InDenialMoney.com

Not only have I been lazy with my lack of posts but also with tracking my spending. I still write down everything we spend, I just haven’t categorized and looked at it lately. Well, I sat down yesterday and did my expenditures for both July and August and was a bit surprised at the totals! I’m glad I got off my rear and did this because I feel we like we’re experiencing “lifestyle inflation”.

The Good

• Other Income
• Mortgage
• Clothing
• Entertainment
• Clothing
• Cosmetics

The Bad

• My Income
• Groceries
• Alcohol
• Eating Out/Takeaway
• Medical

We’re still saving quite a bit overall but there are definitely areas we can improve on. I’m not going to cut us back like I did when we were eliminating debt because there needs to be a balance between saving and living. Back then we were willing to go to extremes to overcome our debt but now that we’re debt free we don’t need to do that. We’re still frugal but overall I think we can reduce our expenses in the coming months :)

news.com.au reports:

A WOMAN who won over £1.9 million ($3.67 million) as a teenager says she never should have been allowed to spend her fortune at such a young age.

Callie Rogers, 22, won the lottery when she was 16 years old and proceeded to go on a “never-ending spending spree”, News Of The World reports.

The second-youngest British person to win lotto spent the money on booze, two boob jobs and almost $500,000 of cocaine.

About $400,000 was spent on a family holiday while a large amount was also spent on a string on boyfriends.

When she won the million-dollar prize, she was earning almost $7 as a shelf stacker for her local supermarket. Now she lives at home with her mum.

Continue reading article.

It’s hard to say how I would have handled a windfall like this at 16, I know for sure that I certainly wouldn’t have spent $500,000 on cocaine! It took me until I was 30 to become financially literate so it’s not too surprising that a 16 would go through that kind of money in that short amount of time.

Where were the parents in all of this? Did any adult give her any sort of financial advice? I suppose whether she took it or not is another issue.

A new report has revealed that Australians are starting to cut back on luxury items including dry cleaning, expensive restaurants, designer fashion, cars and quite a few others.

Interestingly, charity has been included in this list. We donate to charities we feel passionate about because we can afford it and generally when there is a real need. I am not sure if charity should be included as I personally do not see it as a luxury.

MsPennyPincher and I have never been one to indulge to this extent so it’s all a bit foreign to us, this concept of spending every dollar you have on things you don’t need. But I guess for many, it must be a shock to their system.

news.com.au reports:

AUSTRALIANS have taken the financial knife to dry cleaning, expensive dinners and donations to charities – and it’s all thanks to the global financial crisis.

And while much has been made of the “green shoots” of economic recovery, many consumers are still reining in discretionary spending and ditching over-the-top buys.

“It’s very much treat versus indulgence – that’s the theme behind this list,” said senior industry analyst with IBISWorld Michael Wilson.

Continue reading article.

This is a fascinating article on the super rich.

John McAfee, founder of the antivirus software McAfee was worth $100 million but the real estate and stock crash have wiped out $96 million dollars of his fortune.

if i had $100 million dollars I would be conservative, I wouldn’t spend lavishly but then again, I don’t have the mindset that enabled him to take the risks required to make such a massive amount of money.
Those same risks have cost him $96 million dollars.

There is always an element of risk in any financial decisions we make, the trick is to diversify and live within your means. Even if you have a boat load of money next to your name on a ledger.

One thing about people like Mr McAfee, they know how to make money and I’m sure he will accumulate wealth in the future.

The New York Times reports:
Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent, according to CapGemini and Merrill Lynch Wealth Management. Monthly income from stock dividends, which is concentrated among the affluent, has fallen more than 20 percent since last summer, the biggest such decline since the government began keeping records in 1959.

Bill Gates, Warren E. Buffett, the heirs to the Wal-Mart Stores fortune and the founders of Google each lost billions last year, according to Forbes magazine. In one stark example, John McAfee, an entrepreneur who founded the antivirus software company that bears his name, is now worth about $4 million, from a peak of more than $100 million. Mr. McAfee will soon auction off his last big property because he needs cash to pay his bills after having been caught off guard by the simultaneous crash in real estate and stocks.

“I had no clue,” he said, “that there would be this tandem collapse.”

