Personal Finance: Breaking Up With My Insurance Provider

I’ve known for a while now that my car insurance fees were some kind of rort. My small, reliable, low cost car is worth somewhere between $10,000 and $12,000, and I was paying $143 a month for comprehensive car insurance. $143 a month is $1,716 a year. That means I’ve been paying almost 20% of the car’s value every year to insure it, despite my little household’s perfect driving histories, low annual kilometres and a locked garage. I’m the proverbial little old lady who only drives her car once a week to the supermarket, and instead I was being charged like I’m the stereotype of an 18 year old p-plater who’s quite keen on street racing and drink driving.

My dream car! I will own one someday.

Luckily for me, my crappy car insurance company gave me a push to change policies by increasing my fees yet again. To $157 a month, which is $1,884 a year. I repeat: $1884 a year to insure a car worth $12,000 at most. Take a moment to consider how ridiculous that is. I would have to total my car every six years to make that policy worthwhile!

I’d already created a “car replacement fund” able to well and truly cover the cost of replacing the car if I was to total it, as it seems to me that any frugal girl should be preparing for the future. So what was the obvious solution? To take out a third party fire and theft policy so that I wouldn’t be screwed if I hit a Ferrari, and cancel the comprehensive car insurance.

When I called the insurance provider I’d picked as a good bet for a new policy, the very helpful customer service rep explained an amazing phenomenon to me: if your car is worth over $10,000, you can’t get covered for anything less than comprehensive car insurance because it would give you the right to sue the insurance company for under-insuring you. I asked if this was standard across the insurance industry and he told me that for some insurers the limit is only $5,000. Basically, insurance agencies and our legal system assume that you are unable to make decisions for yourself and that you don’t understand what the policy you’re taking out actually means. Otherwise how can you have the ability to successfully sue for your choice to buy a policy that doesn’t cover your car’s value in its entirety?

I was not impressed that my plan to only have a third party policy wouldn’t work. I don’t want to go without insurance at all in case I hit that Ferrari.

However, this story has a happy ending. The customer service rep was able to sell me a policy for $1,074 a year, or just under $90 a month. That’s cheaper than any of the quotes I received from other insurance providers for comprehensive car insurance. It’s not as cheap and cheerful as that third party policy would have been, but it’s an annual saving of $810. It turned out to be very good timing as I had to pay close to $800 for dental work this week. 

My actual car! Which is clearly a Beetle copycat. I love you, Micra.

Just because a service provider was the cheapest option when you last looked, doesn’t mean that’s still the case. When I first had to purchase car insurance three years ago, the provider I picked was by far the cheapest for my circumstances. Now they appear to be very overpriced compared to market standards. My circumstances have changed in that time, and maybe the insurance market has too. This doesn’t just apply for insurance: when was the last time you shopped around for an internet provider, or ran a price comparison on different mobile phone contracts?

Look at whether you really need insurance. I’m still planning to drop down to a third party policy when my car’s value is lower. A different policy may be a better fit than your current one, and if you have a very large savings fund and the value of your vehicle is low, think about what you’re gaining from having insurance coverage. Some people wouldn’t be comfortable with the thought of paying for a new car out of pocket and would rather have insurance just for peace of mind, and that’s okay too.

If you’re friendly and you ask questions, you will receive a wealth of information. The customer service rep was willing to chat to me about all kinds of insurance issues. For example, do you know that if you live in a suburb with lots of car parks (e.g. close to the central business district or a shopping centre) your insurance premiums will be higher? That’s because people are causing accidents by reversing into each other’s cars in car parks and your premium is partly based on the statistics for your suburb.

Finance: Want To Stay Home With Your Babies? That'll be $300,000, Thanks!

Just the other day I asked my sister "are you sure you want to go back to work? It might be cheaper to stay home given the cost of childcare..."

Childcare is expensive, true. Most parents I know are paying $100 a day (no, I'm not joking) for junior to be looked after while they're at work.

But it looks like staying home has some serious financial downsides other than the loss of your salary.

MUMS taking time out from work to care for children until they start school face losing $160,000 in superannuation.

The savings hole has prompted calls for teenagers to be taught about the financial perils of being a stay-at-home mother.

The superannuation sacrifice blows out to almost $290,000 when women stay at home for a decade from the age of 30, calculations by financial research firm Canstar reveal.

