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June 2020 Property Market Update

Saving on health insurance | Money Master Diaries

Mark Wenzel is trialling The Hopkins Group’s  Money Master program  to see if it can help him gain more control over his family’s cash-flow position. Mark’s goal is to free up some of his money to fund family experiences rather than spend them on things that don’t matter as much. He is documenting his progress and key insights in a regular blog series called the “Money Master Diaries”. This blog is the third in the series.

Before we get started on this Money Master diary, I want to be transparent right from the start about the topic I’m tackling today. Health insurance is a topic that’s regularly raised by clients – and it certainly makes sense when you start looking at other personal insurances, like life and TPD, with your financial adviser, that health insurance may come to mind. However as a financial adviser, I’m not in a position to provide advice in this particular area, nor am I qualified to do so. If you’re considering or reviewing health insurance in the context of your own situation, you’ll need to undertake your own research to determine what’s going to be right for you in this area.

All that said, health insurance was another big ticket item that came up in reviewing my family’s cashflow position. So, as part of my Money Master experience, I felt it was important to explore the value I was getting out of this insurance, versus what I was paying. You may decide to consider a similar review in your circumstance, but by no means does the following constitute advice. Rather, this is a personal reflection.

As part of my ongoing expense review with the Money Master program, I contacted my health insurer to see where we could save money. We have not reviewed our health insurance comprehensively for many years. We have held the view that this is a taboo topic and we do not want to upset the status quo in fear of needing to claim or triggering waiting periods for procedures we may need in the future. Really, it’s an excuse; we have been avoiding decision making. Financial decisions are trade-offs. They require you to analyse what you know today and choose a course of action you are comfortable with. Not making financial decisions is costly and lazy.

The reality has been that we are healthy and rarely claim on the policy. This fact has made me question the benefits of health insurance in our situation, given the quality of Australia’s public healthcare system and the small amount of money we get back from the services we use.

This blog series has been the catalyst for me delve deeper to save money now and in the longer term. The long term is the main focus here; while $100 per month saving does not sound like a lot of money in the short term, over 10 years this savings likely amounts to $15,000 (with inflation & compounding of savings).

The phone call to my health insurer was very enlightening. We are on top hospital package with a $250 excess per adult, per year. We can reduce the cost of the premium, saving $347.64 per year, by increasing this excess to $500 per person per year. By self-insuring the additional $250 per person (to a maximum of $500 per year) we have a pay back of 1 year 5 months. This means if neither of us need to go to hospital in a year, we save the money. In my mind, this seems a reasonable financial decision for my family.

As part of this decision, I also noted my insurer also offers an option that has a $750 excess per person but only to packages that are current. We are on an extras package called ‘Standard Extras’ (which is not offered anymore), which covers us for a broad range of services including optical, physio, major dental and chiropractic. Many of these services we have not used in the past and are unlikely to use in the future. However, the main reason we have chosen to stick with our current extras package is that there are no real cost savings by reducing extras to a choice of four. The additional extras are not costing us additional money, so why get rid of them?

The hospital cover we are on is ‘Top Hospital’. By changing to ‘Silver Plus’, we can reduce the monthly premium from $381.46 to $366.34; a saving of $15.12 per month. The trade-off is that we will no longer be covered for chronic kidney disease, dialysis, cataract surgery and joint replacements. These can be added in the future with a waiting period of 12 months, but we did not think this was a worthwhile saving. There is no guarantee that they will not change their policy in the future, so this time a saving of $181.44 per year is not enough of a carrot to reduce the level of hospital cover.

All up, the result of my health insurance review is that we will save $347.64 per year by paying more if we ever need to go to hospital. When this saving is added to the $420 in coffee, $468 from calling the bank for rate reduction and $589 in energy supplies, it brings the annual savings identified with the help of the Money Master program to $1,824.64. When you add the benefits of fixing our interest rate, saving $2,860 per annum, the total is $4,684.64 (I have kept this separate because not everyone wants to fix their rate). I’d say that’s a pretty good start on growing our savings; and it’s definitely money I’d rather be spending on experiences and making memories with my family.

