S1: Hello and welcome to It All Adds Up the podcast
S1: where we chat about money, how to get it, how
S1: to spend it, and how to invest it. I'm senior
S1: economics writer Jess Irvine.
S2: And I'm money at it, dumb pal. And this week
S2: we're kicking off the first part of our new budgeting
S2: series where we're looking at your finances and telling you
S2: how you could be saving some extra dollars.
S1: Thanks to everyone who has already sent us an email at.
S1: It all adds up at nine.com.au dot EU showing us
S1: your budgets and asking your questions. And it's lovely to
S1: see the range of people who are getting in contact.
S1: So I hope that by listening to this series there'll
S1: be something in this for everyone, no matter what your
S1: set up is.
S2: Yes. And if you missed last week's episode, that was
S2: my sort of grilling, budget grilling. So if you want
S2: to listen to someone who really doesn't know what they're doing,
S2: you can go back and see that that you.
S1: Are not too bad.
S2: It was alright in the end, I think. But our
S2: first cab off the rank this week is Jules. She's
S2: a university student and part time early childhood educator living
S2: in Melton, Victoria. And just to set the scene, let's
S2: hear a little word from Jules.
S3: Hi, Jess and Don. This is Jules from Melton. No,
S3: I actually dream of Ballarat. I'm a full time university
S3: student and part time early childhood educator, and I'm currently
S3: saving for my first home. I'm saving at least $410
S3: a month, and I'm hoping to have enough for a
S3: deposit or a 2 to 3 bedroom unit or a
S3: house in Ballarat. My favourite place within the next 3
S3: to 5 years and while I'm saving, I've moved back
S3: in with Mum and Dad. But I was wondering if
S3: you had any extra tips or strategies that I could
S3: use to be saving a bit more or to help
S3: me reach my goal faster. As I said, I dream
S3: of Ballarat and I want to make that dream a reality.
S3: So I'd love to hear what you think.
S1: I love it. I've been through Ballarat on a holiday.
S1: I think it's a beautiful little town and I love
S1: the jewels that she has settled upon wanting to buy
S1: in a regional part of Australia because it's definitely going
S1: to be a little bit more affordable compared to to
S1: say Melbourne. So I think straight off the bat I
S1: think she's doing really well with having a very clear
S1: goal in mind of where she wants to live and
S1: it not being the most expensive place that there is,
S1: although of course it's it's just such a big challenge
S1: these days to save up for a first home and just,
S1: you know, kudos to Jules for putting the flag in
S1: the sand and saying this is, you know what I want. And,
S1: you know, so many people are so disconcerted about how
S1: unaffordable things are to not even try. So I would
S1: love for us to support Jules to be able to
S1: achieve that ambition. And I think, you know, over the
S1: long term, hopefully with enough modest expectations, it's something that
S1: is that can be achievable for people.
S2: Absolutely. And I think this is sort of a great
S2: sort of case study, I suppose, in in showing the
S2: sort of things that that people do to save for
S2: the houses, like, you know, living with their parents, that
S2: sort of thing. Choosing a regional area like these are
S2: the ways that that this sort of goal of this
S2: sort of seemingly unachievable goal of home ownership is is
S2: quite it can become quite achievable. So should we get
S2: into it?
S1: Yeah. Look, you were crunching some numbers. I immediately just
S1: jumped on domain dot com and I was looking at
S1: three lovely beautiful 2 to 3 bedroom homes in Ballarat
S1: and I want to move there now myself. And I
S1: was sort of looking at, you know, of course the
S1: quality of the property can vary, but maybe we're looking
S1: at sort of a 500 ish thousand dollar purchase price
S1: currently for something in that range. And Dom, you were
S1: crunching some numbers on what sort of deposit you might
S1: need or how long that might take.