One year out of the workforce costs $34,000, while three years out amounts to a $95,000 loss, it says.

I knew that being a stay at home mum for a year or two could impact on your super, but seeing the figures makes it real all of a sudden. $34,000 to take off a year?

Of course, my retirement plans don't really take my super into account. I feel like super is too hard to predict - you can't control the investments made past picking what kind of account you want, you can't control changing laws around super, you can't withdraw any money until you're 60. I want to be retired well before 60, and given that I'm committed to living within my means and deliberately building wealth, my super should just be gravy. (Let's keep those fingers crossed).

But there are a lot of parents out there who will be relying on their super in retirement, and it scares me that they could make decisions about whether to continue working or stay at home based on a less than complete understanding of the financial issues.

So is it worth it to stay home with your kids? Of course it is, if that's what you think is best for your family. But you need to know what that means for your financial situation, so that you can make an informed choice.

Finance: Would More Expensive Petrol Change Your Driving Habits?

This news article caused me to stop and think this week:

It is a hard sell, but economists from the Australian National University say Australians would be better off with a higher tax on petrol.

They have compared petrol prices around the world and say if consumers had to pay more at the pump here we would use less fuel and buy more efficient cars.

I've often thought, while reading personal finance blogs or news articles from America, you think your petrol is expensive? We pay way more! But apparently, we're not paying enough for people to switch to fuel efficient cars and drive less.

Australia (and particularly Perth) is extremely car dependent. Thing is, the excessive drivers of the world already have significant disincentives to drive. Getting stuck in traffic for hours, paying for petrol, paying for parking - which is $20 a day and up in the Perth central business district - and yet they still drive. I believe that petrol could cost $5 a litre and some people would still drive.

And the people who don't drive excessively? I'm not sure we're in it for the savings. Personally, I don't enjoy driving as much as I enjoy walking or taking public transport. There are times when I am happy that I can drive and own a car - it was particularly hard to get home from parties at night before I drove. But I didn't get my license until I was almost 23, and I coped just fine. I worked and studied, I lived out of home (alone!) and I didn't need a car.

These days, I live within a few kilometres of the city so I catch free central area transit buses, pay a very small amount to catch buses and trains further out into the 'burbs, and I walk a lot. I even walk home from work on a regular basis.

My point? I bought the smallest, most fuel efficient car I could find. But I bought a tiny car because it's a reliable brand, it's easy to park smaller cars, and I didn't see the point of a bigger car. Not because it was cheaper to run. And my household uses so little petrol that I sometimes forget that cars even need petrol. That's not a joke, though I am blonde so you can blame it on that if you like. To me, walking and taking public transport is just a part of who I am. I do it because it's convenient, it's less stressful than driving, I get more exercise by walking, it's good for the environment... But never once have I based my transportation decisions on saving money.

And that's why I think the people paying $20 a day to park next to the train station in the city centre won't change their ways.

 

My 2013 Budget Part Two – My allocation of funds

In terms of big scale categories, I use two for my budget: spending, and wealth building. One of these means your money has gone away and you’ll never see it again (I sure hope you kissed it goodbye as it flew out your fingers!) and the other means it’s busy making new friends in the form of more dollars, who’ll be your close companions for many years to come.

Why don’t I use the needs, wants, savings categories? Well to me it doesn’t matter all that much whether you’re spending on groceries (a need) or a new dress (a want) – that money is gone, baby, gone. Likewise, the difference between planting money in a dedicated savings account, investing it in an index fund or using it to pay down the mortgage faster isn’t a big deal to me – those are all wealth building activities.

I use these two categories as a way to get an accurate snapshot of how my money is travelling. So in a nutshell, my budget for 2013 is simply:

Spending – 34%
Wealth building – 66%.

But surely I develop my budget in more detail than that, right?

Yep. My categories are as follows:

Wealth Building

Mortgage – technically this is the “rent” I pay Perfect Boyfriend for living in our apartment, the Bakelair, which he bought long before he met me. Why do I pay him rent? We’ll combine finances one day, but for now we’ve got separate finances with shared financial plans and very similar attitudes to money. For as long as our finances remain separate, the apartment continues to be his asset/liability, and if we were to break up, we both understand that I would have no claim to it.
However, he uses my “rent” payment as additional payment towards the principal of the mortgage. So it’s growing his equity, and some day that equity will represent part of the deposit for the family home we buy. As such, paying my “rent” is definitely a wealth building activity for me.
Savings – I’m still building up my savings for the future, though I know the day will come that I have to invest instead of holding my money in a savings account. For now, I’m getting 5% interest and I know the money will be there when I need it.