In my next blog, I will report on the savings that have been identified in the monthly expenditure and some targets we have set on personal expenditure. Stay tuned!

Do you think The Hopkins Group’s Money Master program can help you identify savings in your life? Speak to us about getting started today!

Top 10 EOFY Strategies to discuss pre 30 June

Can you believe the end of financial year 2019/20 is almost upon us?

Amongst all the distraction and chaos we are simplifying everything this year with our top 10 strategies you may wish to discuss with your financial adviser or accountant before 30 June.

1. Top Up Your Super Contributions

2. Bring Forward Super Contributions

3. Make a Spouse Contribution

4. Get a Government Co-Contribution

5. Lodge Your Deduction Notice

6. Review Salary Sacrifice Arrangements

7. Pre-Pay Expenses & Crystallise Losses

8. Defer Income & Gains Until July

9. Gather Your Receipts

10. Meet Minimum Pension Standard

Maximising Super Contributions – Financial adviser

If you’re under 65 or otherwise eligible to contribute to super, you should think about maximising your contributions. However, there are limits on how much you can contribute – generally, up to $25,000 pa from ‘before tax’ money (e.g. employer and salary sacrifice contributions). We can discuss your assessable income, potential tax deductions associated with topping up your super and determine if this strategy suits your circumstances.

If your spouse isn’t earning much, you can consider giving their super a boost. If your spouse earns below $37,000 you might be able to claim a spouse contributions tax offset of up to $540 when you contribute $3,000 to their super.

While it’s generally too late to enter into a salary sacrifice arrangement for employment income earned in the current financial year, you should review your future arrangements for the coming 2020/2021 financial year to ensure they’re effective.

Bring Forward Expenses and Defer Income – Accountant

If you think you might earn less next year, you would generally want to think about bringing forward tax deductible expenses and deferring assessable income.

You can pre-pay up to 12 months of expenses such as interest on an investment loan. This applies to deductible work-related expenses like insurance premiums for income protection policies too. If you’re planning on buying a new work-related tool (e.g. adding to your professional library or tools of trade) it’s immediately deductible if it costs less than $300.

If you’ve realised a capital gain during the year, you might want to consider bringing forward the disposal of an asset carrying a capital loss to offset capital gains.

Deferring income can be problematic, but worth considering if you are certain that you’ll earn less next financial year.

Get your admin in order

It’s a good idea to start gathering your paperwork, including those pesky little donation and incidental receipts, so you’re ready to meet your accountant early in the new financial year.

What to do now?

Book your phone or video meeting with a financial adviser or accountant from The Hopkins Group. This week we can find out if any of the 10 strategies listed above might need further consideration in light of your personal circumstances.

Will you benefit from the new HomeBuilder grant?

Last week, the government announced a new HomeBuilder grant to inject more life into the residential construction market across Australia.

So how much is this grant?

The HomeBuilder grant is a $25,000 time-limited program to home owner-occupiers who are either building a home or substantially renovating one.

This grant applies if you are buying a new home worth no more than $750,000, or renovating your current home for between $150,000 and $750,000.

How long is the scheme running for?

The HomeBuilder grant will be available for building contracts signed between June 4 and December 31, 2020, and where construction or renovation starts within three months of the contract date.

What’s the catch?

This scheme has a number of specific caveats. The key one is that the construction price of the new home must be between $150,000 and $750,000.

There’s also the time limit which basically restricts eligibility to within the next nine months so you will need to move quickly.

What next?

To find out more about the HomeBuilder grant, learn more about the eligibility criteria or understand if this scheme could suit your financial circumstances, get in touch with us today.

Fighting condensation and mould this winter

Help! My walls are starting to grow green and there is water dripping from my windows! What is CONDENSATION? I NEED DAMAGE CONTROL!

It’s definitely that time of year again. With the icy chill of Melbourne winters, it’s no wonder that we’re fighting to keep our homes warm in these cooler months.