Some of the clearest signs of the reversal of fortunes can be found in data on spending by the wealthy. An index that tracks the price of art, the Mei Moses index, has dropped 32 percent in the last six months. The New York Yankees failed to sell many of the most expensive tickets in their new stadium and had to drop the price. In one ZIP code in Vail, Colo., only five homes sold for more than $2 million in the first half of this year, down from 34 in the first half of 2007, according to MDA Dataquick. In Bronxville, an affluent New York suburb, the decline was to two, from 17, according to Coldwell Banker Residential Brokerage.

July 1st is the start of the financial year in Australia so this month and August is when you start to get your big bills like water, council rates, strata fees, insurance, etc. I’ll give you a break down of how much our bills are and the payment options available.

Council Rates
$978.00 if paid in 1 installments
$993.00 if paid in 2 installments (Cost of Option $15.00)
$1023.00 if paid in 4 installments (Cost of Option $45.00)

This will be the first year that I’ve chosen to pay it in 1 installment. We’ve had the money in the past to choose that option but I always played it safe. I’m pretty sure it was a psychological issue that kept me holding onto that money just in case we needed it even though we had enough in the bank. If I did choose to pay in 4 installments and put the extra money into an online savings account earning 4% I still wouldn’t be able to earn $45.44 so it would cost us more.

Strata Fees
$230.00 twice a year.

We live in a unit complex so therefore we have to pay these fees. I suppose it’s similar to condo association fees. It’s for general maintenance, pest inspection, and water usage for the common gardens in the complex.

Water Bill
$605.00 if paid in 1 installment
$609.00 if paid in 2 installments
$615.00 if paid in 4 installments.

Because the cost of the option was only $10 I decided to pay in four installments. I know I can earn more than $10 in interest with the extra money put in savings so it’s a win/win situation.

Electric Bill (billed for two months at a time)
$139.00

This bill has to be paid in full every two months. The amount obviously fluctuates based on our usage. The electric company gives a nice graph of your usage amount for the same period last year as well as your usage amount for the last two months. I always like to see how we compare to last year. This bill was quite a bit higher than last years (about $30). At first I was a bit shocked so I was trying to figure out why but then I realized this winter I’ve used the electric heater in the study quite a bit. In the past my frugal mind would have vowed to stop using the heater to cut down the costs but I’ve come to a point in my life and finances that I’m not going to sacrifice freezing my rear off for $30! Charlie’s grandparents on the other hand are way too frugal when it comes to heating! They never use their gas fire and just wear layers of clothes and blankets to stay warm. If you’re thinking it doesn’t get cold in Australia you would be wrong. It commonly gets down in the 30’s at night. They have plenty of money in the bank and are both in their 80’s so they would especially feel the cold. I don’t get it! They can’t take the money with them when they die!

Gas Bill (billed for a 90 day period)
$132.00

They also give you a nice graph showing your usage for the past year. We used more this period than for the same period last year. This would be for the same reason as above; heat! We have a gas fire that heats up our lounge area and we’ve used it quite liberally this winter. Like I said before, we have the money so there’s no sense being cold if you don’t have to be ;-)

Health Insurance
$81.00 which is paid monthly by direct debit

Car Insurance
$573.00 (This bill was paid in full in December…first time for doing that as well since we usually paid it monthly).

Contents Insurance
$207.00 (Paid in full in November).

Since I took over paying the bills around 7 years ago, we haven’t missed a payment. Tomorrow I will explain how I organize and pay my bills.

Most don’t have enough super

MOST superannuation savers are heading for an impoverished retirement unless they can dramatically increase their contributions.

Even without the ravaging effects of the financial crisis, anyone who is relying on the basic 9 per cent super guarantee for their retirement savings is unlikely to accumulate enough money for a comfortable retirement.

A retirement shortfall of about $450 billion – or $80,000 per person – has been estimated nationwide.

As a result, industry groups are calling on contributions to be raised to a minimum of 12 per cent to prevent a retirement crisis.

Either way, unless you actively choose to salary sacrifice more into your super, you are heading for trouble.

So how much do you need for a comfortable retirement, and how much do you need to save to get there?

At the moment we have around $50,000 combined in our retirement accounts so will need to look into contributing additional funds.

We have chosen to concentrate on reducing debt and building savings but now that we are not incurring any interest on our mortgage and have built up substantial cash reserves, we can start to add funds to our retirement.

