Never Use Your Superannuation to Pay Your Debt!

There is not a week that goes by in which I’m not asked about how to access superannuation to repay debts. In fact, a lot of banks and debt collectors will actively encourage people to access their superannuation. It might seem like a great option. Get some money out to pay down your debts; it’s your “savings” anyway. But early withdrawal of superannuation is a horrifically bad idea for a number of reasons:

  • Superannuation money is protected from creditors in bankruptcy. If you withdraw that money, it’s now available for creditors. I routinely see people who’ve accessed their super and filed for bankruptcy a year or two later. That money would have been safe had they not touched it.
  • You lose the tax protection of superannuation. Generally, if you withdraw your super, you’re going to pay 31.5% tax on it. So not only was that money safe from creditors, but one third of it just evaporated into taxes.
  • It doesn’t fix the problem. Most people are in trouble because their expenses are greater than their income. An injection of cash doesn’t fix this. The super is eaten up by interest, fees, etc., and two years later you’re in the same position, only now you would have less retirement savings.
  • Big mortgages are not made smaller by paying off arrears. If you’re struggling with a big mortgage, the hard truth is that you’d be better off selling and either buying something smaller or renting. Renting is a great option for many people, especially if you’re on a low income and qualify for rent assistance.

The only time you should access your super early is if you have a terminal illness and you’re going on a massive holiday. Otherwise, the money should stay there, safe and protected from your creditors and the tax man. In fact, most people should make extra voluntary contributions to their super, even if you have debt. The tax benefits make it attractive, and it’s a good idea to squirrel money safely away into your own long-term savings.

How to Save on Electricity in a Rental Property

In the past few years, electricity prices have doubled, making Australian power one of the most expensive energy sources in the world. If you’re a home owner, then you can make big changes to your home to drop your power bill, but what can you do as a renter? We’ve developed a list of changes that you can make to reduce your electricity bill. In constructing this list, we’ve chosen low- and no-cost actions. We only suggest buying things with a short payback period and that can be taken with you if you move.

This is a breakdown of a typical Australian power bill. If you live in Victoria, Tasmania or an alpine area, then you may spend a greater proportion of your energy on heating. We listed our suggestions in order of their contribution to your energy consumption.

ENERGY USE PERCENTAGE
Cooling and heating 27%
Hot water 27%
Appliances 16%
Cooking 10%
Refrigeration 8%
Lighting 8%
Standby 4%

 

Cooling and heating

  • In the summer, fans are much cheaper to run than are air conditioners. If there is no ceiling fan, then rather than use air conditioning, buy a pedestal fan.
  • If you have to run an air conditioner, make sure that it’s cooling the smallest space possible, such as a bed room. Ensure that all windows and doors are closed. Buy a draft stopper for doors and keep curtains closed.
  • If you’re going to run your air conditioner, ensure that it is set to 23–24 degrees. Ensure that the filters are clean.
  • Switch air conditioners off at the wall when not in use.
  • In the winter, the easiest way to save money is with a jumper, a jacket and extra blankets on the bed.

Hot Water (for electrical hot water)

  • Check with the property manager to see that the electric hot water system is already connected to an Economy Tariff. If it’s not, then request that this be changed.
  • Reduce the temperature of the tank to 60 degrees; this will ensure a comfortable shower but will use less power.
  • Keep your showers shorter—the shorter the better. Get a four-minute shower timer or take a navy shower http://en.wikipedia.org/wiki/Navy_shower
  • Make sure to fill up your tank every 3 months. Electrical hot water systems use a double boiler, and you need to periodically fill up the outer tank to ensure that it is running efficiently.
  • Wash your clothes in cold water.

Appliances

  • Use the clothes line instead of a dryer. Dryers, air conditioners and ovens use the greatest amounts of electricity.
  • Only run the dishwasher when it’s full.
  • Switch of appliances at the wall.

Kitchen

  • Use the smallest appliance capable of fulfilling the task. Use a microwave instead of an oven, a kettle instead of the stove, and a toaster instead of the grill.
  • Ovens and Stoves use an enormous amount of power. If you can batch cook, then you’ll be more efficient (e.g. do all of your baking and cooking for the week at one time).
  • Defrost frozen food in the fridge overnight.
  • Turn your oven off ten minutes before the end of the cooking time.

