Wrap up

Dear Andrew Hingston,

This will be my last post to you. I thought to fit in some sort of conclusion into my GENC3003 journey on this blog. I have learned a fair bit over the course of this subject. And the stuff I learned here, I know I can definitely take away and use for my benefit in the real world. Which of course is why I decided to take GENC3003 in the first place!

I've gained a better understanding of taxes, superannuation, investments, and most applicable to me at this point of time: the importance of saving. Starting early, and planning for the future are two important aspects of this, and I am thankful to have realized this now rather than after a few years of working life - which means I get a head start.

What I've found particularly helpful is the expense tracker assignment. Even subconsciously, I refrain from making purchases that I do not need, because I know that at the back of my mind I would have to log it into the spreadsheet later. And logging expenses into the expense tracker is not that fun when I see my income draining away faster than I would like. Also, it gives me a handy tool to analyse where exactly my money has gone. It has definitely been an eye opener - especially in the small things that we don't really think about. They really do add up! This helps me to target cut backs in certain areas of expenditure each month. To sum up, I will be continuing to use my expense tracker even after this course is over.

I've realized that I there are creative ways to maximize my money - like automate direct debit from my normal account into a savings account each month. This would mean I save a certain % of income monthly. Other ways are to sell unused items on eBay, and get higher interest rates on my money in the bank if I open an account and make no withdrawals for a certain period. Investments are of course profitable (if I knew how to do it well) but I'll save up that knowledge for when I have enough as a savings buffer in my account for security.

The financial plan that I came up with was a time consuming process because I had to project myself into the future and estimate how I would want my financial situation to be at that point of time. It was very helpful though, to actually lay out a plan for my life - it gives my more perspective on how to work towards those goals.

All in all, I've gained a greater understanding of how to set myself up for a financially secure future. GENC3003 is definitely a course that I would recommend for anyone who wishes to learn and apply some practical financial knowledge for their own betterment.

Thanks, and good luck marking all our submissions!

Sincerely,

Stefanie Chuah Mei Mei

Planning

Dear Andrew Hingston,

Over the course of GENC3003, I realized an important thing: you can never start planning for your financial future too early. I think that was a key message I took away from Paul Clitheroe's book as well, seeing the emphasis he places on saving, investing, superannuation, and preparing for retirement; all of which require mapping out a plan.

Well, of course, that's why we have the financial plan assignment to do right?

Anyway, I was looking into the idea of maximizing my assets as best I can, even with my current situation as a student. Right now, as much as possible, I put my money into the savings account NetBank Saver (I use Commonwealth Bank), because it has a higher interest rate than my Streamline account - 3.75% per annum compared to like zero (well actually 0.01%). Considering that usually at any one time I don't have assets in excess of $2000, the interest I earn is pretty much negligible.

However, over the course of this summer work program, I have accumulated about $5000 that I can put away. Based on advice in your lecture notes, I decided that a good option would be to keep some in my savings account as a buffer if I require any money, and put the rest into a fixed deposit account to earn a higher interest rate.

So, I went to search for options on the commbank website. What caught my eye at first was the Award Savers account, which offers 5.01% interest on savings if I make a deposit every month and no withdrawals until 30 June 2010. That sounds pretty alright, I could just transfer some money from my monthly allowance, and make sure that I have enough in my NetBank Saver to fall back on if I need to.

On the website Award Saver is touted as a way to earn bonus interest (which would be the only plus point I'm aiming for) and also has a regular savings plan. That would be good for me, to just have an automatic transfer from my Streamline account to another one, so that I know I still am saving a certain portion of my money without thinking too much about it.

The other option I was looking at was Term deposits. Using these plans, I will know exactly how much interest I will receive from them and I will be investing for a fixed period. And the interest rate is pretty high for 7 months - 6%. The only problem is that I require $5000 to start a deposit. I may have enough to deposit it, but then I won't have a savings buffer in case I need oh, say, $1000 to go for that trip to South Island NZ. Well, okay, that's not exactly the way I intend to use my buffer, but basically, I won't have enough accessible money left over to feel secure if I start one right now.

