Financial Planning>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 fourth in the series.

Over the past month or so of tracking my expenses with The Hopkins Group’s Money Master program, I’ve managed to save quite a bit of money by reviewing some of the big ticket items coming out of our account. I have been impressed with the progress made so far, but wanted to see if I could squeeze even more savings by reviewing some of the smaller expenses that have been coming out via regular direct debits.

Product and service providers love people signing up to direct debits because they know their cash flow and expect that many subscribers will keep paying regardless if they are using the service or not. And that’s where the danger lies for us as consumers – the set and forget nature that makes things more convenient can mean sometimes we’re paying for things we don’t really need.

We, as a family, have several direct debits set up. They have crept into our spending habits in recent years, so I already had an idea going in that this was an area we could find savings in.

The first area to focus on was pay television subscriptions; for us, that’s Netflix, Disney+ and Kayo (part of Herald Sun subscription). Netflix is the most used among the whole family, so we have decided to keep this. However, we decided to cancel our Disney+ subscription, to save $8.95 per month. While my daughter is disappointed with the decision, paying for a small number shows for one member of the family felt excessive.

 

We also have a newspaper subscription (which includes Kayo) at $22 per month. This allowed online access and the weekend newspapers. My wife and I both enjoy reading the newspaper, but we think we can live without it. To my mind, looking at the news website is habit you get into, but with many sources of news and information out there that you can access if you want to find out more about any topic, it’s an expense we can probably live without.

Next on the list was Audible. I have been a subscriber to this audio book provider for more than three years and it has allowed me to access one audio book a month for $16.95. I used to love it, but have grown less interested over time and find I can find the information I am looking for elsewhere. I enjoy accessing information audibly, but there are alternatives to audio books for learning such as podcasts, YouTube, webinars and company websites (I even present my own podcast focusing on investment management called Talk Investment with Mark Wenzel).

One of the patterns that was consistent with my Audible purchases was that I would buy books from people that I had heard on podcasts. If I went back and listened to the podcast again would the key messages from the book be conveyed in the podcast? I will forgo my subscription to test this out.

While these subscriptions have value in our lives, we’ve decided that we would try life without them to see if it will work for us. We may choose to re-subscribe to any of these subscriptions in the future if we want to, but in my opinion these are things and, once we get used to the alternatives, we will not miss. Time will tell.

The cancelling of these subscriptions, which I did today, will save us $47.90 per month or $574.80 per year.

I challenge you to review your subscriptions and assess if they are still relevant in your life. Are there alternatives? Can you find something else to do with your time that is more productive, more focused on what you enjoy and at a lesser cost?

This is the fourth entry in a series of articles I’m writing about saving money by reviewing and potentially changing behaviours using The Hopkins Group Money Master program. The savings I’ve reaped so far are:

• Energy – $589
• Banking & Coffee – $888 (Plus $2,860 for fixing my mortgage rate – this is a choice with trade-offs so not officially included in the total figure)
• Health Insurance – $347.64
• Subscriptions – $574.80

Which comes to a total savings to date of $2,399.44. When our decision to fix our home loan rate is included in the calculation, this figure tops $5,200 – that’s $100 per week of savings. I am really pleased and surprised by this.

Taking a critical look at what we spend money on, making some important decisions and taking the time to do a few phone calls has saved us a good amount of money – which brings me closer to focusing on the experiences that matter most to me and my family.

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!

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!

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.