Archive for July, 2012


Friday, July 20th, 2012

Some years ago there seemed to be a change in the collective mindset of the Australian community. Suddenly we went from a country where it was totally acceptable to do whatever job you wanted to one where you “needed” to have a university degree. Not that you actually do need a degree, just that there is an expectation that a bunch of jobs that didn’t previously require tertiary qualifications now need the applicant to hold a piece of paper.


So these days there are huge numbers of people who feel stuck in careers they feel obliged to do because of the time and money that went into the study that led to the job. And there are just as large a number of people who are starting their careers with a pile of tertiary education debt. At least they should be earning enough to see it slowly chipped away.


For stay at home mums and dads, earning enough to pay off a Fee HELP debt (or HECS, as it used to be known) is something that seems light years away. In the meantime, this interest free debt keeps growing.


How does interest free debt grow? It’s because HELP debt increases each year in line with inflation (which is currently running at about 1.6%). Yes, that is a very small percent to be paying on a debt, but if the debt doesn’t get reduced it will compound – it gets progressively bigger for every year it sits there. Five or 10 years out of the workforce, or earning under the repayment threshold, could see a substantial amount accumulate, especially if you did post graduate studies that added to your undergraduate HELP bill.


For the current financial year, anyone earning under $49,096 will not be required to pay back any of their HELP debt. That means if you never earn an average or just below average wage, you will never need to pay it back (unless legislation changes). Once your income hits $49,096, four percent is taken out to go towards the loan, rising to as much as 8% of your income if you earn over $91,178.


If you have a HELP debt and you hate the thought of owing anybody any money at all, the big question is this – should I pay it off? If you have the spare cash or a windfall that will cover the amount, voluntary repayments of at least $500 will get you a 5% discount. So for every $500 you pay back, $525 is credited. Yes, it’s bugger all incentive to get cracking on this loan. Years ago when the incentive was 10% I used to tell people to consider it, now I tell people not to bother. If you are thinking of making a repayment of less than $500 it’s pretty much a waste of time. The best thing about the HELP debt that’s been coming out of your wage being gone is that you get an effective tax free pay rise of between 4-8%.


And of course, all of the above assumes that the only university debt you ended up with was provided by the government. All that credit card, personal loan, car loan and other debt you racked up just to get by, that’s another story altogether.

Where Did It Go?

Friday, July 13th, 2012

If you are an employee, around the time of receiving your first payslip for the new financial year you should also receive your payment summary for the financial year just ended. These things used to be called group certificates and contain the total of the amount you earned from your employer as well as the tax that was taken out.


Here is an interesting exercise – take your tax away from your total income for a rough amount of net income. This is the figure that has been going into your bank account (for simplicity I’m ignoring stuff like allowances). If that figure looks scarily inaccurate, if it is the sort of thing that makes you think “Hang on a minute, where the hell is all that money?” then I want you to do something that may frighten the life out of you.


Go through your old tax records for the last five financial years (if you can’t do this because you don’t have them or have no idea where they are, get down on your knees and pray that nobody from the tax office comes knocking on your door anytime soon). Now do the same calculations for those years and add up the total amount that has been paid into your bank account for the last six years.


For the average Aussie it’s quite a bit of money and something that makes you feel rich. Until you logon to your internet banking and look at the amount you have saved (or gone into debt by) over the same time period.


Six years is a long time and your life may have changed a lot since the mid noughties. Your life today with a partner, mortgage and kids might be very different to the single, unburdened one you led back then. But for a few of you, life may not be that different now to what it was. It may be the case that the biggest difference to your financial situation is how much debt you have racked up in those six years.


If it has really flattened you to suddenly realise that the amount you’ve earned looks like a large amount of money compared to what you have to show for it, it’s time to get serious about tracking down those lost dollars. It’s time for a budget.


Budgeting is one of the most painful, boring, emotionally charged and degrading things you can do with your personal finances (I’ve heard it being referred to as a mathematical confirmation of your suspicions). Especially if it’s the first time you have done one.


There are heaps of different ways to do a budget including the traditional pen and paper approach, through to using Excel spreadsheets. I’ve always found carrying a desktop with me while doing the shopping a little cumbersome, so these days there are apps like My Weekly Budget to make it easier.


As painful as your first budget is, it’s important to know that they are a vital tool to getting your act together, and every step after the first is that little bit easier. Start budgeting today and I guarantee you won’t look back with that sick feeling in your guts in six years time.

Clothing Kids (and Dads)

Friday, July 6th, 2012

I will admit it – I’m not really very good at dressing myself (by that I mean matching my outfit, not the actual act of putting clothes on, I’m not some serial nudist). I have a few clothes that I bought as a set and I know that some jeans go with some shirts, but if left to my own devices I will inevitably be told “You can’t wear that jumper!” before my wife Claudia lets me leave the house. It doesn’t really matter if I don’t look like a rock star, ‘cause Claudia doesn’t need to be proud of me when we go to the shops. However, how our daughter looks is another thing altogether.


Almost all of the clothes that we have for our little chicken were not purchased in sets. We were given quite a few and we bought three bagfuls of clothing second hand from a woman who was getting rid of her daughter’s baby clothes. The bags were $15 each and lasted the best part of chicken’s first year. There was a great variety of stuff in there and none of it was dodgy. The only problem was that it wasn’t numbered.


All of the clothing had the sizes clearly marked but it didn’t have a numbering system to help me. You know, an easy to read, easy to understand, foolproof way of making sure that our daughter could be clothed with bodysuit number 1, top number 1 and pants number 1.


Yeah, I know, Pumpkin Patch doesn’t follow Nick’s Numbering System either (although, given the cost of their clothes, they bloodywell should!) but it is a bit more obvious when you purchase everything as a set that it all matches. Even to a man.


When it comes to dressing our chicken I will always fall back on my disability as the reason for not getting it right. I was born with a genetic abnormality which means I can’t properly match clothing, and no, I’m not talking about my Y gene.


You see, I’m colourblind. Not completely colourblind, not like black and white and shades of grey colourblind, but I confuse some colours. For years I thought my old jacket (which Claudia eventually forbid me to wear outside the house unless we were escaping a fire in winter) was bottle green and that Claudia was lying about its shade. Then one day at work I looked at two colleagues wearing green and, referring to my jacket, said “Hey, we’re in the green club!” To which one of them replied “Well we are, but you’re wearing grey.”


So until we start regularly shopping at an expensive children’s clothing store (which, let’s face it, ain’t gonna happen anytime soon) Claudia will have to be content with placing out the clothing I am to dress chicken in the night before.


Or maybe my wife could just accept that even if our daughter’s clothing doesn’t all match itself perfectly, at least it will be pretty obvious that the guy who is dressed just as mismatched walking next to our little chicken is her proud, daggy dad.