Only 104 Weeks to Your Home Deposit

i 104weeks.indd i 3/7/07 11:50:54 AM Every effort has been made to provide accurate and authoritative information in...

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Every effort has been made to provide accurate and authoritative information in this book. Neither the publisher nor the author is engaged in rendering professional financial advice and neither the publisher nor the author accepts any liability for injury, loss or damage caused to any person acting as a result of information in this book or for any errors or omissions. Readers are advised to obtain advice from a licenced financial planner before acting on the information contained in this book. First published in 2007 Copyright © Peter Cerexhe 2007 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act. Allen & Unwin 83 Alexander Street Crows Nest NSW 2065 Australia Phone: (61 2) 8425 0100 Fax: (61 2) 9906 2218 Email: [email protected] Web: www.allenandunwin.com National Library of Australia Cataloguing-in-Publication entry: Cerexhe, Peter. Only 104 weeks to your home deposit. Includes index. ISBN 978 174175 324 0 (pbk.). 1. Finance, Personal. 2. House buying. I. Title. II. Title: Only one hundred and four weeks to your home deposit. 332.024 Set in 11.5/15pt Apollo by Midland Typesetters, Australia Printed by McPherson’s Printing Group, Maryborough 10 9 8 7 6 5 4 3 2 1

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CONTENTS Acknowledgements and disclaimer Introduction

v vii

PART 1: WORKING TO A METHOD

1: The six principles of saving for a home Principle 1: Keep it short Principle 2: Know today that you can achieve your goal Principle 3: Accept that we’re not all the same Principle 4: Allow for failure Principle 5: Put it away as you go Principle 6: Put it in the right place

2: How much do I need to borrow? Monthly repayments guide

3: Introducing the home deposit worksheet

3 4 5 6 7 7 9 10 11 15

The home deposit worksheet

17

4: Put together a stash of cash

24

5: Where should my savings go?

27

What to do with debt Where to put my money What can I save now?

27 31

40

PART 2: MAKING A PLAN 6: Increasing your income What type of job?

45 46

iii

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Where are the jobs? How much could I earn? The part-time work module The holiday of your life

7: Life’s little luxuries Coffee—a drink or an event? What are your luxuries?

50 54 54 57

62 62 64

8: The theory of relatives

66

A pause on presents The subsidy approach Moving in together

68 70 73

9: How essential are the ‘essentials’? Preparing a budget

10: The price of vice What your vices are costing you

PART 3: PUTTING IT TOGETHER 11: Bumps in the road Expect some surprises

12: Knowing the costs ahead Lender’s mortgage insurance Getting out of your lease Government taxes and charges Are you eligible for stamp duty concessions? First Home Owner Grant Registration and transfer fees

13: Some worked examples 1. The single person 2. The couple who won’t sacrifice lifestyle 3. The couple with great motivation 4. The lower income couple Your worksheet End note: Don’t pull yourself down Resources, reading and contacts Index

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80 81

100 101

107 108

110 111 114 114 119 127 127

129 129 136 142 148 154 156 158 164

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ACKNOWLEDGEMENTS AND DISCLAIMER In writing this book I have relied extensively on my experience as a lawyer working with many people on their way to home ownership. My heartfelt thanks go to Hans Kunnen, to the subjects and sources of the various case studies and other anecdotes, and to Katie. Out of concern for the privacy of those who helped me with their case studies I have changed the names of all involved—it is unfair to talk about people and their money, and then potentially to identify them. When it comes to matters of precise detail, including tables, I would like to acknowledge specifically the personal assistance and resources of the Australian Taxation Office, the Australian Bureau of Statistics, state and territory revenue offices, and the Real Estate Institute of Australia, without which this book would not have been possible. The subject matter of this book traverses a huge range of facts, figures and opinion. Government regulation and industry practice are changing constantly and in important ways. While care has been taken to ensure accuracy at the time of publication, readers must seek up-to-date information and expert personalised advice before acting or refraining from acting on anything contained herein. In particular, you are encouraged to discuss your plans with a licensed financial planner; the author is not a licensed financial planner and intends by this book to provide information of a general nature only, not personalised financial advice. I hope this book inspires you to get a home of your own. v

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INTRODUCTION SAVING MONEY . . . IT’S LIKE DIETING Every now and then we try to save some money. But the process is a bit like dieting. We go through all sorts of deprivations and agonies. We cancel our favourite magazines, we stop going to the movies, we only eat out once every two weeks, we tear ourselves away from clothing shops. We suffer. We even contemplate giving up takeaway coffee. Eventually we see nothing but a bleak tunnel ahead—the life we once loved is over. After a while most of us crack under the strain and return to our old ways. Often the sense of release is so strong we go on a binge. We might spend everything we’ve worked so hard to save, and then feel guilty. Just like dieting, sometimes we are worse off than before we started. Traditionally, the way to save for a home is through personal discipline, by putting your head down and working hard. But it’s not good enough any longer. Times have changed and we have changed with them. Life today is fast, and I’m amazed at vii

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104 WEEKS TO YOUR HOME DEPOSIT

how much my attitudes and expectations have changed over the past few years. I can’t believe how impatient I’ve become. The idea of plugging away at saving for years on end is just not on anymore. The key thing here is that you don’t have to enter that savings black hole in order to fulfil your dream of owning a home. This book is not about an endless, indeterminate timeline of hard work and deprivation. If you’ve got a full-time job, or are prepared to get one, then I reckon 104 weeks is all it will take, from day one to the day you lay down your deposit on your home. And this book shows you how. Why do I care? I’ve seen too many people miss out on the security that owning a home can give. The more I learn about the way money works in Australian society, the more I understand how central the role of home ownership is to delivering long-term financial security. Governments of all political parties and persuasions design their policies around this fact, and in some cases offer special financial concessions, subject to eligibility, including: • • • • • •

land tax exemptions capital gains tax concessions social security and pension benefits concessions and discounts for council and water rates security for personal loans at reduced interest rates concessional rates of stamp duty or outright exemptions.

In Australia, if you own your home and pay off your mortgage during your working life, you can look forward to a secure retirement, even if the only regular cash you receive comes from the age pension. So if you manage to do this you’ve in fact got two major elements of security: financial security and security of place.

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INTRODUCTION

ix

Somehow the message gets through—according to the Australian Bureau of Statistics, around 70 per cent of Australian households own the home they live in.

A METHOD ... AND A REWARD So, you want to put together a home deposit. If you’ve tried before and failed or simply lost heart you probably realise that merely setting a household budget and restricting all spending is not a successful approach. What’s more, it’s demoralising. What we need is an achievable method for reaching our goal, and rewards along the way to keep us inspired. It can’t just be pie in the sky—a distant and obscure hope for the future. In 104 weeks you can put together that home deposit. You don’t have to be a genius or have the discipline of a saint. You don’t have to crush and stamp out all joy in the meantime like some kind of Genghis Khan. The following chapters set out a method for building a home deposit. You can see now how you will get there, what you have to do to reach your target and how much you could save in 104 weeks. This book is all about short-term tricks, methods and decisions which will pay life-long rewards. You will find out what to do with the money as you gather it so that savings multiply upon savings, and your money works for you. There are plenty of ways to save money but not all of them are suited to everyone. We are all different. Some people can’t give up daily pleasures but can work harder or longer. Others are not very good at earning money but are ready to make lifestyle sacrifices to reach their goal. Importantly, this book offers a variety of alternatives so you can pick the approach best suited to you and your situation. By the end of this book you will know what target deposit is achievable and how to get there in 104 weeks. In theory, it’s

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harder for singles than it is for couples as there’s much about our Australian financial system that works in favour of couples— income splitting, superannuation, discretionary trusts and more. Couples might have it easier, but singles can often be more determined and less easily distracted. Can you dedicate yourself to your goal for the next 104 weeks? It’s almost no time in the greater scheme of things, yet it can make all the difference to your life. If you follow the method in this book you’ll find your home is waiting for you just around the corner. Keep hold of that image—your home! Turn the pages, start at Chapter 1. Get a home.

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PART 1 WORKING TO A METHOD

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1: THE SIX PRINCIPLES OF SAVING FOR A HOME When you look around sometimes it can feel disheartening to see so many people getting their first home seemingly without effort. Don’t fool yourself into thinking they are doing something you can’t do. People get their first home deposit in a number of ways. Some: • • • • • •

come into money from an inheritance receive it as a gift or loan from their parents win the lottery or a competition and get a head start work all the time and don’t have a life have access to low-interest loans arranged through their employer combine their savings with a partner, or find a partner who has already done the hard work and saved enough money. 3

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These people don’t need much help. However, the rest of us need to learn the tricks to saving not just a few hundred or a couple of thousand dollars but tens of thousands of dollars. There’s a simple method that lies at the heart of it, just like learning how to ride a bike or serve a tennis ball. Whether you’re in a relationship or single, on a large salary, a modest wage or reliant on social security, or whether you’re just out of school or about to retire, there are six principles that will enable you to get that home deposit.

PRINCIPLE 1: KEEP IT SHORT To go back to the diet analogy, many diets fail because they seem to go on forever. In the same way, many of us look at saving as if we are signing a blank cheque—it seems the demands are limitless. No wonder we give up or put off buying a home. So let’s start with a target—104 weeks. Really, 104 weeks is nothing. You might be thinking, ‘Well, it’s still two years, isn’t it? That’s a long time!’ Yet these weeks won’t all feel the same. In the first six months of saving for a home deposit your motivation is at its highest and you can probably do anything and put up with everything. You’ve set a goal and are rushing headlong to embrace it. It’s the period when you still tell yourself: ‘I can live without Thai takeaway on Friday evenings’ or ‘I don’t need a beer or two after work each day to relax’. I’m not suggesting you give up takeaway food, cappuccinos or beer if they are important to you. But no matter how fundamental such things are to your daily wellbeing you are probably prepared to put them aside for a period for the sake of something you really want. So, I’m not suggesting that you be strong for 104 unrelenting weeks of pain. The first six months you’ll be willing to walk over hot coals. And the last six months, if you’ve followed the

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THE SIX PRINCIPLES OF SAVING FOR A HOME

5

method to that point, will be different, too. If you’re on track for your goal—even allowing for some inevitable failures along the way—you will be starting to look at the property market, select a suburb and inspect homes. Now that’s a pretty motivating time! So the hardest part of the journey is those 52 weeks in the middle, and so it might be a good idea, for instance, to allow yourself a few small luxuries during this time to help you get through.

PRINCIPLE 2: KNOW TODAY THAT YOU CAN ACHIEVE YOUR GOAL It’s one thing to be motivated by something you’ve read but it’s quite a different thing to actually possess motivation and apply it. All too often the reality becomes tiring and the pressures and expenses of daily living make persistent claims on us. Before too long the goal falls out of focus as the sweat rolls off our forehead. So, how can you know today that you will in fact reach your goal of creating a home deposit in 104 weeks’ time (or sooner)? It comes down to having a method which shows you the result—in financial terms—now. Here’s how it works. There are a number of ways of improving your savings and increasing your income—the two parts of the equation. Putting a deposit together is a double act involving hunting out extra income and, simultaneously, holding on to as much as you can of the money you make. Getting to your goal fast—and 104 weeks is pretty rapid— takes more than just the age-old adage of ‘prepare a budget and stick to it’. Well, I don’t know anyone who sticks to their budget. In fact, very few people I know even attempt to follow a budget. As far as most are concerned, you’ve either got money or you don’t, and regardless of which camp you fall into, the daily struggle to live within our means is the same.

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104 WEEKS TO YOUR HOME DEPOSIT

In Part 2 of this book you’ll find a number of stand-alone suggestions, or modules, for ways to hold on to more of your income or to increase your earnings. Each module is expressed in dollar terms so you can calculate how much you expect to save or earn over the next 104 weeks. Your task is to read the book and find the modules you believe you can handle, then add the dollar figures together and see what deposit you can realistically achieve. For some this might be $10 000, while others might reach $50 000 or more. It’s easy. 1. Read the book and choose the most appropriate modules. 2. Take the dollar figures to the home deposit worksheet (page 17). 3. Add up the total. 4. Know today where you will be in 104 weeks’ time. There’s no need to embark on a vague, endless course of mad savings. The great thing about this method is that you can feel confident about affording a home soon. If the figures work for you, then go ahead and do it.

PRINCIPLE 3: ACCEPT THAT WE’RE NOT ALL THE SAME There are a lot of variables at play that will affect how you go about getting that home deposit: your income, whether you have a partner contributing, your lifestyle, where you live now, your expectations of life, your degree of self-discipline, the nature of your relationships with your partner and wider family, whether you have kids who are dependent on you, and so on. You need to take these factors into consideration when deciding whether or not a particular method of saving or

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THE SIX PRINCIPLES OF SAVING FOR A HOME

7

earning is likely to work for you. Some suggestions won’t stand a snowflake’s chance in hell of working for you, whereas others will provide definite possibilities, and still others will be positively easy. Discuss the various suggestions with your partner or friends and family as you go through the book. Be in agreement about the task ahead and the reality of what is genuinely achievable. And be prepared to surprise yourself.

PRINCIPLE 4: ALLOW FOR FAILURE Right from the start let’s get this clear: you’re only human. If you don’t have an inheritance or low interest rate loan from an employer it will be hard work to amass a sizeable sum of money. You can expect to fail to meet some of your targets. So what! Just make sure you choose some extra modules now so you have a back-up plan to cover the shortfall.

PRINCIPLE 5: PUT IT AWAY AS YOU GO When I got my first full-time job it wasn’t long before work began to feel like drudgery. Daily drudgery, with a big dollop of stress thrown on top, too. Every day began to look the same. There was no light at the end of the tunnel. Indeed there wasn’t even a blessed tunnel. Just a brick wall in my face that represented my future. And that was only my first week. Very soon I began to long for the oasis of relief called annual leave. It was a long way off, but I sure needed it. Yet how, in a lowly paid job, could I ever afford a holiday? I mean, a real holiday—the kind where you go somewhere pleasurable rather than lying around the house with a drink in one hand and the TV remote in the other. I was determined to save for a holiday.

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104 WEEKS TO YOUR HOME DEPOSIT

I quickly realised that buying lunch each workday was costing me a lot of money. When I did the simple maths—eight dollars a day, five days a week, 48 weeks of the year—I was shocked by the total. One thousand nine hundred and twenty dollars! Now that alone would amount to the cost of a decent holiday. So I started making my lunch and bringing it from home. It still cost a bit, but I knew at the end of the year there would be plenty of cash to get a good holiday happening. Day in day out, I religiously continued to bring my sandwiches from home. It was hard work—buying lunch was a real treat, a moment of light in my otherwise dreary working day—but I knew I must be getting ahead. But come the end of the year, I had no money in the bank and I basically spent the entire Christmas holidays walking around the house in my shorts, with a drink in one hand and the TV remote in the other. What went wrong? As it turns out, I wasn’t actually saving. While I was performing the effort or task which produced the saving, I wasn’t converting that saving into money and putting it away somewhere. Somehow I had managed to spend all the lunchtime cash I thought I had saved—on goodness knows what. When you determine to save money or earn additional money you must follow through and put that money into an account. Quantify the amount you are saving, then bank it. Daily, weekly, monthly—you choose. But put it away—otherwise the saving won’t exist, and the money won’t be there when you should be ready to go house hunting. We’ll look at how to do this in more detail in Chapter 5. The important point for the moment, though, is simply to understand the principle: put it away as you go.

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THE SIX PRINCIPLES OF SAVING FOR A HOME

9

PRINCIPLE 6: PUT IT IN THE RIGHT PLACE You’re going to be making some pretty substantial savings over the next 104 weeks and your everyday bank account is not up to the job. Should you put your money in term deposits? Shares? Managed funds? Under the mattress? Consider the following when deciding where to place your savings and income: • •

• •

•

Your savings should be easy to add to—you will be depositing money probably on a weekly basis. Any fees incurred should be low—if you’re not careful the financial institution will take a big slug out of your savings. Ensure you’re covered by good security—you don’t want to put your hard-earned money in jeopardy. Your investment should offer a good return—your savings shouldn’t just sit there growing old gracefully: put the money out to work for you, so you earn money on your money. Make sure you have good access—you need to be able to get your money out when you meet your target or earlier if necessary.

This is covered further in Chapter 5.

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2: HOW MUCH DO I NEED TO BORROW? Each financial institution will have its own rules about mortgage lending, but under most mortgage agreements you will need to contribute part of the purchase price up front. In addition to extraneous purchase costs such as stamp duty and conveyancing fees and lender’s mortgage insurance which can, in total, be tens of thousands of dollars (covered in Chapter 12), generally you should aim to have saved at least 10 per cent of the purchase price, and the lender will finance the other 90 per cent. So, for example, if you want to buy a property selling for $250 000, ideally you will have saved over $25 000 and will seek to borrow the remaining $225 000. If the home is worth $120 000, aim to put up more than $12 000 and borrow $108 000. Some lenders will offer to finance an even greater percentage of the purchase price—95 per cent is possible, and even 100 per cent (for certain individuals) does occur in special circumstances. Realistically, though, most of us 10

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HOW MUCH DO I NEED TO BORROW?

11

should aim to save at least 10 per cent, or better still, 20 per cent or more if we can. The more you can contribute the less your risk will be. Particularly in times of rising interest rates, it is sensible to minimise your total borrowings by having a deposit of 20 per cent or more.

MONTHLY REPAYMENTS GUIDE Of course, it’s not purely a matter of saving the deposit—no one will lend you the remaining 80 to 90 per cent unless you can afford the repayments. To help determine your eligibility, the loans officer will ask you about: • • • •

• • •

your income your expenses (current rent, loan repayments, living expenses, other debts) your age whether you (and/or your partner, where relevant) are looking to stop work for some reason or other, such as an extended holiday, education purposes or to raise a family the value of the property you wish to buy how much money you have saved (superannuation and otherwise) your assets and their value (car, furniture, jewellery, shares, etc.).

The monthly repayments table on pages 12–14 will give you an idea of what it will cost to borrow certain amounts of money. Look at this when setting your deposit target. Each institution has its own rules but you can work on the assumption that they expect you to be able to pay your way on your debt— all interest and principal repayments—with no more than 30 to

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35 per cent of your gross (pre-tax) household monthly income. (However, it’s impossible to be precise as so much depends on your personal situation.) Your debt refers to all your loans, including personal loans and ongoing credit card debt, for example. Note, if you work for yourself it might be difficult to establish your true income from your tax return, so take the time to get your documents in order to substantiate your income. While writing this chapter I checked with three financial websites to see what amount of money they would lend a fictional couple of home buyers. The details were the same: one gross annual income of $50 000 and a partner’s income of $30 000, borrowing for 25 years on a standard variable interest home loan. According to the Wizard online calculator the couple could borrow up to $330 000, the Commonwealth Bank said $421 449 and the ANZ site came up with $506 093.92. However, by trying to make things quick and easy the online calculators can sometimes lead you astray. It’s best, therefore, to speak to your bank or financial institution directly to get a feel for what they will lend you.

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MONTHLY REPAYMENTS ON A 25-YEAR MORTGAGE Interest rate

Amount borrowed 5.50%

5.75%

6.0%

6.25%

6.50%

6.75%

7.0%

7.25%

7.50%

7.75%

8.0%

8.25%

8.50%

8.75%

9.0%

$75 000

461

472

483

495

506

518

530

542

554

567

579

591

604

617

629

$100 000

614

629

644

660

675

691

707

723

739

755

772

788

805

822

839

$125 000

768

786

805

825

844

863

883

904

924

944

965

986

1007

1028

1049

$150 000

921

944

966

990

1012

1036

1060

1084

1109

1133

1158

1183

1208

1233

1259

$175 000

1075

1101

1127

1155

1181

1209

1237

1265

1293

1322

1351

1380

1409

1439

1469

$200 000

1228

1258

1288

1320

1350

1382

1414

1446

1478

1511

1544

1577

1610

1644

1678

$225 000

1382

1416

1449

1485

1519

1554

1590

1626

1663

1700

1737

1774

1812

1850

1888

$250 000

1535

1573

1610

1649

1688

1727

1767

1807

1848

1888

1930

1971

2013

2055

2098

$275 000

1689

1730

1771

1814

1856

1900

1944

1988

2032

2077

2123

2168

2214

2261

2308

$300 000

1842

1887

1933

1979

2025

2073

2120

2169

2217

2266

2316

2365

2416

2466

2518

$325 000

1996

2045

2094

2144

2194

2245

2297

2349

2402

2455

2509

2563

2617

2672

2727

$350 000

2149

2202

2255

2309

2363

2418

2474

2530

2587

2644

2702

2760

2818

2878

2937

$375 000

2303

2359

2416

2474

2532

2591

2650

2711

2771

2833

2895

2957

3020

3083

3147

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Amount

Interest rate

borrowed (cont’d)

5.50%

5.75%

6.0%

6.25%

6.50%

6.75%

7.0%

7.25%

7.50%

7.75%

8.0%

8.25%

8.50%

8.75%

9.0%

$400 000

2456

2516

2577

2639

2701

2763

2827

2891

2956

3021

3088

3154

3221

3289

3357

$425 000

2610

2674

2738

2804

2869

2936

3004

3072

3141

3210

3281

3351

3422

3494

3567

$450 000

2764

2831

2899

2969

3038

3109

3181

3253

3326

3399

3474

3548

3624

3700

3776

$500 000

3071

3146

3221

3299

3376

3454

3534

3614

3695

3777

3860

3942

4026

4111

4196

$525 000

3224

3303

3382

3464

3545

3627

3711

3795

3880

3966

4053

4140

4228

4316

4406

$550 000

3378

3460

3543

3628

3713

3800

3887

3976

4065

4154

4246

4337

4429

4522

4616

$575 000

3531

3617

3704

3793

3882

3973

4064

4156

4249

4343

4439

4534

4630

4727

4825

$600 000

3685

3775

3866

3958

4051

4145

4241

4337

4434

4532

4632

4731

4831

4933

5035

Notes: Repayments of principal and interest, variable interest rate loan. Interest rates are per annum. You can get a 30-year mortgage but I’ve chosen to use 25-year figures as it is wise to leave a little fat in the equation to cover the risk of rising interest rates.

