Thursday, 31 January 2013

January 2013 in review

The month has gone by quickly for me.  It seems like I’ve written a lot, but what I have actually accomplished?  Hmmm …

I had a look back at my financial New Year’s resolutions, and I think I’m at or close to achieving three of them:
  • Finalise the settlement on my mortgage refinance
  • Try at least one new savings tip a week from my blog
  • Develop my $1 million by 2020 financial plan
The settlement on my mortgage refinance is really, really close.  Everything is approved and ready to go with the new lender, but my (private) bank is trying to drag things out.  The cash back mortgage broker I went with is an absolute gem and has really been driving things along to date.  When it’s all finalised, I should be better off by more than $5,000 after tax per annum for the next three years – or the equivalent of cutting more than eight years off my mortgage term.

I’ve also been attempting to follow some of my own advice:
  • At the end-of-year sales, I spent pretty much nothing, nada, zilch.  In fact, I’ve been so busy with other things, I didn’t even make it into a major shopping centre.
  • For my car servicing, I used a fantastic independent mechanic, which saved me heaps as well on purchasing new tyres.

Wednesday, 30 January 2013

Estate planning

Estate planning ensures that, upon your death, the wealth you’ve accumulated is transferred to your beneficiaries efficiently, tax-effectively, and in line with your wishes.

Elements of an estate plan can include:
  • A will – A legal document that outlines your wishes and names the executor of your estate. This is the person who will have the responsibility of carrying out your wishes as outlined in your will.  If you die without a will, the court will appoint an administrator. It can take months for this process to be completed and there is no guarantee that your dependents will receive what you may have intended.
  • A power of attorney – An enduring power of attorney (EPA) allows you to appoint other people to make decisions on your behalf, in the event that you will not be able to make them yourself.  If you become incapacitated and do not have an EPA, your family may need to obtain an order from the court to be granted decision-making authority.
  • A discretionary trust(s) – Establishing a trust is a way of preserving assets or funds for a particular person or group. Under your will you can create a tax effective trust designed to provide income to fund your children's education or leave a gift for underage or disabled beneficiaries.

Tuesday, 29 January 2013

Insurance protection

Once you’ve started accumulating wealth, you need to protect it in the event that you are unable to work temporarily or permanently and to protect your family in the event of an early death.
Key types of insurance to consider include:
  • Income protection insurance
  • Mortgage protection insurance
  • Term life insurance
  • Total and permanent disablement insurance (TPD)
  • Trauma insurance
  • Health insurance
  • General insurance

Income Protection Insurance

Your most valuable asset is your ability to produce an income.  Income protection insurance replaces your income if you are unable to work due to sickness or injury. Some policies provide additional benefits, such as a claims escalation option, day 1 accident benefit, and business expenses benefit.

The cost of income protection varies significantly depending on the waiting period, benefit period, amount of income insured, gender, and the insured occupation.  You may be required to sit a medical examination if you are looking to insure a high salary.

It is very important to read the fine print of the coverage terms.  Some income protection policies cover you if you are unable to work in your specific occupation, while others are more expansive and could require you to return to work in any occupation.

The cost of income protection is fully tax deductible if purchased outside of superannuation.

Monday, 28 January 2013

Target net worth and plan summary

If you’ve followed along this far through my collection of financial planning posts, congratulations.  You’ve got most of the pieces you need to develop a reasonable financial plan:
  • Your vision and goals – which will determine how much cash you need in the future (and which will make the whole journey worthwhile!)
  • Your available cash flow – the funds you have available to invest after your day-to-day expenditure is deducted from your income
  • Your target asset allocation – how you will invest your savings to ensure you can fund your goals
  • Your desired investment products – the specific financial products you will invest in to achieve your target asset allocation
  • Expense and net worth tracking tools – to monitor your progress against your targets
  • Your financial risk profile – to ensure that you can sleep at night while carrying out the above activities
I’ve taken the opportunity to revisit my own financial plan, and I’m really excited about achieving my new goals.  I’ve built a tracking mechanism into my budget and expense tracking spreadsheet to show my month-by-month progress on the way to being a millionaire by 2020.

