Changing banks

The first step of The Barefoot Investor's finance guide is ditching your old bank and moving to a cheaper online bank. Even though I rarely use 'foreign' ATM's I probably do rack up about $10 a year in these fees, plus my lovely big 4 bank charged me an account fee on a few occasions when I was home on maternity leave and not depositing $2000 a month into the account! They refused to refund the money... not happy Jan!

So the thought of saving some money, plus setting up a new system of banking for me and my partner that would be 'set and forget' was appealing. I particularly like the Barefoot's use of two transaction accounts: one for daily expenses and one for 'splurging'. My partner doesn't spend much on coffees and eating out, and I always feel a bit guilty that I'm eating into our money. However, he likes to buy records. By having a separate splurge account each we'll be able to spend what we want, on what we want, up to a limit. It will be a great way for me to track and prioritise my spending.

So we agreed to set up the accounts with ING. What I didn't expect was the sheer effort involved with switching banks! I have spent many, many hours over the last week or so setting up accounts and amending our direct debits. The fact that I had no idea what the account logins or passwords were for most accounts added to the pain factor.

To give you an idea of the number of changes, here is a list of the changes I've made. They include regular direct debits, apps that include payments (Uber etc) and incoming money (ie. Centrelink, Medicare):

• Rent - set up recurring payments in new account and cancel old
• Childcare -  set up recurring payments in new account and cancel old
• Swimming lessons - fill in a hard copy form with new bank details
• MYKI transport pass - amended auto top up online
• ATO - amended via MyGov
• Centrelink - amended via MyGov
• Medicare - amended via MyGov
• Health Insurance - direct debits amended online
• Uber - amended via the APP
• PAYBYPHONE - amended via the APP
• Online Wine Shop - direct debits amended online
• Mobile phone -  direct debits amended online
• Internet - direct debits amended online
• Netflix - direct debits amended online
• The Age - direct debits amended online
• Citylink - direct debits amended online
• iTunes/Apple store - details amended online

And I'm sure I've forgotten some, so I've left some money in the old accounts just in case!

I also closed down my credit card and old savings accounts. The banks make this VERY difficult to do! I had to go into a branch and plead my case. For the credit card they even had to make a call and they tried the up sell! Let me say that it is a lot easier to open an account than to close it.

However, I had one win. I convinced the bank staff member to have a read of the Barefoot Investor and to consider switching to a no-fee online bank!

I cut up my credit card!

I've been out of debt for many years now (the day I paid off the last of the credit card debt was a proud one!). However, I've always kept a credit card 'just in case'. 

I had a $7000 limit (completely unnecessary) and used it for situations where I was a bit short on cash. For example, when I had a crazy dental bill (I have bad teeth), 'needed' a new outfit for a job interview, had to buy things for my consultancy for which I'd be reimbursed later (airfares, hotels) and occasionally for things that I didn't want my partner to know about (embarrassing!).

However, today I chopped up the card, changed all the direct debits from the credit card to our joint savings account, and reduced the limit. I would have totally cancelled the card, but it seems that this needs to be done in writing or by actually going into the bank. (Sneaky.)

And what brought on this recklessness? I've started reading 'The Barefoot Investor' book! I'm pretty excited about his approach to managing money and have started implementing the steps. His dialogue on debt and credit cards is pretty interesting - particularly how they suck young people in and how having a credit card debt is ingrained in our society.

Anyway, I'm pretty confident that once I set up all the bank accounts he recommends, and also put into place all his strategies, I won't need to rely on the back-up of a credit card.

It's made me totally re-think how I run the money side of my (very small) consultancy. Up until now I've used my personal bank account for all the income receipt and expenses. Problem is, the income disappears very quickly (extra money = excuse to splurge) and I never have enough money to cover the bills (in particular the annual insurance premiums).

So now I've set up a separate online transaction account (free, no fees, and it takes about 5 minutes) with an attached online saver account (for better interest rates). I plan to save the next few payments so that I have a buffer, and then I can start transferring the income straight into our joint account (to be siphoned off to the various accounts).

Yay - no more need for the card! I think it's also going to make me more accountable not having that back-up option. It's a bit scary, but I reckon I can do it.

Back on the horse

Well, it certainly has been a long time between posts. Nearly 6 months in fact! I've been very slack, not only with blogging, but with my budget.
In December I went back to work (3 days a week) and life got a bit crazy.