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3: INTRODUCING THE HOME DEPOSIT WORKSHEET Your home deposit worksheet will act as your blueprint or plan for getting your home deposit. A worksheet template has been included on pages 17–23, which you can use to record the value of your assets, your income, your projected savings and any government assistance you are eligible for (such as the First Home Owner Grant). The worksheet looks to the future—specifically where you will be in 104 weeks’ time. The period of 104 weeks has been chosen because it’s a simple, definitive and achievable target. However, you may wish to use a longer or shorter timeframe, in which case you can adjust the worksheet accordingly. You will find that some of the categories or specific items listed on the worksheet may not be relevant to you (for instance, you may not own shares), in which case leave them blank. Similarly, you may not be able to reduce your 15

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104 WEEKS TO YOUR HOME DEPOSIT

expenses in all the categories listed either. Don’t worry if you leave a lot of areas blank. The important thing is to make a realistic assessment of what you can earn and what you can save, and to marshal your resources as best you can. You might find you only need to fill in three or four areas of the worksheet in order to save enough for your home deposit. Remember, nothing in life ever goes exactly according to plan (for instance, in the end you may only be able to meet 96 of the 104 weekly savings deposits you’ve committed to), so ensure you build in allowances for slip-ups. As long as you are as realistic as possible and are committed to banking your savings each and every week, there’s no reason why you shouldn’t reach your target. Leave the worksheet blank for now—as you read each chapter you will be presented with a number of options, and once you’ve decided which is best for you the corresponding section of the worksheet can be filled in accordingly. For instance, after reading Chapter 10 on expenses, you might decide you can do without your car yet opt to retain your relatively inexpensive magazine subscription so you have something to read on the train. Use pencil rather than pen to fill out your worksheet so you can play around with the figures. And remember to discuss your plans with your partner or family, too. Once you’ve filled in the worksheet and calculated the total values over the 104-week period, transfer the totals to the worksheet summary at the end of the worksheet to arrive at the final figure for your home loan deposit. Now read the book, choose the options that suit you, and fill in the gaps in this worksheet as you proceed. By the end of the book you should know how much money you can raise in 104 weeks. You’ll have taken the first steps towards achieving your home deposit!

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17

INTRODUCING THE HOME DEPOSIT WORKSHEET

THE HOME DEPOSIT WORKSHEET ASSETS Existing savings Money in bank accounts now

$..........

Money in term deposits now

$..........

Value of shares now

$..........

Value of units in managed funds now

$……….

Money owed to me (from friends, family, etc.) now or in a trust fund

$..........

Money in property (e.g. shared ownership, where the property will be sold) now

$..........

Total savings now $.......... (take this figure to the worksheet summary on page 23) Assets See chapter 4 Garage sale (estimate) Specific items of value which

$.......... ………….$……......

can be sold (estimate) e.g. car, sports equipment,

………….$……......

jewellery, furniture, collectables

………….$............

$..........

Total asset sales $.......... Cash value after sale (take this figure to the worksheet summary on page 23)

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18

104 WEEKS TO YOUR HOME DEPOSIT

Gifts and support See Chapter 8

Value after 104 weeks

From parents and family Per birthday, Christmas and other special occasions Subsidy

$............

$..........

Description of subsidy scheme (estimated value) ……… …………………................................. ………………….................................

$..........

Total gifts and support $.......... (take this figure to the worksheet summary on page 23)

INCOME (Use ‘net’ figures for income—after tax has been

Value after

deducted)

104 weeks

New income to be saved See Chapter 6 My income [$………. Partner’s income [$………. (if relevant) What I/we could save now from my/our income(s) each week $………. Part-time job #1 $………. Part-time job #2 $………. Part-time job #3 $………. Existing job #1—overtime $………. Existing job #2—overtime $………. Annual leave—additional work for me $……….

104weeks.indd 18

per week net] per week net]

per per per per per per

week week week week week week

net net net net net net

$........... $........... $........... $……….. $……….. $………..

per week net

$………..

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INTRODUCING THE HOME DEPOSIT WORKSHEET

19 Value after 104 weeks

Annual leave—additional work for my partner

$………. per week net

$.…......

Total new income to be saved $......... (take this figure to the worksheet summary on page 23) EXPENSES I/we can cut back in these areas:

Transport See Chapter 9 What I/we can save by not using or owning a car

$………. per week

$……….

$………. per week

$……….

Cycling/walking—saving on public transport fares Total transport saving

$..........

Communications See Chapter 9 Mobile phone

$………. per month

$……….

Fixed-line phone

$………. per month

$……….

Total saving on communications

$……….

Energy See Chapter 9 Electricity/Gas

$………. per month

Total saving on electricity/gas

$………. $……….

Loans See Chapter 9 Loans reassessment

$………. interest saved per year

Total saving on loans

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$……….

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20

104 WEEKS TO YOUR HOME DEPOSIT

Insurance See Chapter 9

Value after

Policies reassessment—

104 weeks

am I paying too much?

$………. per year

Total saving on insurance

$……....

Regular fees See Chapter 9 Memberships

$………. per year

Subscriptions

$………. per year

Other

$………. per year

Total saving on regular fees

$……….

Luxuries See Chapter 7 Luxury #1

$………. per week

$……….

Luxury #2

$………. per week

$……….

Luxury #3

$………. per week

$……….

Luxury #4

$………. per week

$……….

Luxury #5

$………. per week

$……….

Luxury #6

$………. per week

$……….

Luxury #7

$………. per week

$……….

Total luxuries saving

$……….

Rent See Chapter 8 [current rent or board

$……….per week]

Moving to cheaper premises $……….per week for .... weeks Living with parent(s)

$……….

$……….per week for .... weeks

$……….

(after deducting any board I/we will pay) Living with friends

$……….per week for .... weeks

Total rent saving

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$………. $……….

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INTRODUCING THE HOME DEPOSIT WORKSHEET

Presents See chapter 8

21 Value after 104 weeks

To my partner from me

$………. per birthday, Christmas and/or other special occasions

$……….

To me from my partner

$……….

per birthday, Christmas and/or other special occasions To my family

$……….

$………. per birthday, Christmas and/or other special occasions

To my partner’s family

$……….

$………. per birthday, Christmas and/or other special occasions

Total presents saving

$………. $……….

Superannuation See Chapter 9 Amount ‘saved’ if I/we stop paying voluntary superannuation contributions (e.g. self-employed or employee ‘salary sacrifice’) $………….per week, or $………….per year Total superannuation saving

$……….

This is not the superannuation payments made to your account by your employer as part of the superannuation guarantee scheme. If you don’t make any other contributions to superannuation then you have nothing to add to the worksheet.

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104 WEEKS TO YOUR HOME DEPOSIT

Vices See Chapter 10 Smoking

$………. per week

$……….

Alcohol

$………. per week

$……….

Recreational drugs

$………. per week

$……….

Gambling

$………. per week

$……….

Total vices saving

$……….

(add up all your expenses savings subtotals) Now add up all sub-totals from pages 19 to 22

Total saving on expenses $………. (take this figure to the worksheet summary on page 23) GOVERNMENT HELP WITH YOUR DEPOSIT Value after 104 weeks

Government assistance See Chapter 12 First Home Owner Grant1 2

Other scheme?

One-off payment

$………. $……….

Total government assistance $………. (take this figure to the worksheet summary on page 23) Notes: 1. The First Home Owner Grant is just that—it must be the first property owned by you and your partner, either jointly or separately. For details about the grant see Chapter 12. 2. You may be entitled to concessions on the payment of government stamp duty taxes.

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INTRODUCING THE HOME DEPOSIT WORKSHEET

23

WORKSHEET SUMMARY Where the money is coming from

Value after 104 weeks

Total savings now (from page 17)

$.................

Total asset sales (from page 17)

$.................

Total gifts and support (from page 18)

$.................

Total new income to be saved (from page 19)

$.................

Total saving on expenses (from page 22)

$.................

Total government assistance (from page 22)

$.................

Home Deposit Grand Total

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$..............

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4: PUT TOGETHER A STASH OF CASH Enough of estimates! Let’s start putting it into practice with some money-making. Capital is what it’s all about. Capital here really means your money—not just a scattered handful of dollars but money in larger lump sums. When you gather your money together it becomes powerful and can be life-changing. It’s a simple truth that savings breed other savings. Before you start the process of working towards a home deposit, it’s a good idea to put together the largest lump of capital you can. Whereas the savings process described in this book is otherwise all about ongoing effort—either to make more money or to hang on to what you are making—a little bit of capital up front will kick-start your efforts. It’s time for the garage sale of your life. Look at your assets. What have you got that is valuable that you would be prepared to sell? A piece of jewellery, for example? Or a state-of-the-art LCD TV you could substitute with a cheaper 24

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PUT TOGETHER A STASH OF CASH

25

version? However, by no means am I suggesting you sell items you need or possessions of serious sentimental value. No way should you be getting rid of your mother’s rings or your father’s watch. If you’ve never been a successful saver, getting that first $1000 together is a wonderful feeling. It is the breakthrough to a new way of living and investing for your future. Or if you are used to having $1000 or so lying around in a bank account, aim for five times this amount from your asset-clearing sale. Before you get carried away, though, be aware that your possessions are mostly worth far less than you believe. If you can get even half of what you originally paid for them you are doing very well. But don’t let that put you off. A few years down the track when you’re sitting in the lounge room of your new home, you might be able to upgrade to an even better TV than the one you sold to help you get your deposit. There are several ways to go about turning assets into cash: •

• •

•

•

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Furniture, computers, musical instruments, fridges and motor vehicles can be sold through newspapers and websites such as the Trading Post and eBay. Books are hard to sell in any number—try local secondhand bookshops to start with. Old clothing and costume jewellery—if they are of good quality or have real character—might be purchased by recycled clothing stores or shops specialising in antiques. Your wider family and friends might be interested in buying certain items. Do you know anyone setting up their first home or expanding to a larger home? They might want your furniture, baby gear or a bargain-price camera. Run a garage sale from your current home or the home of a friend. Alternatively, in many suburbs there are

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104 WEEKS TO YOUR HOME DEPOSIT

schoolgrounds or church properties where weekly markets are held, which are basically giant garage sales. You pay a fee for your spot for the day and a crowd generally appears. This is a good place to sell CDs, DVDs, interesting clothes, old stereo speakers, and all sorts of things that, elsewhere, are valueless. It doesn’t even matter if some things are broken (as long as you’re upfront about this)—take it along and someone might offer you a few dollars for it. In some cases you should seek expert valuation of items before offering them up in a garage sale or on the shop counter. If in doubt check with someone—for example, a piano-valuer, jeweller, antiquarian or art dealer. Maybe you unwittingly own a valuable collectable or piece of art. Apart from the sale, look to other possibilities. Are you owed any money? If so, call it in. Or is there any other ‘windfall’ money to which you are entitled? Check your pay slips for holiday pay or any bonuses which might be due to you. You might also have long service leave accruing on your behalf—this could be worth thousands of dollars if you meet the eligibility criteria. Now hold that cash until you’ve read Chapter 5.

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5: WHERE SHOULD MY SAVINGS GO? If there is one thing I can say to you with absolute passion and conviction, it is this: don’t leave your savings in your everyday bank account. The money will disappear as if by magic. Whenever I put money into my bank account, I know I must get it out and invest it somewhere else fast or it will disappear. But before we look at what we can do to maximise our savings, let’s consider the more pressing issue of how to minimise the cost of our debts.

WHAT TO DO WITH DEBT As part of your preparation for saving a home deposit it is vital to take a good look at your current debt situation. Debt is money you owe. And it costs you money on a regular basis, in both interest and principal repayments, and you must repay it. The interest rate you are paying on your debt 27

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104 WEEKS TO YOUR HOME DEPOSIT

could be as low as 7 or 8 per cent or as high as almost 30 per cent depending on current market conditions. As a guide, here is what debt interest rates look like, from the cheapest cost to the highest using typical borrower rates. THE COST OF BORROWING Type of loan

Annual interest rate you are paying

Home mortgage (fixed rate, three years)

7.30%

Home mortgage (variable rate) with a bank — basic

7.50%

— standard

8.05%

Home mortgage (variable rate) with a building society — standard

8.00%

Home mortgage (variable rate) through a mortgage manager — basic

7.05%

— standard

7.60%

Home equity loan

8.20%

Personal loan (unsecured) — fixed rate

12.75%

— variable rate

13.00%

Credit card

17.55%

Store credit card

up to 22%

Store finance with long ‘pay no interest up-front’ period

20 to 27%*

Source: Reserve Bank of Australia, February 2007. * Applies if you fail to pay off the debt by the end of the ‘interest-free’ period.

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29

ARE YOU PAYING TOO MUCH INTEREST?

Unless you know how the system works, you can be caught paying far more in interest than you need to. Consider these five strategies for bringing debt under control. 1. BEWARE OF CREDIT CARDS ISSUED BY SHOPS The cards issued by clothing shops, department stores, and so on are at the highest end of the debt spectrum. While they may offer some benefits to shoppers, these are often negligible compared to the interest you will end up paying. 2. CUT UP YOUR CREDIT CARDS OR STORE THEM FOR EMERGENCY USE ONLY Credit cards are convenient but they’re also a trap, shielding us from the full impact of our purchasing. Generally, I’m not a fan of the idea of cutting up the cards as they offer the user many benefits in terms of control over cash flow. But there are some people who never live comfortably with their credit cards. If you have a tendency to pay just the specified minimum repayment amount, or can’t ever reduce the outstanding balance to nil, it might be a sign that you should put away the cards for now. They won’t be gone forever, and you can still leave them at home for emergencies. 3. CONSIDER A PERSONAL LOAN Personal loans attract a much lower interest rate than credit cards. However, they are more cumbersome and less flexible. You can’t just pay for a meal or a new dress and add the expense to your personal loan. If you need to buy something expensive and know now that you won’t be able to pay it off quickly, you should consider getting a personal loan to cover the situation. A car loan is a good example. Even a necessary holiday or a flight

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104 WEEKS TO YOUR HOME DEPOSIT

to attend a family wedding or funeral might be better handled with a personal loan than a credit card. 4. CONSIDER CONSOLIDATING YOUR DEBT Debt consolidation is a budgeting trick we should all be aware of. This is the idea of taking debt from high-interest situations— shop cards, credit cards, car finance—and tacking it onto lower interest arrangements such as a property mortgage or personal loan. Now, at the moment you mightn’t have a mortgage, but it’s important to understand what’s going on here. Say you’re paying $40 per month interest on a credit card balance of $3000 at 16 per cent, $80 per month interest on an unsecured personal loan of $8000 for your car at 12 per cent, and $55 per month interest on a department store card balance of $3000 at 22 per cent interest. That’s a total of $175 per month for your debt in interest alone. If you rolled all these debts into a mortgage (when you get one) your monthly repayment of $175 in interest at 8 per cent would reduce to $93—a saving of $82 per month or just over $1968 after 104 weeks. However, debt consolidation runs the risk of turning a shortterm debt into a long-term debt. For example, your personal loan might be timed to repay most of the amount you have borrowed—the principal—by the end of four years. When you roll this debt into a mortgage, the repayments run for the term of the contract, which might be 25 or even 30 years (or earlier if you sell the property and discharge the mortgage). So by taking longer to pay the debt, you may ultimately accrue even greater costs in terms of interest, despite the lower interest rate. Speak to an independent financial counsellor, not just the bank staff, if you feel that debt consolidation could work for you. 5. WATCH OUT FOR FEES AND CHARGES Do the sums before you sign. A monthly account-keeping fee

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31

of a mere $4 on a debt of $1000 is the equivalent of almost 5 per cent interest over the course of a year. Get a printed list of all fees.

WHERE TO PUT MY MONEY Reducing the cost of debt via interest, fees and charges is one side of the equation. The other is how to earn more from the stash you have managed to save. This used to be fairly straightforward to answer, but recently it has become less simple. Let’s run through the options. MONEY IN THE BANK

OK, you’ve saved $1000—now where should you put it? You’ve probably got an everyday ‘transaction’ account with a bank or credit union. What will your $1000 do for you there? If you place $1000 in an everyday transaction account you will earn next to nothing over the course of a year. The first column in the table on page 32 names the Big Four banks, the second shows the interest rate applicable to $1000 deposited mid2007, the third turns this into cents earned, the fourth applies a low income tax at the rate of 30 per cent plus the 1.5 per cent Medicare levy. It is not a pretty sight. When you include fees and charges you might actually be losing money to have it in these accounts. However, let’s not ignore the benefits: ready access to your money on demand, and security from thieves and other hazards. Providing it doesn’t get stolen, you are possibly better off financially to have $1000 under the mattress than in a basic transaction account—but will you rest as comfortably? It is a key part of the home deposit method to have a helpful place to stockpile your savings as they grow. If transaction

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EVERYDAY ACCOUNTS—WHAT YOU’LL EARN PER $1000 Amount of

Financial

Interest

Amount of

institution

rate earned

gross interest net income

on $1000

you will earn

after deduct-

deposited

in a year (in

ing income

over one year

cents)

tax at 31.5% (in cents)

ANZ Bank

0.00%

0

0

CBA

0.01%

10

6.85

NAB

0.01%

10

6.85

Westpac

0.00%

0

0

accounts are out of the picture, that is no great loss. There are other, more useful places to park your cash for this project. TERM DEPOSITS

Banks and other financial institutions borrow money from all sorts of places. They offer a deposit situation where you agree to loan them your money for a set period of time at an advertised interest rate. The income you will earn from the term deposit will be paid to you in accordance with the contract: monthly, quarterly, once a year or at the expiry of the term. You need at least $1000 to open a term deposit account. Earnings: 5.00% to 6.70% per annum (pa). Term: 30, 90, 180 or 365 days, and up to five years. Examples: ANZ, Commonwealth Bank, CPS Credit Union, Westpac.

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33

CASH MANAGEMENT TRUSTS

These products pool the money of many investors, hold it on trust for them, and place it in wholesale cash investments like short-term bank bills and the overnight money market. The impact is that a cash management trust can offer you a higher interest rate than a bank account, but you lose a little flexibility and incur a raised level of risk. Importantly, you can withdraw your money fairly easily—usually after giving one day’s notice to the company. They will usually give you a cheque or pay the money directly into your nominated account. Earnings: up to 6.10% pa on $5000 deposited. Term: at call (about one day after you request a withdrawal). Examples: Commonwealth Financial Services, Education Credit Union, HSBC, Suncorp Metway. INTERNET SAVINGS ACCOUNTS

These savings accounts have recently shot to prominence. They offer interest rates comparable to (and sometimes better than) cash management trusts, but without the hassle of paperwork on deposits. There are no branches—the whole thing takes place online. You set up an account with the online bank and connect it to an existing account you have with another financial institution (such as a bank). You make deposits into your internet account via your existing account (over the internet) or by cheque in the mail. You make withdrawals by phone or internet, with funds available the next day. Your internet bank makes the arrangements with your existing financial institution. Interest is calculated daily and paid monthly. There is no minimum balance required, and no minimum amounts for deposits or withdrawals. All fees are incorporated in the way the deposit interest rate is calculated—they are not added on at the end.

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Earnings: up to 6.80% pa. Term: no fixed term. Examples: ING Direct, dragondirect (from St George), Easy Street Financial Services. Many banks now offer accounts on similar terms. It becomes a question of what is most convenient for you. BONUS SAVER ACCOUNTS

Banks and many other financial institutions now offer accounts that bring the promise of higher interest rates. There is a catch, however: generally you must make no withdrawals and must make at least one deposit in the account each month if you are to earn the bonus rate of interest. For example, one such account pays you nothing on your account balance (below $20 000) if you fail to meet these two conditions, but if you comply, your money earns 3 per cent interest. Interest is calculated daily and paid monthly. And that’s not a bad return for an account which lets you withdraw your money at will. Earnings: nil unless you comply with the terms of the bonus; then 2.50% to 6.30% pa. Term: no minimum term (although money must be in the account for one full month to earn any interest). Examples: Westpac Reward Saver, ANZ Progress Saver, Commonwealth AwardSaver. SHARES

When the stock market is booming it seems everyone but you is making serious money out of shares. There is an almost overwhelming pressure applied through the media for all of us to jump on the gravy train.

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35

Experts generally say that, for the purpose of saving for a home deposit, shares are unsuitable. Ignore the pressure from friends, family and the media to ‘get into shares’. There will be more appropriate times for this. Because of the volatile nature of the share market, shares are usually seen as a long-term investment of five or more years’ duration. You need to allow this time period so that you can ride out any plunge in values. Earnings: these vary too widely to predict. Term: you can sell at any time (provided there is a buyer), but you should be prepared to leave your money in the shares for up to five years in order to ride out any low periods. Of course, some companies will go broke and the shares will be worth nothing. Examples: Commonwealth Bank, CSR, BHP Billiton, Telstra, PBL. MANAGED FUNDS OR UNIT TRUSTS

There are many purposes for which investors might usefully pool their money—to buy a wide range of shares (Australian or overseas), to buy shopping centres or office blocks, to buy government bonds and other expensive securities, and so on. Investors sign up to a prospectus which sets out the deal, including how to buy ‘units’ in the fund and how to get your money out by selling units. Some funds are designed to maximise income to the investor while others aim at capital growth or a mix of the two. The three great benefits of managed funds are: 1. You spread the risk—by buying across a range of investments. 2. An ‘expert’ manages the whole thing for you and gives you written reports.