At the moment we are trying to figure out how to diversify our retirement accounts, both are in conservative funds due to the economy. Now that the economy appears to be turning the corner, we need to evaluate whether to move them into a higher risk fund. We are both still quite wary of the economy though, something the head of the Australian Treasury has just discussed with the media.

Greg Norman raises asking price on Florida mansion

A RECESSION in the US? A real estate slump?
Australian golf great Greg Norman isn’t letting these details get in his way.

For almost two years Norman has been unable to sell the nine-bedroom, 11-bathroom oceanfront Florida mansion he once shared with ex-wife Laura Andrassy despite dropping the price tag to $US47.5 million ($57 million).

Instead of slicing more off the price, Norman, after undertaking renovations, has lifted his target to $US60 million ($72 million).

Those must have been some renovations to increase the price by $15 million!

It seems a little odd that you would spend such a significant amount on a property that has obviously devalued given it was on the market for such a long time.

Over capitalizing on your home can be a real trap and you have to do your research before committing yourself to such an investment.

It will be interesting to see if there is method to his madness.

I’ve been MIA for several months due to a variety of reasons, laziness and complacency being two of them! But I’m back now and will try to do a better job of updating this blog. I guess the best place to start would be to revisit those short-term goals I set back in July ‘08:

Move savings into a Vanguard Index Fund by Jan. 2009
The rest of our savings ($42,000) is in an online savings accounts earning 7.5%. I want to eventually move some of this into a Vanguard Index Fund.

• Goal not achieved! Wow, what a difference a year makes! Obviously I didn’t follow through on this goal since the market took a tumble and I thought it was better to hold onto all of our cash! We now have almost 100,000 in online savings accounts earning 4% and 53,000 in our offset account which makes the interest on our mortgage zero.

Save over $40,000 in 2008
We managed to save $40,000 last year so I would like to improve on that this year. So far we have saved $20,028.64 so we’re about where we should be. We don’t have any major expenses or trips planned for the rest of the year so we might be able to do it.

• Goal achieved! We were able to save 41,528.23 in cash which exceeded my goal :)

Improve other income and interest savings
Our other income and interest is averaging around $300 a month so I feel we could do better in this area.

• Goal achieved! At the moment we’re averaging around $600 in other income and interest savings. As of today, our online savings account is earning 4% while back in July 08 it was earning 7.5%…I wish it would get back up there! There is talk in Australia that the Reserve Bank will start increasing rates soon so I guess we’ll see.

When we turn 40 start putting more into our retirement accounts
Currently our employers put the standard 9% into our superannuation accounts (similar to a 401k). We will probably increase this to 15% or maybe more in a few years. I’ll have to evaluate where we are when that time comes. Charlie will also be able to salary sacrifice into her superannuation. This means instead of paying tax, it will go into her retirement account. At the moment Charlie has reached the salary sacrifice cap $8,000 a year which goes towards our mortgage. It’s kind of hard to get your head around at first but the savings are tremendous.

• We’ll both be 40 in a couple of years and still plan on doing this at this stage but it might change if we take on a bigger mortgage.

Change jobs
I’m really torn over this one because I love the people I work with but I don’t really enjoy the job itself. It’s much too stressful and chaotic at work. I think I would be better suited working in a bookstore. I’ve also been using this job as a crutch because it was my first one after overcoming my anxieties. Talk about being thrown from the frying pan into the fire. I went from almost being agoraphobic to a chaotic working environment dealing with thousands of customers a day! Although I may not enjoy it at times it has been a great experience for me. I also know I could probably make more money elsewhere (this is a minimum wage job that pays $17/hour). What can I say, I am a constant underachiever. By writing this blog, I’m actually using my university education so at least it didn’t go to waste ;-)

• Goal achieved kinda! I quit the video store back in April and have been deciding what direction to take my life. I’m thinking of going back to school to do bookkeeping and need to look into that. I’ve also applied for casual jobs in the meantime so hopefully something will turn up. Charlie has been nothing but supportive.

Buy a house?
We’re also not sure about this goal either. We are currently in a unit and would love a house but we don’t think this would be a wise decision financially. Unfortunately the average house price in our area of Australia is $500,000. It is going down a little but so is the value of our unit so it’s relative. I think we could do it if we managed to maintain our annual savings of $40,000 but we would have to sacrifice our desire to travel which leads to our next goal.

