Penny Pinchers
The Age
Monday December 6, 1993
A few weeks ago, Money Extra readers were asked to send in their favorite money-saving tips, the best which appear below. When the time comes to pay for your Christmas spend up, you may be glad we asked.
`LOOK after the pennies and the pounds will take care of themselves" is an old-fashioned maxim that many Money Extra readers still live by.
The money-saving tips below show that the careful scrutiny of a few dollars spent here and there can produce surprisingly significant savings over the long term. Importantly, you don't have to live like Ebenezer Scrooge for these tips to work. All that's required is a little extra thought and effort before you part with your hard-earned dollars.
Off-peak saver JENNIFER LANNEN, from Swan Hill, writes that she has saved more than $300 a year by switching to the ``Winner" time-of-use tariff system that allows her to take full advantage of off-peak electricity rates.
Ms Lannen points out that electricity betweeen 7am and 11pm Monday to Friday costs 17.31 cents per kilowatt-hour, compared to 3.74 cents per kilowatt-hour at all other times, including weekends.
Ms Lannen does her washing after 11pm each night and her ``baking, casseroles and vacuuming" on weekends. ``Of course, there are peak usages you can't avoid _ lights, heater, television and radio _ but they are minor factors in your overall power bill," she writes.
``I have personally saved over $300 this year by choosing my power usage times a little more carefully."
According to the SEC, the ``Winner" tariff system can be installed automatically with any new electric hot water service. If people already have an electric hot water service they can apply to switch to the tariff for about $300.Ed.
All-in-one package GARY BOURKE, from Rupanyup, writes that there are big savings to made by consolidating several loans into one mega loan. Two big banks, the Commonwealth and the National Australia, as well as several smaller financial institutions have recently launched the so-called ``consolidated" loans that let you roll your home loan and personal loans into one package _ all at the competitive home loan interest rate.
The Commonwealth's loan package allows home owners to finance personal (not business) needs such as a new car, a holiday, or home renovation at the bank's variable home-loan rate of 8.75 per cent or its 12-month capped home loan rate of 6.95 per cent.
Home owners need 20 per cent equity in their homes to qualify for the package deal. The bank is not charging an establishment fee for loans charged at the variable rate.
The National Bank offers a similar package using the bank's variable home loan rate of 8.75 per cent, or a range of fixed-term rates starting at 6.95 per cent for 12 months. The NAB charges an establishment fee of $600 (or $400 for cardholders).
Salary direct ADRIAN LAWLER, from Pascoe Vale South, advises employees to arrange for part of their salary to be paid directly into their home mortgage account.
Many employers, Mr Lawler notes, offer direct payment of salary into bank accounts with multiple account facilities. By having your employer make the mortgage repayment on your behalf each week or fortnight, Mr Lawler writes, you can save on Government debit charges and reduce your interest costs as well.
According to Mr Lawler's calculations, if your salary is paid into your account, drawn out by yourself and then paid into your mortgage account, Government debit charges are about $2.50 a month (based on an average home mortgage where repayments are about $800 a month). If your repayments are paid directly from your salary into your mortgage account at $200 per week, the cost will be reduced to under 50 cents per month _ a saving of almost $500 over the term of the loan. If the $2 saved each month is then added to your mortgage repayments, you will repay the loan almost six weeks earlier, saving an additional $800.
Cut debit tax ROBYN SPENCE-BROWN, from Camberwell, has two tips on ways to avoid or reduce the Government's debit tax on bank accounts. Every time you withdraw money from a bank acccount with a cheque facility, you are charged a substantial Government debit tax (the minimum being 30 cents) regardless of whether the money is withdrawn by cheque or not.
Her first tip is to close off unnecessary cheque accounts, as the tax is not charged on accounts without a cheque facility. The second tip involves structuring withdrawals to minimise the tax. Ms Spence-Brown points out that it costs 40 cents less to withdraw $99 than to withdraw $100. Or you can save $1.40 by withdrawing $300 at the beginning of the week, rather than withdrawing three lots of $100 spread over the week.
Similarly, if paying off a bankcard bill of $300 and withdrawing $150 in cash, it pays to make one withdrawal of transactions at an automatic teller: the tax on the former is 70 cents, compared to $1.40 in the latter case. If you wish to withdraw $550 dollars you can save 50 cents by doing so in two transactions rather than one.