So, my plan is to save up another $1000, so I will have at least that much to use, and then put the money I earned of $5000 into the term deposit. I should be able to achieve this in about 4 months down the road if I am very careful with how I spend my money. And, if I don't spend any of my 'ang pow' or red packet money that I receive from my parents and relatives during Chinese New Year coming up. Will be aiming for the 7 month term deposit because that offers 0.1% more interest than if I keep it there for 12 months. I am not sure why.

Now I guess I'm only comfortable with placing my money in the bank, but once I have a steady income, I will move on to investments and hopefully remember all the sound advice from this course then.

C ya.

Retirement & Will

Dear Andrew Hingston,

For me, Part 4 was very informative, but I found the topics on retirement and estate planning not very relevant to me at first. I've barely started working, so I'm not exactly considering retirement (though I'd like to if I won the lottery or something) and I really don't have much to my name which is worthy of noting in a will.

Nevertheless, retirement is a valid issue for my parents, well my dad anyway since my mother doesn't work. He's even considering retiring early... i.e. before age 55. In Malaysia where they reside, the situation is slightly different from Australia. For example, it's quite rare for the older generation to continue working part time after they are officially retired. Also, since my father works in a non-government company, he will not be eligible to receive any pension benefits after retirement, but he will be able to withdraw the equivalent of superannuation called EPF - Employees Provident Fund.

Another thing is in Malaysian Chinese culture, family ties are very important. It is considered normal and respectful for adult children to care for their parents when they are old by taking them into their own home. Or at the very least, hire help for them so that they can live in their own home. Sending your parents to an old folks home would be turning your backs on the people who clothed and fed you and cared for you, and isolating them from the rest of the family. For my family at least, noone would be ecstatic about being sent there. That's why my grandmother who is 74, lives with us (and is still healthy and strong I might add - she takes care of us, not the other way round!). Thus, retirement homes are not popular, and I highly doubt my parents are considering any of the sort.

My parents are doing what they can now to assure themselves of a comfortable retirement. Besides seeking to pay off the house, my father (as mentioned previously) is investing in various things, like property and shares. Because the money in his EPF exceeded a certain amount, he was able to withdraw the extra without being taxed and invest it. He has purchased several properties (some of them jointly under my name, since I am the first child and I will be the next person in the family to enter the workforce. It is sometimes difficult to obtain bank loans for property when you are almost hitting the retirement age).

I guess my dad believes he is doing enough to set himself and my mum up for a happy retirement. Unless of course he decides to migrate to Australia like he always claims he wants to do. I think the money he has earned won't go very far then if the exchange rate (rm3 = AUD 1) is taken into account.

On the topic of a will, I am quite unconvinced that I need one, though you sir, seem to think we all do. First of all, I have barely $5000 worth of assets, and I am unmarried. Wouldn't everything I own automatically go to my parents and my siblings? Noone would bother to dispute over the amount that I have.

I would definitely make sure I have a will once I start working permanently. Also, the story of John and Judy is a scary (and such a depressing) scenario; I'd definitely talk this issue over with my future spouse and get the issue of a joint will settled after our marriage. I plan to be an optimist though, and NOT put a dampener on my honeymoon by meeting up with a lawyer right after the wedding vows. Sorry, I'm a romantic. And I choose to look on the bright side instead of anticipating we'll die within the week of after getting married.

I think I will go check out that "will kit" this weekend - just to be safe.

