Finances

OILY RAG
INDEX

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Making sense of your dollars

Automatic payments

With Telecom people often pay about $15 per fortnight directly to the company via automatic payment to cover their bill before it comes in. Paying a little more than the monthly rental will cover a toll call or two that they might make. This way, when the bill comes in you don’t have to worry about it as it is taken care of. It’s the same with your electricity supplier. In the meantime the company has your money sitting in their bank account collecting interest from yours and everyone else’s money! Just look at the annual profit they make! Isn’t that enough to tell you its time to put your money into your own high interest bearing account? I have an account set up with the BNZ, which I call my bills account. I get 5% interest annually with a bonus of 2% if I withdraw only once a month. The bills are paid once a month so I am getting 2.5% interest because I draw enough money to cover all the bill sat one time. With my system I pay $60 fortnightly into my account to cover my electricity for the year. When the bill comes, I only draw what is necessary to cover it, the rest stays there to cover the increased winter charges. At the same time I am claiming my interest back out of their pockets and putting it into my own pocket. – K.B.
For the past few years I have worked out the average monthly amount I pay on all of my bills and set up an AP to come out each pay day. I always slightly overestimate to be safe. ALL of my accounts are in credit with variable bills such as power gaining so much credit that I can stop the AP over the Christmas period and have that money to spend on other things. Just remember to restart the AP after Xmas! This also means that in times of hardship you may be able to scrounge some money from the money allocated to your bills to cover unexpected expenses without fear of being cut off or getting in further debt. - Sam, Auckland.

Bank charges

Bank charges of automatic payments. My grandmother pays 25 cents to the bank each time an auto payment goes out. 25c for rent, 25c telephone, 25c HP, 25c electricity, 25c doctor, 25c insurance; plus anything else she may pay. Why? They’re small amounts - it doesn’t bother her. It does bother me! All the 25c’s add up to $91 a year. I’d rather have this money in my account earning interest. – K.B.
Don’t bounce cheques. It’s bad for your credit rating and costs heaps in bank fees.

Bills

Pay bills on time and if there is a discount for early repayment then take advantage of it. Don’t get behind on your power and telephone to avoid disconnection and reconnection charges.

Budgeting

To make budgeting easier for our family, I calculate ALL bills for the year (including car warrants, regos, insurance, rates, power, phone, etc). I then divide the full yearly amount by 52 weeks, and deposit that amount to a bills account. I have all automatic payments and direct debits set up to come out of that bills account, so you always have the money to pay the bills and you know they will be paid on time. - Tracy Smith
Save all change given to you at shops that is under $1. Our family of three adults has made this a habit. We use an old glass vase and all the 10, 20, and 50 cents pieces get dropped in after each shopping trip. We only dip into it if we need parking meter money. It is mounting up slowly. - Sande
Always include some sanity money in your budget as it means you are less likely to spend other money that you need for something else. Get this money out in cash each pay day and when it is gone it is gone-NO SWIPING!! - Sam, Auckland.
I think the only way to prepare for each Xmas is to put some money away each week, fortnight or whatever and try NOT to use it during the year. It makes things so much easier and not so stressful. Buy presents during the year but it this doesn't happen put a limit on each present and stick to it. The same goes when buying groceries - stick to a limit and look for specials ALL THE TIME!!!!! If you haven't got the cash on hand for Xmas items then the credit card nightmare begins and the start of the New Year is one big nightmare!!! Don't go there!!!! - Peter & Robyn.

Credit cards

If you use a credit card, and many people are nowadays to collect reward points, make sure you make prepayments in full and on time.
To focus on your goals it can be a good idea to print out a picture of the things you are aiming for (eg house) or that are important (eg kids) and either glue this onto your credit card or print it as a sticker and stick it on. That way every time you take out your card you'll see the thing that you really want. If you still want to use the card you'll have to peel this off! I saw this used very effectively on a BBC programme called 'Spendaholics' - PK

Debt

Make the most of the recession with interest rates for floating mortgages low at present, if you are able to keep paying the same amount you were before the interest rates dropped. This way you will be paying the difference straight off your principle loan amount. You can save thousands of dollars in interest in the long run. - Shirl, Napier.
Avoid the temptation to buy on tick. This applies especially to motor vehicles, furniture, clothes, holidays and hobbies. It’s bad enough that things like cars and household items lose value. Don’t add to your problems by paying interest as well.
If you must borrow, make sure you get a good deal. Just because a money lender wears a suit doesn’t mean that they are not a shark. Seek advice before you sign on the dotted line. Most cities have a free budget advisory service. They will give an unbiased opinion about financial contracts.
If you have a mortgage, and other debt like hire purchase finance or credit card debts, look at the possibility of combining all of the debt into a single mortgage. Because mortgage money costs less than other debt, you may be able to cut heaps from your mortgage bill.
Be very careful about acting as a guarantor for other peoples debt. Being a guarantor means the lender has every right to claim repayment of the debt from you as though you were the borrowers and they will certainly come knocking if the borrower fails to meet their obligations. Being a guarantor has nothing to do with being a character witness.
Beware of hire purchase. This is where the customer makes a down payment on a purchase and agrees to repay the balance over a period of time (usually 2 to 3 years) by making regular payments (usually monthly). Hire purchase may look tempting because it seems to make things easy to buy. But don’t be fooled. It is a very expensive way to buy stuff.
A retired oily ragger from Tauranga says they have a lot of fun entering free competitions. They reckon they do well winning cash and goods. All of the winnings are used for debt repayment.

Purse, note in

Put a note in your purse - "The easiest way to make money is by not spending it." And put a note on your credit card - "Are you sure you want to do this?", and a P.S. on the note: "Are you really sure you want to do this?" – O.R.

Spending contract

One method is to question yourself as husband and wife several times before buying anything. Do we both agree that we really need this? Can we borrow it? Hire it? Get it on special? Is there an alternative? Give it the ten-day waiting test – if the need remains go ahead, get it and enjoy it. We’ve been needing more furniture but it’s amazing what has turned up from family members in the meantime. – A.C.

Saving tips

We bought a TV/HiFi unit at Harvey Norman in Whangarei last year but nearly didn't - the reason? When we asked the price it was nearly $700. We told the salesman this was way outside our budget and then he said "Were you planning to buy it on our pay-later scheme or did you want to pay cash now?" We told him we'd be putting it on our credit card (which we always pay off each month, come hell or high water) and he then said in that case the price was $350!!!! In your Northland Age column today (12/04/09) you mention asking for discount for not taking 'pay later' deals but we didn't even have to ask. - Reader from Mangonui.

Suckers

Don’t get on the sucker list. Some people are suckers for anything new and anything peddled by high-pressure sales people. These seemingly charming gents and ladies have been trained in selling techniques. They receive a commission on everything they sell. Don’t let them talk you into a major commitment (that is, anything over $10!) without first taking advice from others (others who are not already on the sucker list!). Ask someone who knows, such as a budgeting organisation.