S2: Yeah, So to do a 22% deposit for something, obviously 20%
S2: for over 500,000 is 100,000. So that is if you
S2: do that 20% mark, obviously you can get a home
S2: loan with, with less than, than 20% of a deposit,
S2: but you will be paying lender's mortgage insurance which makes
S2: your repayments a bit more. But you're looking at about
S2: that $100,000 mark. So with the current rate that you're saving, Jules,
S2: it's looking like it's going to take quite a while too,
S2: to save up to that mark, obviously. But as Jules
S2: has mentioned to us, she's currently on a part time
S2: salary and expects to be working full time in a
S2: year or two. So that will sort of drastically increase
S2: the amount that that she's saving. So yeah, and there's
S2: there's a lot of things to think about here, I suppose,
S2: like you're not necessarily needing that 20%, 20% deposit and
S2: perhaps going a little bit a little lower or doing
S2: a sort of a first home buyers scheme. That's also
S2: something you can look at as well. I mean, my
S2: sort of initial thoughts when I saw this is that
S2: considering that Jules says that she wants to buy a
S2: house in 3 to 5 years, that's a decent timeframe
S2: away in terms of that money that that she's saving
S2: this $410 a month that she said that she saves.
S2: Maybe there's something that she could be doing with that
S2: that's not just putting it into a bank account. Like,
S2: you know, you could be putting that into a term
S2: deposit or something like an ETF or some sort of,
S2: you know, other investment like that which would see your
S2: money appreciate in a sort of a more significant way
S2: than than just to sort of leave it in the bank.
S1: Yeah. Although I mean, I was looking at some online
S1: savings accounts because this is like also a radical thing
S1: for for younger generations, if I can include myself in that,
S1: is that you can actually put money in the bank
S1: and earn interest. You know, look, I just Google canstar
S1: or finder and best savings accounts, 4% is about the
S1: interest rate that you can expect to get on your
S1: savings at the moment. And to get that, sometimes you
S1: usually have to be making, you know, regular contributions and
S1: sometimes you have to be contributing $2,000 a month, which
S1: is going to be ambitious. But there's even like one
S1: with St George where you just you're popping in $50
S1: per month. If you're over 21, you can earn a
S1: bonus total interest rate of 4%, you know, with, with
S1: I don't think any fees associated. So you know, I
S1: think people if you are sort of looking at that
S1: five year horizon, maybe you can be looking at shares
S1: and you can ride out some of those fluctuations in
S1: values because if you've been trying to save for your
S1: first home in shares for the last year, you might
S1: be very disappointed because share returns have been very modest,
S1: if not negative. So, you know, I'm actually all about
S1: putting money in the bank. Don't you know, it's guaranteed
S1: if you have under $250,000, you know, you won't lose
S1: your money and and you get the interest rates that
S1: are on offer and rates are still going up. So
S1: and there's a lot of pressure on banks to be
S1: passing that on even from here. So maybe four, four
S1: and a half, will we see a 5%, you know,
S1: savings rate? Hopefully we will. But as you say, term
S1: deposits too, could be a good option, although you tend
S1: to need to have a big whack to sort of
S1: pop in up. For that.
S2: Something else I was thinking about is this that at
S2: the first home super saver scheme, which the government has,
S2: where you can put additional sort of contributions into your
S2: super and then take them out as sort of like
S2: a tax free sort of savings for a house and
S2: use that that sort of additional money that you put
S2: in as a deposit and you get all obviously all
S2: the gains of all the, you know, hopefully gains that
S2: you would have gotten on your on your super. But
S2: you were mentioning just that that might not be so
S2: applicable because that some sort of not so much of
S2: a tax break when you got a lower income.
S1: Yeah, well, contributions to super are taxed at $0.15 in
S1: the dollar. So if you are on a lower income
S1: and you maybe most of your income is, you know,
S1: zero tax, you pay zero tax up to your first
S1: $18,000 of income and then you get popped on the
S1: 19th century marginal rate. So, you know, it's a saving
S1: $0.15 in the dollar versus $0.19. But what I think,
S1: you know, when Jules is in that full time position
S1: and her annual income is going up, and I think
S1: she said she is going to or interested in being
S1: a kindergarten teacher. I'm not sure what the salaries are
S1: actually for that at the moment. But if you're getting
S1: to the point where you're over the threshold for the 32.5%
S1: tax rate, then you're popping your money straight into your
S1: super and paying $0.15 in the dollar rather than taking
S1: it home and having the tax man take 32.5 cents
S1: in the dollar can be a great way to turbocharge
S1: your savings, and yet you're allowed to pop money into
S1: your super account and withdraw it later on. As long
S1: as you've checked with your super fund that they will
S1: let you do this and actually release the funds to you.