Next post will be soon! Since I have a week left to post. *wink*

ebay

Yes, today's post will be about ebay. =)

I discovered ebay 2 years ago, but did not realize the beauty of this site until late last year. Since i discovered how I could purchase items that I needed for less than half the usual price, I've been hooked. Just because it's been used before is no reason to say no to something in perfectly good condition, right? This way I can save heaps on items like books, appliances, computer accessories... even gift cards or vouchers for 1/2 price! (I tried to find Paul Clitheroe's book on ebay... unfortunately, plus postage, it was cheaper to just walk to the bookstore and buy it full price. Go figure.)

Well, you would probably think: isn't that worse for your savings... Since you'd probably be more inclined to buy stuff that you don't really need! Surprisingly, I have never bought something off ebay on impulse, or something I don't really need. Perhaps it's just the detachment of seeing merely a picture of an item without touching it or eyeing it up close. I admit I love shopping, and sometimes can buy things on impulse at the mall. However, whether it's the overwhelming range of choices, the hassle of bidding, or the wait for the parcel to finally arrive... whatever the case, I don't spend more than necessary at this popular worldwide marketplace than I need to. This is perfect, because...

I get to SELL on ebay too! Recently, I managed to sell a voucher (that I bought off ebay) for a profit. This has piqued my interest in selling, because it's a great way to get rid of old stuff and earn extra cash! Now, I've listed a book of mine for sale, and plan to get rid of plenty more stuff from my place in Sydney before I leave Australia for good (after graduation). The only problem is that I lose about 40-50 cents if I list an item and it doesn't get sold. Well, you have to take some risk in business right? And ebay does charge a fee after an item is sold too, which decreases your profit. Nevertheless, I suppose if I don't really need something I own anymore, it's better to convert it into SOME cash rather than just sit there in my closet being useless and eating up room.

All in all, I think ebay is a great way for someone to earn money while getting rid of old stuff and freeing up some space in the house. It's also perfect for getting awesome bargains on almost everything. Lastly, it's addictive - the anticipation of winning a bid at a great price as the clock counts down, the excitement of someone placing a high bid on your item for sale... Definitely, you should try it if you haven't.

See you next post. =)

p/s: my dad should really use ebay. He's kind of a hoarder; loves to keep everything he buys. The house is going to overflow one day. I'll introduce him soon, but hopefully more stuff flows out than into the home!

Investments

Dear Andrew Hingston,

This post will be about investments. Though I have not previously taken much interest in investments, reading through Paul Clitheroe's advice has led me to investigate more. Since I have not really begun to earn my own money yet, considering investments isn't on the top of my priority list. How can I invest when I've just enough to spend for a month before my next allowance comes in?

However, I do understand that investing is one of the keys to financial success. My father has recently invested in a diverse range of investments though previously he had not because of the risk involved. I suppose all the money he earned when I was younger went towards supporting the family (my mother does not work); but now he has bought shares in several different companies and also purchased 3 types of property. I'm happy to say that he has profited from the investment in shares so far. I suppose the apartment's rental payments will take awhile to cover back its original cost, much less bring in money; but it is another asset.

My father did take some of my savings from when I was a child, and invest them for me. So technically I do have investments, but I didn't do the homework. He foresees that the shares he bought from a Malaysian telecommunication company will yield a large profit after several years.

I was intrigued by the no.1 key to successful investing: to invest in something you understand. Prior to this, I assumed that by looking at a company's previous performance, or maybe it's forecasted return, one could determine if it would be a good investment. I guess that isn't all that matters however, which probably limits me to buying shares from say... McDonald's? But those shares aren't cheap. My friend recently recommended to me to buy shares in Suncorp... because the share price isn't too expensive. I've looked through its share webpage, and seen its past performance. Though it looks like it will give me good returns in the future, I'm still hesitant to part with my meagre savings to invest when I don't know that much about it.

Another eye opener reading this chapter was that shares have more advantages than property does. I always thought that investing in land, or a property, would not go far wrong rather than buying shares. Now I realize that there is a lot more to investing in property than meets the eye. Drawbacks like no diversification to minimize risk, not as flexible as shares, and higher fees never occurred to me before. I now understand that shares may be a more viable option for me as an investment especially in the near future because it is less risky and doesn't require a hefty sum of payment each month. It also could be safer to start off with, so I can limit the amount I'm willing to invest. I believe that there are do's and don'ts in the investment game, and one has to be smart to earn off it, no matter if its property or shares.