However between heaters blaring, clothes drying, kettles boiling, and just generally breathing, we probably don’t realise that all the things that keep us toasty and warm are contributing to the moisture in the air and temperature profile of our homes. But why does moisture matter?

What is condensation and how can it be identified?

Condensation is caused by humidity in the air from general everyday living. Moisture is absorbed into the atmosphere of your home and then when the home begins to cool, the moisture comes down to rest on cool surfaces resulting in condensation.

Identifying condensation is reasonably straight forward. The giveaway is moisture dripping and collecting on the inside of windows and their sills. Condensation is most noticeable on non-porous surfaces, as the moisture is not absorbed, making it easier to spot as it sits on top of the surface.

However, condensation can settle on any surface and may not be noticeable until you have a small spread of green mould growing in the affected area.

How can you prevent condensation in your home?

To help you keep your home climate and atmosphere in a condensation free sweet spot, here are some preventative tips to help get you started:

1. Open your windows.

Proper air flow through the home is vital in the prevention of condensation. It helps the humidity and moisture in the air escape, while also regulating temperature.

2. Turn on your range hood.

Simply boiling the kettle or cooking on the stove top can significantly contribute to the humidity in your living spaces. Luckily your range hood is designed to suck up some of the moisture caused by these activities – you just need to make sure you turn it on!

3. Turn on your exhaust fan.

Whether you are showering, tumble drying clothes or simply leaving wet items to dry inside, remember to leave the exhaust fan running to help that moist air escape.

4. Run the dehumidifier setting on your split system.

Most newer split systems have this option, so it is worthwhile running this setting for a few hours a day to see if you can noticeably reduce the amount of moisture in your home.

What happens when preventative measures aren’t working?

If you are doing everything to prevent condensation, but still have those pesky droplets running down your windows, it is important to make sure you are regularly wiping down affected surfaces to prevent the moisture from building up. Not wiping the surfaces that are damp can not only cause damage to areas such as skirting boards and joinery, it can also cause the sudden growth of mould.

While mould isn’t exactly a pretty sight for any home owner or tenant, the visual elements are not the most concerning; mould can also cause serious health problems if left untreated, so it’s in your best interests to take actions to remove it as soon as possible.

How to treat and prevent mould

In the event that condensation has gone on to create mould, you will need to act swiftly to treat the growth and prevent its spread.

1. Wipe down the infected area.

Using a test patch first, dilute a small amount of bleach in water and use this to clean the mould from the surface. If you are looking for a natural alternative, white vinegar is also a great option for cleaning away those pesky green mould spores.

2. Make surfaces less hospitable to mould.

Anti-mould preventative can be added to normal water based paints for a more permanent solution. Of course, if you are a tenant make sure to ask your property manager first before repainting or painting any walls!

3. Purchase a de-humidifier.
Failing the dehumidifier setting in your split system, a more permanent option is to purchase a standalone dehumidifier. These are designed specifically to extract excess moisture in the air, stopping condensation in its tracks and preventing the moist environment in which mould thrives.

Condensation can seem scary and unmanageable but when you break it down and make small changes to keep it at bay, you will find the little things make the world of difference!

Are you concerned about condensation and mould as a tenant or landlord? To discuss your options in the fight against these issues please do not hesitate to contact one of our property managers today.

This article was first published in July 2017.

The phone calls that saved me money | Money Master Diaries

Mark Wenzel is trialling The Hopkins Group’s Money Master program to see if it can help him gain more control over his family’s cash-flow position. Mark’s goal is to free up some of his money to fund family experiences rather than spend them on things that don’t matter as much. He is documenting his progress and key insights in a regular blog series called the “Money Master Diaries”. This blog is the second in the series.

It’s been a few weeks now since I decided to trial The Hopkins Group’s Money Master program, so I thought it’s about time I gave you an update on the progress I made so far.