Spending:

Groceries – food, toiletries, laundry detergent, etc. Pretty self-explanatory, right?
Bills – some of these bills are for needs (electricity) and some are for wants (my mobile phone). But they’re all bills.
Discretionary – the category that allows me to have a social life and look so darn pretty! This covers clothes (technically a need, but I spend a lot more than I could so to me that’s discretionary), entertainment, eating out, dates, presents…
Buffer – I’m in two minds about this category. My plan is to build up this money in my regular bank account, then use it for odd things. Like the holiday I take every year with Perfect Boyfriend – I don’t see the point of having a separate account / tracking my savings for one small holiday. Last year I used the money that built up in my account as extra savings, transferring it whenever the amount got over a certain point. That’s part of my plan for this year, too (and I won’t reach my goal of saving 45% of my income without a little bit of help from the buffer!). The buffer money is also there to take advantage of opportunities without having to transfer money out of my savings account.

Another one of my 'begonia babies' - plants are one of the many things I spend my discretionary budget on.

The breakdown of where my money will go:
Mortgage 22%
Savings 44%
Groceries 9%
Bills 9%
Discretionary 13%
Buffer 3%
I had to check this twice to make sure it adds up to 100%!

There are improvements to be made in some categories (I’m determined to get the “groceries” budget at or below 7%) but overall I’m happy with this budget.

 

Can you see any areas for improvement? Do you think the "buffer" category is a bad idea?

My 2013 Budget Part One – Why it won’t be 50-30-20

One of the first posts I wrote was about the 50-30-20 budget, which I now know comes from All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren and Amelia Warren Tyagi. I think that this model is fantastic as a starting point for first time budgeters, and it’s what I will probably be teaching my future children when they start earning a paycheck. When I was first learning how to manage my money (i.e. not just spend it all and then wonder why I was broke), this was the easiest budget to get my head around and follow.
 
The 50-30-20 budget is simple:
50% of your post-tax income is spent on needs.
30% is spent on wants.
20% is saved/invested.
 
So if I love it that much, why don’t I use it anymore?
 
I earn a high income (by my standards – realistically it’s about average in Australia), and while there are plenty of things I want, I try to resist lifestyle inflation. To spend 30% of my income on wants would be completely ridiculous for me. What am I going to do, hit up the shops every single weekend for new dresses and books? I’m much happier spending strategically on my wants – carefully assessing which wants will actually make me happy and which only seem as though they will.

One thing that always makes me happy: tending to my begonias.

 

So if I’m not going to spend 30% on wants, surely it should go into savings instead?

That’s the other category for which I won’t follow the 50-30-20 budget. I love saving. It makes me happy. I like knowing that when it’s finally time to replace Perfect Boyfriend’s car, we can pay for it in cash. I like knowing that I can get married without going into debt. I like knowing that if something terrible happens and I lose my job, I’ll have an emergency fund.

What’s more, while I enjoy my job and can’t imagine quitting anytime soon, I know I don’t want to work until 70. I look forward to the first day of official retirement, when I can wake up at a natural time for my body, take as long as I want to eat breakfast and go for a three hour walk before lunch.

There are plenty of blogs out there about early retirement, and from what I can gather, a savings rate of 50-75% is essential. So if I settled for a savings rate of 20%, what would happen to me if I got to 40 and wanted to retire? I’d have to keep working! That’s no fun. I like knowing that I have enough money saved to give me options for what I do with my life. This is why I believe your savings rate should be much, much higher than 20%. I’ve set myself a goal of saving 45% of my income in 2013, and I can’t wait to tell you on December 31st that I’ve achieved it.

 

Coming next Friday: My 2013 Budget Part Two

Finance and Life: Goals for 2013

Well, it's taken me a while, but I've made up my mind on what I want to achieve in 2013.