Though I've learned much about investing, and I believe Paul Clitheroe's advice will be still very valid in the future when I start to earn my own money, I'm still going to bide my time before I dip into the investment pool and for now stick to earning money from my savings in the bank.

Til I return.

Tax - ARgh!

Dear Andrew Hingston,

Apologies for not posting for awhile, over the Christmas break I really did have a proper break and didn't so much as go near my laptop. New year's resolution: post more regularly. I'm starting now, even though the bed is really inviting after a long day at work staring at a computer screen for hours on end.

Anyway, I'm here to post briefly on that matter close to my heart (more like being a constant pain in the butt) - TAX. The reason why I've got my hackles raised again is because, first day back at work after the 1 week break, I was greeted by a lovely email on my payslip for the last week of the year 2009. Lovely because... I was taxed at 46%. That's almost half my pay!

I was quite upset, because I couldn't understand the logic of charging me one tax rate for almost a month then hiking it up to 46% next. I checked ato.gov.au, and discovered that one would only be taxed that much if you made an insane amount of money a year (which obviously I don't) or if you didn't submit a tax file number. I'm pretty sure I didn't fit the bill in either category, so I took it up with my employer immediately. Since I was doing that, must as well take the opportunity to kick up a fuss about the previous tax rate which was higher than it should really be.

Since the last post, I did some snooping around the Australian Taxation Office site, and discovered that there really wasn't much good reason to tax me extra. Initially, I thought that maybe this was a penalty for not filing my tax return last year, but found out that penalties are administered as a lump sum, not a higher tax rate for the following year. Also, penalties are only enforced if someone from the Tax Office had been in contact with me regarding my tardiness in submitting a tax return. This did not happen. Lastly, penalties almost exclusively apply to tax returns that would have resulted in debt to the government, and not to returns resulting in a nil result or refund. In my case, I was entitled for a refund. Clearly, the higher tax rate should not have stemmed from this issue!

I put the tax calculator on the website to use and calculated my estimated tax based on my weekly pay. I believe that there was an issue with my TFN form which I filled out on the first day of work. Probably I mistakenly ticked: NOT Austraian resident for tax purposes, because if i was not, then I would be taxed higher. I am really, having studied here for 3 years.

In any case, the 'happy' ending is that I filled out another form again, and sent it to my employer today. According to her, she sent in the form and managed to get the problem fixed. They can return me the extra tax charged for the last 3 weeks, but prior to that, I can only recover at the end of the financial year by lodging a tax return.This is great, and the money should come in tomorrow, so I'll be eagerly waiting for good news in my payslip tomorrow.

Moral of the story: Do your homework, and never give up. People will help if you ask nicely (and pester them incessantly).

See ya soon.

Tax

Dear Andrew Hingston,

I suppose tax is something that I have just not worried about before I started vacation work in Brisbane. Prior to this, I've only worked a casual job as a residential advisor, not earning enough to be taxed by the Australian government. Now, however, I'm taxed at 30%, and when that sum amounts to more than $300 a week, it's hard not to notice.

The tax is at such a high rate, because the monthly salary I earn would translate to more than $52,000 gross income a year. Though, of course, I'm only going to be working for 3 months here, not the whole year. I do realize that I will be able to file a tax return and get back at least some of what has been deducted as tax, at least for the 1st $6000 I earn.

One thing has irritated me about this whole tax issue. I am taxed at 30%, however most of my colleagues (except one) are only being taxed at 20%. I have tried to get my employer to look into this issue but to no avail. I was worried at first that I couldn't claim the tax-free threshold in the current position I hold, because I had already claimed it in my casual job (which I am still going to go back to when I return to Sydney). But, upon asking around, this shouldn't be the case. Another friend suggested that I did not file a tax return in the middle of last year, which could have caused it. I will have to look into that. In any case, my employer (a recruitment agency) is not helping one bit.