Since my last blog, I’ve managed to set up the data feeds from my bank, which took a little bit of back and forth between the systems but thankfully it’s all been resolved now. I can now get a feed of my transactions in Xero (the system behind our Money Master program) and have started to track and tag ingoing and outgoing expenses against my budget. This is something our accounting team will help you with as part of the program.

After getting this set up, the first order of business was for me to tick off some big-ticket items that I was confident I could squeeze a better deal out of.  My first call was to the energy company.

I have found energy pricing is difficult to manage. They only seem to put you on annual contracts, after which the price reverts to the maximum. I’ve found it pays to keep on top of energy bills.  The phone call saved me $422 on the electricity bill and $167 on the gas bill; a worthwhile phone call, I’m sure you’d agree. The only major change to make this happen was that the funds had to be paid via direct debit from a bank account not a credit card. For a $589 a year saving, I am happy with this arrangement.

The next change I have committed to is buying my bean coffee from Aldi.  I was paying my favourite café in the city $48 per 1kg bag (with a free almond cappuccino) for beans I loved. As a sacrifice for this exercise I thought I would try $13.95 bag from Aldi.  I had low expectations which have been exceeded massively. The coffee is smooth and tasty. I like it. If we commit to buying Aldi coffee beans over café coffee beans, we estimate we will save $33 per month or a tidy $420 over a year.

The next call I made was to my bank. I make this call regularly because it is a big-ticket item. In the last 2-3 years I have wiped off 77 basis points off my mortgage. The last time I called, the answer was a flat no. They said that I was on the lowest rate. This time, they were more than happy to give me a 11-basis point reduction.

It’s worth noting here that while rate reductions with my bank do not equal more cash in my pocket, I do benefit from paying down the principal of my loan. This will save me an additional $468 per annum or $11,699 over a 25 year period.

Adding to the 77 basis points I’ve managed to wipe off in the last couple of years, this additional 11 basis point reduction brings my original loan interest rate down by a total of 88 basis points. This is more than $4,000 in savings per year, not including the interest rate reductions that have been passed on from the Reserve Bank. No wonder house prices are rising!

If you’ve never made this call to your bank before, it’s worth starting to do so on a regular basis and to have comparison offers on hand before you call. While I do not think you will get the full amount from your bank in one call, persistence and a bit of research can save you in the long run.

Another thing to think about when reviewing your loan, is whether or not you fix your rate. In my situation, I have always been a variable rate person, but I am not advocating it for you without understanding your situation. For me fixing is compelling on a 1- or 2-year outlook.

However, the difference in fixed vs variable rates that my bank is currently offering is 68 basis points, which will save me $2,860 each year. This has got me thinking…

For me, the main reason stopping me from fixing my rate in the past has been the prospect of lower rates. Additionally, some of the downsides of fixed rates are no offset account against the portion that is fixed, limited ability to make extra repayments, no benefit from future rate reductions and break fees if you have to exit the loan for any reason.

That said, now that it’s become highly unlikely that interest rates are going to drop much further, as the Reserve Bank of Australia have clearly stated that they do not expect to lower the cash rate below 0.25%, if you are going to fix your rate, it becomes more compelling to do so while they are low.

The risk of higher rates is real. The government overestimated the JobKeeper benefit and is planning on kick starting the economy with direct stimulus to important sectors such as construction and tourism. The massive stimulus around the world has made money more expensive due to the quantity of government debt available.  This could filter through to the banks funding costs over time.

In addition to this, there are figures that suggest retail spending is recovering strongly.  This could result in a change in outlook for interest rates which would lead to an increase in fixed rates. Please note, this is not advice – you need to consider this information in the context of your own situation before making any decisions. If you would like to discuss fixing your interest rate, please speak to our mortgage broker, Loreen Dyer, to answer any questions you might have about your loans.

Ultimately, the biggest saving I’ve identified so far in this Money Master experience is the reduction in my loan interest rate – but I’m looking forward to continuing to identify areas I can improve my family’s cash-flow as we try to put ourselves in a better position to live the life we want.

Could you also be saving big on your mortgage? Speak to us today about reviewing your home loan and to see if we can help you save!

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