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.