It looks like this:

I did a quick calculation as to where I’m at for January and was quite pleasantly surprised!  I’ll show the results in my 31 January post.  In the meantime, I want to cover two important topics on protecting your wealth: insurance and estate planning.

Sunday, 27 January 2013

Investment planning - product selection

Once you’ve determined your target asset allocation, it’s time to decide which specific products to invest in.

Key considerations include:
  • Which products to invest in within each asset class
  • Diversification
  • Whether to use managed funds or go direct
  • Whether to use a full service financial advisor, specialist advisors, or do-it-yourself (DIY)
Which products to invest in within each asset class

Each of the asset classes I discussed yesterday has a whole smorgasbord of options to invest in.

Cash investment options include:
  • Savings and cheque accounts
  • Term deposits
  • Cash management trusts
Fixed interest investment options include:
  • Government bonds
  • Corporate bonds
  • Debentures
  • Hybrid securities
Property investment options include:
  • Residential property
  • Industrial property
  • Commercial property
  • Listed property vehicles (e.g., REITs)
Equities investment options include:
  • Australian equities
  • International equities
Basically, any of the above products could be Australian or international.

Some of the products require large lump sums to invest in (e.g., government bonds, commercial property), so to access these products you may need to invest via a managed fund, exchange traded fund (ETF) or listed investment company (LIC).  I’ll talk about these more a bit later.

Saturday, 26 January 2013

Investment planning - asset allocation

Once you understand your free cash flow, you need to determine where to invest it.  Keeping it under your mattress is not likely to be the best option if you want to see the balance grow over time.  While it’s easy to jump straight into product selection (should I buy Westpac or CBA shares?), it’s important to start with your overall asset allocation. 

One of the figures I remember from my financial planning course was that 90% of the overall performance of your portfolio over time is determined by your asset allocation – i.e., what percentage of your portfolio was invested in cash, fixed interest, property, domestic shares, international shares, etc. and when.  Only 10% depends on the actual products selected.

So today, I’m going to discuss some of the key aspects of asset allocation:
  • Investment asset classes
  • Historical performance of different asset classes
  • Performance v. risk
  • Diversification
  • Alignment to risk profile

Investment asset classes

Each of the main asset classes is outlined below, along with their indicative level of risk and return.

Friday, 25 January 2013

Expense tracking v. budgeting

Expense tracking documents the past. While this is a very worthwhile endeavor, and in fact essential to setting a baseline for your financial plan, by itself it’s not going to achieve your goals.  You need a budget.

A budget is quite simply a forward plan for the year of all your income and day-to-day expenses, plus any one-off expenditure related to your goals.  To build my expense budget for the year, I:
  • Review my total expenditure for the prior year in each of the categories I use to track day-to-day expenses
  • Increase the prior year figures where required for non-negotiable items – e.g., council rates, car registration, etc. rise each year without fail
  • Assess all negotiable categories to see if there are opportunities to lower expenditure
  • Allow a bit of leeway for unexpected expenditure – otherwise you’ll always miss your budget targets
  • Divide the totals by 12 to determine a monthly expense target
I then do the same for income.  This is a bit simpler, as I have mainly my salary and various types of investment income.

By doing the above, I can track my actual income, expenditure, and savings against budget.

Thursday, 24 January 2013

Expense tracking

If regular expense tracking is a true sign of a personal finance geek, the Millionaire on Heels qualifies in spades. I’ve religiously tracked my day-to-day income and expenditure on a weekly basis for about 10 years, ever since I was saving for my first home deposit.

The process is pretty simple:
  • Choose a tool to track your income and expenditure
  • Choose the categories of income and expenditure you wish to track
  • Do it
Expense Tracking Tools

There are thousands of different tools out there.  You can use:
  • Personal accounting software – e.g., Quicken
  • Mobile apps
  • A spreadsheet
  • Pen and paper
Personally, I think accounting software is a bit of overkill unless you have quite complex financial affairs.  I’ve tried a few mobile apps, and I think they’re a good idea if you spend a lot on the go, have difficulty saving receipts, and are happy with a fairly limited range of spending categories and reports.  Some of them have pretty nifty features like the ability to scan invoices.  Personally, I’ve used a spreadsheet since before the days of apps, and I’m happy to stick with it for the meantime.