I don't believe in New Year's Resolutions - why resolve to change, when you can just do it instead? However, I do love the idea of using the new year as an excuse to take stock of where I'm at and announce what I'm going to do with the next twelve months.

I'm terribly proud every time I manage to keep a plant alive long enough to produce flowers - this Portulaca on my balcony is a rare success.

Save at least 45% of my income
This is an increase from 35% last year and as such, I guess it's a bit of a stretch goal. How will I achieve it? By scheduling the transfer to my savings account and not touching the money! Seriously though, I'm in a good situation with a reasonable income, no 'bad debt' and no medical or personal issues - so why shouldn't I be able to save money like a champ? This will require me to stretch my frugal muscles (eeeeww) so expect to see a few posts on frugality soon.

Pay off my HECS-HELP debt
That's the student loan the government provides if you can't pay for uni up front. It's not bad debt (the repayments are based on income and instead of a 'real' interest rate the debt is only indexed by inflation), but I still want to be rid of it. Psychologically it will be nice to have paid my degree off, and it will improve my cashflow as the repayments will no longer be deducted from my paycheck.

Complete my Graduate Diploma
This will be the fourth consecutive year that I've chipped away at my post-graduate qualifications while working full time. Enough is enough. I worked part time while studying at undergrad level, now I've been studying part time while working in a professional career - it's time to complete my current study commitment so I can focus on work for a few years before even thinking about any more formal education. I'm enrolled in classes for the first and second trimesters of the school year, so if all goes to plan I'll be graduating in August.

No drinking in 2013
I might elaborate on this later, but I feel like alcohol is doing me harm and no good. I've been toying with the idea of trialling an alcohol-free life for some time, so I decided to align it with the calendar year because, well, I guess just because it's fun to say "no alcohol in 2013" :-)

Cook one new recipe a month
I love my favourite meals so much, sometimes I struggle to find motivation to learn new recipes.

What are your goals for 2013? Do you have any advice on how I can achieve my goals?

Is the $10,000 Chery Unethical?

The Chery J1 will soon be selling for $9900 - brand new.

Given that this car has been criticised for having inadequate safety features:

The car doesn't have stability control, which, from the beginning of this year, is mandatory for all passenger vehicles registered in Victoria. There are anti-lock brakes but only two airbags, at the front.
 

Do you think it's unethical to sell such a cheap car if it's poor quality?

My concern is based on the idea that those who aren't doing well financially (or are, um, just plain old cheap) will buy this car based on the drive away price, not knowing that it potentially isn't the standard of quality you expect of a new car.

If I bought this car, I would be concerned that it would be less reliable and more prone to those mysterious car "issues" than, say, a new Toyota Yaris.

On one hand, I feel like large corporations have a responsibility to market products that won't need to be replaced any sooner than the average for that industry. What I mean is that if the average small car can survive to 250,000 kilometres before it gets driven to the big scrapyard in the sky, it's unethical to produce and sell a car that can only make it to 150,000. Whether or not the Chery J1 would be unethical by that measure is far too technical for my knowledge of cars.

On the other hand, it really is the responsibility of the consumer to undertake research on any product they purchase, including safety issues for a product like a car where poor quality could cause your untimely death. I wish I'd learnt more about safety ratings for cars before I bought my car in 2010 - it's only rated at three stars, and now that I know a little more, I should have paid more for a higher-rated car. I can't blame anyone but myself for that.

I'm also conflicted about whether the difference between a three star rated car (such as the J1, or my little Nissan) and a five star rated car is honestly large enough to increase the statistical likelihood of death or serious injury in an accident. Mr Money Mustache explains much better than I can that safety is an illusion - your chances of dying in a car accident are so minuscule anyway that a slightly "safer" car could be said to make no difference at all.

What are your thoughts? Are cheap, poorly-made cars unethical? Is the difference between a three star safety rated car and a five star car enough to make any real change to your chances of being hurt in a crash?

Could You Live on the Dole? And How?

In case you missed it, this week our Federal Families Minister, Jenny Macklin, stated that she could live on the dole. This has caused a massive amount of controversy in the media, with a Greens senator declaring that he will live on the dole for a week to experience the hardship of the unemployed, and calling on Macklin to do the same.

In one sense, this is a ridiculous question because if any given person loses his or her job and is forced to rely on welfare, of course they scrimp and struggle and get by. What's the other option - give up and let yourself starve to death? So who would honestly answer "no" to "could you live on the dole?"