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104 WEEKS TO YOUR HOME DEPOSIT

3. You can get into the ‘big league’ of investing—huge shopping malls and multimillion-dollar share portfolios, for example—with just $1000. Allow for capital gains tax where relevant. Earnings: these vary widely, from double-digit positive returns to double-digit negative returns (you’re going backwards). Some trusts are designed to work for capital gains, others for income or a mix of the two. Term: apart from cash management trusts (see above) managed funds are generally a long-term investment—think five-plus years. Examples: Colonial First State, Perpetual, Tyndall. MORTGAGE TRUSTS

These managed unit trusts are sometimes recommended as a place for keeping your savings if you’re only looking for a two- or threeyear period. The trust pools investors’ money and lends it out on secured mortgages. The return can be slightly higher than many other types of shorter investment, and the security (real estate) should be relatively solid. Generally there is no entry fee to pay, but there may be an exit fee for getting out within 18 to 36 months (depending on the fund). Find out about this before investing. Earnings: 6.0% to 8.5% pa. Term: 18 months, or three to five or more years. Example: Challenger Howard Mortgage Trust. CONSULT A FINANCIAL PLANNER

If you have little experience with saving large amounts of money it is wise to discuss your options with a licensed financial planner—and everything in this book is predicated on this

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37

DOWN THE AISLE AND THE GARDEN PATH

‘My tip for anyone saving for their first home is this: start early! It’s later than you think!’ Miranda is only 25, but she knows what a struggle it is to put a home deposit together. With her fiancé, Michael (also aged 25), she travelled to Sydney from Brisbane following an important job offer. ‘Rent is the big killer,’ says Miranda. ‘It’s costing us $300 per week for a tiny flat. This is a lot more than back in Brisbane.’ One thing is sure: Miranda and Michael are not planning on staying in Sydney. ‘If we buy a home in Sydney I can see we’d still be paying off the mortgage when we’re 60. So we’ll move back to Brisbane—that’s where Michael and I met, so it feels like home there. ‘The price of property is a big factor in our plans. A modest house in Brisbane will cost us around $150 000 to $160 000. OK, it will be a real “first home”, but we’ll stay there a few years, do it up, then sell it and make a little profit. Eventually we’ll move into a real family home.’ But a home is not all that is on the shopping list. ‘Our problem is that we are trying to save for a home and our wedding at the same time. We’ve set the date for the wedding and I’m concerned we’ll be left short of cash.’ Here’s what’s happening financially for Miranda and Michael. Miranda started her savings with a small inheritance—just a few thousand dollars—which she received on turning eighteen. Despite many financial

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104 WEEKS TO YOUR HOME DEPOSIT

demands she has managed to hang on to this money, rolling it over from year to year in a savings account which pays bonus interest if you make no withdrawals. ‘The fact that the account has no passbook or access card helps keep the money out of reach (you have to phone the bank to make arrangements for any withdrawal). That system, along with the bonus interest, has worked well for us and we have basically doubled our money over time. ‘However, on coming to Sydney we bought a new car, and this has slowed us down on the savings front,’ she laments. Other parts of their savings scheme include: •

•

•

•

104weeks.indd 38

‘We try to save money every fortnight. Michael and I get around $2000 per fortnight net between us from our jobs. We aim to bank $900 of this each fortnight.’ ‘We feel more in control of our expenses by putting most of our bills on the credit card. This way we pay them off just once a month.’ ‘I have found part-time work in a café for one day each weekend. This pays me about $120 net a week. I call this my “play money”—it’s my own to do with as I like. But I might have to start saving some more of this now.’ Michael has also started some part-time work. He and a friend have a casual job delivering mattresses and beds for a retailer. They might move four beds a day on the weekend. Between them they make $50 per bed. ‘And it helps keep him fit,’ says Miranda.

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•

•

39

‘The next thing we’re going to do is to organise with our bank for the regular automatic debit of savings out of our working account. It will be just like having a mortgage—we won’t have to think about it. The money will go into a savings account automatically every fortnight. When I was single I had an arrangement like this with the bank and it worked very well for me. Now that we have a clear goal it is time to get back to this type of regular savings scheme.’ ‘We are planning to be ready to make our purchase while the government grant for first home buyers is still available.’

Miranda and Michael will combine the government grant with their own savings to give them a 10 per cent deposit on a home in Brisbane. They are planning to borrow around $145 000 to complete the purchase. To reach their target deposit and target date—within the next 12 months—they know they must triple their current savings. However, even today they can see what they must do to get there on time and on budget. It’s a stretch, but they are prepared to work to make it happen. ‘I wish we had started saving earlier,’ says Miranda. ‘I’m 25 and I realise I could have had a house by now. Moving around a lot certainly hasn’t helped!’

recommendation. You don’t have to go to someone expensive, but at the very least you should make an appointment to see one of the planners with your bank or credit union. While they would like you to invest in their institution’s deposit accounts

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104 WEEKS TO YOUR HOME DEPOSIT

and products—or others where they might receive a commission—you are under no such obligation. As a customer of that financial institution you should avail yourself of the opportunity to get information and advice about where to put your savings. Moreover, the planner should try to gain an understanding of the wider context of your life and plans. They should discuss issues like risk and security, superannuation, and so on. As a rough guide, a planner charging commission on the products you buy will earn 1.5 per cent to 2.5 per cent of the money you spend up-front. He or she might also receive a small percentage every year back from those investments (called a trailing commission). A planner who charges a flat fee or charges by the hour will cost you something like $500 to $2000 for a modest plan; more where there are complications. When you first call, see if the appointment is free of charge and ask about how the fees will be calculated. Confirm that the adviser is licensed.

WHAT CAN I SAVE NOW? As you start your planning, consider whether there are ways you can save a few dollars each week almost without noticing it. Here I’m talking about money you don’t need to save from somewhere else—for example, by giving up going to the movies or having a big eat-out lunch. This is ‘no effort’ saving money. Maybe you have some spare cash at the end of each pay period, even if it is only $10 a week. It might be money you are already consciously saving regularly, perhaps through an automatic deduction from your bank account—or into a jar at home. Look at the table on page 41 to see how even a few dollars can quickly add up, and note down any simple savings like this straight onto the home deposit worksheet on page 17.

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41

WHERE SHOULD MY SAVINGS GO?

SAVINGS NOW Amount you can save each

Value after 104 weeks

week without effort: $10

$1040

$20

$2080

$25

$2600

$30

$3120

$35

$3640

$40

$4160

$50

$5200

$75

$7800

$100

$10 400

Note: If you can save more than shown here just add or multiply the relevant columns together.

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PART 2 MAKING A PLAN

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6: INCREASING YOUR INCOME One of the most effective ways to reach your home deposit goal is to earn extra money. Many times, when thinking about saving for something important to us, the focus falls solely on ‘doing without’—budgeting and cutting costs (the ‘demand’ part of the equation). However, as vital as that is, it is only one side of the coin. To reach our goal fast we must also look at increasing the ‘supply’ side of our home economy. There are several tried and proven ways of increasing income. In this chapter we’ll consider the real value of casual or part-time work. If you can find even one evening each week, or a shift on Saturday and/or Sunday, where you can do additional work, you will make a substantial move towards owning your home. Remember, it’s only for 104 weeks (or less). Then it can stop. If you don’t want to take on overtime work or an additional part-time or casual job, then there are other options 45

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that might suit you better in the following chapters. But it’s certainly worth considering, as you can add thousands of dollars to your home deposit. If you have a partner who can do it too, you will really start moving ahead. And, if it’s any comfort, you won’t be doing it alone—almost 5 per cent of Australian workers have more than one job.

WHAT TYPE OF JOB? There are a number of ways you can go about increasing your income. Here are a few options for you to consider. 1. WORK MORE HOURS OR EXTRA SHIFTS AT YOUR CURRENT JOB

•

• • •

This is the easiest route to go. You know the boss, you know the system, you know the tasks you have to do. It’s just a matter of getting your head down and keeping on going. Most importantly, you make impressive savings of time and money: if you’re simply staying back longer hours, there is no extra travel time involved— every extra minute away from home counts towards income. Similarly, there are no additional travel expenses—petrol or fares. You don’t have to change clothes or tidy yourself up (as you would for a second job, starting fresh). You can start earning immediately. There is no need for a trial period, a probation period or a training period at reduced wages.

If your current job won’t pay you for extra hours worked, move to option two.

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47

2. SAME JOB, EXTRA RESPONSIBILITIES

It has become expected that we must put in more time at the workplace above and beyond the call of duty. Many employers believe they shouldn’t have to pay you extra for this time. But they are often wrong about this and can be shown to be shortchanging themselves in the long run. Can you think of a way to make yourself more valuable to your employer? Analyse the business and see if there is a way you can make a real difference to your boss and his or her quality of life. You can bet that the boss is more stressed than most of the employees, and the boss simply can’t do everything. That’s your opening. Even a small task, if repeated over a week—such as staying back an extra hour to ensure couriers have picked up outgoing parcels or looking after the switchboard first thing in the morning—will add up. What’s it likely to be worth to your employer to be relieved of a little pain? Twenty dollars per week? Thirty? More? You can also volunteer to train for a new task. Once trained you could ask for a higher rate of pay—even just an extra dollar an hour—or get a small weekly loading added to your pay. There may be shifts available that are more highly paid than the one you’re on now. Here’s my tip: don’t be afraid to discuss it with your boss. Any half-smart employer will have a lot of plans floating in their mind, just waiting for the opportunity to be developed. Sow the seed that you are ready, willing and capable of doing something outside your current job boundaries, and see what opportunities it brings. 3. NEW JOB, WORK FROM HOME

Time is money, or sleep and relaxation. If you can avoid travel time you are already ahead. Can you work from home?

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BANG THE DRUM

Tracy and Brock knew it was time to give up the renting game. Their first child was still a toddler, but the writing was on the wall . . . literally. They would go mad if they didn’t get safely inside the walls of their own place soon. Although they, as a couple or individually, had never been very good at saving money, they realised it was time to stop going out so much and spending their weekly pay packets. They put their heads down, watched a whole lot more television, and saw their savings start to grow. But cutting back on their lifestyle expenses just wasn’t enough. Said Tracy, ‘It didn’t take long for us to see that there was a limit to what we could save just by pulling in our heads and buying less chocolate and alcohol—although every bit helped. We needed more income.’ This is where Brock took the bull by the horns. For many years he had been a casual musician, playing in a number of spectacularly unsuccessful bands. Usually he was lucky to end up with enough money at the end of a gig to pay for his drinks that night. Still, music was a talent he had—but could he put it to real financial use? Brock asked around and found a singer who was putting together a band for a series of shows. This singer had good contacts, and Brock was soon playing two or three nights every week. Because the singer had arranged the band on a professional basis, with agents booking the gigs, posters, demo CDs and the whole boxand-dice, the band members were making money.

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49

Now it wasn’t enough money to live on, but it made a fantastic supplement to Brock’s day job. After tax, Brock was earning an additional $160 to $300 each week. And within two years Brock and Tracy had put a deposit down on their first home—a two-bedroom flat in a good suburb of Sydney. ‘The good thing about having a second job,’ said Tracy, ‘is that it’s all savings. We already knew we could live on our wages so the music money went straight to the home deposit account. It was all cream.’ ‘It was pretty exhausting, finishing work and then going out again at night several times a week,’ said Brock. ‘But look where it got us! Finding that extra income was the key for us. It broke us out of the stalemate we were in, where the longer it took to save money the further house prices seemed to rise above us. The pay wasn’t very good—if you looked at it on an hourly basis we were being ripped off—but the job fitted in well with our lives. Everyone in the same position as us should take a look at their talents and hobbies and see what they can turn to good use.’ As it turns out, two years was about right for the band, too—it imploded thanks to the usual spicy mix of colourful personalities, insecurities, jealousies, creative differences and too much junk food. This option requires a good sense of self-discipline. Not everyone can do it. You have to be able to shut yourself off from your location and avoid the temptation to raid the fridge, water the garden or lie down on the bed. It can be lonely and quiet, but for some of us these factors are great attractions; others crave noise and social interaction.

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4. NEW JOB, NEW WORKPLACE

Taking on a second job is not the easiest of options, but it’s probably something you’ve done at least once or twice before and know how it goes. The problem you’re going to face is that part-time or casual work may involve either a drop in status or increased responsibility. We are becoming a nation of gap-fillers—it’s a land of opportunity, but the opportunity is to work part time and earn insufficient money to live well. Which is precisely why we all need to get cracking and buy a home—an asset that will increase in value throughout our life. So seize the opportunity provided by the collapse of traditional job structures and use it to your advantage.

WHERE ARE THE JOBS? Are you prepared to see the opportunities? Then, are you prepared to have a go? An organisation called WorkVentures (www.workventures. com.au) runs a number of programs to help people find work and train for particular jobs. WorkVentures places a lot of people into full-time, part-time and casual work. According to one of the program managers, ‘People who have skills can find work’, and there’s basic work available in most areas—particularly cities. WorkVentures also offers a mature workers’ program, funded by the government, that sets out to get people aged 40+ into the workforce. In this case, the key to getting a job is often upgrading skills that have become a little rusty or learning new skills which are now in demand. Here are some suggestions for basic casual or part-time work, readily available in most areas throughout the year: •

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Hospitality—food preparation, bar work.

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•

• • • • • • • • • • •

• • • • •

• •

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51

Waiter/waitress—cafés, restaurants or special functions. You can train to obtain a certificate in gaming or alcohol supervision for club work. Concierge in a hotel or apartment block—often, rotating six-hour shifts run 24 hours a day, seven days a week. Security—for either an individual company or a security firm. Deliveries—pizza, other takeaway food, flowers, etc. Courier—bicycle, motorcycle or car. Secretarial or clerical work—typing, filing, office administration, etc. Retail—department stores and chain stores. Cash register work—supermarkets, department stores. Stacking shelves—supermarkets and large stores. Computer work—data entry. Market research—interviewing people, conducting surveys. Telemarketing—phoning people to sell products or services, from wine to pest control to raising money for a charity. Customer service—for a bank, post office, department store, etc. Cleaning—for commercial businesses, hotels or private households. Mowing lawns—for businesses or private residences. Newspaper run/brochure delivery—to homes and letterboxes within a specified area. Pet services—washing and grooming animals, taking them for walks, or feeding pets while the owners are away. House painting—internal or external. Also businesses and commercial premises. Nurse’s aide—hospitals, nursing homes or private care.

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104 WEEKS TO YOUR HOME DEPOSIT

Some jobs are seasonal—they only appear for a particular period each year and may be quite short term. These include: •

•

•

•

•

•

•

•

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Fruit picking—there is a circuit around the country. The pay is low, the work is hard, but you get to spend the day outdoors and you’ll end up fitter. Taxation—the end of the financial year (30 June) brings a number of opportunities. Often government agencies need more people to answer phone queries and to process tax returns. People with aptitude can be trained by tax agents or accounting franchises to help clients prepare basic tax returns. New government schemes—every time a government (state or federal) announces a new scheme they increase the number of people dealing with inquiries from the public (remember the introduction of the GST, for example). Stock market floats—similarly, whenever a large company is ‘floated’ (when shares are offered to the public), additional people are taken on to field inquiries from the public. When it’s cold look to the ski industry—winter brings opportunities to work at the ski fields, supervising chair lifts, cleaning hotel rooms, and so on. When it’s hot it’s peak season at the beach—hotels, restaurants and retail businesses may require extra staff over summer to cope with the crowds. Tourism—tour guide work, driving buses, collecting tickets, helping with activities (abseiling, rafting, bushwalking, canoeing, etc.). Retail—additional jobs become available in the leadup to Christmas and through the stocktake-sale period immediately after.

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•

53

Read the papers: if a local factory reports winning a large contract or tender, give them a call. They could be looking for new workers and might be interested in those who are prepared to live with the insecurity of being part time or casual.

There are also some more specialist part-time or casual jobs that draw on specific skills which you might have, but are not currently putting to economic use. Some examples include: • • • • • • • •

Singing or playing music—either performing or teaching. Stand-up comedy—at the local pub, a comedy club or a festival. Ski or surf instruction—although seasonal, it can be great casual or weekend work. Gardening—using your knowledge of plant selection, propagation, water issues, diseases, pruning, etc. Knitting or quilting—selling handicrafts or running workshops. Painting, sculpting, pottery, etc.—selling artworks and running classes. Woodwork—selling furniture and wood products or running workshops. Home handyperson—building maintenance and small jobs commercial builders are unwilling to take on.

You can bring your skills up to date or learn new ones from books, over the internet, from instructional videos or by attending courses. According to WorkVentures, courses suitable to get you work in the computer field start from around $300 (through TAFE) or $600 through a private provider. Check out TAFE and community evening college courses.

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HOW MUCH COULD I EARN? The money from most part-time or casual jobs is often not great and, of course, is subject to income tax. In general you can expect to earn between $14 and $20 per hour gross, and more for jobs requiring specialist skills. For example, a musician in a duo can earn between $100 and $250 for a night’s work (four hours of playing, a couple of hours’ travel and setting up equipment). Feeding people’s pets when they go away on holiday might get you $10 to $15 a day for one or two weeks, but once you’ve built up a clientele in your local area this can turn into a nice little earner—neighbours will spread the word for you. When it’s suddenly $30 or $40 to open two or three cans of pet food in the same street each day over the school holidays, you’re looking good. If you don’t have contacts for work, or are unsure what is available within a close distance, get in touch with a job agency and discuss your skills and interests. Find out what courses they recommend to qualify you for well-paying jobs.

THE PART-TIME WORK MODULE The tables on the following pages show how much you could earn in a basic part-time or casual job over a 104-week period (figures will be better if you can find a suitable higher paying job). Note, all figures assume you already have a first job and have received the benefit of the tax-free status of the first $6000 you earn.

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Part-time or casual work for 104 weeks—one person, taxed at 30% plus 1.5% Medicare levy $14 p/h* $17 p/h*

$20 p/h*

4 hours per week each, net earnings

$3989

$4844

$5699

8 hours per week each, net earnings

$7979

$9689

$11 398

$11 968

$14 533

$17 098

12 hours per week each, net earnings

* The figures in the column headings are gross hourly rates. The figures shown in the body of the table, however, show net earnings after deduction of income tax at the rate of 30% plus the Medicare levy of 1.5%.

However, if your additional taxable income falls wholly in the next tax bracket—income $75 001 to $150 000—your marginal tax rate is 40 per cent + 1.5 per cent Medicare levy. The table below shows what you would earn for your part-time work over 104 weeks. Part-time or casual work for 104 weeks—one person, taxed at 40% plus 1.5% Medicare levy $14 p/h*

$17 p/h*

$20 p/h*

4 hours per week each, net earnings

$3407

$4137

$4867

8 hours per week each, net earnings

$6814

$8274

$9734

$10 221

$12 411

$14 602

12 hours per week each, net earnings

* The figures in the column headings are gross hourly rates. The figures shown in the body of the table, however, show net earnings after deduction of income tax at the rate of 40% plus the Medicare levy of 1.5%.

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Now here’s what happens if you have a partner who can join in. The following table is based on the total taxable income per person falling within the range of $30 001 to $75 000, in which case income tax is deducted at the rate of 30 per cent + 1.5 per cent Medicare levy. Part-time or casual work for 104 weeks—two people, taxed at 30% plus 1.5% Medicare levy $14 p/h* $17 p/h* $20 p/h* 4 hours per week each,

$7979

$9689

$11 398

$15 958

$19 377

$22 797

$23 937

$29 066

$34 195

net earnings 8 hours per week each, net earnings 12 hours per week each, net earnings * As for the previous tables, figures in column heads are gross hourly rates, but figures in the body of the table show net earnings.

The next table shows earnings for two people whose income wholly falls within the $75 001 to $150 000 tax bracket, and which is thus taxed at 40 per cent plus the 1.5 per cent Medicare levy. The tax rate for taxable income above $150 000 is 45 per cent plus Medicare levy of 1.5 per cent, or 2.5 per cent if you are caught by the Medicare surcharge. As you can see, the figures are impressive, and quite achievable with some motivation. If you take on a Saturday or Sunday job for eight hours weekly you will still be able to enjoy one day off per weekend—you’re not giving up all your free time by

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INCREASING YOUR INCOME

Part-time or casual work for 104 weeks—two people, taxed at 40% plus 1.5% Medicare levy

4 hours per week each,

$14 p/h*

$17 p/h*

$20 p/h*

$6814

$8274

$9734

$13 628

$16 548

$19 469

$20 442

$24 823

$29 203

net earnings 8 hours per week each, net earnings 12 hours per week each, net earnings *As for previous tables, figures in column heads are gross hourly rates, but figures in the body of the table show net earnings.

any means. Maybe you’d prefer to do a couple of evening shifts at a takeaway shop or work as a cleaner? Or perhaps you could manage four hours over the course of a week where you sit down in front of a computer and type—that’s just a bit more than an hour every second night. Now take the figure you think you can achieve and add it to your home deposit worksheet on page 18.

THE HOLIDAY OF YOUR LIFE Some people can live with the idea of taking on regular part-time work to top up a full-time job; others can’t. If you feel unable to add to your weekly burden, consider this: you can earn a substantial amount of money for your home deposit by taking a different job during your annual leave. Do it all in one hit. If you plan well you should be able to find a job that is not just a repetition of what you do all year but which, somehow, feels at least like a change, an escape from the everyday. OK, it’s not the same as a holiday. But you will be

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mixing with new people at least and learning something new, you can put old workplace feuds and frictions to one side for a while and enjoy a change of scenery. And if you put some thought into it you might just find yourself working a four-week block somewhere really enjoyable, such as: • • • • • • •

Selling icecreams in a beachside town or suburb over summer. Working on a cruise ship. Being a roadie for a band tour or working at a festival. Crewing a commercial boat. Being a ski instructor (or a liftie), here or overseas. Working outdoors after a year stuck indoors. Travelling from town to town, selling or promoting a product or information campaign.