From the notes I learned that Australians are taxed at relatively high rates compared to most other countries because of the benefits that the government gives back to the community. Before this, I questioned whether I'd really want to work in Australia long term because of the higher tax rate than my home country, Malaysia. However, recently I've noticed that a lot of the things Australians might take for granted are really benefits to the society that the government sustains using taxes.

Take for example, reliable public transport. Not to diss Malaysia, but public transport there is really... not up to standard. Which is why people prefer cars there. Another thing is beautiful recreational areas for Australians to relax in like parks, botanical gardens, beaches and so on. Money is needed to maintain the plants, the cleanliness and the safety of these areas. The police force is also a point to be proud of. Where the police here can be relied on to be trustworthy... in countless countries, corruption is rampant - because of the low pay they receive.

In short, I do understand why tax is high here, and am grateful for it. I guess I'll just have to think of my withheld tax as savings... with no interest. Big no no for Paul Clitheroe. Oh well.

See ya next post.

Saving

Dear Andrew Hingston,

Going through the component on 'saving', I've learnt a lot and managed to put some of the very good tips on saving in practice.

The first thing I found particularly interesting was that the term 'saving' only applied to limited circumstances. Most of what I thought saving to be previously was really deferred spending! And even leaving money in my transaction account didn't count as saving; only putting money in my Commonwealth Netbank account (with higher interest returns) did. I always thought it a hassle to keep transferring money from my Netbank to my accessible bank account, but now I realize that the interest generated in the former is much better for me.

Besides that, I think the saving tips were practical and did work! The first one I tried was delaying buying stuff that I wanted for 2 weeks (as mentioned in the previous post). After a week, I no longer feel the desire to go out and buy the clothes that I had wanted.

"Save little and save often" was another great tip from the book. Long-term regular savings is actually not that difficult! I have already planned to channel at least 10% of my income in the period of these 3 months towards savings in Netbank, and possibly open a fixed deposit account if I garner enough funds to merit one. And of course, I'm starting to save in small ways; for example after a week of noting down my expenditure in the expense tracker, I've realized that I spend quite a fair bit on drinks - $4 for coffee, $5 for a Boost juice... etc. And this happened almost daily. I didn't realize that I was spending that much really, and I decided to pull back on that this week. And I'm going alright so far.

On a side note, the expense tracker helps to keep my spending in check. Every time I want to spend on something, I remember that I have to note it down in that spreadsheet, and the desire to buy just for fun dissipates in a snap; to be replaced by a sense of unwillingness to see money flowing out of my account. I might just consider continuing to track my spending even after this course. It has its benefits!

In terms of other tips I've tried, I've incorporated bringing lunch to work from home into my lifestyle, and realized it's pretty easy (and healthier!) to do this. Great way to save up to $40 bucks a week!

I think the take-away message is to save consistently, save where possible, and save reasonably (i.e. not until i can't have any fun at all). In my first year in university, I kept an expense tracker of my own making, but I became more stressed because my savings goal was a bit too unrealistic. It didn't allow me to have much fun; movies, eating out at nice restaurants, and transport seemed too expensive, so I cut them out of my lifestyle. Eventually, I gave up because it was quite depressing. Now, I don't plan to repeat that mistake, and instead save in smaller amounts. It's better than giving up anyway.

Til next time.

Being Generous and Content

Dear Andrew Hingston,

After listening to Part 1 of this course, I think the parts that impacted me the most was on planning to be generous and content. The chunks of the pie were not what I was expecting, because I thought the rule of thumb in money matters is usually: save up and invest. However, the first chunk of the pie focused on being generous. Coming from a typical Chinese background (what more of Hokkien dialect; we are notorious for being tight-fisted), it didn't make too much sense to find advice on financial planning starting off by encouraging spending.