That doesn't mean it would be in any way easy to live on the dole. What I'm sure of is that those of us with well paid jobs have no idea how hard it is to make ends meet on the dole (or Newstart Allowance, as it is officially titled). I doubt that a week is enough to understand how brutal that kind of existence would be. A year might be more appropriate.

The political furore over this issue started me thinking: what would I do if I lost my job and I had to live on the dole?

My reality:
My job is extremely secure, I have an emergency fund, and I live in a dual income household which means that if either Perfect Boyfriend or I became unemployed, the employed partner could support the other.

But let's imagine...
If I'm going to imagine a scenario in which I'm on the dole, I would also, for fairness, exclude my current fortunate situation in which I have a partner who could support me. So let's pretend I'm single, and renting (which I would be if I was single at this age).

According to the Human Services (formerly Centrelink) website, if I was unemployed my dole payment would be $492.60 a fortnight.

When I was renting my own tiny flat, I was paying $520 a fortnight rent.

So, obviously the very first thing I would do is break that imaginary lease and move in with a family member. Sure, it wouldn't be all that great to sleep on the floor of my brother's study, but it beats homelessness.

Next up: I would change the insurance on my car from comprehensive to third party only. This might seem like a strange next step, but because of my age and the relatively short time I've had my license, my insurance is stupidly expensive. It would represent something close to 15% of my income if I was on the dole. I love my car, but I accept that it's a convenient luxury rather than an absolute necessity, so I would change my insurance immediately and if the length of time I went without finding work stretched on, I would consider selling it.

I would sell my furniture, white goods and anything that could bring in some money - if for no other reason than because when you're flat broke, you can't pay to store your furniture!

What wouldn't I give up? I'd like to believe I'd be able to keep my private health insurance and mobile phone. In the scenario I've outlined, because I could live with a family member, I'd be able to afford to eat something other than two minute noodles, and to contribute to household bills. I would need to tighten the budget for food and ongoing bills, but I think it would be possible to get by.

But, wait: this imaginary world doesn't seem so bad?
Yep. That's my conclusion too. And do you know why this scenario is liveable, and not a world of horrors? Because I'm so freaking privileged. I have strong relationships with family members who have stable homes and would welcome me with open arms. That is pure luck. It's pure luck that I don't have a whole family of drug dealers, that my relatives aren't violent thugs, that they're alive. Not everyone is in this situation. Some people have no family at all, or a family so terrible that living on the streets looks like a better alternative to them. 

If I didn't have family to rely on, I would have to rent or pay a mortgage. Even if you share a house with as many people as possible in a crappy suburb, could you find a room for less than $100 a week in Perth?

Additionally, I'm healthy. If you had any kind of health problem, I imagine that it would be extremely difficult to find money for medical care on the dole. 

I don't have children. I do not know how any parent pays for school fees, uniforms, books etc while on the dole. The allowance goes up slightly if you have children, but not enough to cover the costs of the little tykes.

Shouldn't people on the dole just get jobs?
Sure, if I was on the dole I'd have a good chance of finding employment quickly. That's because I'm lucky enough to have been born into a literate family, lucky enough to have attended good public schools, lucky that I'm smart enough to get okay grades even with a stressful family situation and patchy attendance, lucky that my Dad pushed me to go to uni, lucky that said Dad supported me financially while I was at uni, lucky that I have an Aunt who told me to apply for graduate jobs... The list goes on.

Try to imagine being born into a family where nobody has ever had a job, and in fact, nobody can read and write. Try to imagine growing up in a family where your parents never enrolled you in school, or they enrolled you but failed to feed you breakfast beforehand or even keep food in the house, failed to take you to school, never encouraged you to go. Imagine growing up without ever learning to read and write well enough to complete the most basic school work. Imagine having nobody in your life who could provide you with information about how to better yourself, nobody who could teach you basic life skills. Imagine having never used the internet, or read a book.

How easy would it be to find a job then?

I am so very, very grateful for everything I have.
        

Coffee Machine Ownership On The Rise - Does This Mean We're More Frugal Than We Used To Be?

Did you catch this article yesterday?

Aussies are getting more cup for their buck, saving up to $800 a year on cafe-quality coffees with the rise in popularity of affordable at-home machines.