A lot of the demand for casual jobs is found where tourists gather—the beach, the snow, lakes, rivers and mountains. These are areas of great natural beauty, and there’s often a lot on offer in terms of entertainment and nightlife, too. If you go there with your partner you can have a lot of fun and great experiences wrapped around the hours of work. Watch your costs, however (accommodation, travel, meals, etc.). Can you stay at a friend’s place? If you need to stick close to home because of your commitments—children, relatives, pets, and so on—you might like to think of your four weeks’ annual leave as an opportunity to find work in a job which teaches you something of value. Is there a particular skill you need to acquire if you are to advance (and earn more money) in your current job? If it requires experience yet your boss won’t let you gain that experience, try to find it elsewhere. For example: marketing, bookkeeping, making espresso, child care.

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59

THE HOLIDAY JOB

The four tables on the following pages show how much you could earn by working during your annual leave from your usual full-time job. Again, we are looking at a number of weeks from within your 104-week allowance. The maximum is two periods of four weeks over the 104 weeks. If you have a partner who can get in on the act you have a potential 16 weeks of extra income. For one period of your life, can you do it? The tables also show shorter periods of holiday work—if you can manage even two weeks over the 104 weeks, it will still leave you with six weeks of holiday. As with the previous tables in this chapter, the hourly rates shown in the column headings are gross, but the figures below are net of income tax. This is what you should get in your pocket. However, different marginal tax rates will affect this amount, as with the part-time work examples we’ve just looked at. When you’ve worked out an amount you think works for you, then take this figure and put it on your home deposit worksheet on page 18. And don’t forget you’ll be getting holiday pay from your full-time job, too, if you are an employee with this entitlement. Use these tables constructively. Savings and budgeting alone probably won’t get you to your goal on time—you need to beef up your income as well. The two go hand in hand. One hundred and four weeks gives you two full sets of holidays to use to your advantage, and when you’ve got your home you’ll have the rest of your life to enjoy holidays, to travel or simply laze about the house. Now is the time to take the steps that will deliver you this freedom of choice for the future. So, does it mean, even in the short term, the death of holidaymaking? Of course not. That’s being too dramatic. There will still be plenty of opportunities, if you are employed full time, to take

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Holiday job—one person, taxed at 30% plus 1.5% Medicare levy, for 40 hours per week excluding breaks $15 p/h $20 p/h $25 p/h $30 p/h $40 p/h 2 weeks

$822

$1096

$1370

$1644

$2192

4 weeks

$1644

$2192

$2740

$3288

$4384

8 weeks

$3288

$4384

$5480

$6576

$8768

Holiday job—one person, taxed at 40% plus 1.5% Medicare levy, for 40 hours per week excluding breaks $15 p/h $20 p/h $25 p/h $30 p/h $40 p/h 2 weeks

$702

$936

$1170

$1404

$1872

4 weeks

$1404

$1872

$2340

$2808

$3744

8 weeks

$2808

$3744

$4680

$5616

$7488

Holiday job—two people, taxed at 30% plus 1.5% Medicare levy, for 40 hours per week excluding breaks $15 p/h $20 p/h $25 p/h $30 p/h $40 p/h 2 weeks 4 weeks 8 weeks

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$1644 $3288 $6576

$2192 $2740 $3288 $4384 $4384 $5480 $6576 $8768 $8768 $10 960 $13 152 $17 536

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Holiday job—two people, taxed at 40% plus 1.5% Medicare levy, for 40 hours per week excluding breaks $15 p/h $20 p/h $25 p/h $30 p/h $40 p/h 2 weeks 4 weeks 8 weeks

$1404 $2808 $5616

$1872 $3744 $7488

$2340 $2808 $3744 $4680 $5616 $7488 $9360 $11 232 $14 976

a holiday. The trick is to make the most of what you’ve got—to maximise your ‘break’. Over the course of the year there will be many days off, including long weekends—you’ll still get time off. If you’re motivated you can really boost your income. Don’t be embarrassed to take a job that is a few steps down from what you do day in, day out. It’s only for a short time. Just don’t be too unrealistic in setting your target. Maybe set yourself a goal of working two extra weeks in the first year and three the year after. Start the ball rolling. Ask around about additional work— speak to friends, family, your employer and any organisations to which you belong. Check noticeboards, search the internet or drop in at a local jobs agency.

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7: LIFE’S LITTLE LUXURIES Getting through life is not always easy so we love our little luxuries. At the end of the day it might be opening a bottle of wine. Maybe it’s hiring the latest DVD, eating out at a favourite restaurant or having a massage. We love ’em, often we simply need ’em. And they are costing us a small fortune.

COFFEE—A DRINK OR AN EVENT? Take a cup of coffee—now just as much a social event as a drink. The price of a cup of coffee is whatever you are prepared to pay. And it’s fun. Coffee makes a good illustration of where the ‘hidden’ money for your home deposit might be lurking. The two tables following look at the cost of a cup of coffee, purchased from a shop, at a range of common prices. The figures show the cost over a 104-week period. Think about how often you buy a cup of coffee—or some similar stimulant—then look at the table. Now, if you have a partner, use the second table to account for your partner’s coffee habits in addition to your own. 62

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The coffee fix—one person, for 104 weeks Cost

Cups per week 1

2

3

4

5

6

7

8

9

10

11

12

$2.50

$260

$520

$ 780

$1040 $1300 $1560 $1820 $2080 $2340 $2600 $2860 $3120

$3.00

$312

$624

$ 936

$1248 $1560 $1872 $2184 $2496 $2808 $3120 $3432 $3744

$4.00

$416

$832

$1248 $1664 $2080 $2496 $2912 $3328 $3744 $4160 $4576 $4992

The coffee fix—two people, for 104 weeks Cups per week

Cost 1

2

3

4

5

6

7

8

9

10

11

12

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$2.50

$520 $1040 $1560 $2080 $2600 $3120 $3640 $4160 $4680 $5200 $5720 $6240

$3.00

$624 $1248 $1872 $2496 $3120 $3744 $4368 $4992 $5616 $6240 $6864 $7488

$4.00

$832 $1664 $2496 $3328 $4160 $4992 $5824 $6656 $7488 $8320 $9152 $9984

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WHAT ARE YOUR LUXURIES? Coffee is just an example. Maybe for you the hidden cash is lurking in pots of chai or expensive ‘sports’ soft drinks. Here are a few other luxuries to think about. CLOTHING

What do you spend on clothing each year? It can be hard to know for sure as the figures get buried. Take a look in your wardrobe and make an estimate—shoes, sports gear, jackets, T-shirts, and so on. Maybe you could make a pact with your partner that you only replace worn-out clothing and shoes rather than buying for fashion. Or give yourselves a reduced budget and allocate the rest to your home deposit. LUNCHES

Bring your lunch from home? A net saving of five dollars per working day (after ingredients costs) adds up to $2400 over 96 weeks (104 weeks minus eight weeks of annual leave). Bring in your partner and there’s room to save almost $5000. That $5000 saved could support extra borrowings of up to $45 000 for your home. TAKEAWAY

Fast food and restaurant food are eating into the average household budget. Almost one-third of the total money Australians spend on food and drink goes on takeaway and eating out. Can you rearrange your spending in this area? For a couple, demoting a night at a restaurant to a night with takeaway chicken or pizza will represent a saving of between $30 and $100 per occasion.

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LIFE’S LITTLE LUXURIES

ENTERTAINMENT

Just going to the movies can cost over $30 for two people, plus extras like parking, petrol, junk food, babysitting, etc. Are you a regular purchaser of CDs, DVDs, books, magazines, newspapers? Assess your lifestyle and look for patterns of spending where you can make regular savings. Luxuries—estimated savings over 104 weeks Estimated savings per week

One person

Two people

per person $1

$104

$208

$3

$312

$624

$5

$520

$1040

$10

$1040

$2080

$15

$1560

$3120

$20

$2080

$4160

$25

$2600

$5200

$30

$3120

$6240

$40

$4160

$8320

$50

$5200

$10 400

$60

$6240

$12 480

$70

$7280

$14 560

$80

$8320

$16 640

$90

$9360

$18 720

$100

$10 400

$20 800

Remember this: you don’t have to give up anything forever. Try a four-week period, or every second day. Rotate your sacrifices. Use the table above for your calculations and move any savings to the home deposit worksheet on page 20.

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8: THE THEORY OF RELATIVES This is a chapter to make you grit your teeth, to test your resolve. In short: what can your parents or family do for you? Not only have your parents given you the precious gift of life . . . can you ask them for more? Can they, in some way, help you reach your home deposit? Perhaps on some level it will help them if you buy your own home. Don’t just limit your thoughts to your parents. Sometimes friends, brothers and sisters can step forward and be counted on at this crucial stage of your life. For some it’s a cultural issue. Many Anglos have been raised to be independent, to bear the burdens of life privately and face them single-handedly. They find it embarrassing to ask for help. And so, large numbers of people in our community battle on financially, never quite getting on top of the monthly, weekly, daily struggle to pay the bills. In fact it’s often the case that we are proud to be self-sufficient. Meanwhile, many people from other cultural backgrounds approach the situation from a different perspective: 66

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THE THEORY OF RELATIVES

• •

•

67

Instead of being totally self-sufficient they are happy to accept assistance. Instead of concentrating solely on their own financial needs they cooperate within the wider family group to aid each other on projects such as buying a home or renovating a run-down bargain property. Instead of being proud of ‘doing it alone’ they are proud of working together and being aware of each other’s needs.

Do you worship the Cult of the Individual or belong to the Community of Cooperation? The questions you must ask yourself are these: are you willing to ask for help (and to give help in return)? How can relatives and friends assist you to reach your home deposit goal? Here are some suggestions you might like to consider: • • • • •

• •

•

104weeks.indd 67

Can you move into the home of a family member to save money on rent? Can you rent a home together, reducing the costs to each of you? Can they move into your home, once you buy it, and pay you rent? Can you borrow money from your family? Can you work for your relatives in exchange for money (relatives and friends can be a good source of casual work)? Can you ask for cash instead of presents on birthdays and special occasions? Can you seek encouragement in the form of sponsorship: for example, for every $100 you save towards a home deposit they will contribute an additional five dollars? Can your family assist with renovations if you buy a place needing a lot of work?

3/7/07 11:51:18 AM

68

104 WEEKS TO YOUR HOME DEPOSIT

•

Can your family prepare or share meals and entertainment costs (for example, they rent the holiday cottage this year)?

A PAUSE ON PRESENTS Have you ever sat down and worked out how much you spend on gifts for your family and friends over the course of a year? It’s surprising how quickly the costs add up, and how spending can sometimes spiral out of control. There are a number of strategies to keep your spending on gifts in check, and to perhaps even add to your savings over the next 104 weeks: •

•

•

•

Ask your family (and your partner’s family if relevant) to give you cash instead of presents on birthdays and other special occasions. Perhaps family members will let you place into your savings account the money you would have spent on gifts for them, like a form of sponsorship. If you have a large family, celebrations such as Christmas can become very expensive. Perhaps you can suggest doing Kris Kringle instead, where each family member draws the name of another family member out of a hat and is responsible for providing a gift for that person only. Often a cap is set on how much each person is allowed to spend on the gift. Consider making gifts for family and friends. With craftwork, the cost of materials might be small; it’s your time and labour which makes the saving.

How much could you save in this way? The table on page 70 works in two ways—use it to calculate how much you can save on the cost of gifts for other people and, if your family has agreed to give

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69

you cash rather than presents for the next two years, use it to calculate how much their contributions will add to your savings. The left-hand column of the table refers to the number of gifts you give (or receive) each year, the column headings refer to the value of the gift, while the body of the table presents savings over a 104week period based on an average of two occasions per year (such as a birthday and Christmas)—or four occasions over 104 weeks. So, for example, say you and your partner have four siblings between you and in the past have given them each two $30 gifts per year. If you agree with your siblings not to purchase gifts for each other over the next two years you will make a saving of $480. Alternatively, perhaps you have a partner and in the past you have given one another two gifts per year, each worth $50. So, using the table, this means that over the 104-week savings period, you will set aside 4 ⫻ $50 per year which would otherwise be spent on presents—a total of $400. Now, if you are more generous with one another—say you and your partner tend to give each other presents worth around $100 on each occasion— the amount you save on gifts to one another will be even greater (in this case $800). And if your parents and parents-in-law normally buy you both two presents each year of approximately $30 each in value but agree to give you cash instead, this adds up to $240 over two years. So, if you save $480 by not giving gifts to your siblings, $800 by not giving or receiving gifts from your partner, plus you receive $240 in cash from your parents and parents-in-law instead of presents, your total has already reached $1520 in savings towards your home deposit. So, work out your current present-giving practices and, using the following table, see what savings you can add to the home deposit worksheet on page 18. Remember, you can always break away from the plan if circumstances warrant it—for example, if someone is unwell or you feel particularly grateful for some reason. It’s not a trap—it’s just a guide for planning.

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70

104 WEEKS TO YOUR HOME DEPOSIT

Gift-giving—showing savings over 104 weeks

Average value of each present

Number of gifts per year

$10

$20

$30

$50

$70

$100

$150

$200

$800

2

$40

$80

$120

$200

$280

$400

$600

3

$60

$120

$180

$300

$420

$600

$900 $1200

4

$80

$160

$240

$400

$560

$800

$1200 $1600

5

$100

$200

$300

$500

$700

$1000

$1500 $2000

6

$120

$240

$360

$600

$840

$1200

$1800 $2400

7

$140

$280

$420

$700

$980

$1400

$2100 $2800

8

$160

$320

$480

$800

$1120

$1600

$2400 $3200

9

$180

$360

$540

$900

$1260

$1800

$2700 $3600

10

$200

$400

$600

$1000

$1400

$2000

$3000 $4000

THE SUBSIDY APPROACH Do your parents or relatives want to encourage you to buy a home, and are they in a position to help financially? A straightout gift of money is great but can sometimes come with unwanted strings attached. As an alternative, consider asking your relatives for a performance-based subsidy linked to your own savings progress. Even a small subsidy will help—particularly once your worksheet takes shape and you can see where the money comes from and how it adds up to your total deposit. What about a one-forten subsidy? That’s ten cents for every dollar you set aside for the cause. Not much? On the contrary. If you manage to save $30 000 that one-for-ten subsidy will mean an additional $3000. If your

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71

planned deposit is only $15 000 the subsidy is still a meaningful and valuable $1500. Some parents or family members might even consider a super-subsidy, paying you more than you save yourself—say, $2 for every dollar you save. Now that would be a dramatic incentive! Take a look at the savings subsidy table on page 72. If your relatives are willing, discuss the idea and the amount. It need not be a straight-out gift either. You might agree to make it a loan, repayable at some future time. And, rather than a lump sum at the end, perhaps it might be easier all round if the subsidy were to dribble across to your account week by week—say $20 per week rather than $2080 at the end of the 104-week savings period. Make sure that whatever arrangement you reach with your parents is documented by a solicitor and is fair to all. You don’t want to end up in the position where you own your new home but have no relatives willing to come around and freeload off your hospitality! If your parents or relatives are pensioners, be aware that their pension entitlement may be affected if they give away more than $10 000 in any one financial year (with a maximum of $30 000 in any five-year period). Seek advice from Centrelink first. If you can, set up a subsidy arrangement and, using the following table, calculate the total and move it across to your home deposit worksheet on page 18.

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104weeks.indd 72

A savings subsidy—what it’s worth to you Subsidy

Deposit target

$1 for every

$10 000

$15 000

$20 000

$25 000

$30 000

$35 000

$40 000

$45 000

$50 000

$50 you save

$200

$300

$400

$500

$600

$700

$800

$900

$1000

$20

$500

$750

$1000

$1250

$1500

$1750

$2000

$2250

$2500

$15

$666

$1000

$1333

$1666

$2000

$2333

$2666

$3000

$3333

$10

$1000

$1500

$2000

$2500

$3000

$3500

$4000

$4500

$5000

$5

$2000

$3000

$4000

$5000

$6000

$7000

$8000

$9000

$10 000

$4

$2500

$3750

$5000

$6250

$7500

$8750

$10 000

$11 250

$12 500

$3

$3333

$5000

$6666

$8333

$10 000

$11 666

$13 333

$15 000

$16 666

$2

$5000

$7500

$10 000

$12 500

$15 000

$17 500

$20 000

$22 500

$25 000

$1

$10 000

$15 000

$20 000

$25 000

$30 000

$35 000

$40 000

$45 000

$50 000

$20 000

$30 000

$40 000

$40 000

$60 000

$70 000

$80 000

$90 000

$100 000

$2 for every $1 you save

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THE THEORY OF RELATIVES

73

ALL FOR ONE

Lena’s father, Joe, was living on his own. He had had enough of renting in the city and wanted to move to a country town. Property was cheap there so he thought he should buy a home where he could find some security. But he didn’t have enough money for the deposit. Joe had half the money necessary for a deposit on a typical home in the town he had chosen. And this is when the family stepped in. Lena and her brother— neither of whom owned their own home—were both in steady employment. They had each saved a little money but were a long way from being in a position to buy a home on their own. Rent and living expenses in the city seemed to eat up most of what they earned. Still, when the call came they kicked in most of their savings to help their father raise the deposit to buy his home straightaway. There would be no period of renting or ‘lost money’. On the title to the property Lena and her brother are shown as having a quarter-share each, alongside Joe’s half-share. Neither Lena nor her brother are ready to buy a home yet, but when the time comes they know they can rely on each other to help put together a home deposit.

MOVING IN TOGETHER If you’ve been living independently from your family for any length of time, moving back home is probably the option you dread most. Yet the savings are huge if you are paying market rent for your accommodation now. The question is, can you

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104 WEEKS TO YOUR HOME DEPOSIT

move back home—or into your partner’s family home—for a short period in order to save for your own home? It’s an issue that has to be considered carefully and thoroughly. Many of us spent effort and time trying to work our way out of our parents’ home, which is a natural process and part of establishing an independent life. Going back is not something done lightly. But the money side is important, too. Anyone who rents their accommodation knows it is a huge drain on their income (even if they are receiving rent assistance from Centrelink). It would be wrong, however, to call rent ‘dead money’ as so many people do. Renting can be a legitimate choice ahead of buying a home for lifestyle reasons. HOW MUCH CAN YOU SAVE BY CHANGING YOUR RENT SITUATION?

The table on page 76 shows the cost of renting over a period of 104 weeks. If you are paying $200 per week in rent, for example, you can see that the total for this period is $20 800. By moving in with your parents you can save this amount. Alternatively, you might move back home but still contribute a set amount per week to your parents as a sort of rent (above and beyond normal food and other ‘living’ expenses). For example, your old rent might be $200 per week but you will pay $50 weekly to your parents for letting you stay. From the table look at the entry for $200 minus $50 ⫽ $150, and see the 104-week saving as $15 600. You should also understand that if you pay a regular sum of money as rent to your parents it becomes income in their hands and may be taxable. For readers in some parts of the country these rents might seem extremely high. However, for our purposes, the table assumes a more modest level of rent or board is being paid. Even

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75

a small weekly saving on rent will amount to thousands of dollars over 104 weeks. For this amount of saving, could you handle moving back with your parents or parents-in-law? Now here’s the thing: I’d recommend you don’t do it for the full 104 weeks. You can make a big saving, in a more realistic way, if you limit the amount of time you live at your parents’ home. Think of it like this: when are you going to be most motivated to make it work? The obvious answer is: right at the beginning. If you don’t think you will be able to last 104 weeks with your parents, try it for the first 26 weeks of your savings period. This is the time when everyone—you, your partner and your parents or parents-in-law—will be most tuned in for success. Everyone will want to make it work. What’s more, the end is quickly in sight. After 26 weeks you move out again. And at a rent saving of, say, $200 per week, you’ll have saved $5200 towards your home deposit. But there’s more you can probably do. I’d even suggest putting in a second period of living with the parents, provided your moving and lease exit costs are minimal. This time look at the end of your 104-week savings regime. In the last few months your motivation will soar again. Your savings will be mounting up and, if you are proceeding according to the plan in your worksheet, you will know you are close to your deposit goal. This is the time to start looking at real estate and narrowing your broad property focus towards your selection. If you’ve followed your plan, albeit with occasional lapses, this will be a fun time. Why not consider moving back home for this period, too? This option is only realistic, however, if you can move home easily and at low cost—perhaps you have a friend with a truck. Be careful not to run up expenses for breaking a lease. There will also be some ancillary costs to consider, including connection/ disconnection costs for phones, electricity, gas and letting agent costs/bond hassles.

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76

104 WEEKS TO YOUR HOME DEPOSIT

Add a further 26 weeks’ rent savings and your $5200 in the tin becomes $10 400. Check the table on page 77, then deduct your expenses to arrive at your final savings amount and add it to the worksheet on page 20. Moving back home—what you’ll save Weekly saving on rent you pay

Weekly saving over

now (after deducting any

104 weeks

contribution to your parent/s)

104weeks.indd 76

$2600 $5200 $7800

$25 $50 $75 $100

$10 400

$125

$13 000

$150

$15 600

$175

$18 200

$200

$20 800

$225

$23 400

$250

$26 000

$275

$28 600

$300

$31 200

$325

$33 800

$350

$36 400

$375

$39 000

$400

$41 600

$425

$44 200

$450

$46 800

$475

$49 400

$500

$52 000

$525

$54 600

$550

$57 200

$575

$59 800

$600

$62 400

3/7/07 11:51:21 AM

77

THE THEORY OF RELATIVES

Moving back home—what you’ll save (cont’d) Weekly saving on rent you pay now (after deducting any contribution to your parent/s)

104weeks.indd 77

Weekly saving over 26 weeks

Weekly saving over two periods of 26 weeks

$25

$650

$1300

$50

$1300

$2600

$75

$1950

$3900

$100

$2600

$5200

$125

$3250

$6500

$150

$3900

$7800

$175

$4550

$9100

$200

$5200

$10 400

$225

$5850

$11 700

$250

$6500

$13 000

$275

$7150

$14 300

$300

$7800

$15 600

$325

$8450

$16 900

$350

$9100

$18 200

$375

$9750

$19 500

$400

$10 400

$20 800

$425

$11 050

$22 100

$450

$11 700

$23 400

$475

$12 350

$24 700

$500

$13 000

$26 000

$525

$13 650

$27 300

$550

$14 300

$28 600

$575

$14 950

$29 900

$600

$15 600

$31 200

3/7/07 11:51:21 AM

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104 WEEKS TO YOUR HOME DEPOSIT

ANYTHING . . . BUT NOT MY PARENTS!

