home prices are not as high as Victoria.

I just want to point out some general things. Let’s say that Mr and Mrs Smith (made up people/couple) bought one of these median houses in Vic.. Mr and Mrs Smith paid $520,000 as the article suggests. However they had a 10% deposit of $52,000. Now they owe $468,000 on the home.

My current home loan is with Home Side Lending (A company 100% owned by the National Aust. Bank). At the start of this month, I was getting a 5.33% interest rate. So let’s say that in this example Mr Smith gets that as well.

They decide to pay weekly over a 25 year loan. Their payments would be $651.76 a week. That is $33,891.52 a year.

Let’s say Mr and Mrs Smith both work and earn good salaries of $50,000 each. That is $100,000 a year gross and $82,300 after tax.

So from $82,300 subtract their mortgage payments of $33,891.52 which leaves them $48,408.48 a year to pay for everything else.

As I say in my book “How to cut your debt to zero in five simple steps, the keep it simple stupid home budget” you should never set your mortgage payment over 33% of your total net take-home pay. Mr and Mrs Smith have set their payments at 41.19%. Just above the level I suggest to set your payments.

While $48,408.48 might seem like a lot, it can quickly be eaten up by interest rate hikes. As I write this the Reserve Bank of Australia has increased their interest rate by 0.25%. This means that my home loan will increase by this amount and let’s say it does in this example for Mr & Mrs Smith.

Now their weekly home loan payment will go from $651.76 a week to $667.84 a week. Not a huge deal as it is only an extra $16.08 a week to find. Also, it only lifts the percentage of their after tax pay that goes towards the mortgage from 41.19% to 42.21% or 1.02%.

However, let me give you this real life example. In Aug 2008, I was paying an interest rate of 9.15%. Over the next 8 months, the rate dropped to a low of 5.33% (or where we were at before the interest rate rise.) A 3.82% drop.

Let’s pretend over the next 8 months this interest rate goes up to 9.15% again. Now all of a sudden in less than a year they have gone from paying $651.76 a week to $916.76 a week or a total of 57.94% of their after tax wage; a huge jump in such a short time. This leaves them with $34,628.48 a year in cash to live on. Or $13,780 less than they had when interest rates were at 5.33%.

Now I’m not saying this will happen or is even likely to happen. However it has gone down this quickly in the past, so it only makes sense that it could go up just as quickly.

More importantly it does not give them any room for error. Someone loses a job, someone gets sick, they decide to have a baby and take time off, or they have a financial crisis elsewhere in their lives. Things can go from bad to extremely bad, very quickly.

My rule is you should only buy a house that is going to cost you 33% of your net after tax take-home pay a year. In fact, to purchase a house worth $468,000 (at 5.33% interest) this couple would have to earn $64,000 each a year before tax. This would be a combined amount of $128,000 before tax and a total of $101,920 after tax!

Each week after tax they would be clearing an amount of $980 each or $1960 a week combined. The home loan would still be $651.76 a week or 33.25% of their total net pay. This is just above the 33% range.

However even using these guidelines it would only be good if interest rates stayed at this level. If interest rates go up then they will go well above the 33% rule. Plus due to interest rates being at the bottom of the barrel at the moment, it is likely to only go in one direction and that is up.

So let’s go back to the first example and say that they are only on $100,000 total and $82,300 net.

So what would my advice be to Mr and Mrs Smith? I would suggest that they purchase a $312,400 house. Pay a 10% deposit to bring the house down to $284,000.

Now their monthly minimum payments (at 5.33%) are only $395.51 or only 25% of their net pay. This is well below the 33% that I have as a rule. However it gives them a huge space to move. Even if interest rates rocket back up to 9.15% they will only be paying $556.32 a week or 35.16%; just a small amount over the rule.

They would now have plenty of room to breathe in case of any financial problems taking place.

Sure the house they get for $312,400 would not be as nice as the $520,000 house.

So I go back to my first question, ‘Are house prices in Victoria too high? If a couple earning $100,000 a year struggles to purchase a median priced house that sets off my alarm bells.

What is your opinion? Send me your stories!

Thanks Adam Goulding (Also known as Mr Home Budget)
For more information go to
www.mrhomebudget.com.au

Warren Buffet on credit cards

2009-10-01T11:55:00.001+09:30

If you want to get good at golf it would only make sense to watch and learn from the world’s best golfers. This is true for most sports. If you want to improve your game, take advice and watch the best in the world, whatever the sport.

The same is true for almost anything; from dieting, driving, money and getting a promotion at work. Take advice from people that have done it in the past.

Warren Buffet is the second richest man in the world. I guess this makes him someone you could take advice from, knowing that it is likely to be excellent.
In 2008, he met with some girl scouts in the USA for lunch at a takeaway restaurant. This was an opportunity for the girl scouts to get some money advice for their lives going forward.