I find the increase in ownership of coffee machines (especially pod based machines, like the Nespresso system) fascinating.

I'd love to believe it represents a growing awareness of how all those little luxury purchases affect the bottom line. I wish I could say it shows that Australians are finally learning to live within our means.

But honestly? I think that it's just one of the new, exciting toys that everyone wants to own right now. To me, a coffee machine in the kitchen represents lifestyle inflation. Five years ago it was ipods, this year it's Nespresso machines. If I don't see an article about increasing ownership of e-readers, and whether it represents a new frugal and / or minimalist zeitgeist, within the next two years I'll be very disappointed.

I'm not telling you that you shouldn't buy a coffee machine. Perfect Boyfriend bought one (for 60% of its retail price!!) a few months back and I love it.

But what I hope the folks running into Nespresso shops with their credit cards understand is: your coffee machine is only saving you money if you're actually saving more money. Has your savings figure gone up since you bought one? Has it changed your spending habits?

It could be true that Australians are becoming more frugal. However I tend to think that there will always be a section of the community who will live within their means, another section who will buy the new exciting toy no matter how much debt they have, and a whole other section who spends big bucks when times are good, and cuts back when that paycheck isn't looking so great anymore. I suspect that those people are currently cutting costs at about the same rate the big miners are cutting jobs in Perth.

I can see clearly now the rain has gone... Wait, nope, it's just my new glasses.

When I was about twenty, years of school and uni finally took their toll on my eyes. I started getting headaches and having trouble reading the slides in lectures... Yep, I needed glasses.

I think I spent about $400 on that first pair of glasses, and I didn't even really like them all that much.

I've learnt a lot since then. Some of what I've learnt is even about buying glasses without spending a whole week's pay. That's what I'm sharing here.

Your eye tests are free.
Medicare will pay for you to have an eye test every two years. Some optometrists will waive the cost of your eye test even if medicare doesn't cover it (i.e. if you've already had a test in the last two years), because they want you to buy your frames from them.

Your employer may partially cover your costs.
This is the case for almost all public servants and a great deal of employees in the private sector. If you work at a computer, usually all you need is a note from your optometrist stating that you require glasses for screen work, and your receipts. Chat to your HR team for more information.

Your health insurance will cover more of the costs at some stores than others.
I looked into it and my health fund offers special deals at Specsavers stores. Some quick maths made it clear that this was my cheapest option. When I visited the Specsavers shop, they were more than happy to check for me exactly what my fund would cover. I chose one pair of awesome frames and one of very stylish sunglasses - $339 in total - but all I paid was $89. I cannot recommend enough that you work out where your insurance dollar counts the most.

Yes, these are actually my new glasses. Are they not beautiful?

It's almost always cheaper to have your old frames updated.
This means that optometrists try to steer you away from it (hint: they're in this business for the excellent profit margin). It costs about $100 at most optometrists to update your current glasses. If you love your frames, there's no need to adjust to a new style when you can have them remade with your new prescription. Speaking of which...

Optometrists HAVE to provide a written prescription if you ask... But they won't offer.
Without your prescription, you can't buy glasses anywhere else. This is what they want. Get your prescription and you suddenly have more options for where you buy your frames.

Don't be afraid to buy glasses online.
All you need is your prescription and your "pupillary distance" (this gets measured as part of your eye test, but you may need to ask for it specifically). I've bought several pairs online and it's always worked out well. I've used Optical4Less and despite the slightly dodgy website and not-so-great English, the glasses were great. It's an excellent site if you don't have health insurance and you need to buy glasses as cheaply as possible. The frames I bought never broke or scratched, though I admit they didn't have that designer look. I've also used SelectSpecs for designer frames. That's where I bought the Burberry frames I'm wearing right now - I tried them on in an optometrist where they would cost $450. I bought them for $149 online. Is it any wonder Australians are turning to internet shopping to save cash? Both sites provided exactly what was promised, with excellent customer service.