Here’s an alternative that is less dramatic, but is still a powerful tool for saving: sharing a flat with friends or even with strangers. Have you got good friends who are also motivated to save for a home of their own? Work cooperatively towards your goals. The rent savings will still be significant. You can use the ‘moving home’ saving table to work out how much money you could save in this way. Remember that even a mere $50 saved per week will bring you $5200 after 104 weeks. A further alternative is to get your parents to move in with you. This puts the shoe on the other foot in some important psychological ways—it’s not their home; it’s not the place where you were a little kid. They can share the overall rent burden. There are situations in which this could work out well for all concerned. For example, your parents might want to take a few months to travel across Australia. They might be in the process of selling their home and taking to the roads in a campervan—part of the wave of Australian ‘Grey Nomads’, as they are known. They’ll just move their furniture in with you and give you a few dollars for looking after it. It’s a way of sharing the savings your parents will make by not having a mortgage or rent to pay on their own home. Of course, if your parents are off travelling for an extended period, you could babysit their home and make a rent saving that way instead. Finally, would you consider moving to a cheaper rental area or to a smaller property in the short term? For 104 weeks could you drop one bedroom, lose a garage or pool, or shift a suburb or two further away from the action (the beach, the shopping mall, the park, etc.)? Once you start looking at your family and the needs of the various members you might find that other creative strategies come to light. For example, you mightn’t be the only one wanting

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79

to cut living expenses in the short term while saving for a home. Families that work cooperatively are capable of achieving financial goals rapidly. Use the table on pages 76–77 and take the savings figure to the home deposit worksheet.

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9: HOW ESSENTIAL ARE THE ‘ESSENTIALS’? I recently heard of a young couple who heeded the call of the ocean and moved closer to the beach. About ten minutes closer (by car). They closed the door for the last time on the two-bedroom apartment that had been their home for some time (rent: $200 per week) and shifted a few suburbs to their new two-bedroom apartment (rent: $400 per week). If this couple wanted to save the deposit for a home, what has the move cost them? Over 104 weeks they’ll ‘unsave’ $20 800. And then there was around $400 in removalist expenses and $300 in lease fees and sundries. Let’s say a total of $21 500. If they saved nothing else other than this $21 500 they would have the minimum 5 per cent deposit the bank would require for the purchase of the beach-suburb apartment into which they have moved. The apartment is worth $400 000. If they worked on a savings plan for 104 weeks at the old address they might well have reached a 10 per cent deposit. 80

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HOW ESSENTIAL ARE THE ‘ESSENTIALS’?

81

The example of the beach-loving couple is not put here as a profound example of buying a home on a small percentage deposit and getting into huge debt. The point, for the moment, is to open up the area of what we would call—when doing a household budget—‘fixed’ expenses. These are the ones we think we can’t avoid.

PREPARING A BUDGET Following is a worksheet for a household budget. It’s broken into sections for fixed expenses, discretionary expenses and income. On pages 87–92 I’ve provided an example of a completed budget.

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104weeks.indd 82

Budget for a non-homeowner FIXED EXPENSES

Item Rent Electricity Gas Telephone—fixed line Telephone—mobile Public transport Car—fuel Car—servicing and repairs Car—insurance Car—registration 3/7/07 11:51:22 AM

Insurance— contents

Yearly Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar Apr

May Jun

total

104weeks.indd 83

Insurance—life Insurance— hospital Insurance—other Subscriptions and memberships Loan repayments (credit cards, personal loans, etc.) Child care Superannuation Fees—school Fees—medical, dental, etc. Fees—bank 3/7/07 11:51:23 AM

Fees—other

Total

$

104weeks.indd 84

DISCRETIONARY EXPENSES Yearly Item Food at home Alcohol Cigarettes Other Recreational drugs Entertainment Clothing Shoes Chemist Holidays Newspapers, magazines Books CDs, DVDs, etc. purchased Video, DVD hire

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

total

3/7/07 11:51:23 AM

104weeks.indd 85

Gifts Sport Eating out Hobbies Boat, trail bike or other Health therapies (massage, chiro, physio, naturopath, etc.) Other

Total

$

Notes: 1. Remember to use net or ‘after tax’ money for your expenses. For example, union fees, accountancy fees (for assistance in preparing your tax return) and sometimes expenses like travel or food may be tax deductible as work expenses (for which you were not reimbursed by your employer). If you claim any expenses on your tax return as deductions you should calculate the net cost to you and put that figure here. 3/7/07 11:51:24 AM

2. Allow for variations due to holidays. On holiday the usual expenses often change—you might buy fewer newspapers but more magazines, or eat more takeaway food, for example. 3. Medical and similar expenses should be shown after allowing for any refund from Medicare or your health fund.

86

104 WEEKS TO YOUR HOME DEPOSIT

MY HOUSEHOLD BUDGET Income and expenses

Value ($) over one year

Income (after tax) Wages or salary (main job) Mine My partner’s Wages from casual jpb Bank or other account interest Shares dividends Distribution from managed funds Centrelink or other government benefits Other

Total income

$

Expenses Fixed expenses Discretionary expenses

Total expenses

$

Total income minus total $ expenses

104weeks.indd 86

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104weeks.indd 87

Example: Budget for a non-homeowner FIXED EXPENSES Yearly Item

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Rent

866

866

866

866

866

866

866

866

Electricity

400

–

–

250

–

–

250

–

–

–

–

–

–

100

100

120

90

80

Telephone—mobile

33

33

56

60

33

Public transport

86

86

86

86

125

125

125

and repairs

300

–

Car—insurance

400

–

Gas

Apr May

Jun

total

866

866

866

866

10 392

–

–

300

–

–

1200

–

–

–

–

–

–

0

120

100

100

70

90

100

110

1180

33

66

50

33

33

33

50

513

86

86

86

86

86

86

86

86

1032

125

125

125

125

125

125

125

125

125

1500

–

150

–

–

–

460

–

80

–

–

990

–

–

–

–

–

–

–

–

–

–

400

Telephone—fixed line

Car—fuel Car—servicing

Car—registration and compulsory 3/7/07 11:51:24 AM

insurance

550

550

104weeks.indd 88

Yearly Item (cont)

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr May

Jun

total

–

–

370

–

–

–

–

–

–

–

–

370

–

–

–

–

–

–

–

–

–

–

–

0

–

256

–

–

256

–

–

256

–

–

1024

–

–

–

–

–

–

–

–

–

280

Insurance— contents Insurance—life

–

Insurance— hospital

256

Insurance—other (motor bike)

280

Loan repayments (credit cards, personal loans, etc.)

50

50

50

50

60

75

80

60

50

50

50

50

675

120

–

–

–

–

–

–

–

–

–

–

–

120

360

360

360

360

360

180

–

360

360

360

360

360

3780

–

–

–

–

–

–

–

–

–

–

–

–

0

Subscriptions and memberships Child care Superannuation (additional 3/7/07 11:51:25 AM

contributions)

104weeks.indd 89

Fees—school Fees—medical

–

–

25

25

Fees—bank Fees—other

Total

–

–

–

–

–

–

–

–

–

–

–

–

0

10

–

–

10

10

10

–

–

–

–

90

10

10

10

10

10

10

10

10

10

10

100

–

–

–

–

–

–

–

–

–

–

0 $24 196

3/7/07 11:51:25 AM

104weeks.indd 90

DISCRETIONARY EXPENSES Yearly Item Food at home

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

350

350

350

350

350

350

350

350

350

Apr May

Jun

total

350

350

4200

350

Household cleaning, toiletries, etc.

50

50

50

50

50

50

50

50

50

50

50

50

600

120

120

120

120

120

200

150

120

120

120

120

120

1550

60

60

60

60

60

60

60

60

60

60

60

60

720

–

–

–

–

–

120

120

–

–

–

–

–

240

Entertainment

130

130

130

130

130

130

130

130

130

130

130

130

1560

Clothing

100

100

100

100

100

100

100

100

100

100

100

100

1200

–

–

–

–

70

–

90

–

–

–

30

–

190

Chemist

15

15

15

15

15

15

15

15

15

15

15

15

180

Holidays

200

–

–

–

–

–

500

–

–

–

–

–

700

Alcohol Cigarettes Other recreational drugs

Shoes

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104weeks.indd 91

Newspapers, magazines

40

40

40

40

40

40

40

40

40

40

40

40

480

Books

30

–

–

15

–

–

–

30

–

–

–

15

90

120

–

–

20

–

120

50

–

–

–

30

–

340

Video, DVD hire

20

20

20

20

20

20

20

20

20

20

20

20

240

Gifts

30

30

100

20

20

500

20

20

30

30

100

20

920

Sport

15

15

15

15

15

15

15

15

15

15

15

15

180

110

110

110

110

110

150

200

110

110

110

110

110

1450

10

10

10

10

10

10

10

10

10

10

10

10

120

10

10

10

10

10

10

10

10

10

10

10

10

120

path, etc.)

30

30

30

30

30

30

30

30

30

30

30

30

360

Other (donations)

30

30

30

30

30

30

30

30

30

30

30

30

360

CDs, DVDs, etc. purchased

Eating out Hobbies Boat, trail bike or other Health therapies (massage, chiro, physio, naturo-

3/7/07 11:51:26 AM

Total

$15 800

92

EXAMPLE:

104 WEEKS TO YOUR HOME DEPOSIT

HOUSEHOLD BUDGET

Income and expenses

Value ($) over one year

Income (after tax) Wages or salary (main job) —Mine

15 500

—My partner’s

25 450

Wages from additional casual or part-time job

—

Bank or other account interest

1

Shares dividends

120

Distribution from managed funds Centrelink or other

— —

government benefits Other

Total income

— $41 071

Expenses Fixed expenses

$24 196

Discretionary expenses

$15 800

Total expenses

$39 996

Total income minus total expenses

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$1075

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HOW ESSENTIAL ARE THE ‘ESSENTIALS’?

93

You might like to have a go at filling in the budget worksheet yourself. It’s more accurate if you pull out the old bills and put in genuine figures rather than estimates, but in some places you’ve just got to make a guess. A personal budget is one of the foundation tools of good financial planning. But if it contains more guesses than facts it can be an unhelpful guide. Much of what we’ve looked at elsewhere in the book could be termed discretionary expenses—entertainment, lunches, food generally, clothing, CDs, magazines, and so on. This means you’ve got a lot of say about whether to keep paying them or not. This is the column we first go to when we know we’re living beyond our means. We rummage around in the discretionary expenses hat and hope to solve our debt or lack-of-savings problems. But we can have a go at our ‘fixed’ expenses, too. RENT

Savings on rent were largely dealt with in Chapter 8. I only mention the issue again here as it’s an important part of the household budgeting process. Once your current lease expires what will you do? Will you take the opportunity to cut costs? Pull out the lease document and check what period of notice you must give if you intend departing. ENERGY

A process began in January 2002 whereby it became possible for consumers in New South Wales and Victoria to choose their electricity providers (gas, too, for the Australian Capital Territory and New South Wales from this date). Other states have followed progressively. Check the situation for your city or town. You may be able to leave the company you’re with and take up with a different retailer. Just as we’ve found with phone companies, this

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104 WEEKS TO YOUR HOME DEPOSIT

might lead to savings—and confusion. Energy costs are getting more expensive, so make a few phone calls and see what competition can do for you. Add any savings you do make to the home deposit worksheet on page 19. LOANS

In Chapter 5 we looked at interest rates for various types of loans and how you should consider restructuring any loans so you are paying less interest. Now we should put a dollar figure on this for personal loans. For example, if you can’t pay off your credit card—the new bed, skis, clothes, computer, and so on—you are probably paying something like 16–19 per cent interest on this debt. If you were to go to your bank, building society or credit union and restructure this out of the credit card and into a personal loan you would be paying 10–17 per cent interest. (And if you can roll it into a home loan—once you’ve got one—the interest rate would fall to around 8 per cent.) All figures are current at the time of writing—they may have changed by the time you read this, although the margins between the various rates will probably remain much the same. On an outstanding credit card balance of $8000, this represents a saving over 104 weeks of something like $640 if you move the debt to a personal loan (as much as $1760 if you move the debt to a home loan). As mentioned earlier, there are problems with doing this as you turn a short-term debt (one you might pay off within say one or two years) into a debt which is structured to take five, 25 or even 30 years to pay off completely. In so doing you will ultimately pay an enormous amount more in interest than if you stuck with the debt on the credit card and paid it off quickly. Check with your financial institution and, if restructuring your

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HOW ESSENTIAL ARE THE ‘ESSENTIALS’?

95

debts, move any savings to the home deposit worksheet on page 19. TRANSPORT

Do you know what your car or cars are costing you? The NRMA has done the calculations on running costs as at June 2006. For example, let’s take a car aged three years old or less. Assume you travel 15 000 kilometres each year and that you’ve borrowed 75 per cent of the purchase price for the car. You insure it and get it serviced. The average weekly cost of owning a small Holden Astra CD three-door coupe (1.8 litre, manual) is $148.75, a Subaru Impreza WRX (AWD, five-door, 2.5 litre turbo manual) is $236.28, a people-mover such as the Toyota Tarago Ultima (fourdoor wagon, 2.4 litre automatic) is $322.56, a fashionable 4WD like the Mitsubishi Pajero (four-door wagon, 3.8 litre manual) is $277.44 and a family-sized Ford Falcon SR (LPG fuel, four-door sedan automatic) is $197.57. It seems unrealistic, doesn’t it? Not when you add it all up: interest on the loan, registration, insurances, servicing, tyres, fuel, repairs and the declining value of the vehicle. It’s not hard to spend the best part of $16 000 to $26 000 over 104 weeks on a fairly new model car. Two cars and you could be doubling this. Just one single, heavily financed, newish car represents a home deposit throughout most of regional Australia and in some capitals, too. Can you move back to a one-car household? Would you consider selling your only car and relying on public transport for a while? These are big decisions. You might be locked into a finance contract, for example, or be unable to pay out your loan with what you would get for selling the car now. Still, take a look at the figures and ask your lender for an early payout figure.

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104 WEEKS TO YOUR HOME DEPOSIT

How much can you save on transport? Getting rid of a second car should save you at least $5000 over 104 weeks. And that’s on a simple old car with no finance owing. For newer cars which are financed check the NRMA website <www.nrma.com.au>, RACV or your motoring association for an all-up weekly cost. Multiply the figure by 104 weeks to get your savings estimate. Add back into the mix the extra cost of public transport before moving any savings to the home deposit worksheet on page 19. COMMUNICATIONS

A family I know has five mobile phones for four people. Three are on minimum $15 monthly plans, one is on a $30 plan and the other is on a $70 plan. Mobile telephony is costing them $3480 over a period of 104 weeks—extra if they make more than the cost-included calls. Then there is the home landline phone, internet usage and pay TV. Don’t throw them all away—but review your needs and what you’re paying. •

•

• •

104weeks.indd 96

Can you share a mobile phone or phones rather than everyone having their own? Get rid of one with the most basic of phone plans and you’ll add at least $360 to your savings worksheet (for a $15 monthly plan over 104 weeks). Look at the bills: are you using all your ‘cost-included’ calls for each phone contract or cap? Does anyone in the family use a phone plan which is out of step with their usage pattern? If you are out of contract get quotes from other phone companies. Better deals may now exist. Major carriers offer discounts on total bills if you combine several phone services, sometimes in combination with pay TV or internet. Would you save money by bringing them together? Or moving from a plan to pre-paid?

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97

Check the deals and add any savings to the home deposit worksheet on page 19. INSURANCE

As a general rule it is good to reassess your insurance needs from time to time. They do not remain constant. You may be underinsured or you may find you are paying too much. How long is it since you read the brochures and compared policies and insurance companies? Are you insuring your car for too much? Do you make good use of any ‘extras’ cover on your health insurance? Pull your policies out of the drawer and make a few phone calls. If you have a lot of insurance policies you might want to contact an insurance broker and see if they can save you money. I checked my car insurance, which is due for renewal, and found I can save $160 by taking my business to another insurer. That’s maybe $320 in savings over 104 weeks. Now I’ll get some quotes on my home insurance, too, just to check if I’m keeping pace with the best prices. Make a few calls and take any savings to the home deposit worksheet on page 19. MEMBERSHIPS AND SUBSCRIPTIONS

Do you belong to a gym? Do you use your membership to the point where it gives you real value? Any magazine subscriptions or club memberships which are expensive? Only you know the true value these things bring to you. If you can save $500 a year by jogging round the park instead of on the gym carpet, now is the time to get into the great outdoors. But whatever you do, don’t give up on exercise. If the gym, yoga, tai chi or cycle club motivates you, then keep it going. Your health is more important than buying a home.

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104 WEEKS TO YOUR HOME DEPOSIT

But if, on reflection, it’s a dud, then liquidate it. Move any savings to your home deposit worksheet on page 20. SUPERANNUATION

The big question is: should you pause your voluntary additional contributions to superannuation (if any) and plough this money into saving for a home deposit? Many financial experts would suggest directing all your financial resources towards getting your home as the first priority. Then, once a home base is secured, you could return to making your super contributions. Remember, your super is locked away until your preservation age. The 2006 Federal Budget also provides a major incentive to leave your superannuation untouched until you reach 60 when you can withdraw it without paying the exit tax. On the other hand, if you buy a home you might have paid the mortgage off by then (or at least substantially reduced it). When making longterm plans get personalised financial advice to determine your best strategy. If you decide to stop making voluntary super payments for 104 weeks, include the amount of your current payments in the home deposit worksheet on page 21. If you are an employee and are making no additional payments above your employer’s superannuation guarantee, then there is nothing to add to the worksheet. UPDATE YOUR SOCIAL SECURITY ENTITLEMENTS

Are you overlooking any social security benefits to which you might be entitled? There are regular payments, entitlements and annual rebates available, including:

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HOW ESSENTIAL ARE THE ‘ESSENTIALS’?

• • • • • • • • • •

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99

Family Allowance, including a large-family supplement and multiple birth allowance Child Care Benefit Parenting Payment and Sole Parent Rebate Carer Allowance an allowance for looking after dependent relatives Newstart and Youth allowances—while studying or looking for work education assistance—Austudy, ABSTUDY and Partner Allowance Assistance for Isolated Children and a Remote Area Allowance Rent Assistance Health Care Card.

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10: THE PRICE OF VICE What are those vices costing you? Ignoring the cost to your health and wellbeing for a moment, are you prepared to put a dollar value to your vices and make decisions that limit or rationalise their use based on this? I’m not suggesting you give up your cigarettes, beer, gambling or whatever for the rest of your life. Not even for an extensive period. But can you put the brakes on for 104 weeks? Or part of this time? You’d be surprised how much you can save towards your home by shaving back their use just a little. For instance: • • •

•

If you smoke 40 cigarettes a day, can you get by on 35? If you drink a carton of beer (24 cans) each week, can you survive on two or three cans per day? If you place $10 bets on four races every weekend, would you be prepared to pull back to three races weekly? Can you play the pokies on a cheaper machine or set yourself a time limit? 100

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101

THE PRICE OF VICE

•

If you have a glass or two of wine each night, can you have two alcohol-free days per week?

The list could go on, but I don’t want to risk trivialising the issue. What seems simple to one person might bring on the sweats in another. Taming your vices can sound either too easy or just too mean and boring. But there’s such a lot of money buried here. Why not liberate some of it?

WHAT YOUR VICES ARE COSTING YOU BEER AND WINE

For these purposes I’ve chosen a price per can/bottle, based on the assumption that you are buying beer in 24-can/bottle cases. If you are more likely to purchase beer in six-packs you are paying substantially more for your drink, and so if you reduce your consumption your potential savings are much greater. Beer—what you’ll save Number of 375 mL cans/

Potential saving over

bottles saved per week

104 weeks

@ $1.37 each

104weeks.indd 101

1

$142.48

2

$284.96

4

$569.92

6

$854.88

8

$1139.84

10

$1424.80

24

$3419.52

30

$4274.40

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104 WEEKS TO YOUR HOME DEPOSIT

A few cans a week less? It’s not just small beer. Could you do with another $500 on your home deposit worksheet? Wine—what you’ll save

Number of 750 mL bottles

Potential saving over

per week @ $15 per bottle

104 weeks

half

$780

one

$1560

two

$3120

DRINKS AT THE CLUB OR PUB

What would it mean to cut back by one drink at the pub or one round of drinks each week? Social drinks—what you’ll save Cost of your regular drink or

Potential saving over

one round

104 weeks

$3.00

$312

$5.00

$520

$7.50

$780

$10.00

$1040

$12.00

$1248

$15.00

$1560

$20.00

$2080

If you consume recreational drugs other than alcohol and tobacco you might wish to calculate their cost and potential saving too.

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103

THE PRICE OF VICE

CIGARETTES

Let’s ignore the health issues for the moment. Just how much cash from the ash can you recover? Cigarettes—what you’ll save Can you cut back by:

Potential saving over 104 weeks*

1 per day

$255

2 per day

$510

3 per day

$764

4 per day

$1019

5 per day

$1274

7 per day

$1784

10 per day

$2548

15 per day

$3822

20 per day

$5096

40 per day

$10 192

* calculated at 35 cents per cigarette

Even four fewer cigarettes per day can shift over $1000 to your home deposit worksheet. Now, let’s tally up. Are there any savings that you can make from limiting or rationalising one or more of your vices? If so, do the calculations and transfer the figures to the home deposit worksheet on page 21–22.

