Claw Back Your Money

Sun Herald

Sunday July 16, 2006

David Potts

There are plenty of ways you can save without depriving yourself, David Potts writes.

PITY those poor people who drive and have a mortgage. Oh, sorry. I didn't mean you or anything.

But since we're being personal, perhaps it's best to know that petrol prices and interest rates are more likely to rise than fall.

Never mind. There are ways of clawing these back without going without.

On the contrary, this clawback strategy will even let you go ahead and enjoy your tax cut.

No sermonising here about being fiscally responsible and putting it into super or paying off the mortgage. Promise.

Petrol

Already there are predictions of $1.70 a litre for petrol and probably some places are already paying that.

The reason for the latest price spike is that North Korea is shooting missiles, even though they're obviously duds. If it isn't North Korea, it's Israel and Lebanon or Iran or global warming or . . .

The point is that oil has become the new gold standard. If something goes wrong out there, the price of oil rises.

It's a safe haven, there's not enough of it and central banks don't have any, so you don't have to worry about them. A speculator's paradise, really.

So get used to it. Oil and so petrol prices will stay high, barring a global recession.

On top of that our dollar isn't exactly the world's strongest currency. Even if the price of crude stayed still, or perhaps dropped a little, we would still have to contend with the dollar.

To be blunt, if the biggest commodity price boom since the 1970s can't get the dollar to US80 cents, you can't count on any help from that quarter.

Unfortunately the oil companies have cottoned on to us as well. Word got around that the cheapest petrol days were Mondays and Tuesdays. Don't count on it any more. Lately they've been the most expensive.

A better idea is to keep the tank at least half full, so that you're averaging out cheap and dear prices.

Or perhaps that should be dear and dearer prices. Anyway, you top it up whenever you see a discounted price. As the panel opposite shows, there are also ways of cutting your petrol consumption.

Interest rates

Since global rates are rising, there's a better than even chance that Australia will have to follow suit.

For one thing the Reserve Bank can't afford to be seen as the odd central bank out. In this game perception is everything.

Besides, mounting wage costs, skilled labour bottlenecks and a cheap dollar will eventually force the bank's hand. At least that's what the money market thinks.

Not that higher rates are all bad, anyway.

As it is, you can earn more than 6 per cent on money at 24-hour call. For example, BankWest is paying 6.4 per cent in the first year for new accounts. Even if you're on the top tax rate, that still puts you ahead of inflation, so making you better off, though not enough to pay the petrol, I guess.

Centralising your mortgage so your pay goes into it and then you redraw from it for bills will save you money, and it's tax-free to boot.

Using a linked credit card with a 55-day interest-free period, so that you put all your expenses on it and then pay it off from the surplus money in the mortgage account, will put you even further ahead, if not test your self-discipline.

Check whether you have the right savings or cheque account with your bank, too.

Often you can escape monthly fees by asking for cash out when using Eftpos - it counts as only one "withdrawal".

You can compare bank accounts at www.cannex.com.au.

Debt

OK, it's the interest on the mortgage that's a killer.

But at least clawing back mortgage repayments is easier than combating higher petrol prices.

Where you have to get a smaller car or not drive at all to beat petrol prices, you can tame the mortgage without having to move home.

Refinancing is one possibility, fixing is another.

Changing your mortgage doesn't necessarily mean you have to change the lender as well. Because of the slump in new loans thanks to the moribund home market, lenders value your debts a lot more than you may realise. In fact the more you owe, the better.

Your first port of call is to ask the bank for a professional package. For an annual fee of about $300, this will slice from 0.5 to 0.75 per cent off the standard variable card rate. That's a saving of at least $20 a month on a $250,000 mortgage with 25 years to run. And it'll more than cover the last 0.25 per cent rate rise with some to spare for higher petrol prices.

True, the $300 fee sounds a lot. Except most account keeping and credit card fees disappear, too. Besides, it's only the cost of one overnight DVD hire a week.

But you can do even better if your goal is simply to keep the interest rate as low as possible. Wizard and Resi offer no-frills variable rate loans at just below 6 per cent. This could save you another $175 a month, but don't forget exit and entry fees.

There's a good case for fixing at least some of your mortgage, no matter where rates go. Fixing half, for example, gives you a hedge. Whether rates rise or fall, you're no better or worse off.

As it happens, however, by fixing the entire mortgage you could be a lot better off than paying the standard bank variable rate.

That's because fixed-term rates from some lenders are almost 1 per cent lower.

You can't lose, really, so long as the fees in switching aren't excessive. And you probably will have to shift, because the lowest fixed-rate lenders tend to be credit unions and building societies.

If rates rise subsequently you're safe. And if they fall it would have to be at least three times before you were worse off. In the meantime, of course, you've been saving heaps in interest.

Although petrol prices and interest rates would normally have nothing to do with each other, they have one ugly meeting point: credit cards.

The worst thing you can do is put the petrol on plastic and not pay it off when the statement comes. In effect you're adding a surcharge of between 12 and 18 per cent to the already high petrol price.

You don't want to be chasing all round town with your supermarket docket for 4 cents off, a discount of barely 3 per cent, only to blow it with 18 per cent credit card interest.