Refrigeration

  • A full fridge is a cheap fridge to run—fill all the empty space with containers full of water.

Lighting

  • Halogen downlights use a lot of electricity. If you intend to be in the property for a long time, then LED bulbs may be worthwhile. If you are unsure of how long you will be there, then buying some lamps with compact fluorescent bulbs and using them instead may be the better option.
  • Maximise the amount of sunlight that you use. Open blinds and curtains during the day.
  • Ensure that lights are turned off in empty rooms. While turning fluorescent lights on uses more power than running them, it only uses about 10 seconds worth of power.
  • Replacing any incandescent lighting with compact fluorescent lights will reduce the amount of power used by 75%. LED lights generally use about one half the power of compact fluorescents. LED lights also last about five times longer than a compact fluorescent light.

 

Inge Got Debt Free

J&A_DCSgroup_Inge_002Can you tell me about your background? How did you accumulate your debt?

I have always aimed to budget properly. When I had work, I did my best to keep it and stay on top of my bills, most of the time, successfully. Unfortunately, I am prone to getting sick, despite trying to be as healthy as I can. Due to my list of more long-term illnesses, I often got to the point where keeping my employment was not possible anymore. Because of my reduced income on welfare, and despite my budgeting efforts,s I fell behind, more and more. I also made a poor investment choice, as it had turned out.

Was there a “light bulb” moment when you decided that you were going to get debt free?

There was never really a “light bulb” moment; I just did not want to stay in debt. So I searched for ways to get out of debt efficiently.

How long did it take you to get debt free? How did you stay motivated?

Overall, I was in debt for four years. After obtaining help from Debt Mediators, however, my debt was sorted out within six months.

What advice would you give to people with large amounts of debt who don’t see a way of getting debt free?

Don’t be afraid to ask for help. Definitely contact Debt Mediators: they are understanding and really helpful. I honestly did not see myself getting rid of my debt. Once you do it, you will never look back, and the weight of the world will feel like it is lifted from your shoulders.

What mistakes do you see others making with their money?working o

Cut up your credit card right away and just pay up what you owe on it—resolve to never have one again.

What was the most important thing you’ve learnt along the way?

BUDGET, BUDGET, BUDGET!!!! If you cannot afford it right now, then work it into your budget.

Do you have any goals you can achieve now that you’re debt free?

I am currently saving for some world travel. I am going to save up a deposit to buy a house or two. Rather than look at my financial probation time (as the lending world will see it) as a time to wait, I am looking at it as a time to save up and organise my finances for my dreams and aspirations.

The Worst University Degrees to Study

There are many degrees that are just not worth the investment. The following are the worst, according to the McCrindle Research study of graduate earnings:

  • Psychology: The 6th most popular degree in the world has only 63% of its graduates working in the field of psychology. The starting salary is only $47,500, well down from the average starting salary of $50,000.
  • Architecture: While you may dream of building high-rises or housing for the poor, in reality, you might just need to design your own poor house. Your starting salary will only be $32,500… less than a waiter earns.
  • Visual and Performing Arts: Less than half of these graduates will get a job, making it the worst degree for finding work. Even if you find a job, you’re only going to earn $38,000. Maybe it’s not worth the $15,000 in debt. No worries; graduates in this field rarely earn enough to pay it back anyways.
  • Social Science: Anthropology and archaeology may sound really sexy, but the reality is that there is not a lot of demand in this field. You’d be better off financially by flipping burgers and looking for fossils on the weekend. The average graduates’ wage for this area of study is $45,000.

 

Top 10 Missed Tax Deductions: How to Keep Your Money

Tax DeductionsIt’s tax time again, and sadly, many of us are going to miss out on thousands of dollars of deductions. We’ve compiled a list of the most commonly missed deductions, so you don’t have to pay the ATO any more than is required.

You need to be able to justify your deductions. The easiest way to do this is with a receipt. An original receipt is great, but a good-quality electronic version is fine too. Get into the habit of taking receipt photos with your phone, and that way you’ll never lose a receipt. For a lot of expenses, a diary can be an acceptable form of evidence. In general, you don’t have to keep it for the whole year; one to three months is usually sufficient.

Disclaimer: You will read tips below but not tax advice. While we believe the details to be accurate, we encourage you to see a tax agent—their fees are tax deductable as well.