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PART 3 PUTTING IT TOGETHER

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11: BUMPS IN THE ROAD Sooner or later you will fail to meet some savings or income targets set out in your home deposit worksheet. From the start: • • •

recognise this reality be comfortable with it make preparations: design a robust worksheet now.

Whatever you do, don’t blame yourself (or your partner). There’s no room for guilt and blame here. If saving for a home deposit doesn’t enhance your life then leave the task for another time. Levels of motivation will rise and fall; things will go wrong at home or at work; unforeseen expenses will crop up; a great opportunity will open before you that must be seized immediately. All sorts of things will slow you down. 107

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104 WEEKS TO YOUR HOME DEPOSIT

On the other hand, occasionally you might find yourself exceeding your target on a particular part of your deposit worksheet. One of the unexpected things I’ve learned about saving is that once you’re into the flow it seems to accelerate almost inexplicably from time to time. For example: • •

If you’ve landed a casual job you might be offered extra shifts or get a pay rise for your enthusiasm and skill. In changing your lifestyle to cut down on waste or luxuries in one area you could find you’ve also been trimming other kinds of excessive expenditure without realising it. If you’re not drinking as much alcohol you might also be smoking fewer cigarettes; if you cancel the pay TV you might find you’re eating less junk food.

EXPECT SOME SURPRISES The other important consideration is how best to build into your deposit worksheet a bit of slack, some room to move. Play to your strengths. This will vary for everyone. •

• •

•

104weeks.indd 108

If you have a great capacity for work and are more likely to give in to your need for luxuries and treats, then think in terms of maximising the income side of the equation rather than cutting back on expenses. If you are fairly disciplined in your spending, look to the expenses side. If your parents or other relatives are prepared to be your back-stop, that should be sufficient to get you to the finish line on time. Aim high: add an extra module or two to your worksheet from the outset.

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BUMPS IN THE ROAD

109

And you can always adjust the deadline as you approach it. This program seeks a balance between setting a savings goal and being realistic. Giving yourself a target of 104 weeks for your home deposit, for example, helps reduce the size of the task to something that is more manageable and more immediate. However, you can always finish later. It’s best if you don’t begin the process expecting this will happen, though—people tend to hit the target they set themselves, particularly if they know they can keep rolling it. And if things start going somewhat off the rails early on, don’t adjust your completion date right away. You might get back on track. Leave it to the second half of the period to shift the date.

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12: KNOWING THE COSTS AHEAD When planning your purchase you must be prepared for the fees and costs necessarily involved. You must also do your research about minimising these, whether through smart shopping or by accessing government assistance available to first home buyers, and so on. Here are the categories of fees and taxes: • • • • • • • • •

conveyancing fees conveyancing search inquiries and sundries stamp duty on the purchase stamp duty on the mortgage registration fees expert reports on the property removalist expenses any penalties for getting out of an existing lease lender’s mortgage insurance. 110

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KNOWING THE COSTS AHEAD

111

Some of the bank websites have handy calculators that give a rough idea of the costs associated with purchasing property. Take a look at <www.wizard.com.au>, <www.anz.com.au> and <www.national.com.au>. A few of these expenses warrant particular attention, namely lender’s mortgage insurance, exiting lease agreements, and government fees and charges.

LENDER’S MORTGAGE INSURANCE The good news is that you can now borrow on your first mortgage pretty well as much money as you can afford to repay. The barriers and eligibility criteria are less of a hurdle than ever before. The immediate consequence of letting people borrow so much money is that the lender is taking a greater risk. When consumers could only borrow less than half the property value from the bank, the bank’s risk was highly contained. Now a financial institution will let you borrow up to 95 per cent of the property value. So what can the bank do to protect itself from exposure to risks such as a 15 per cent fall in property prices or a situation where the borrower loses their job and stops paying the mortgage instalments? The solution lies with a product called lender’s mortgage insurance. If you are going to borrow more than 80 per cent of the value of the home you are planning to buy then a likely requirement of your mortgage will be that you take out lender’s mortgage insurance. You might think that mortgage insurance covers the situation where you (the borrower) get sick and have to take time off work without pay. In comes the mortgage insurance to see that your mortgage instalments continue to be paid so you won’t lose your home. Wrong. Although you pay the premium the policy exists to protect the lender, not the borrower.

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104 WEEKS TO YOUR HOME DEPOSIT

What it means is that if you get sick or lose your job, or for any reason stop paying back the lender, the insurance company steps in and pays the lender what you owe. But it doesn’t end there. The insurance company then has the right to pursue the defaulting borrower to get the money back. If you want to protect yourself against financial problems arising from long-term illness or injury you need a different product altogether. This is called income protection insurance. Generally these policies will pay you around 75 per cent of your wage (after an agreed initial waiting period has first expired) when you can no longer work due to illness or injury. While there are many tricky definitions involved in these policies they remain an important part of a person’s financial planning, particularly once they start borrowing money and have family or financial commitments. The premiums for this type of insurance are expensive but, fortunately, they are generally tax deductible. Check it out with a life insurance company or contact an insurance broker who should find a good deal for your situation. That’s an aside, albeit an important one, because this insurance is optional. Lender’s mortgage insurance, however, will not be optional if you will be borrowing more than 80 per cent of the value of the property (or sometimes even a lesser proportion). The cost of this insurance will be somewhere on a sliding scale from less than 1 per cent to a solid 3 per cent of the amount you are borrowing (the loan ‘principal’). A small amount of stamp duty is then added on top. The less equity you have in the property the higher will be the percentage of premium you will be charged. At least you only have to pay the premium once—it lasts for the full term of the mortgage. As a guide, in New South Wales you will pay roughly $3051 in mortgage insurance where you are borrowing 90 per cent of the value of a $300 000 property. The insurance rises to $5330 on

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KNOWING THE COSTS AHEAD

113

a $400 000 property and to $7326 on a $550 000 property, and so on. Insurance costs are similar, or sometimes a little lower, in other states and territories. If you borrow just over the 80 per cent threshold (instead of borrowing 90 per cent) your mortgage insurance could drop by up to half. Your lender will give you accurate figures when you discuss your plans. The other potential trap with mortgage insurance concerns the value of the property you are buying. Because the insurance company and your bank or other lender are in a situation where they want to control their risk exposure they will not necessarily base their calculations on the price you are paying for the property. That’s the purchase price. What they are interested in may be something a bit different: the valuation. When margins are tight or economic conditions are dodgy, lenders will not simply proceed on the basis that what you are paying for the property is what it is worth. A valuation report will be required (which might cost you $600–$900, for example) and that figure will establish the value of the property. Mortgage insurance will also be based on this figure. The danger is that you might not be budgeting on paying a mortgage insurance premium—you might have saved a 20 per cent deposit for your home—but a low property valuation will pull you over the line where you have to get insurance. Do you plan to have a deposit of 20 per cent or more? When you first start talking to your bank or other lender about a loan to purchase a particular property, get confirmation that they will be accepting the purchase price as the value of the property and will not be requiring a formal valuation report or mortgage insurance.

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104 WEEKS TO YOUR HOME DEPOSIT

EXAMPLE

The home you want to buy is selling for $400 000. You have saved an $80 000 deposit—20 per cent of the price—so you will need to borrow $320 000. Because you are not borrowing more than 80 per cent of the price you do not expect to pay mortgage insurance. Due to economic circumstances the lender wants a valuation done. The valuation for the property comes in at $380 000—$20 000 below what you have agreed to pay the seller. It’s not a big drop in value—$20 000 is only 5 per cent of $400 000—but it has financial consequences. You still need to find $320 000 to buy the place, but this now represents 84.2 per cent of the property valuation ($380 000). As a result you now have to find a couple of thousand dollars to pay the mortgage insurance premium.

GETTING OUT OF YOUR LEASE If you are renting your current home, check the lease document and with the managing agent or owner about the period of notice required (if any) for vacating. If you don’t follow the terms of the lease strictly you may have to continue paying rent beyond the date you leave.

GOVERNMENT TAXES AND CHARGES Governments need to find money from somewhere, be it tax on what we earn (income tax) or on what we purchase (GST). Historically, governments have made real windfall gains from what might be called ‘wealth taxes’. These are taxes that are raised at

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KNOWING THE COSTS AHEAD

115

the point when we are building or selling our investments. Prime examples are capital gains tax and stamp duty. When you buy a piece of real estate, stamp duty will be charged by your state or territory government at two points: 1. Stamp duty on the transfer of property. 2. Stamp duty on the mortgage (except in the Australian Capital Territory, Northern Territory, South Australia and Victoria, and from 1 January 2009 in Queensland, and from 1 July 2008 in Western Australia, and from 1 September 2007 in New South Wales when borrowers are ‘natural persons’). Timing is important here. As a general rule you will have to pay this stamp duty before you complete the purchase of your property. Make sure you’ve got the money on hand, either as your own cash or as part of the amount you are borrowing. However, there is a major exception to this. State and territory governments provide generous concessions for people buying their first home (see pages 119–27). STAMP DUTY ON TRANSFER

Stamp duty is a state/territory-based tax payable by the purchaser when they buy property. Here’s a guide to what you’ll pay if it’s your first home. Rates may change for vacant land or if it is not your first home. There are many options across the eight states and territories, so this table is limited to first home purchase. In the ACT the duty concession is based on an income test where the allowable income threshold increases according to the number of children you have. Similarly there is a ‘family’ element to the test in Victoria and Western Australia.

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104weeks.indd 116

Stamp duty on purchase of real estate for a home Where two figures are given, the first is the stamp duty payable on a transfer of property; the second is the stamp duty payable if the home is your first home. Victoria has a more complicated system of concessions affecting the choices to be made by the home purchasers: see notes on page 126. See pages 119–27 for more information on government concessions to first home buyers and home buyers generally where there are eligibility criteria. Vacant land might attract a different rate according to the local scheme. Price

ACT

NSW

NT

QLD

SA

TAS

VIC

WA

$75 000

1500/2000

1203/0

0/0

750/0000

1955/0000

1675/0000

1600

1500/0

$100 000

2000/200

1990/0

250/0

1000/0000

2830/1415

2425/0000

2200

2200/0

$125 000

2875/200

2865/0

1141/0

1250/0000

3830/1915

3175/0000

3060

3200/0

$150 000

3750/200

3740/0

2113/0

1500/0000

4830/2415

3925/0000

4310

4200/0

$175 000

4625/200

4615/0

3166/0

1750/0000

5830/4015

4800/8000

5560

5200/0

$200 000

5500/200

5490/0

4300/0

2000/0000

6830/5615

5675/1675

6810

6200/0

$225 000

6500/200

6365/0

5516/0

2250/0000

7893/7278

6550/2550

8060

7200/0

$250 000

7500/200

7240/0

6813/0

2500/0000

8955/8940

7550/3550

9310

8200/0

$275 000

8500/200

8115/0

8191/0

2750/0000

10 1430

8550/4550

10 560

9450/0

$300 000

9500/2730

8990/0

9650/0

3000/0000

11 830

9550/5550

11 810

10 700/0

10 115/0

11 191/0

3375/1750

12 580

10 550/6550

13 060

11 950/0

$325 000

10 875 9555

3/7/07 11:51:32 AM

$350 000

12 250

11 240/0

12 813/0

4250/1650

13 830

11 550/7550

14 310

13 200/0

$375 000

13 625

12 365/0

14 516/1703

5125/2925

15 080

12 5500000

15 560

14 450/0

$400 000

15 000

13 490/0

16 300/3488

6000/4400

16 330

13 5500000

16 810

15 700/0

104weeks.indd 117

$425 000

16 375

14 615/00000

18 166/5353

6875/5675

17 580

14 550

18 310

16 950/0

$450 000

17 750

15 740/00000

20 113/7300

7750/7150

18 830

15 550

19 810

18 200/0

$475 000

19 125

16 865/00000

22 141/9328

8625/8325

20 080

16 550

21 310

19 450/0

$500 000

20 500

17 990/00000

24 250/11 438

09500

21 330

17 550

22 810

20 700/0

$525 000

21 938

19 115/56230

25 850/13 038

10 500

22 705

18 550

27 160

22 050/6525

$550 000

23 375

20 240/11 245

27 200/14 388

11 500

24 080

19 550

28 660

23 400/13 050

$575 000

24 813

21 365/16 868

28 550/15 738

12 500

25 455

20 550

30 160

24 750/19 575

$600 000

26 250

22 490/22 490

29 900/17 088

13 500

26 830

21 550

31 660

26 100

$625 000

27 688

23 615/23 615

31 250/18 438

14 500

28 205

22 550

33 160

27 450

$650 000

19 125

24 740/24 740

32 600/19 788

15 500

29 580

23 550

34 660

28 800

$675 000

30 563

25 865/25 865

33 950/21 138

16 500

30 995

24 550

36 160

30 150

$700 000

32 000

26 990/26 990

35 300/22 488

17 500

32 300

25 550

37 660

31 500

$800 000

37 750

31 490/31 490

40 700/27 888

22 000

37 830

29 550

43 660

36 900

$900 000

43 500

35 990/35 990

46 100/33 288

26 500

43 330

33 550

49 500

42 300

$1 000 000

49 250

40 490

51 500/38 688

31 000

48 830

37 550

55 000

47 700

Source: revenue offie calculators 3/7/07 11:51:33 AM

118

104 WEEKS TO YOUR HOME DEPOSIT

Mortgages attract their own tax regime. Here are the details: Stamp duty on mortgages Mortgage

Qld*

Tas

WA

$50 000

0/0000

90

63

$100 000

120/0000

178

125

$150 000

320/0000

265

188

$200 000

520/0000

353

250

$250 000

720/0000

440

313

$300 000

920/2000

528

375

$350 000

1120/4000

615

438

$400 000

1320/6000

703

500

$450 000

1520/8000

790

563

$500 000

1720/1000

878

625

$550 000

1920/1200

965

688

$600 000

2120/1400

1053

750

$650 000

2320/1600

1140

813

$700 000

2520/1800

1228

875

$750 000

2720/2000

1315

938

$800 000

2920/2200

1403

1000

$850 000

3120/2400

1490

1063

$900 000

3320/2600

1578

1125

$950 000

3520/2800

1665

1188

$1 000 000

3720/3000

1753

1250

* The two figures represent later home/first home amounts respectively Source: revenue office calculators

104weeks.indd 118

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119

ARE YOU ELIGIBLE FOR STAMP DUTY CONCESSIONS? Governments help soften the tax blow for first home buyers or those purchasing inexpensive properties. These concessions vary across borders and over time, so contact your state/territory revenue office for the latest information—see the Resources, reading and contacts section at the end of this book for details. AUSTRALIAN CAPITAL TERRITORY

The Australian Capital Territory stamp duty concession is notable for not being restricted to first home buyers. The concession applies to duty on the transfer of property; as mentioned earlier, in the ACT there is no stamp duty on mortgages. Under the concession, the transfer stamp duty is a mere $20 on homes worth no more than $290 000 (or $161 300 for vacant land), and follows a sliding scale before cutting out at homes worth more than $331 000 (or $182 700 for vacant land). These figures are updated twice yearly. Eligibility criteria include: •

•

•

104weeks.indd 119

You are not disqualified for having owned a property before. However, the owner or their spouse must not have owned or had a legal interest in land in Australia for the previous two years. The two-year waiting period may not apply if the previous interest in land was relinquished as part of an order of the Family Court or similar. There is an income test but not an asset test. The total income threshold for all applicants is $100 000 where there are no dependent children, rising by $3330 per dependent child to a ceiling of $116 650 (for five or more children). Income is assessed against the threshold over the 12 months prior to the date of the grant.

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104 WEEKS TO YOUR HOME DEPOSIT

•

All applicants for the grant and transfer of property must be aged 18 or over at the time of the transfer and grant (although there are limited exceptions). At least one of the owners must occupy the home as their principal place of residence for a continuous period of at least six months commencing within one year of settlement or completion of construction. There are other criteria.

•

•

The precise details of the conditions that apply and the amount of stamp duty you will be required to pay are quite involved, and it is simplest and best to get them directly from the website of the Australian Capital Territory Revenue Office at <www.revenue.act.gov.au>, or by phoning (02) 6207 0028 and asking for ‘Home Concessions’. You must lodge a formal application before the duty is required to be paid—speak to your solicitor or conveyancer to get the correct date in your situation. NEW SOUTH WALES

In New South Wales there are stamp duty concessions available for both the transfer and mortgage of a first home under the First Home Plus scheme. If you meet the eligibility criteria (see below), and your targeted home comes within the scheme guidelines, first home buyers will pay no stamp duty on the transfer or mortgage of a home valued up to $500 000 and concessional rates up to $600 000. For residential vacant land upon which you intend to build your home there is no duty on land valued up to $300 000 and concessions up to $450 000. The concession on mortgage stamp duty is also on a sliding scale, from nil to 100 per cent. Eligibility criteria include:

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KNOWING THE COSTS AHEAD

•

• • •

•

121

It must be your first home—neither you nor your spouse/ partner may have owned residential property anywhere in Australia, whether solely or with someone else. Each applicant must be a natural person (not a trust or a company, for example). There are no income or assets tests—you can be wealthy and own valuable assets and still be eligible. Neither you nor your spouse/partner can have applied previously under this scheme. All applicants must occupy the property as their principal home for a continuous period of at least six months commencing within 12 months of completion of the agreement. There are other criteria.

The precise details of the conditions and the amount of stamp duty you will be required to pay are quite involved, and it is best to get them directly from the website of the New South Wales Office of State Revenue at <www.osr.nsw.gov.au> or by phoning 1300 130 624. Refer to the First Home Plus scheme. Note that pending arrangements take into account situations where home owners make their purchase in a shared equity scheme with an approved lender or immediate family member. It should be possible to retain a stamp duty concession pro rata to your proportion of ownership of the property. Details were still to be finalised at the time of writing but look for the scheme under the name ‘First Home Plus One’ on the website. NORTHERN TERRITORY

In the Northern Territory there are two stamp duty concession schemes: the First Home Owner Concession and the Principal Place of Residence Rebate. These schemes affect the duty you

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104 WEEKS TO YOUR HOME DEPOSIT

pay on transfer of the property—there is no duty on mortgages in the Northern Territory. The concession on property transfers for home buyers removes the duty payable on the first $350 000 of the purchase price. If it is not your first home you can apply for the Principal Place of Residence Rebate, providing a rebate of up to $2500 off the duty. Eligibility criteria include: •

• • • • • •

•

For the First Home Owner Concession it must be your first home—neither you nor your spouse/partner may have owned residential property used as your home anywhere in Australia, whether solely or with someone else. This does not apply to the Principal Place of Residence Rebate. Each applicant must be a natural person (not a trust or a company, for example). There are no income or assets tests—you can be wealthy and own valuable assets and still be eligible. Neither you nor your spouse/partner can have applied previously for a duty concession. At least one applicant must be an Australian citizen or a permanent resident. Each applicant must be a natural person, and at least one applicant aged 18 or over. All applicants must occupy the property as their home for a continuous period of at least six months, commencing within 12 months of completion of the agreement for purchase of an existing home or completion of construction, or within three years of entering a contract to acquire the property—whichever deadline expires first. There are other criteria.

The precise details of conditions and the amount of stamp duty you are required to pay are quite involved, so it’s best to get

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123

them directly from the website of Northern Territory Revenue Management at <www.nt.gov.au/ntt/revenue>, or by phoning 1300 305 353 or (08) 8999 7949. QUEENSLAND

The Queensland Government offers a stamp duty concession on property transfers for home buyers plus a further rebate for first home buyers. The general home buyer concession sees a nil transfer rate on properties valued at up to $320 000, with a concession continuing to a property value of less than $500 000. First home buyers of vacant land to build their first home will pay no duty up to a purchase value of $150 000 and will receive a rebate where the land value is up to $300 000. Eligibility criteria include: • •

•

•

It must be your principal place of residence. You must move in within 12 months of the transfer. To get the full concession entitlement you must live there for a full 12 months. If you dispose of the property or lease it within this 12-month period you must notify the Office of State Revenue, which will reassess your concession. For the first home concession you must not have owned other residential land in Australia and you must be aged 18 years or over. There are additional criteria.

Stamp duty is charged on mortgages in Queensland, although there are exemptions from duty for home buyers with a mortgage amount of up to $70 000 and first home buyers, in which case the ceiling lifts to $250 000. Mortgage duty is due to be cut by 50 per cent from 1 January 2008 and removed totally by 1 January 2009.

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104 WEEKS TO YOUR HOME DEPOSIT

The precise details of conditions and the amount of stamp duty you will be required to pay are quite involved, and so it’s advisable to get them directly from the website of the Office of State Revenue at <www.osr.qld.gov.au> or by phoning 1300 300 734. SOUTH AUSTRALIA

In South Australia the first home buyer concession results in there being no stamp duty payable on the transfer of a property worth $80 500 or less, with a sliding scale up to a maximum purchase price of $250 000. There is no duty on a mortgage. Eligibility criteria include: • • • •

•

The purchaser must be a natural person or persons (for example, the applicant cannot be a company). You must not have previously owned a home in South Australia or elsewhere (except as a minor). You must not have previously received a stamp duty concession under the scheme. You must live or intend to live in the property as your principal residence within 12 months of settlement or, for vacant land, within 12 months of completion of construction. There are additional criteria.