Wednesday, 23 January 2013

Financial net worth assessment

Tracking your net worth regularly is an essential part of the financial planning process.  Your net worth is basically the total of all your financial assets minus your financial liabilities – i.e., if you sold all your assets today and repaid all your debts, how much cash would you have in hand.

You can track your net worth on something as simple as a piece of paper or using an online tool or software package.  Personally, I just use a spreadsheet, and add a new column every few months, so that I can track my net worth over time.

To get you started, assets to record could include:
  • Home
  • Investment properties
  • Cash/term deposits
  • Managed funds
  • Shares
  • Superannuation
  • Home contents
  • Car(s)
Liabilities to subtract could include:
  • Mortgage
  • Property loan(s)
  • Margin loan(s)
  • Car loan(s)
  • HECS/student loan(s)
  • Other personal loan(s)
  • Credit card balances
Some good online tools include:

I like to track my net worth including and excluding my home contents and car, as these are depreciating assets.

Tuesday, 22 January 2013

Financial risk profiles

Before we get too far into the financial planning process, it’s important to discuss the concept of your financial risk profile.  Basically, your risk profile refers to the amount of risk you are willing to bear across your investment portfolio.  Your profile will help you to determine the best asset allocation for your portfolio, as well as the best product selection strategy.  And these will in turn, determine your expected returns.  Generally, lower risk investments deliver lower returns and are less volatile than higher risk investments.

Your risk profile is likely to change over time and can be different across different investment horizons.  For example, someone nearing retirement may have a more conservative risk profile than someone in their 20s.  However, the person in his/her 20s may be saving for a home loan deposit.  In that case, his/her superannuation investment strategy could be quite aggressive, while their growing home deposit remains in a lower risk, lower return cash account.

Monday, 21 January 2013

The importance of symbols

This wasn’t a subject in my financial planning course, and old-school financial planners would probably turn in their graves upon reading this, but I want to explore the power of symbols in helping you achieve your goals and dreams.

Self-help-type books recommend having a vision board to document your life vision and goals.  I’ve done similar exercises in business coaching sessions, where you pick a series of images that represent your past, present, and future.  Both concepts rely on the power of images.  The saying goes that an image is worth a thousand words.  So representing your goals via images allows you to say a lot more with fewer words.  You can also display the images where you will regularly see them to ensure your goals remain top of mind.

So I’m going to do a bit of experiment this year and develop a vision board for my financial goals, plus a few other New Year’s Resolutions that are less financially significant.  I’ll keep a copy on my pin-board at work and the fridge at home, so I’ll see them daily.  No doubt I’ll get a few questions at work, but I’ll think of a good response.  If it works, I guess the results will speak for themselves.

Sunday, 20 January 2013

Financial goal setting

The keys to success in achieving what you want out of life are understanding what you truly desire in the first place and then setting specific goals to deliver this – and writing them down.

There’s an often cited study involving three groups of Harvard graduates several years ago.  Those who wrote down their goals were the most successful at reaching them.  Those who mentally noted their goals were moderately successful.  And those who did neither were the least successful.

I’ve found this to be true personally.  The last time I wrote down my financial goals was a few years ago when I did a graduate diploma in financial planning.  I put them at the front of the spreadsheet I used to track my spending, so that I’d see them weekly.  Sure enough, I tracked my progress against them religiously, and achieved most of them – although luckily not some of the longer-term ones like retirement!

The good thing is that you don’t have to be Harvard graduate to write down your goals.

A good process to go through involves:
  • Setting a draft set of goals
  • Validating and prioritising these against your values
  • If you have a combined budget with your family or partner, consolidating your goals into a single list and action plan
  • Developing an action plan to achieve each goal
  • Ensuring you have the cash flow to achieve the goals (this is where reality tends to set in … and prioritisation becomes important)
  • Putting in place processes to regularly track your progress against achieving your goals and to review and update them as required
I’ve provided more detail on each of these steps below.

