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!

I am Mark Wenzel, Senior Financial Adviser with The Hopkins Group and for as long as I remember, I have been recommending people spend less than they earn and invest the excess money. 

In my own situation, I have broadly used an ad hoc system where I pay myself first and invest this money without having any structure to the process. However, always looking for ways to improve, I wanted to look into ways I could better monitor my cash flow position and be more mindful of how my family and I spend our money.

With the additional time I have due to the COVID-19 shut down and a desire to experience more and buy less, I thought I would try ‘The Hopkins Group Money Masters’ program and share my experience with you. Over the next three months, I plan to write about my experience and share what I’ve learned over the time.

What is The Hopkins Group’s Money Master program?

Money Master is The Hopkins Group’s cashflow and budgeting solution to help put your finances in focus and give clarity to your spending. 

It’s powered by Xero Cashbook, which is an online app which can help track income and expenditure. The program is described to “take the stress out of managing your money, so you can be in a healthy position to plan and save for the future.” 

In my case, I hope it can help me better understand where my family is spending money.  

What do I hope to get out of the program?

I aim to increase my savings so that I can experience more in life.  Experiencing more to me means: 

1. Sharing activities with my family & friends now.  I get far greater enjoyment from time spent with people rather than buying things.  While you get initial enjoyment from things like cars, technological devices and home goods, the real memories for me come from activities with my family and friends.  These do not have to be expensive activities.  It is time together that brings me joy.
2. Saving money to fund future experiences.  These can be activities like holidays, bucket list activities or a course. They require planning and saving over a longer term than day to day experiences. On my bucket list is going to the US Masters, the NFL Super Bowl and living in Asia learning how to cook authentic Asian techniques.
3. Having less things that keep me tied down.  We accumulate commitments in life that keep us tied down such as mortgages, car loans and school fees.  While this will take a while to work through, I aim to be in a position in 8 years to have more financial freedom to experience life with less financial commitments and more passive income.

What will I be doing and why am I documenting the experience?

By sharing my experience, I hope to encourage more people to take stock of their finances and work towards achieving their goals. While I won’t be getting into detail about how much I spend, nor what I chose to spend money on, over the next three months I hope to:

• Be more conscious of what I spend money on and make mindful decisions about the expenditure considering my future goals
• Recognise that small regular expenditures add up to be a lot over a year
• Make changes to my habits so as to have a positive impact on my financial position
• Run some experiments to try reducing expenditure (such as shopping more at Aldi than Coles & Woolworths to see if this saves money)
• Attempt to put a value on things like insurance and considering alternative ways of reducing this cost
• Highlight that expenditure today can affect tomorrow’s experiences
• Test to see if I can save money from the regular expenditures such as the mortgage, private health insurance, electricity and gas

I plan to write regular articles sharing my progress and what I’ve learnt, to hopefully shed some light on small changes that people can make that may have a longer term impact.

If you’d like to learn more about the Money Master Program and how it may work in the context of your own financial situation, please get in touch by clicking through to our contact page or give The Hopkins Group a call on 1300 726 082.