The precise details of conditions and the amount of stamp duty you will be required to pay are quite involved, so it’s best to get them directly from <www.revenuesa.sa.gov.au> or by phoning (08) 8226 3750. TASMANIA

In Tasmania you pay nothing in stamp duty for a property valued at $150 000 or less, and a concession worth up to $4000 is

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KNOWING THE COSTS AHEAD

125

available for properties valued between $150 000 and $350 000. For vacant land on which you intend to construct your home the property value ceiling is $175 000 for the concession, with the maximum grant worth $2400. Eligibility criteria follow those of the First Home Owner Grant and include: • • •

• •

•

At least one applicant must be an Australian citizen or a permanent resident. It must be the first residential property owned by the applicant, or each of them if more than one. You must live there as your principle place of residence for a continuous period of at least six months commencing within 12 months of the date of purchase or completion of construction. All applicants must be aged 18 or over and natural persons. In the case of vacant land, a dwelling must be constructed on the land within two years of the date of the purchase agreement or transfer. There are additional criteria.

The precise details of conditions and the amount of stamp duty you will be required to pay are quite involved, and so it’s best to contact Tasmania’s Treasury directly via their website at <www. treasury.tas.gov.au> or by phoning (03) 6233 3566. VICTORIA

Victoria offers a generous First Home Bonus worth $3000, applying to established homes up to the value of $500 000 and $5000 for new homes. The bonus runs until 30 June 2009 but may be renewed then. Alternatively, there is a concession scheme for stamp duty on the transfer of property. You must elect in writing

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104 WEEKS TO YOUR HOME DEPOSIT

whether you are applying for the bonus or the duty concession—you can’t get both. There are duty concessions for pensioners and those buying their first home (and having children in the family). Different eligibility criteria apply. The concession cuts the rate of duty for homes priced between $115 000 and $400 000 (with the rate dropping from 6 per cent to 5 per cent), while there is a cut of $2850 for homes priced from $400 001 to $500 000. Note that there is no stamp duty on your mortgage in Victoria. The precise details of conditions and the amount of stamp duty you are required to pay are quite involved, and it’s best to get the details from the website of Victoria’s State Revenue Office at <www.sro.vic.gov.au> or by phoning 13 21 61 or (03) 9628 0000. WESTERN AUSTRALIA

In Western Australia there is a First Home Owner rate of stamp duty on a transfer. No duty is payable where the value of the home does not exceed $500 000, and there is a concession which cuts out at $600 000. For vacant land there is no duty up to a land value of $300 000, with the concession ceasing at a value of $400 000. Eligibility criteria include: •

•

You must be eligible for the First Home Owner Grant; you can still get the stamp duty concession if you did not pay for the property (such as where it is a gift). It must be your principal place of residence.

Even if it is not your first home, a duty concession applies to the purchase of a property to be your residence. In addition a concessional rate of stamp duty also applies to home mortgages. The mortgage duty was cut by 50 per cent from 1 July 2006 and will be abolished from 1 July 2008.

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127

The precise details of conditions and the amount of stamp duty you are required to pay are quite involved, so it’s best to get them from the website of the State Revenue Department at <www.dtf.wa.gov.au> or by phoning them on (08) 9262 1100 or 1300 368 364.

FIRST HOME OWNER GRANT First home buyers may be entitled to other government benefits above and beyond a concession on the stamp duty. In 2000 the federal government introduced a generous grant scheme to encourage people to purchase their first home and, in particular, a newly constructed home. At its height the scheme provided $14 000 to the purchaser of a new construction and $7000 to the purchaser of an existing home (provided it was the first home they had owned). In 2001 the scheme wound down to $7000 for a first home plus an additional $3000 for a new construction. The $3000 additional component expired on 30 June 2002, but the basic $7000 first home grant remains available (at the time of writing). You cannot have owned property previously and you must occupy the property as your principal home for a continuous period of at least six months, commencing within 12 months of settlement of the purchase or completion of the construction work. There are restrictions on obtaining the grant if the applicant is under 18 years of age. Confirm the current details and your eligibility at <www.firsthome.gov.au>.

REGISTRATION AND TRANSFER FEES State/territory governments charge a fee to process the transfer and registration of property purchases. Some states have a flat charge while others use a scale. For example, here are the

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104 WEEKS TO YOUR HOME DEPOSIT

transfer charges on a $100 000 purchase/transfer and on one worth $600 000. $170

/

$170

NSW

$79

/

$79

NT

$90

/

$90

ACT

Qld

$111.30/ $1106.70

SA

$473.50/ $3348.50

Tas

$131

/

Vic

$341

/ $1325

WA

104weeks.indd 128

$92

/

$131 $192

3/7/07 11:51:36 AM

13: SOME WORKED EXAMPLES What does it all look like? You’ve seen the blank home deposit worksheet in Chapter 3, now here are some illustrations to show how different people might fill theirs in. This should give you a few ideas about how to do it yourself. If you have a partner, sit down together. Get a calculator so you can better understand what’s going on. There’s nothing magic about it—small sums of money, if saved and set aside out of easy reach as you go, can add up to a home deposit. But if you don’t put your savings or additional income into a special savings account at least each week or fortnight you may as well kiss it goodbye. That’s the critical step on which you will build your deposit.

1. THE SINGLE PERSON You’re leading an active life and have travelled a bit, so your garage sale should be good. You’re prepared to give up 129

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130

104 WEEKS TO YOUR HOME DEPOSIT

your freedom, grit your teeth and move back in with your parents for 52 weeks. You know you could put into automatic savings $30 per week straightaway without affecting your lifestyle. There are a few shares you’ve picked up over the years from a couple of popular company floats—you feel OK about selling them sometime over the savings period. You’re aware you’ll have to do some serious part-time work to boost your income—perhaps all day Saturday or two four-hour shifts spread over the week. You’re prepared to cut back on a few of your vices and luxuries for 104 weeks. Food waste, eating out, subscriptions/memberships, clothes and CDs/books are where you think you can make some major savings.

ASSETS Cash value

Existing savings Money in bank accounts now

$ 1500

Money in term deposits now Value of shares now

$.......... $ 2500

Value of units in managed funds now

$……….

Money owed to me (from friends, family, etc.) now or in a trust fund

$..........

Money in property (e.g. shared ownership, where the property will be sold) now

Total savings now

$..........

$4000

Assets See Chapter 4 $ 1500

Garage sale (estimate) Specific items of value which can be sold (estimate) e.g.

104weeks.indd 130

—sports equipment $200

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131

SOME WORKED EXAMPLES car, sports equipment, jewellery, furniture, $

collectables

Total asset sales

200

$1700

Gifts and support See Chapter 8 From parents and family Per birthday, Christmas and other special occasions Subsidy

$............

$..........

Description of subsidy scheme (estimated value) ……… …………………................................. ………………….................................

Total gifts and support

$..........

$nil

INCOME

Value after 104 weeks

New income to be saved See Chapter 6 My income Partner’s income What I/we could save now from my/our income(s) each week see Chapter 5 Part-time job #1 see Chapter 6

104weeks.indd 131

[$700 per week net] [$nil per week net]

$30 per week net

$3120

$………. per week net

$7979 ..........

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132

104 WEEKS TO YOUR HOME DEPOSIT Value after 104 weeks

Part-time job #2 Part-time job #3 Existing job #1–overtime Existing job #2–overtime Annual leave—additional work for me Annual leave—additional

$………. $………. $………. $……….

work for my partner

per per per per

week week week week

net net net net

$........... $……….. $……….. $………..

$………. per week net

$………..

$………. per week net

$.…..…..

Total new income to be saved

$11 099

EXPENSES I/we can cut back in these areas

Transport See Chapter 9 What I/we can save by not using or owning a car

$………. per week

$……….

$………. per week

$……….

Cycling/walking—saving on public transport fares Total transport saving

$……….

Communications See Chapter 9 Mobile phone

$………. per month

$……….

Fixed-line phone

$………. per month

$……….

Total saving on communications

104weeks.indd 132

$……….

3/7/07 11:51:37 AM

133

SOME WORKED EXAMPLES

Value after 104 weeks

Loans See Chapter 9 Loans reassessment

$………. interest saved per year

Total saving on loans

$……….

Insurance See Chapter 9 Policies reassessment— am I paying too much?

$

per year

Total saving on insurance

$….…...

Regular fees See Chapter 9 Memberships

$

250

Subscriptions

$

120

Other

$

per year per year per year $

Total saving on regular fees

740

Luxuries See Chapter 7 Luxury #1

(restaurants, takeaway)

$

Luxury #2

(CDs, books, magazines)

$ 250

70

per week per year

$ 7280 $

500

Luxury #4

$

per week

$……….

Luxury #5

$

per week

$……….

Luxury #6

$

per week

$……….

Luxury #7

$

per week

$………. $ 7780

Total luxuries saving

Rent See Chapter 8 [current rent or board $150 per week— $15 600 for 104 weeks] Moving to cheaper premises $………. per week for .... weeks

104weeks.indd 133

$……….

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134

104 WEEKS TO YOUR HOME DEPOSIT

Living with parent(s)

$ 150

per week

for 52 weeks Living with friends

$ 7800

$………. per week for .... weeks

Total rent saving

$………. $ 7800

Presents See Chapter 8 To my partner from me

$………. per birthday, Christmas and/or other special occasions

To me from my partner

$……….

$………. per birthday, Christmas and/or other special occasions

To my family

$……….

$………. per birthday, Christmas and/or other special occasions

To my partner’s family

$……….

$………. per birthday, Christmas and/or other special occasions

Total presents saving

$………. $……….

Superannuation See Chapter 9 Amount ‘saved’ if I/we stop paying voluntary superannuation contributions (e.g. self-employed or employee ‘salary sacrifice’) $………….per week, or $………….per year Total superannuation saving

104weeks.indd 134

$……….

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135

SOME WORKED EXAMPLES

Vices See Chapter 10 Smoking

$………. per week

Alcohol

$ 1248 per week

$………. $ 1248

Recreational drugs

$………. per week

$……….

Gambling

$………. per week

$……….

(one less bottle of wine)

Total vices saving

$ 1248

Total saving on expenses

$17 568

GOVERNMENT HELP WITH YOUR DEPOSIT Government assistance See Chapter 12 First Home Owner Grant

$ 7000

One-off payment

Other scheme?

Total government assistance

$……….

$7000

WORKSHEET SUMMARY Where the money is coming from Total savings now (from page 130)

$

4000

Total asset sales (from page 131)

$

1700

Total gifts and support (from page 131)

$

nil

Total new income to be saved (from page 132)

$ 11 099

Total saving on expenses (from page 135)

$ 17 568

Total government assistance (from page 135)

$

7000

Home Deposit Grand Total $41 367

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104 WEEKS TO YOUR HOME DEPOSIT

2. THE COUPLE WHO WON’T SACRIFICE LIFESTYLE You know it’s going to be a hard slog. Maybe you’ve tried before and failed. So you’re realistic about what you can achieve. You’re not going to move in with anyone to save rent! However, one of your parents is prepared to sponsor you along the way. One of you will return to an old part-time job you once had as a waitress, the other will work over his holidays but not during the normal working week—he’s just too wrecked already. Existing savings are small and there are no shares to sell. You are happy to ask relatives to give you cash instead of presents and you will do the same for each other and your parents. You’ll get rid of the second car—it’s not worth much but every little bit helps now. You’ll replace it with another cheapie once you’re in your home. ASSETS Cash value

Existing savings $

Money in bank accounts now

500

Money in term deposits now

$..........

Value of shares now

$..........

Value of units in managed funds now

$……….

Money owed to me (from friends, family, etc.) now or in a trust fund

$..........

Money in property (e.g. shared ownership, where the property will be sold) now

Total savings now

$..........

$500

Assets See Chapter 4 Garage sale (estimate)

104weeks.indd 136

$

800

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137

SOME WORKED EXAMPLES Specific items of value which

—Car parts

can be sold (estimate) e.g.

—camera

$100

car, sports equipment,

—2nd car

$2000

$350

jewellery, furniture, $ 2450

collectables

Total asset sales

$3250

Gifts and support See Chapter 9 From parents and family Per birthday, Christmas and other special occasions Subsidy

$..........

(estimated value of subsidy scheme) scheme: $50 for each $1000 we save

$ 1000

Total gifts and support

$1000

INCOME

Value after 104 weeks

New income to be saved My income Partner’s income What I/we could save now from my/our

[$540 per week net] [$320 per week net]

income(s) each week $15 per week net see Chapter 5 Part-time job #1 See Chapter 6 $14.00 per hour, 8 hours per week Part-time job #2

104weeks.indd 137

$………. per week net

$ 1560

$.......... 7979 $..........

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138

104 WEEKS TO YOUR HOME DEPOSIT Value after 104 weeks

Part-time job #3 Existing job #1–overtime Existing job #2–overtime Annual leave—additional work for me Annual leave—additional work for my partner

$………. per week net $………. per week net $………. per week net

$……….. $……….. $………..

$………. per week net

$………..

$20.00 per hour, 40 hours per week, for 8 weeks

Total new income to be saved

$........... 4384

$13 923

EXPENSES I/we can cut back in these areas

Transport See Chapter 9 What I/we can save by not using or owning a car

$………. per week

$............ 3000

$………. per week

$.……….

Cycling/walking—saving on public transport fares

$ 3000

Total transport saving

Communications See Chapter 9 Mobile phone

$………. per month

$……….

Fixed-line phone

$………. per month

$……….

Total saving on communications

104weeks.indd 138

$……….

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139

SOME WORKED EXAMPLES

Value after 104 weeks

Loans See Chapter 9 Loans reassessment

$………. interest saved per year

Total saving on loans

$……….

Insurance See Chapter 9 Policies reassessment— am I paying too much?

$100 ......... per year

Total saving on insurance

$ ......... 200

Regular fees See Chapter 9 Memberships

$………. per year

Subscriptions

$………. per year

Other

$………. per year

Total saving on regular fees

$……….

Luxuries See Chapter 7 Luxury #1

$………. per week

$……….

Luxury #2

$………. per week

$……….

Luxury #3

$………. per year

$……….

Luxury #4

$………. per week

$……….

Luxury #5

$………. per week

$……….

Luxury #6

$………. per week

$……….

Luxury #7

$………. per week

$……….

Total luxuries saving

$……….

Rent See Chapter 8 [current rent or board $...... per week] Moving to cheaper premises $………. per week for .... weeks

104weeks.indd 139

$……….

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140

104 WEEKS TO YOUR HOME DEPOSIT Value after 104 weeks

Living with parent(s) Living with friends

$……… per week for ..... weeks $………. per week for .... weeks

Total rent saving

$………. $………. $……….

Presents See Chapter 8 To my partner from me

To me from my partner

To my family

To my partner’s family

$30 per birthday, Christmas and/or other special occasions

$ 180

$30 per birthday, Christmas and/or other special occasions

$ 180

$30 per birthday, Christmas and/or other special occasions

$ 120

$30 per birthday, Christmas and/or other special occasions

$ 120

Total presents saving

$.......... 600

Superannuation See Chapter 9 Amount ‘saved’ if I/we stop paying voluntary superannuation contributions (e.g. self-employed or employee ‘salary sacrifice’) $………….per week, or $………….per year Total superannuation saving

104weeks.indd 140

$……….

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141

SOME WORKED EXAMPLES

Value after 104 weeks

Vices See Chapter 10 Smoking

$………. per week

$……….

Alcohol

$………. per week

$……….

Recreational drugs

$………. per week

$……….

Gambling

$………. per week

$……….

Total vices saving

$……….

Total saving on expenses

$3800

GOVERNMENT HELP WITH YOUR DEPOSIT Government assistance See Chapter 12 First Home Owner Grant

One-off payment

$ 7000

.........Other scheme?

Total government assistance

$……….

$7000

WORKSHEET SUMMARY Where the money is coming from 500

Total savings now (from page 136)

$

Total asset sales (from page 137)

$ 3250 $ 1000

Total gifts and support (from page 137) Total saving on expenses (from page 141)

$13 923 $ 3800

Total government assistance (from page 141)

$ 7000

Total new income to be saved (from page 138)

Home Deposit Grand Total $29 473

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142

104 WEEKS TO YOUR HOME DEPOSIT

3. THE COUPLE WITH GREAT MOTIVATION As a couple you’re really prepared to do what it takes to get the best home you can afford fast. You’ll both take on some part-time work (a mix of overtime and helping out in a mate’s business) and you’ll move into a two-bedroom flat with friends who are also saving for a home. You will get a little sponsorship from a parent and you’ll cut expenses with a machete. At present you don’t own much of value, so your garage sale will not be a big financial success—though it’s still worth doing to get the account rolling. Two mobile phones and two cars are luxuries you are prepared to cast aside for 104 weeks, getting rid of one of each and sharing where necessary. Some (but not all) takeaway food and entertainment will be curtailed for the duration. Cigarettes and alcohol will be reduced. You’re carrying several thousand dollars in debt on credit cards and shop cards, which you’ll convert to a personal loan to save on interest. ASSETS Cash value

Existing savings Money in bank accounts now

2500 $..........

Money in term deposits now

$..........

Value of shares now

$..........

Value of units in managed funds now

2000 $..........

Money owed to me (from friends, family, etc.) now or in a trust fund

$..........

Money in property (e.g. shared ownership, where the property will be sold) now

Total savings now

104weeks.indd 142

$..........

$4500

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143

SOME WORKED EXAMPLES

Assets See Chapter 4 Garage sale (estimate)

500 $..........

Specific items of value which

—2nd car ……...... $ 5000

can be sold (estimate) e.g. car, sports equipment, jewellery, furniture, collectables

5000 $..........

Total asset sales

$5500

Gifts and support See Chapter 8 From parents and family Per birthday, Christmas and other special occasions Subsidy

$..........

(estimated value of subsidy scheme) scheme: $30 for each $1000 we save

1700 $..........

Total gifts and support

$1700

INCOME

Value after 104 weeks

New income to be saved My income Partner’s income What I/we could save now from my/our income(s) each week

[$750 per week net] [$430 per week net]

per week net

2600 $..........

see Chapter 5 Part-time job #1 see Chapter 6 $20.00 per hour, 4 hours per week

$ 5699 ...........

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$25

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144

104 WEEKS TO YOUR HOME DEPOSIT

Part-time job #2 $14.00 per hour, 8 hours per week Part-time job #3 Existing job #1–overtime Existing job #2–overtime Annual leave—additional work for me Annual leave—additional

$………. per week net $………. per week net $………. per week net

$........... 7979 $……….. $……….. $………..

$………. per week net

$………..

work for my partner

$………. per week net

$………..

Total new income to be saved

$16 278

EXPENSES I/we can cut back in these areas

Transport See Chapter 9 What I/we can save by not using or owning a car

$………. per week

$........... 3500

$………. per week

$………..

Cycling/walking—saving on public transport fares Total transport saving

$........... 3500

Communications See Chapter 9 Mobile phone

$

Fixed-line phone

$………. per month

Total saving on communications

104weeks.indd 144

30

per month

720 $ .......... $………. $

720

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145

SOME WORKED EXAMPLES

Value after 104 weeks

Loans See Chapter 9 Loans reassessment

$300 interest saved per year

Total saving on loans

$ 600

Insurance See Chapter 9 Policies reassessment— am I paying too much?

$100 per year

Total saving on insurance

$ 200

Regular fees See Chapter 9 Memberships

$………. per year

Subscriptions

$………. per year

Other

$………. per year

Total saving on regular fees

$……….

Luxuries See Chapter 7 Luxury #1

(taking lunch from home, except for

$

40

per week

$.......... 3840

movies, etc.)

$

40

per week

$.......... 3840

(takeaway food)

$

25

per week

$.......... 2600

Luxury #4

$………. per week

$……….

Luxury #5

$………. per week

$……….

Luxury #6

$………. per week

$……….

Luxury #7

$………. per week

$……….

annual holidays)

Luxury #2 Luxury #3

(entertainment,

Total luxuries saving

104weeks.indd 145

$ 10 280 ........

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146

104 WEEKS TO YOUR HOME DEPOSIT Value after 104 weeks

Rent See Chapter 8 [current rent or board $300 per week] Moving to cheaper premises $………. per week for .... weeks Living with parent(s)

$……… per week for ..... weeks

Living with friends

$………. $……….

$150 per week for 104 weeks

Total rent saving

$15 600 ......... $15 600 .........

Presents (See chapter 8) To my partner from me

$100 per birthday, Christmas and/or other special occasions

To me from my partner

$ 400

$100 per birthday, Christmas and/or other special occasions

To my family

$ 400

$………. per birthday, Christmas and/or other special occasions $……….

To my partner’s family

$………. per birthday, Christmas and/or other special occasions $……….

Total presents saving

104weeks.indd 146

$.......... 800

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147

SOME WORKED EXAMPLES

Value after 104 weeks

Superannuation See Chapter 9 Amount ‘saved’ if I/we stop paying voluntary superannuation contributions (e.g. self-employed or employee ‘salary sacrifice’) $………….per week, or $………….per year Total superannuation saving

$……….

Vices See Chapter 10 Smoking

$

per week

$

Alcohol

$ 12

per week

$ 1248

Recreational drugs

$………. per week

$……….

Gambling

$………. per week

$……….

(one less round at the club)

7

Total vices saving

728

$ ......... 1976

Total saving on expenses

$33 676

GOVERNMENT HELP WITH YOUR DEPOSIT Government assistance See Chapter 12 First Home Owner Grant

One-off payment

$ 7000

Other scheme?

Total government assistance

104weeks.indd 147

$……….