Saturday, 19 January 2013

Financial values

Creating wealth is not an end in itself.  Wealth is just a tool to enable you to live out your dreams.  However, many people do not take the time to truly articulate what their dreams are, what financial success means to them, what is truly important.  Without being grounded in values, a financial goal is just a generic “save enough for a comfortable retirement” or “pay off the mortgage.”  Someone who values adventure and friendship would have quite different retirement plans and housing needs compared to someone who values serenity and family.

Values are your personal beliefs about what you regard as important, worthy, desirable, or right.  They tend to reflect your upbringing, and change very little without conscious effort over time.  Knowing your values in advance of creating wealth will help you understand why you are creating it in the first place, and what to do with the wealth once you’ve accumulated it.  The financial planning firm ipac ( even states that:
“We know from research that those who have a clear idea of what’s important to them are generally happier in life than those who don’t.”
So before I launch into goal setting tomorrow, I want to spend a bit of time today considering what is actually important to me.  There are a couple of good ways I know of to get your values out of head and down on paper.

Friday, 18 January 2013

Elements of a financial plan

Once upon a time, the Millionaire on Heels did a graduate diploma in financial planning.  The fairytale ending was meant to be a new career advising clients on how to build wealth successfully.  However, the dream soon ended with the realisation that the vast majority of financial planners are product salespeople who are remunerated to sell their financial institution’s or recommended platform’s managed funds.  Anyone feel free to challenge me if you know a financial planner who is different.  I have to say I’ve visited a few personally, and have never found one willing to prepare a plan that didn’t include his/her incentivised products.

So, taking into account all my disclaimers at the bottom of the screen, if you want to make your own way independent of the product salespeople, here’s how I’ve learned to prepare a financial plan.

Step 1 – Assess Your Current Financial Position

I think it might be more exciting to start with Step 2, but Step 1 helps you to be a bit more realistic about your starting point.  The purpose of this step to obtain a clear picture of your assets and liabilities, plus your income and expenses.  The key word is expense tracking.

Thursday, 17 January 2013

Public transport savings tips

The Millionaire on Heels is not a huge public transport user.  I pretty much have to incur the fixed costs of having a car to get to work.  And the incremental costs of the odd driving I do elsewhere don’t seem to add up to much.  Plus, I enjoy air conditioning and being able to sing along to my favourite songs.  I haven’t tried singing on public transport, but I’m not sure it would attract the best looks!

But it is definitely worthwhile considering if you need a car at all – see my previous post

Non-car ownership transport options include:
  • Walking
  • Cycling
  • Car pooling
  • Rental car
  • Car share schemes
  • Taxis
So when is public transport a more cost effective option than hopping in the car?  Because I have to have a car in the first place, I compare the incremental costs of driving to the public transport fare.  For me, the primary incremental cost of driving is petrol – about $0.15 per km, so $1.50 for a roundtrip to the gym, main library, or local shopping centre, or $7.50 for a roundtrip to work.  That’s less than it would cost me for a public transport fare.  Other incremental costs to take into account would be parking, tolls, your carbon footprint, etc.

Wednesday, 16 January 2013

Car sales and trade-ins

Once you’ve decided on a new car, you’ll need to work out what to do with your existing car (assuming you have one).  Your goal is to get the best possible price in the shortest time.  But what’s “best” and what’s “shortest” differs between people.  Your basic options include:
  • Trading it in to the dealer you’re purchasing the new car from
  • Selling it privately
  • Auctioning it
  • Consigning it
  • Gifting it (in my family we had a lot of hand-me-downs)
Here are some tips to guide you through the sales process, whichever means you choose.

Preparing Your Car for Sale

As with selling a house, selling your car relies on good presentation and things being in working order.  But you don’t want to overcapitalise or go overboard on repairs, which could make potential buyers suspicious.

Key tasks to focus on include:
  • DO clean your car inside and out, including under the bonnet.  First impressions do count, and people associate a clean car with good maintenance.  And potential buyers will open the bonnet, boot, glove box, etc. during their inspection.  Consider getting the car professionally detailed.