The relevant debit tax rates are: $1 to $99.99 30cents $100 to $499.99 70 cents $500 to $4999.99 $1.50 $5000 to $9999.99 $3 $10,000 plus $4 Select your broker DENNIS BRIEN , of Sandringham, advises people with small shareholdings to shop around for stockbrokers that offer discount brokerage for transactions of less than $5000. He recommends Melbourne private client broker, E.L & C. Ballieu, which does not charge a minimum brokerage. The firm charges 2.5 per cent for the first $5000 invested, plus a $10 administration fee. From $500 to $15,000, the brokerage reduces to two per cent.
Consolidate credit cards The introduction of credit card fees has prompted an accounting teacher, KEN EVELY, to stress the need to consolidate your cards. Mr Evely has recently taken the scissors to two of his bankcards, leaving just his National Australia Bank Mastercard, which has a fee attached to it of $24 a year; but the fee is waived where purchases for the year total more than $8000.
Mr Evely notes that this card provides an effective 55-day interest- free period, where the bill is received 25 days after a purchase is made. And now that he has only one card, Mr Evely says he is far more likely to reach the fee-free $8000 threshold.
Mr Evely believes there is much to be gained by using credit cards wisely. They provide accurate records of expenditure for accounting purposes and offer the convenience of paying bills over the phone, saving on stamps and envelopes in the process. But Mr Evely says cardholders should be vigilant about paying bills before the interest-free period expires. He claims to have never paid interest on any credit card purchase, with the exception of a parcel of shares, which was intentionally negatively geared.
Save on lawyers fees MAX SCHELLEKENS, from Sunbury, says he saved $153 in solicitor's fees by going direct to the titles office to organise a title transfer for a relative who was recently widowed.
The home of Mr Schellekens' relative was in joint names and had no outstanding mortgage. Mr Schellekens' first response was to approach a solicitor to handle the title transfer to the surviving widow's name. He was told the solicitor would charge a fee of $153 for handling the transfer, plus the titles office fees ($59.50 as of 6 December). Mr Schelleken decided to do it himself.
``If you take the original title plus $59.50 and spend about one-and- a-half hours at the titles office you can complete the transfer yourself," he writes. ``My own experience showed that the titles office staff were very helpful and the whole process was very simple, and very easy. The saving was $153 in solicitor's fees".
Mr Schelleken's adds that if there is a mortgage on the title, or the transfer is more complicated than the example above, then a solicitor may be the more appropriate course of action.
A choice of duty If you are going to shop around for interest rates, shop around for the best deal on financial institution duty (FID) as well, says VICKI FOWLER, a manager in the treasury department of a Melbourne bank.
Ms Fowler's tip concerns investors with more than $50,000 to spend.
Many investors in this category, she says, are unaware that they can save quite a bit by choosing a bank account that charges so-called ``short-term" FID, as opposed to receipts duty, where FID is applied at the rate of 0.6 per cent flat, regardless of how long the money is deposited in the account. Short-term FID applies to a term of less than 185 days.
The Bank of Melbourne, Ms Fowler explains, offer two accounts where short-term FID is charged at the rate of 0.00166 per cent per month, the equivalent of 0.02 per cent per year. These accounts are particularly appropriate for investors who might want to change financial institutions every 30 or so days in order to get the highest interest rate.
Ms Fowler gave the example of an investor who saved $163.87 by investing his $300,000 in a 0.02 per cent ST FID accounts for four months, as opposed to a receipts duty type account.
(Jocelyn Eastway's column on this page further examines the effect of Government debit tax and financial institution duty).
One for the dog A great many of the letters received by Money Extra in our quest for the best money-saving tips, were recipes aimed at reducing the weekly food bill. Here is our pick of the bunch, from JOHN COLLINS and ROBYN WHITELY, which, appropriately, was written on the blank side of a piece of junk mail, a useful money-saving tip in itself.
John and Robyn both admit that their tip, concerning lamb shanks, is mostly applicable to those people who have plenty of time on their hands, and presumably a dog.
They write: ``We don't buy tinned food for our dog. We buy lamb shanks, which usually cost 50 cents each, 40 cents if we're lucky. We cut the meat off the bones and bring them to the boil. At that point we take the water and keep it for stock for soup for ourselves. The shanks go back on to the stove and are again brought to the boil. We add a lamb's fry cut small, one or two potatoes and a couple of carrots.
``When the meat and vegetables are cooked, we add about one-and-a- half packets of house-brand rolled oats and something green when the oats are cooked.
``We pack the food into plastic boxes, each box taking two or four meals, each meal having a shank bone in it. If we have more food than bones, we pack the food into a box marked ``no bones" and use that box when we have bones to add from our weekly roast.
``We get at least 16 nourishing meals, at about 44 cents a meal, for a medium-sized dog who eats once a day and has a coat that calls forth admiring compliments wherever she goes."
© 1993 The Age
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