One of the questions that were asked was.

Questions: What financial suggestions do you have for college students?

Warren Buffet’s Answer: The biggest suggestion I have is to avoid credit cards. I get letters every day; lots of letters every day, from people that have financial troubles. And it comes about from three things; one is losing their job, the other is some kind of terrible illness that hits them by surprise, but the third thing is credit cards. Interest rates are very high on credit cards and sometimes they’re 18%, sometimes they’re 21%. If I borrowed money at 18% or 20%, I would be broke. I can’t make a living by borrowing money. If I’m $10,000 ahead, and $9000 or $10,000 in the hole is night and day and credit cards, it is very easy to get in the hole and the interest charges compound and finally you’re in too big a hole to dig your way out. If I had one piece of advice for young people, generally it is just to avoid credit cards.

Warren Buffet has made all of his money from the sharemarket. It was interesting that his advice was to avoid credit cards. He could have said anything from learn about stocks, start your own business, get a degree in a particular subject or even write down and stick to goals.
But he didn’t, his advice was not to sign up to and use credit cards.

The funny thing about this is, Warren Buffet is one of the major shareholders in American Express; one of the world’s largest credit card companies. He has been involved with that company since the 1960s!

So he has made a huge fortune in getting people to use credit cards, yet his biggest advice is not to use credit cards!

Thanks Adam Goulding (Also known as Mr Home Budget)
For more information go to www.mrhomebudget.com.au

First Blog Ever My Friends New Car

2009-09-17T12:01:00.006+09:30

This is my first blog ever. If you are unsure of my back ground here is a quick reminder: My name is Adam Goulding and my story is quite simple. Four years ago my bank balance was so low paying rent was a big problem. March 15th 2005 was the day rock-bottom was hit emotionally and financially for me. The term completely broke and debt-ridden sums it up nicely. This was the result of a "she will be right" attitude.

Then like a flash of lightning, a thought so extremely simple, yet a powerful realisation hit me. Whatever happened in my life with money up to March 15th 2005 wasn't working! Most decisions about my money to then were wrong. This one true realisation changed my life... who could show me a way out of financial danger? Not changing was not an option, as things would only get worse as time went by.

Then my girlfriend, Renee (now my wife) let me in on her system for growing money. Knowing Renee was much better at handling money than me, she could help. She told me secret number one of keeping more money in my bank account. This was the KISS principle, KISS simply stands for "Keep It Simple Stupid".

Renee started to show me how easy and quick killing my debt could be. Stop my spending ways and get back on the right path with my money. Due to working with Renee, I'm very proudly announcing our goal of "becoming financially independent". In fact, between Jan 1st 2007 and Dec 31st 2008 savings of $84,975.71 have been achieved. Just by using Renee's "Keep It Simple Stupid" ideas, our overall wealth has accumulated.

My new book is called "How to cut your debt to zero in 5 simple steps the keep it simple stupid home budget"

Thanks Adam Goulding (Also known as Mr Home Budget) www.mrhomebudget.com.au

Ok there is the history lesson. Lets get down to business.

I want to talk about the old Adam vs the new Adam. Yesterday I went to meet a friend of mine that I use to live with in my early 20's.

He talked about a 2nd hand car that he was looking to purchase. This car was a 1999 BMW m3. The 1999 model. He was going to purchase this for the $24,500.00 mark. However he was quick to add that when this model was new in 1999 it cost around the $150,000 dollar mark.

When he talked about his new car I didn't think about it at the time but later it dawned on me. The old Adam probably would have been jealous of his purchase. A BMW was a huge status symbol (even if it was ten years old). The old Adam would have regarded my friend as taking a huge step forward in life getting this car.

The German styled body and luxury interior. The looks from people driving it down the street. Also the praise from friends and family at his new car. Where all things the old Adam would have thought about. Plus not to mention me beating myself up over the fact that I didn't have such a nice car.

The new Adam (or the one that heard this news) didn't really care about anything the old Adam held close to his heart. It not everyday you think how much you have changed in 5 quick years.

The new Adam tried to work out in his head how much money the original first buyer on the car had lost had he held it all 10 years. The new Adam was thinking about fuel usage and insurance costs. Not to mention how much a BMW would cost to service and repair.

Lets do the sums real quickly lets pretend the first guy brought this car new in 1999 for $150,000 and ten years later sold it for $25,000. This means he had lost 83.3% on his car purchase price.

I thought about my friend and thought if he keeps it for 10 years and the car continues to drop in value at the same pace it will only be worth $4250.

The moral of the story is that a old dog can learn new tricks. Or a different way to think about it is a leopard can change there spots. But you have to be committed. Old Adam and New Adam where chalk and cheese. You can change. www.mrhomebudget.com.au