Tuesday, 15 January 2013

Car renovation

After writing so much about new cars lately, I’m starting to get a bit itchy for one myself.  However, my current car is in nearly perfect condition, so it would be financially irresponsible to trade it in for a newer model.  And luckily for me, the next version of my preferred model doesn’t hit Australia until later this year, and then there will be a waiting list, etc., so it wouldn’t be realistic to get a good deal until next year anyway.

So my plan in the meantime is to do a bit of “renovation”.  People invest heaps of money to improve vintage houses, so I’m going to do the same for my less than vintage car.  It will certainly cost less than purchasing a new one that will depreciate sharply in value.

The areas I’ll focus on will be:
  • Exterior detailing
  • Depending on the success of the detailing, potentially some bodywork
  • Interior detailing
  • Potentially new floor mats
  • Wheel rim servicing

Monday, 14 January 2013

New car purchases - negotiation tips

“Good” salespeople are prolific in the car sales industry – good in the sense that they have the ability to extract thousands of dollars of profit from you, the innocent customer, while at the same time managing to convince you that you actually got a good deal.  An entire counter industry seems to have emerged to address this issue, with thousands of websites devoted to helping you get a better deal.  Of course, the best salespeople will be clued on to recommended counter attacks to their standard tricks and will no doubt have thought of new ways to entrap you.  So at best here, I’ve resigned myself to providing you with some guidance on how to deal with a less than average to average car salesperson.

Fundamentally, the price you will pay for a car is a function of how much you want to buy it versus how keen the vendor is to sell.  From your perspective, the price you will pay is somewhere between the recommended retail price (RRP) and the dealer’s invoice price (what they pay the manufacturer for the car) minus any holdback price or special discounts from the manufacturer, depending on how good a negotiator you are.  Once you visibly commit to the vendor that you will make a purchase if the price is right, your negotiations are limited to that range.  However, until you have committed, the potential sale for the vendor ranges from $0 to the RRP.  The longer you can keep the vendor thinking $0 is an option, the lower you can get his/her frame of reference as to what is a good sales result for all the effort he/she has put into winning the sale. 

Sunday, 13 January 2013

New car purchases - funding options

Once you’ve found your dream car, you will have to pay for it.  It’s best to work out how you’re going to pay for the vehicle before you set foot in a dealership or meet with private sellers.  Key topics to think about include:
  • Sources of funding
  • Types of financing
  • Other funding considerations
Sources of Funding

Sources of funding range from car dealers themselves, through to financial institutions, and even yourself.

Your Own Bank Account

Funnily enough, few of the sources I researched to write this article mentioned actually paying for a car out of your own pocket!  In our credit-fuelled society, many people have not had the experience of saving up for a major purchase.  But if the car is going to be used for predominantly private purposes, this is by far the cheapest source of funding.

If you don’t have a large amount of funds in your savings account, consider making the car payments you would pay under a loan into an offset account or high-interest savings account.  Once you have enough money to purchase a car, keep on making the payments to your account, and when you want to replace the car, the funds will be there.

Saturday, 12 January 2013

New car purchases - used car checklist

The Millionaire on Heels remembers back to her first used car purchase.  I was fresh out of university and scanned the classifieds.  The classifieds were all in the newspaper back then.  I found an ad with the make and model I wanted with super low kms at a good price.  My dad was visiting, so I enlisted him, and we went out to do a test drive.  I think we walked around the car once looking for any major damage … my dad’s main comment was that it was missing hub caps on the wheels.  The test drive for a couple of minutes went OK, and I bought the car with a cheque.  Of course, once I took the car home with me, I found out all the things that weren’t quite right – the rear door that didn’t open, the leaking window, etc.  But mechanically the car was pretty sound for something of its vintage, and it went on to serve me well and then my family once I moved to Australia.

So, if I was doing it all again, what would I do differently.  Some key checks you need to do when considering a used car purchase include:
  • Seller verification
  • Personal property securities register (PPSR) check
  • State transport agency checks
  • Vehicle inspection

Friday, 11 January 2013

New car purchases - new v. used cars

Cars are one of the most expensive items you will ever buy, perhaps second only to a house.  But while a period house in a good location with original features and tasteful updates is frequently valued more highly than a cheap project home with a brand new kitchen and bathroom, there can be a certain stigma about a used vehicle.  This comes through even in the terminology – one doesn’t talk about a “used” house.  Applying the same economics to buying a car as one would a house, it’s hard to argue that a cheap Asian model with new plastic finishes is somehow better than a three-year old luxury car in immaculate condition that has been regularly serviced and only sold because it’s at the end of its lease.  However, there’s just something about that new car look and smell.