• Goal not achieved! If anything our desire to buy a house is stronger now than it was back then so it’s definitely still on the cards. We are both ready for a “sea change” at the moment. It would be great to get away from the traffic and our neighbors who love to cut down every tree in sight! Unfortunately it’s not as easy to find the kind of salary we would need to live in the country at the moment. Things are still kind of up in the air in regards to Charlie’s employment so we will just continue to save for this. If we do buy a house we’re hoping to keep our unit as an investment property. We will need to visit an accountant to find out the tax consequences to this.

Travel
This falls under financial goals because it costs a lot of money, especially with airfares increasing every day. We want to travel while we’re still youngish. There are so many places to visit but our top five are:

1. New Zealand, especially the South Island (We were going to do this in Feb. 2009 but have put it off till 2010 since Charlie’s job situation might change).
2. Machu Picchu
3. Egypt
4. Canadian Rockies
5. A safari in Africa

In the last 12 months we spent 10 days in Port Douglas snorkelling on the Great Barrier Reef and visiting the World Heritage Listed Daintree Rainforest (our holiday was fantastic!). We also spent a week in Sydney this past April which was also a wonderful holiday. Until we’ve saved what it requires to make those big trips we’ll continue to make cheaper trips around Australia. It’s a gorgeous country with so much to see.

• Goal not achieved! Things have been so stressful with Charlie’s job lately that we decided just to do local trips. Charlie was off work on stress leave for a couple of months so we spent some time with her parents in the south which was lovely. I would still like to travel but if we buy a house we’ll have to put that off so we can concentrate on the mortgage. Both of our passports are also expired so until we renew those then we aren’t going anywhere!

Over all I’m really pleased with what we have achieved given the extreme economic climate of this past year. Here’s hoping that the economy has turned the corner and that we can achieve the rest of our goals.

This is a really interesting article from today’s paper in Australia.

Australian loan borrowers are not shopping around for the best deals so are paying a whopping $2.7 billion a year in repayments!

HOME loan borrowers are paying an extra $2.7 billion a year in repayments because they don’t shop around for the best deals.

Despite the major banks charging higher interest rates than smaller lenders, about 90 per cent of home buyers still choose one of the more expensive big four banks, according to financial research company InfoChoice.

We were in the exact same position about 5 years ago. I had taken out my loan with one of the big 4 banks way back and had never bothered to shop around since. I think part of it came down to complacency and some just plain laziness but I was with the one banking institution for well over 6 years.

When things got tough and we were struggling to make ends meet, MsPennyPincher started shopping around for a better deal. We saved a small fortune, cut years off our home loan and now own our home because of the decision we made.

In terms of finding a new product, most banks are more than happy to discuss you refinancing with them and will often wave fees to get your business. It is a competitive market and they need your business just as much as you need a loan.
In terms of effort, it is minimal compared to the long term benefits you can expect to gain.

“It is baffling that so many new homeowners refuse to look beyond the big banks and take advantage of lower rates from more competitive institutions.

“Claims that consumers have little choice but to go with the big four are wide of the mark.

“There is competition in the marketplace, it’s now up to the consumers to take responsibility for researching and locking in the best possible deal,”

Read rest of this article

Do yourself a favor and start shopping around, there is money to be saved!

It is amazing just how much we spend on food each week.

We all get into habits, whether it is buying certain brands or types of food each week or going out to dinner, our habits can really put us in a routine mindset. The big problem with this is you are not always fully aware of what things are costing you because it’s a routine or habit.

For many of us, eating out once or twice a week is fairly common and unless you keep a close eye on your expenditures it can be quite expensive.

Being organised in your kitchen can save you a small fortune. If you have planned out your meals in advance you are less likely to be stuck without a meal and left with only a dining out option.

Here are some ideas to cut your food bill.

1. Don’t go out to dinner for a month. I know this will be hard for many people but you will be amazed how much money you will save by avoiding restaurants and fast food takeout. After the month, see what your savings have been and try to limit your dining out to special occasions.

2. Check out the specials at your grocery store and create a menu for the week or month if you can manage it.

3. Try and use vegetables and fruit in season. Generally speaking they are cheaper in season.

4. Make a grocery list and stick to it.

5. Buy in bulk and freeze. We choose to buy in bulk and prepare meals that we freeze for a quick and easy dinner during the week. We estimate a weekly saving of around $40. Quite significant. Every dollar counts!

It all comes down to discipline. If you can manage that then you are well on your way to saving money and paying off debt!