Out went meal planning, monthly shops and tracking our money. In came expensive childcare, bought work lunches, excessive numbers of bought coffees, and even the odd take-away meal.

I also found just being part of a workplace to be expensive. My workmates have a penchant for Uber Eats (expensive delivered lunches) and fancy lunches out, after work drinks, as well as lots of contributions to gifts (engagement/baby/leaving).

For a completely different reason I've just given notice at said workplace and might be unemployed for a bit. This has given me the much needed motivation to get our finances sorted again!

Step one was reviewing our spending and preparing a budget, which I did the other night. A big shock was how much childcare really costs. I knew we were paying around $200-$400 a week, but I hadn't really computed that this is a LOT of money each month and across the year. It makes me wonder why we weren't saving that much beforehand...

Anyway, it seems the reason we kept running out of money in our joint account is that we were budgeting around $1500 a month less than what we were actually spending. Whoops!

Life changes. The kids have gotten older and have started doing pricey activities. They also eat more and our eating habits have also changed (isn't it annoying how being super healthy is more expensive?!). And the expense of working again and childcare have massively increased compared with last year.

This is a good reminder that budgets are not stagnant or set in stone. They need to be regularly reviewed and they need to be realistic. A review of your actual expenses can be a nice/scary reminder to reign in poor spending habit and to help you get back on that horse!

Renting

A lot of the articles you read in financial papers/websites talk about the pros and cons of renting versus buying in purely economic terms, focusing on the rate of return on investment, usually assuming that a renter is investing the money they are saving by renting.

As a long term renter I like to read these articles, as they often put the renter out in front. However, I have not been a good saver and investor, only recently getting my act together and still only having a small amount invested. And my partner and I do want to buy property and have been saving a deposit for quite a while now. However, due to crazy Melbourne house prices we have resigned ourselves to buying an investment property rather than a home to live in. We figure that at least we will have a property of some sort paid off by the time we retire, allowing us to live rent-free in retirement.

But I thought I would put together a list of all the good things about renting, not only to make myself feel better, but to make others feel good about their renting situation too:

• Rent is usually well below what you would be paying for a mortgage for the same property, even with interest rates this low. For example, I live in a house that would probably sell for a bit over $1million (even though it's old and run down, it's in inner Melbourne's Northcote which is prime real estate at the moment!) but we only pay $2064 a month in rent. An $800K mortgage would set you back around $3800 a month at the moment with 4% interest rates.
• If you are fortunate enough to find a long-term rental (which we have), rent increases are generally minimal, especially in comparison to market increases. Eg. I estimate our house would rent now for around $2400 a month, probably more given our improvements - see below.
• When things go wrong, you don't have to pay! ie. plumbing issues, hot water service breaking. Not your problem.
• You can move much more easily and cheaply if your situation changes. Around my area it's all about high school zones. When it comes time to choose a high school for my children, we could potentially move houses and even suburbs, to get into the desired school zone, without having to pay the premium house price and all the other associated costs of buying and selling a home.

 And a few other thoughts about long-term renting:

• If you have a nice landlord/agent who is happy for you to make improvements to the property, and you feel confident that you will be there for a while, consider investing a bit of money to improve the property. 
• For example, our house was very run-down and a bit depressing and cold when we moved in. Improvements we have made over the years to the house include: 
• Painting the interior of the main rooms (with the landlord's permission; she agreed to avoid rent inrease for a year, as we did it ourselves and were given the paint from friends);
• Installing gas ducted heating (the landlord agreed to go halves; about $1100 each);
• Changing blinds and lampshades (got on sale at Spotlight so very inexpensive but looks great!);
• Buying and installing a dishwasher (we paid for it ourselves, plus the plumbing, but it was the best $1100 I've ever spent!);
• Painting the interior of the rest of the house (I got the paint cheap from a paint store - mistinted paints but all versions of off-white - enough for 4 rooms for $120!)
• Fake grass for the concrete back garden. I got a large piece for about $600 and have filled the gaps over the last year by picking up off-cuts from hard rubbish and friends. It doesn't look perfect but it means my kids have a soft ground to play on. And I don't have to stare out the back window at concrete!
• A raised veggie box/planter. This can be taken with us if we move, but it makes the back yard look much nicer.
• So even though over the years we have spent a bit of money to spruce the place up, I estimate that what we save in rent has made it well worth it, and renting a cheaper house and fixing it up is a strategy I'll use again when we inevitably have to move. 
• For example, a freshly painted house with heating and a dishwasher in our suburb would be perhaps $130 a week more than what we currently pay, which is $500-600 month more or $6000 a year more! And we have been here for 7 years, so that's about a $42000 'saving' over this period! We will never move if we don't have to - but am sure that day will come. Fingers crossed it's not too soon. And I'd better actually start investing those savings!