I’ve outlined some of the advantages and disadvantage of new and used cars below, as well as the middle variant, the demonstrator vehicle.

Thursday, 10 January 2013

New car purchases - optimise the process

The Millionaire on Heels has a confession to make: I love new cars.  The pragmatic, financially astute side of me says new cars are an absolute waste of money, as their value drops by 10% (minimum) the second you leave the showroom.  It reminds me of my 20km commute along a road frequented by diesel-spewing semi-trailers who pepper the car with bits of gravel on dry days and muddy water on wet ones.  But I can forget all that when I see a gleaming, new model, turbo-charged driving machine beckoning at me from the dealership.  I don’t want anyone to have set foot in the driver’s seat except me, I don’t want someone else’s crumbs and unidentifiable sticky marks.  I am a car dealer’s best friend!

My current car is days under six years old, and I desperately want to keep it for at least another year until I succumb to the Pied Piper of new cars.  There’s absolutely nothing wrong with it.  It has never had a single maintenance issue, and it is nearly immaculate inside, as I don’t ferry around kids or dogs.  There’s the odd scratch and curb rash on the alloy wheels, and the leather on the driver’s seat could us a bit of attention, but that’s it.  My planned solution is what I’ve termed “car renovation,” which I’ll discuss in a later post.

In the meantime, I’ll live the process of buying a new car vicariously!

Wednesday, 9 January 2013

Car maintenance tips

The Millionaire on Heels drives a European car that has a warning light for seemingly every occasion – low tyre pressure, low oil levels, low coolant levels, broken taillight bulbs, you name it.  So my quite practical approach to car maintenance is to turn on the car and hope for the best.  If any of the warning lights come on, I read the manual and find out what the warning light is (the picture on the light itself often doesn’t reflect the problem at hand) and what you’re meant to do. 

This has worked without fail for me except on two occasions:
  • The first time I had to open the bonnet, I couldn’t find the lever – the car manual is for a left-hand drive model, and I was looking for the lever on the passenger side!
  • One time, the coolant warning light came on; however the coolant level was fine.  I drove with trepidation to the mechanic (the manual said DO NOT DRIVE THE CAR), and it turned out the coolant sensor itself was faulty
So I’m in complete envy of those people who actually understand what’s happening under the bonnet.

Tuesday, 8 January 2013

Petrol consumption tips

Fuel can easily eat up a couple of thousand dollars a year from your budget if you drive frequently.  There are some straightforward ways to reduce your petrol consumption.  Other recommendations seem to keep being published year after year, but I wonder if they’re still relevant given the more modern technology behind the later model vehicles.

Here are a few ideas I’ve seen working in practice:
  1. Walk, cycle, or take public transport whenever you can. I try to walk 15-30 min before I would jump in the car.  From home, that takes me to the supermarket in one direction and newsagent and local restaurants in the other.  From work, that takes me to the local shopping centre.
  2. Get an electric, hybrid, or diesel car.  Obviously this is not a short-term solution!  You need to run the numbers for one of these cars, as the initial capital outlay will be higher than for a similar, but petrol-powered car.  Electric and hybrid vehicles would be good if you drive short distances in an urban location, while diesel engines go for 1,000+ km without needing to refuel.
  3. Save up all your errands and do them in one trip.

Monday, 7 January 2013

Extended manufacturers' warranties

Like car servicing, the subject of extended manufacturers’ warranties is sure to spark debate amongst the frugal and non-frugal alike.

Basically, a manufacturer’s warranty is a promise from the vehicle manufacturer to rectify faults that occur during the warranty period.  Generally, the motor vehicle and all accessories fitted at the time of sale are covered by the warranty. If a defect occurs during the warranty period, the dealer is obliged to fix the defect (including both parts and labour) at no cost to the customer so that the vehicle is in reasonable condition for its age.  An extended warranty extends this coverage for a set period of time and/or kms.