Paying the minimum monthly due doesn't let you off the hook, either. You'll still be paying it off in 20 years, by which time the accumulated interest would be getting near the original price of the petrol.

By the way, it might pay you to get a credit card with a zero interest honeymoon. The only one without an annual fee is Virgin's credit card which gives free credit for six months on balance transfers.

But don't use the card for new spending in that time - it'll be charged as a cash advance.

Food

Cutting costs by the clawback method means smart, not sacrifice.

Mind you, if there's some waste going on, then by all means cut it back. An easy way of doing this is keeping a record in a notebook for a week or two of how much you spend.

You'll be surprised how much slips through your fingers that you can do without. Well, you are doing without, come to that.

Bonus as it is, that's not what clawback is about. We want more bang for the buck, not less.

Food is a surprising starter and you don't even have to diet. Or tighten the dog's collar, for that matter.

Do as much shopping at the supermarket as you can, and take a list. Also take cash. If you use your credit card there's a bigger risk of grabbing something that wasn't on your list but takes your fancy. The fear of running out of money at the checkout is a great discipline.

Oh, and take a pocket calculator to work out whether three for the price of two really is cheaper than two of another brand or size, or the 450 grams on special is better than two lots of 300 grams. Or whatever.

And don't fall, or trip over, for the end-of-aisle rack displays. They're for promoting new and probably high margin products.

The real sales are on the shelves, usually the top or bottom ones - never those at eye level.

Fruit and vegies are the exception to the supermarket rule. Start a co-operative with friends so that each week somebody is out at the markets bright and early. This could almost halve your vegie bill, and the produce will be a lot fresher than the supermarket's.

Speaking of co-operatives, a babysitting pool and a bulk buying pool are also great for slashing costs.

Check out the clawback panels for other suggestions that save money without having to cut back.

Phones

For all the cutthroat competition phone bills never seem to get cheaper.

Well, it's clawback to the rescue again. And no, you don't have to talk less.

The big issue here is whether you need to keep your fixed phone.

The independent website www.phonechoice.com.au says if you spend less than $30 a month on calls, a prepaid mobile would be better.

But it also depends on whether you want broadband or not. The big telcos offer package deals to dissuade you from dropping the fixed phone.

High-speed ADSL also needs a fixed phone. Then again, there are wireless alternatives.

Or maybe it's better to sort out your broadband connection first, then look at the phone. After all, the cheapest phone calls are those over the internet, or so-called voice over internet protocol (VoIP) to give it its unnecessary technical term. It's ideal if you make a lot of international and interstate calls.

Businesses using VoIP report savings of 20 to 30 per cent on their telephony, says Phonechoice.

Hmm, just think, if you have wireless broadband and a laptop, you wouldn't really need a mobile phone at all. Just kidding.

Anyway, it's probably best just to head for the free bill calculator at www.phonechoice.com.au.

Utilities

Cutting back on power and water costs won't be fun, but at least a little bit goes a long way.

For example it's been estimated that the old beer fridge in the garage can cost up to $20 a month to run because it's so energy-inefficient, what with poor seals and an old motor.

Regularly changing the lint filter on the clothes dryer will help, even if it's not immediately noticeable. As will stopping the dishwasher at the drying cycle. Let the dishes dry naturally and you'll save electricity.

Taking shorter showers will save both power and water. I told you this wouldn't be fun.

Anyway, if you can't bear that idea there are other suggestions in the clawback panels, all of which are far more palatable.

And in keeping with good clawback principle, they all save money without having to spend extra on anything.

CLAWBACK: FOOD

? Have a list when you go to the supermarket and stick to it. We'll be doing random checks.

? Bulk buy meat and freeze it.

? Buy discretionary items only when they're on special.

? Use generic brands so long as they taste all right.

? Buy your fruit and vegies at the markets - set up a co-operative with friends so one of you goes each week.

? Or grow your own vegies. But you need to be patient.

? Pay cash only at the supermarket so you have to stick to your budget.

CLAWBACK: PHONE

? Email instead of phoning if you have a broadband connection.

? Go on a capped mobile phone plan.

? Use the same mobile network as family and friends: these calls are very cheap or even free at certain times.

? SMS rather than phone on the mobile.

? Cancel the landline and use a mobile phone or payphone phonecard.

? Phone off-peak.

? Use prepaid mobile phone cards for the kids.

CLAWBACK: PETROL

? Save your supermarket dockets to get a 4 cents a litre discount.

? Fill up when prices are lower.

? Drive more slowly - it saves fuel.

? Don't carry excess loads around in the boot.

? In traffic jams or at lights, stop the engine by switching to accessory.

? Cut the air-conditioning in summer - open the windows.

? Don't take off at the green light, or brake suddenly.

CLAWBACK: POWER

? Get up to 5 per cent off by consolidating electricity and gas with one supplier.

? Seal off drafts and windows; use energy-efficient globes.

? Heat room by room instead of whole house.

? Get rid of the grog fridge in the garage.

? Don't leave appliances on stand-by.

? Wash clothes in cold water.

? Open the curtains during the day and turn lights off.

© 2006 Sun Herald

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