Changing utility suppliers: Take 2!

Oh the joys! After deciding to stick with AGL for gas and electricity after they agreed to give me an extra discount off our already okay rates, I was pretty pleased to have saved some money with minimal effort. However, luckily I then checked the fine print when they emailed me the plan details (and next bill). Inexplicably, they had increased the base rate so substantially that I was now MUCH worse off!

I was naturally outraged and called them up.  I was put through to the 'resolutions' team, and the person I spoke to could not explain why the rates had gone up. She agreed to investigate and get back to me. Then nothing!

I called again a few weeks later and spoke to another person in the team, who also could not figure out why it had happened. Again, he agreed to investigate and promised to call back within 10 working days. That was about 4 weeks ago now and I've heard nothing.

So instead of going through the pain of calling them again, I've decided to switch. And it was surprisingly easy! I used the government site called Victorian Energy Compare and picked the cheapest electricity option, then went to the new company's website and signed up within about 5 minutes! All I needed was the metre number from a previous bill, and they then know all your details.  And my rates have dropped from a daily $1 supply charge to 71 cents, and usage from 19 cents to 15.4 cents. Which should all add up, plus there is a pay on time discount.

Now to sort out gas, but I was so excited about how easy it was, that I had to blog about it immediately!

Bread!

This is just a quick post about bread. I made my sourdough for my playgroup friends today and they were very impressed - even two ladies who had recently attended a sourdough workshop!

So here is the link to the recipe, which also includes a helpful video on how to make it. It's on Stonesoup, a very healthy and inspiring food blog.

I pretty much make it as she does, although my starter didn't use yoghurt to start it - just good old flour and water. It's now a year old, and definitely improves (!) with time.

Enjoy!

(PS. I can't seem to post/reply to comments at the moment - my apologies!)

School holiday blow-out!

This is my oldest son's first year in school and thus my first real experience of the school holidays (well, since trying to reign in my spending). And I have to say it's been a bit of a financial disaster! I feel like all the hard work I put in cutting back my spending over the last 4 months has completely gone out the door. These holidays I was a bit like a teenager with their first credit card - I was spending willy-nilly and saying 'stuff it!' and  'I deserve a treat!'.

Our grocery spend for the month of September ended up being about $400 over budget, mostly due to a week away with the extended family (why do kids in groups eat more than when at home?!), plus we threw a dinner party that I hadn't planned for. And the entertainment/food & dining categories were also way out of control. We treated the kids to the movies, and there were many cafe trips, lunches out, a zoo visit... Plus, a much needed date night got a bit extravagant with dinner, drinks and a movie!

Anyway, after spending this evening perusing the damage via my online banking portal, I think I can take away a few lessons.

1. It's very easy to fall back into old habits. But I'm not going to chuck the whole thing in. I'm going to be more vigilant this month and stick to our budget.
2. Next school holidays I'll be more prepared. I know the Simple Savings vault has heaps of tips on how to make the school holidays more affordable, and I'll also ask for tips online. 
3. The monthly shop is a good idea, but it doesn't cater for things that crop up (such as me deciding to host a dinner party), and I had tried to buy extra school holiday supplies/treats, but it just wasn't enough. So I'm going to try to keep more of the budget back to cater for these extra things. (I already set aside money for the weekly fruit and veg top up, so I just need to shop a bit smarter at the start of the month and put extra aside.)
4. It wasn't the kids' fault. It was mine. They would have been happy with home-made treats and a prima from Aldi, but it was me who was using the holidays as an excuse to break my 'limit cafes' rule. I need to plan better (including the kids in the planning) and get baking! I've been totally slack in that department recently.

So, it was a bit of a step backward, but we all had a lot of fun. And hopefully I've learned a few lessons!