If you are considering paying for an extended warranty, please keep the following points in mind.

Sunday, 6 January 2013

Roadside assistance

The Millionaire on Heels learned how to drive in a small town in America, where the driving age in most states is lower than in Australia.  So I was still in school and living with my parents throughout my early driving years.  We all drove old, inexpensive cars, and “roadside assistance” was often required.  That meant ringing Dad to come pick you up!

When I moved out of home and started purchasing my own cars, sure enough a few things went wrong.  And what did I do?  If it was major, I rang Dad.  He was interstate, but he told me what to do.  The only minor incidents I had were running out of petrol once and a single flat tyre.  I don’t know if this is a sign of the changing times or if Sydneysiders are just less considerate, but the time I ran out of petrol, some nice strong guys pushed my car to the side of the road and drove me to the petrol station.  And when I had a flat tyre on the motorway, a guy just walked up and offered to change it.  This was a bit freaky, as walking on a motorway is not allowed in America.  I thought he might have been a hitchhiker, but he didn’t ask for lift.  I said thank you, he said you’re welcome, and then he just walked away. (To be fair to Sydneysiders, I have had one nice person offer to assist me with changing a flat tyre.  The roadside assistance guy was already at work on the tyre, though!)

Saturday, 5 January 2013

Registration, CTP, and comprehensive insurance

Each year, the Millionaire on Heels forks out close to $1,500 for rego, CTP, and comprehensive insurance.  So this is one area I try to stay on top of for savings.


In NSW where I live, rego is absolutely non-negotiable.  According to the NSW RMS:
“Registration fees are a combination of an administration fee and a tax. Most light vehicle registrations include a component of Motor Vehicle Tax. Revenue from this tax helps fund road construction and maintenance.
Registration fees for vehicles up to 4.5 tonnes Gross Vehicle Mass (GVM) are based on the tare (unladen) weight of the vehicle. The more it weighs, the higher the cost. In addition, vehicles used for business purposes pay higher registration costs than those for private use.”
So if you want to pay lower rego, get a lighter car!  There are various concessions, etc. that can be deducted, but you generally need lower income than an aspiring millionaire to qualify.

Friday, 4 January 2013

Tyres, parts, and service add-ons

The Millionaire on Heels is a sucker for getting absolutely ripped off on this topic. 

A typical story goes like this.  During the week, a tyre blows, as the Millionaire on Heels tests just how tightly the steering wheel can turn at speed around inner city corners.  The resulting hole is unpatchable, and the roadside assistance guy puts my doughnut spare on.  The days pass and I continue to drive on the doughnut although I know I shouldn’t.  Saturday arrives … I really have to go to the tyre shop … but I have a migraine.  Sunday I feel better … I’ll go to the tyre shop … but nothing is open … I discover there are only three tyre shops in greater Sydney open on Sunday.  I limp along on my doughnut to a suburb I’ve never heard to get a new tyre. 

At the shop, the salesperson is super helpful.  However, I cannot buy just one tyre.  They don’t have my brand in stock, and the front set needs to be similar.  And they notice the rear ones are getting bald as well.  So, an hour or so later I emerge with four brand spanking new tyres at the recommended retail price (RRP).  For a performance car, this is an amount equivalent to the average Aussie wage.  Now I have to say these are really excellent tyres and they have lasted me years longer than the previous factory fitted ones.  And they did come with lifetime free rotations … whenever I’m in the area of the suburb I’d never heard of previously.

Thursday, 3 January 2013

Car servicing tips

The most valuable car servicing tip the Millionaire on Heels can offer is to avoid dealer servicing.