I was taught not to be too frugal with my money by my parents in word, because they understood that such a selfish outlook would only bring unhappiness. However, often their innate nature to spend only for personal benefit would counteract their verbal teachings. In that sense, I was brought up with a healthy respect for the value of money, but never found it particularly easy to be generous with people.

As a Christian however, I gradually realized that being generous with others (especially those who were more in need than I was) would be something God would want. Hence, my commitment to give regularly to the church out of what I have. Yet, in other things, I was seldom generous; but in my defense, I had a limited amount of money to spend on others as a student.

This week, I was given a chance to show generosity to my friends. On the weekend, my friends decided to come over to my new apartment in Brisbane for dinner and I offered to cook. At first, I contemplated asking them to chip in for the cost of the ingredients, but when I thought of the chunks of the pie, I decided against it to try to be more generous. I knew I could afford the $50 for the meal, since I now earn enough in my current job.

We had a great time, and though I felt a little pinch at the sudden drop in my bank account balance (I saved for a whole week, and now in one day $50 is gone!), I did feel good being able to treat my friends to a nice dinner. With Christmas coming up, I think this part of the course will help me understand that balance is important in every aspect of life, particularly in financial matters. I will save where I can, but also be reasonably generous in spending on my loved ones.

The other chunk of the pie that had impact on me was the part on 'being content'. Prior to listening to the slidecasts, I was hoping to purchase several expensive items for personal use; namely pretty working clothes and shoes so that i'd look professional at my new office job. After I listened, however, I thought about the money I had wanted to spend and asked myself if it was really necessary. And the answer was no. I had enough clothes; I didn't really need any more except to satisfy my craving for newer, better possessions.

Therefore, I held off the buying of those items for 2 weeks, to see if I really couldn't live without them. And concluded that those certainly were wants and not needs. Now, I no longer have the urge to run to the shopping mall because I need to look as good as everyone else in the office. I think I can save quite a fair bit by reducing the amount of wants I buy, and being satisfied with what I have. Of course, a realistic budget is key, as Paul Clitheroe advises: a budget that doesn't allow you to enjoy yourself is unrealistic and will be ignored.

So, I take away two valuable lessons from the first part of this course already. Until the next post then!

Basic Introduction

Dear Andrew Hingston,

Since this blog will be for your eyes only (I highly doubt anyone else would care to read it), I shall address each post to you. I shall briefly introduce myself here.

I'm a 20 year old international (Malaysian) student who has just completed her third year of studies for a Bachelor in Petroleum Engineering. Currently, I am located in Brisbane to undergo industrial training with a mining company for 3 months which is a requirement for me to graduate.

This explains why I have been tardy getting my blog and first post up; I relocated here from Sydney during the 1st week of the summer term and was unable to access the internet during my one week stay at a hotel. Now that I have moved to my permanent dwelling for the next few months here in Brisbane, I have finally purchased mobile broadband and gotten myself online.

I am rather lucky to have landed a position as a vacation student in this company because the cost for my accommodation is covered by them. Living in Brisbane CBD, I know that they are paying a fair sum for my place. I am also a paid intern, which is a sweet deal.

On another note, I am under a scholarship from a company in my home country, therefore I receive a monthly allowance to cover my living expenses. This amount is barely enough for me as a student; which is why I used to have a part-time job while studying in UNSW.

I enrolled for this course because I heard from several sources that it is a very beneficial subject to learn; because it would help me plan financially for the future. And hey, i need to complete two more gen eds anyway.

What I hope to get out of this subject is a better understanding of how to maximize money, invest, and set myself up for a financially sound future. I'd also like to see if Paul Clitheroe really has good advice, since I had to pay $35 today to find out. Well, at least I logged in something into my expense tracker!

Til next time,

Mei Mei