I spent more than I had to...
Because my job is reasonably conservative, I'm getting my current black Burberry frames updated so I can wear them to work most days and save the brilliant, colourful frames above for casual wear. I feel lucky to be able to afford this luxury - as one of my favourite heroines, Aurora Teagarden, says, having several pairs of frames is one of the best parts of being rich. For me, it's one of my favourite splurges. Even so, my new frames, new sunglasses and new lenses for my current frames will cost me... $188 ALL UP. That's still half of what I paid for that very first pair years ago. And if I'd chosen frugality over style, I could have paid nothing at all out of pocket.

If You're Only Going to Read One Personal Finance Article This Week...

It should be this one.

Justine Davies explains the predicament parents find themselves in when juggling financial pressure with the desire to - crazy suggestion - actually spend time with their children:

Being a primary carer is a role that’s at odds with current economic reality, whereby it really does take two incomes to afford a house, a car and the running expenses of day-to-day life.

 Read it!

Happy Financial New Year!

I've decided to stop beating myself up about falling off the frugal wagon. You know what? I didn't actually spend THAT much more than I should have (I think my budget slipped by $20 - $30 a week) and I was still saving as much as I should - one of the many benefits of "paying yourself first".

What I've also realised is that I need to be more realistic in my expectations of my own behaviour. I put a lot of pressure on myself to be perfect, which is an impossible goal. No one's perfect (even Perfect Boyfriend has been known to make the occassional mistake). I'm working full time in a demanding job with a high level of responsibility and stress, I'm studying at a post-graduate level part time, and I'm honouring my commitments to my beloved family. Heck, I'm even slowly building up my fitness again after being ill and injured this past twelve to eighteen months. I'm doing pretty well! So if I'm saving somewhere in the vicinity of 50% of my income, I can forgive myself an infrequent takeaway or coffee.

Moving on.

It's the first day of the new financial year!

What does this mean?

You get to submit your tax return anytime from now onwards... So you'll probably have a refund (yay!), but if you're unlucky or you've left those finances to flounder this year, possibly a bill.

What else? Well, you have a brand new financial year in which you can achieve those financial goals you've been daydreaming about.

When you're setting financial goals, you need to focus on what it's realistic to achieve based on your income and financial commitments. You need to set a date by which you will have achieved this goal. And you need a plan for how you'll get from "this is what I want to do!" to "wow, I did it".

I have two financial goals for this financial year: pay off my student debt, and contribute $13,000 minimum to my savings.

Student debt in Australia is not all that awful. It doesn't even qualify as a "bad debt" according to most people. Why? We used to have free university education, and when the government at the time scrapped that, very real concerns were raised that only the rich would be able to pay for degrees. So the government set up a system whereby it provides interest free loans for the majority of university students, and the repayments are based on a percentage of your income once you're working full time.

Any Americans reading this right now are probably thinking huh? Interest free loans? Yep, I get the impression we're very lucky with this system. Loans are indexed by the rate of inflation (usually 3%) each year, and the repayment scheme is generous. It's taken out of your pay before it even gets to you, just like our tax contributions. I currently earn slightly more than the average income in Australia, and I only pay $250 a fortnight towards my student debt. If you don't earn above a certain amount each year, you don't have to make any repayments at all. Some people never have to pay off their debt, because their degrees lead to low-earning professions.

However, I'd rather not have this debt at all. For a start, while the loan is only increasing at the rate of inflation, that money would look great in my savings account gaining compound interest.

My debt is currently $10,500, so if I keep paying it off automatically, it'll take almost two years at the current contribution rate. Instead, I'm going to save up the $4000 extra I'll need to pay it off, I'll have to ready and waiting by next May so that the payment can be transferred prior to 1 June (indexation date). I'm not making the voluntary payment any earlier than that because I'd like it to gather dust - I mean, 4.5% interest - in my savings account instead of sitting in government coffers, earning someone else that interest. As mentioned, by paying it off in full prior to 1 June my debt won't be raised in line with inflation, so there's no downside to keeping the cash where it'll work harder for me. I don't have a separate plan to save this money - it'll just be included in my normal fortnightly savings each payday.

Speaking of which...

This financial year I'm going to save at least $13,000, which is $500 from each pay. The due date for this figure is June 2013 (i.e. the end of the next financial year). This is realistic with my budget (which I'll be posting about soon). I will achieve this via automatic transfers from my spending account to my savings account each payday. I may even exceed this goal - we'll see! This is my "long term savings", which is only a portion of the total amount I save each fortnight.

Have you set any goals for the financial new year?