$7000

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148

104 WEEKS TO YOUR HOME DEPOSIT

WORKSHEET SUMMARY

Value after

Where the money is coming from

104 weeks

Total savings now (from page 142)

$

4500

Total asset sales (from page 143)

$

5500

Total gifts and support (from page 143)

$

1700

Total new income to be saved (from page 144)

$ 16 278

Total saving on expenses (from page 147)

$ 33 676

Total government assistance (from page 147)

$

7000

Home Deposit Grand Total $68 654

4. THE LOWER INCOME COUPLE Even though you’re not big earners there is still much you are prepared to do to get your home. One of you is already working part time—you can’t find a full-time job. But you are willing to match it with a second part-time job till you get your deposit. Your partner will work his/her holidays. You don’t have much in the way of assets so even a killer garage sale won’t raise much cash—but it is still worth doing. You’ll sell your good tools, intending to replace them once you’re in your home. Your wider family is happy to support you by giving cash instead of presents. By reassessing your existing credit card debt and insurance you can save a few dollars, too. Rent is another area where you see the potential to make some big savings, even though your current rent is not very high ($120 per week)—friends and family are ready to share. But there’s not much fat you can take out of weekly living expenses, so you won’t—a little less alcohol, a few less cigarettes. You’re not going cold turkey on anything.

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149

SOME WORKED EXAMPLES

ASSETS Cash value

Existing savings Money in bank accounts now

$.......... 250

Money in term deposits now

$..........

Value of shares now

$..........

Value of units in managed funds now

$..........

Money owed to me (from friends, family, etc.) now or in a trust fund

$..........

Money in property (e.g. shared ownership, where the property will be sold) now

Total savings now

$..........

$250

Assets See Chapter 4 Garage sale (estimate) Specific items of value which

$.......... 500 —tools

$ .......... 120

can be sold (estimate) e.g.

.…………$……......

car, sports equipment,

………….$……......

jewellery, furniture, collectables

$......... 120

Total asset sales

$620

Gifts and support See Chapter 8 From parents and family Per birthday, Christmas and other special occasions Subsidy

$ 200 ............

(estimated value) Description of subsidy scheme (estimated value) ………

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150

104 WEEKS TO YOUR HOME DEPOSIT …………………................................. ………………….................................

Total gifts and support

$..........

$200

INCOME

Value after 104 weeks

New income to be saved My income Partner’s income What I/we could save now from my/our income(s) each week

[$550 per week net] [$350 per week net]

$10 per week net

$........... 1040

see Chapter 5 Part-time job #1 see Chapter 6 $14.00 per hour, 8 hours per week Part-time job #2 per week net Part-time job #3 $………. per week net Existing job #1–overtime $………. per week net Existing job #2–overtime $………. per week net Annual leave—$15.00 per hour, additional 40 hours per week, for 4 weeks work for me (2 sets of annual leave) $ 3288

$ .......... 7979 $………. $……….. $……….. $……….. $………..

...........

Annual leave—additional work for my partner

$………. per week net

Total new income to be saved

$………..

$12 307

EXPENSES I/we can cut back in these areas

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151

SOME WORKED EXAMPLES

Value after 104 weeks

Transport See Chapter 9 What I/we can save by not using or owning a car

$………. per week

$……….

$………. per week

$……….

Cycling/walking—saving on public transport fares Total transport saving

$……….

Communications See Chapter 9 Mobile phone

$………. per month

$……….

Fixed-line phone $………. per month

$……….

Total saving on communications

$……….

Loans See Chapter 9 Loans reassessment

$100 interest saved per year

Total saving on loans

$.......... 200

Insurance See Chapter 9 Policies reassessment— am I paying too much?

$50 per year

Total saving on insurance

$ ......... 100

Regular fees See Chapter 9 Memberships

$………. per year

Subscriptions

$………. per year

Other

$………. per year

Total saving on regular fees

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$……….

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152

104 WEEKS TO YOUR HOME DEPOSIT Value after 104 weeks

Luxuries See Chapter 7 Luxury #1

$………. per week

$……….

Luxury #2

$………. per week

$……….

Luxury #3

$………. per week

$……….

Luxury #4

$………. per week

$……….

Luxury #5

$………. per week

$……….

Luxury #6

$………. per week

$……….

Luxury #7

$………. per week

$……….

Total luxuries saving

$……….

Rent See Chapter 8 [current rent or board $120 per week— $12 480 over 104 weeks] Moving to cheaper premises $………. per week for .... weeks Living with parent(s)

for 52 weeks Living with friends

$……….

$60 per week $.......... 3120

$60 per week for 52 weeks

Total rent saving

$ ......... 3120 $........ 6240

Presents See Chapter 8 To my partner from me

$100 per birthday, Christmas and/or other special occasions

To me from my partner

$

400

$

400

$100 per birthday, Christmas and/or other special occasions

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153

SOME WORKED EXAMPLES

Value after 104 weeks

To my family

$………. per birthday, Christmas and/or other special occasions

To my partner’s family

$……….

$………. per birthday, Christmas and/or other special occasions

$……….

Total presents saving

$.......... 800

Superannuation See Chapter 9 Amount ‘saved’ if I/we stop paying voluntary superannuation contributions (e.g. self-employed or employee ‘salary sacrifice’) $………….per week, or $………….per year Total superannuation saving

$……….

Vices See Chapter 10 Smoking

$

2

per week

$.......... 208

Alcohol

$

12

per week

$.......... 1248

Recreational drugs

$………. per week

$……….

Gambling

$………. per week

$……….

Total vices saving

Total saving on expenses

104weeks.indd 153

$ 1456

$8 796

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104 WEEKS TO YOUR HOME DEPOSIT

GOVERNMENT HELP WITH YOUR DEPOSIT Value after 104 weeks

Government assistance See Chapter 12 First Home Owner Grant One-off payment

$.......... 7000

Other scheme?

$……….

Total government assistance

$7000

WORKSHEET SUMMARY Where the money is coming from Total savings now (from page 149)

$

250

Total asset sales (from page 149)

$

620

Total gifts and support (from page 150)

$

200

Total new income to be saved (from page 150)

$ 12 307

Total saving on expenses (from page 153)

$

8796

Total government assistance (from page 154)

$

7000

Home Deposit Grand Total $29 173

YOUR WORKSHEET These are just four examples of how it can be done. Your worksheet will be different again. But remember you won’t get to your deposit fast just by cutting back on expenses or just by getting some extra work. You need new income, new cuts and ideally a solid attempt to convert a few assets to cash. You’ll probably miss a few targets so make allowances as you go. And remember the

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SOME WORKED EXAMPLES

155

expenses involved in buying a home, as well as any concessions on stamp duty to which you may be entitled—see Chapter 12. If you choose the right suburb and price range these concessions will give you a lift. Now return to the home deposit worksheet in Chapter 3 and fill it in.

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END NOTE: DON’T PULL YOURSELF DOWN ‘It’s harder now to buy a home than it’s ever been.’ ‘I don’t know how I’ll live with such a big mortgage.’ ‘The whole idea of being in debt to the bank for 30 years sends shivers up my spine.’ Practically everyone I know who owns a home has at one time made these pronouncements. But who cares if they’re true or not? Despite the odds, we are a nation of home owners. Somehow vast numbers of us did it and got on with life. And you’re on that road now. You’ve read the book, you’ve thought about the options, you’ve gone through the home deposit worksheet. That’s an achievement in itself worth celebrating. Take a few days to mull over your worksheet. Does it feel right to you? Does it feel good? If you have a partner, does he or she agree with you about this plan? Set the wheels in motion. Make a list of those people you need to speak to—family, friends, Centrelink, your employer, an 156

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END NOTE: DON’T PUT YOURSELF DOWN

157

employment agency, the bank, insurance companies (to find better deals at reduced premiums), and work out what assets you can turn to cash in your garage sale. Give yourself a little time before you start in earnest. Lay the groundwork so that you can proceed with confidence and with the support, where possible, of those around you. Be prepared for the knockers—it’s one of our national characteristics to pull down those who set out with determination to get ahead and improve their lives. Sometimes the criticism is direct (‘You’re mad! Think of all you’ll have to give up!’) and sometimes it is wearing (‘A home? Oh, that’s a nice idea for you to work on’). But you’ve got your worksheet and a plan. You can see now what you are capable of achieving. Finally, don’t let yourself get depressed about the sort of home you can afford. When we think about buying a home we often turn our minds to something like the home we grew up in. But this is the home our parents could afford (if they owned their home) at the peak of their working lives! That’s not a start, it’s a finishing line! Almost everyone begins with a more modest home—a place with many faults and in the wrong suburb or location. But, eventually, we leave it—on average we shift every seven years. Chances are you too will move on to something better. The first home you buy is the hardest. Make it happen—in 104 weeks.

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RESOURCES, READING AND CONTACTS REAL ESTATE WEBSITES AND PROPERTY REPORTS Many real estate agents have their own individual websites. Contact them for the address. Here is a selection of more general property sites. Domain, a Fairfax publications site <www.domain.com.au> Domain is a good place to check real estate advertisements from the Fairfax publications around Australia. You can get a suburb snapshot, ask to be electronically alerted when a type of property is advertised and save particular property ads to your own shortlist file. A mortgage comparison tool is also available. Australian Property Monitors <www.homepriceguide.com.au> or <www.apm.com.au> This site sells property reports—you can select by postcode, suburb or even by street name. Auction results and a free email newsletter will keep you up to date. Homepath <www.homepathcom.au> Homepath is an information site which is a subsidiary of the Commonwealth Bank. Free registration brings you information on aspects of buying, selling and investing in property, including calculators, some price data and a personalised property alert function. Property <www.property.com.au> Search under all the obvious names: property, real estate 158

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159

etc. Think about estate agency sites which cover major regional areas. Go to Google and search under the name of the town/ suburb and try an estate agency franchise name. PropertyWeb <www.propertyweb.com.au> Although the focus here is largely on commercial and industrial property, there is still good information for those looking for homes or residential investments. Auction clearance rates and volumes (in price brackets) are a highlight feature. An interesting range of articles can be found here, too. Residex <www.residex.com.au> Here you can get hold of price information and reports for Queensland and New South Wales for a fee. Performance predictions are a feature. Residex links to <www.findmeahome.com. au> where you can search for a property and mortgage.

ONLINE MORTGAGE PROVIDERS Some examples: <www.eloan.com.au> <www.ewizard.com.au> <www.mortgagehouse.com.au> <www.yeshomeloans.com.au> Check out a property magazine in the newsagency and see who is advertising. Then go to their website.

ONLINE MORTGAGE FINDERS Don’t know which loan is right for you? Online mortgage finders will help you. Here is a selection to get you started: <www.aussiehomeloans.com.au> <www.echoice.com.au> <www.homeloansnow.com.au> <www.mortgagechoice.com.au> <www.onedirect.com.au> <www.peachhomeloans.com.au>

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104 WEEKS TO YOUR HOME DEPOSIT

<www.propertypenguin.com.au>

FINANCIAL INSTITUTIONS Looking for the website for a particular bank or other lender? Try inserting the name of the institution, as in these examples: <www.anz.com.au> <www.aussiehomeloans.com.au> <www.commbank.com.au> (Commonwealth Bank) <www.imb.com.au> <www.nab.com.au> (National Australia Bank) <www.westpac.com.au> <www.wizard.com.au>

RESEARCH AND MONEY ISSUES Architects’ building inspection reports: <www.archicentre.com. au> or phone 1300 13 45 13. Australian Taxation Office publishes useful booklets on a range of topics including capital gains tax, depreciation and a general guide to rental properties. For personal tax inquiries, phone 13 28 61 or go to <www.ato.gov.au>. Cannex collates financial information on a huge range of banks and other financial institutions in a form which lets you make comparisons between their terms and fees. Go to <www. cannex.com.au>. Consumer Credit Code outlines the lender’s obligations: <www. creditcode.gov.au>. You can compare interest rates between mortgage deals at <www. cannex.com.au> and <www.interestrate.com.au>. echoice <www.echoice.com.au>. Here you’ll find information on interest rate movements, calculators and graphing. Property Investors Association of Australia Inc. (PIAA) is a notfor-profit organisation representing the interests of property investors (although it still remains a useful site for those looking for a home rather than a pure investment). You can subscribe to the organisation if you are interested in its financial education materials, events, seminars, and so on.

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161

Phone (02) 9499 9499 or go to <www.piaa.asn.au>. Real Estate Institute of Australia collects statistics from the state institutes in such areas as median property prices and vacancy rates. Its publications are for sale. Phone (02) 6282 4277 or go to <www.reia.com.au>. Reserve Bank of Australia: phone (02) 9551 8111, outside Sydney 1800 300 288; fax (02) 9551 8000; <www.rba.gov.au>.

GOVERNMENT ASSISTANCE First home owner schemes: <www.firsthome.gov.au> This site links to all state and territory governments operating a first home buyer scheme of some kind.

INTEREST RATES Here are some sites where you can find current interest rates for loans from a wide range of financial institutions: Cannex <www.cannex.com.au> InterestRate <www.interestrate.com.au> ninemsn <www.money.ninemsn.com.au> Mymoney <www.mymoney.com.au> Rate City at <www.ratecity.com.au> Yahoo <www.finance.yahoo.com.au>

STAMP DUTY For inquiries and information, call your state or territory revenue office: Australian Capital Territory Revenue Office at <www.revenue. act.gov.au> Phone (02) 6207 0028. New South Wales Office of State Revenue at <www.osr.nsw.gov. au> Phone 1300 130 624. Northern Territory Revenue Management at <www.nt.gov.au/ntt/ revenue> Phone 1300 305 353 or (08) 8999 7949. Queensland’s Office of State Revenue at <www.osr.qld.gov.au> Phone 1300 300 734.

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104 WEEKS TO YOUR HOME DEPOSIT

South Australia’s RevenueSA at <www.revenuesa.sa.gov.au> Phone (08) 8226 3750. Tasmania’s Department of Treasury and Finance at <www. treasury.tas.gov.au> Phone (03) 6233 3566. Victoria’s State Revenue Office at <www.sro.vic.gov.au> Phone 13 21 61 or (03) 9628 0000. Western Australia’s Office of State Revenue at <www.dtf.wa.gov. au> Phone (08) 9262 1100 or 1300 368 364.

CONSUMER PROTECTION AGENCIES AND ASSOCIATIONS Australian Competition and Consumer Commission (ACCC) Phone 1300 302 502; <www.accc.gov.au>. Australian Securities and Investments Commission (ASIC) runs a consumer information website dealing with your rights and warning against financial scams. Go to <www.fido.gov.au> or phone 1300 300 630. Australian Capital Territory Consumer Affairs Bureau Phone (02) 6207 0400; <www.fairtrading.act.gov.au>. New South Wales Office of Fair Trading Phone 13 32 20 or (02) 9895 0111; <www.fairtrading.nsw.gov.au>. Northern Territory Office of Fair Trading Phone 1800 019 319 or (08) 8999 1999; <www.nt.gov.au/justice>. Queensland Office of Fair Trading phone 13 13 04 or (07) 3246 1589; <www.fairtrading.qld.gov.au>. South Australian Office of Consumer and Business Affairs Phone 13 18 82 or (08) 8204 9777; <www.ocba.sa.gov.au>. Tasmanian Office of Consumer Affairs and Fair Trading Phone 1300 654 499 or (03) 6233 4567; <www.justice.tas.gov.au/ca>. Victorian Office of Fair Trading—Consumer Affairs Victoria Phone 1300 558 181 or (03) 9627 6444; <www.consumer. vic.gov.au>. Western Australian Department of Consumer and Employment Protection Phone 1300 304 054 or (08) 9282 0777; <www. docep.wa.gov.au>. CHOICE Phone (02) 9577 3333; <www.choice.com.au>.

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INDUSTRY COMPLAINTS HANDLING SCHEMES AND ASSOCIATIONS Have a complaint but don’t know where to take it? Try the federal government’s directory of consumer dispute resolution schemes and complaint handling systems at <www.dist.gov.au/ consumer/dispute/index.html>. The Banking and Financial Services Ombudsman handles disputes involving member banks and their affiliates and can make an award in the consumer’s favour up to a maximum of $280 000. There is no charge for this service. Phone 1300 780 808; <www.bfso.org.au>. Credit Union Dispute Resolution Centre. Disputes with participating credit unions (which abide by a code of practice) are handled without charge to credit union members. The centre has jurisdiction to handle a complaint up to $100 000, for matters which took place less than six years ago. A decision of the centre is binding on the credit union but not binding on the customer. Phone 1300 780 080; <www.cudrc.com.au>. Credit Ombudsman Service Ltd handles consumer complaints about businesses working in the credit industry. The business must be a member of the scheme. Phone 1300 780 808 or go to <www.creditombudsman.com.au>. Abacus—phone 13 11 28; <www.abacus.org.au>—is the peak industry association for mutual building societies and credit unions and can direct you to the best way to work through any issue or complaint. However, it is not a complaints-handling body itself. Try the Financial Co-operative Dispute Resolution Scheme by phoning 1300 139 220 or go to <www.fcdrs.org.au>. Financial Industry Complaints Service Ltd can help you resolve a complaint with your financial planner, stockbroker, life insurance company, fund manager and, in some cases, with superannuation providers. Phone 1300 780 808 or go to <www.fics.asn.au>.

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INDEX A annual leave, 7 working during, 57–61 asset-clearing sale, 24–6 B bank accounts, 27, 31–2 banking savings, 8 beer, 101–2 bonus saver accounts, 34 books, selling, 25 borrowing, 10–14 cost of, 28 budget discretionary expenses, 84–5, 90–1 non-homeowner, for, 82–3, 87–9 preparing, 81 budgeting, 5, 45, 93 C capital, 24 capital gains tax, 36 car loans, 29 cars cost of, 95–6 selling, 25, 95 cash management trusts, 33 casual work, 45, 50–1, 53–4, 58 module, 54–7 Centrelink, 74 Christmas, 68–9 cigarettes, 103 clothing luxuries, 64 selling, 25 coffee, 62–3 communications, cost of, 96–7 community evening college courses, 53

computers, selling, 25 conveyancing fees, 10, 110 conveyancing search inquiries, 110 cost cutting, 45 costs calculators, 111 knowing, 110–28 couples, worked examples great motivation, with, 142–8 lower income, 148–54 not sacrificing lifestyle, 136–41 credit cards, 94 emergency use, 29 stores, issued by, 29 D debts consolidating, 30 minimising cost of, 27 what to do with, 27–31 deposit amount of, 10 worksheet, 15–23, 154–5 discretionary expenses, 93 drinks, social, 102 E eBay, 25 electricity expenses, 93–4 energy expenses, 93–4 entertainment, 65, 93 essentials, 80–1 exercise, 97 expenses discretionary, 93 fixed, 93 expert reports, 110 extra shifts, 46

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INDEX F failure, allowing for, 7, 107–9 fast food, 64 fees and charges, 30–1 financial planners, 36–40 financial planning, 93 First Home Bonus (Vic), 125–6 First Home Owner Concession (NT), 121–3 First Home Owner Grant, 15, 127 First Home Plus scheme (NSW), 120–1 fixed expenses, 93 fridges, selling, 25 furniture, selling, 25 G garage sale, 24 gas expenses, 93 gifts, spending on, 68–70 goal, achieving 5–6 government taxes and charges, 114–15 ‘Grey Nomads’, 78 GST, 114 H health, 97 help, asking for, 66–7 holiday pay, 26 holidays, saving for, 7 home, working from, 47–9 I income increasing, 5–6, 45–61 substantiating, 12 income protection insurance, 112 income tax, 54, 114 insurance, cost of, 97 interest paying too much, 29 interest rates debts, on, 27–8 rising, 11

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internet costs of, 96 savings accounts, 33–4 J jewellery, selling, 25 job agencies, 54 L lease getting out of, 114 penalties regarding, 110 lender’s mortgage insurance, 10, 110, 111–13 loans, 94–5 long service leave, 26 lunch, buying, 8, 64, 93 luxuries, 62–5 M managed funds, 9, 35–6 markets, 26 mature workers’ program, 50 memberships, 97–8 mobile phones, 96–7 monthly repayments guide, 11–14 more hours, working, 46 mortgage agreements, 10 mortgage lending, 10 mortgage trusts, 36 motivation, 5, 107 motor vehicles, selling, 25, 95 movies, going to, 65 moving back home, 73–9 moving in together, 73–9 musical instruments, selling, 25 N NRMA, 95, 96 O 104 weeks 4–5, 15 online calculators, 12 overtime work, 45

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104 WEEKS TO YOUR HOME DEPOSIT

P parents, 78–9 part-time work, 45, 50–1, 53–4 module, 54–7 pay TV, 96 personal loans, 29–30, 94 phones, cost of, 96–7 plan, making, 43–103 presents, spending on, 68–70 Principal Place of Residence Rebate (NT), 121–3 public transport, 95 putting savings away as you go, 7–8 putting savings in right place, 9 R RACV, 96 recreational drugs, 102 registration fees, 110, 127–8 relatives, 66–79 removalist expenses, 110 rent assistance, 74 changing rent situation, 74–7 market rent, 73 savings on, 93 repayments guide, 11–14 risk, 40 S saving holiday, for, 7 immediate savings, 40–1 improving, 5–6 principles 3–9 seasonal jobs, 52–3 second jobs, 50 security, 40 self-discipline, 49 selling assets, 24–6 shares, 9, 34–5 single persons, 129–35 skills, upgrading, 53

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social drinks, 102 social security entitlements, 98–9 stamp duty, 10 concessions, 119–27 mortgage, on, 110, 118 transfer, on, 110, 115–17 subscriptions, 97–8 subsidies, performance-based, 70–1 superannuation, 47, 98 T TAFE, 53 takeaway food, 64 term deposits, 9, 32 tourists, 58 Trading Post, 25 trailing commission, 40 transfer fees, 127–8 transport costs, 95–6 U unit trusts, 35–6 V valuation, expert, 26 variables, 6–7 vices, cost of, 100–3 W wealth taxes, 114 ‘windfall’ money, 26 wine, 101–2 work annual leave, during, 57–61 casual or part-time, 45, 50–1, 53–7 extra responsibilities at, 47 home, from, 47–9 seasonal, 52–3 second job, 50 working more hours, 46 worked examples, 129–55 worksheet, 15–23, 154–5 WorkVentures, 50, 53

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