Dealers earn more profit from after sales services than from the sale itself, and they do so by propagating various myths about their services:
  • The manufacturer’s warranty myth – It is widely presumed for some reason that dealer servicing is required to maintain the car manufacturer’s statutory warranty.  This is not the case.  See the ACCC website for further explanation
  • The extensive care and attention to detail lavished on your car during its log book service myth – This myth is cunningly supported by the dealer’s insistence that you leave the car there for the full day (and of course a loan car is available should you need one … for a fee).  It only takes an hour or to complete a log book service (most are simply an oil change and a few checks of fluids, filters, and whatnot); the rest of the day your car just sits in the lot.  Unless of course you consent to the dealer providing the range of additional services they ring you about during the day.  I’ve had dealers tell me the tyres needed to be rotated … when I’d had it done a couple of weeks beforehand.  Just try and tell the dealer you’ll wait in their lounge for the service to be completed and see their reaction!

Wednesday, 2 January 2013

Do you need a car?

Before jumping into all my tips on saving money on cars, I thought I should first question the premise of "needing" a car in the first place. After all, replacing one or more vehicles with a free or cheaper alternative would save thousands of dollars if not tens of thousands of dollars a year.

The first question to ask is what are the alternatives?  Obvious choices could include:
  • Walking
  • Cycling
  • Public transport
  • Car pooling
  • Car share schemes
  • Taxis for short distances; rental cars for long ones
The footprint of car share schemes in Sydney seems to be expanding pretty rapidly and could certainly be a viable option for inner city dwellers.  For suburbanites like myself, renting a car for a medium to long term can actually be financially comparable to purchasing a new car.  I rented a Toyota Corolla prior to purchasing my first new car in Australia and it actually cost me less than the new car payments plus rego, insurance, etc. did later on.

Tuesday, 1 January 2013

New Year's resolutions and how to keep them

The Millionaire on Heels is a HUGE fan of New Year’s resolutions.  I love lists in general, and having my goals for the year down on paper really crystalises them for me.  I then have mini goals during the year that I aim for, with the idea that by achieving most of the mini-goals I’ll hit the big ones easily.  I then do a review at the end of the year while I’m writing the next year’s resolutions.

If this sounds too good to be true … well it’s stretching the truth a little bit.  I forgot to set my resolutions on New Year’s Eve this year, and I have to say I’ve felt a bit lost without them.  That said, there were still plenty from previous years that I hadn’t achieved that I could still aim for!

So, as I’m writing this post on New Year’s Eve, ready to publish tomorrow, I’m determined to get back on track this year.  I like to set goals in eight areas that are important to me:
  1. Family
  2. Friends and community
  3. Intellectual
  4. Career
  5. Financial
  6. Home
  7. Spiritual
  8. Health
I aim to have three or four resolutions in each area – some really easy one-off ones to feel like I’m accomplishing my plan and a few stretch goals.

Upcoming January posts

Welcome to 2013!

January is all about New Year's Resolutions, and at the Millionaire on Heels we're talking financial resolutions.  This photo from the Sydney Morning Herald captures my point of view completely:

Photo: Louie Douvis
 My big focus for January will be on developing a financial plan.  It's going to take me a couple of weeks to get the content into a shareable state, so in the meantime, I'm going to discuss the second biggest source of expenditure for many households - transport.  As I purchased my current car and previous car both in January, it is also the month I pay rego, CTP, comprehensive insurance, servicing, etc., so it's quite timely for me.

So my planned posts for January include:
  1. New Year's resolutions and how to keep them
  2. Do you need a car?
  3. Car servicing tips
  4. Tyres, parts, and service add-ons
  5. Registration, CTP, and comprehensive insurance
  6. Roadside assistance
  7. Extended manufacturers' warranties
  8. Petrol consumption tips
  9. Car maintenance tips
  10. New car purchases - optimise the process
  11. New car purchases - new v. used cars
  12. New car purchases - used car checklist
  13. New car purchases - funding options
  14. New car purchases - negotiation tips
  15. Car renovation
  16. Car sales and trade-ins
  17. Public transport savings tips
  18. Elements of a financial plan
  19. Financial values
  20. Financial goal setting
  21. The importance of symbols
  22. Financial risk profiles
  23. Financial net worth assessment
  24. Expense tracking
  25. Expense tracking v. budgeting
  26. Investment planning - asset allocation
  27. Investment planning - product selection
  28. Target net worth and plan summary
  29. Insurance protection
  30. Estate planning
  31. January 2013 in review
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