S1: You can save up to $50,000 in total split across
S1: a number of years and withdraw that to use as
S1: your first home deposit. So possibly something worth checking out
S1: there or having a Google first home super saver scheme.
S1: So we've probably covered off on some ways or places
S1: to put Jules's savings once she has diligently accumulated them.
S1: And it does look like she is regularly saving, which
S1: is fantastic. She did provide us with some of her figures,
S1: so she's on a roughly a monthly income take home
S1: of of 1950. So as we said, she's studying and
S1: so this is a part time income and that's sort
S1: of the the base amount that she expects to get
S1: from her regular part time job as an early childhood educator.
S1: And big shout out to the early childhood educators out there.
S1: It's amazing. Absolutely. It's often you should be paid double
S1: what you're paid, but thank you for the wonderful work.
S1: So of that she's tallied up that she's got monthly bills,
S1: probably of about 821 per month. And so she's got
S1: that savings she wants to make. And it does look
S1: like she is in a bit of a surplus after that.
S1: But let's have a look at some of her major costs,
S1: because I was wondering if we could save you money.
S1: One of the best ways to save money is to
S1: reduce your expenditures. We did identify that there's a big
S1: monthly direct debit for a phone, her phone plan and
S1: the the handset, which is $174 per month, that's already
S1: sort of locked in for the next 23 months. But
S1: can you talk us through is it is it a
S1: good idea to buy the handset and sort of be
S1: paying that off monthly or, you know, what's the best
S1: way for people to save on a phone plan if
S1: they haven't already locked in?
S2: Yeah, it's a bit tough once you've already sort of
S2: committed to it. But yeah, I mean, I've always been
S2: a big believer in the buy a phone outright and
S2: go on a prepaid plan. Obviously, buying a phone outright
S2: is a significant outlay and this is why these plans exist,
S2: because it means you don't have to pay anything upfront,
S2: but you end up paying, you know, the full market
S2: value of the phone and then some of the sort
S2: of 12 to 24 months that you've got onto these plans.
S2: So I mean, hundred $74 a month for your phone
S2: and handset is is quite a lot of money. But
S2: so this is where it's always a good idea to
S2: look at sort of second hand phones unlocked, phones, all
S2: that sort of stuff. Like that's how you sort of
S2: save a bit of money on these on these big
S2: direct debits every month because you get prepaid plans like
S2: 30 bucks, like 30 bucks a month. That's that's cheap chips.
S2: So this is definitely sort of an area, I think that,
S2: you know, Jill's if you had your time again, maybe
S2: that's something that you could could look at. But obviously
S2: that's locked in now. So this there's not a great deal.
S2: I also want to talk about the $60 of guinea
S2: pig expenditure a month, because Jill's very kindly also send
S2: us in some lovely photos of her pet guinea pigs,
S2: which I wish we could show you on the pod,
S2: but obviously we can't. But it's imagine some very cute
S2: guinea pigs.
S1: Two beautiful girls called Billie and Zita, and they're very
S1: cute guinea pigs. And I didn't know how much guinea
S1: pigs cost to feed, but apparently they eat a lot
S1: of hay socials and spending about $30 per month on hay.
S1: And then they get pellets and also fresh fruit, fruit
S1: and vegetables as well, which is adding up to $60
S1: per month, 60.
S2: Bucks a month. Not that bad. You know, other pets
S2: cost a lot more. So, look, 60 I think there's
S2: no issue there with the guinea pig expenditure. I just
S2: wanted to point it out because it was.
S1: Just.
S2: Unusual.
S1: It's so cute. And she's also paying $390 a month aboard.
S1: So that's a payment to her parents to sort of
S1: cover some of the costs. And so I think that
S1: is a great you know, not everyone can live at
S1: home completely rent free with the with the parents. So
S1: wonderful that she's contributing. And that's, you know, building discipline
S1: as well of sort of paying for those housing costs,
S1: which will be much higher. Yeah. If she's successful in
S1: getting into home ownership, I also see there's there's $12
S1: for Google, a slash YouTube monthly direct debit. So that's
S1: the kind of thing you could maybe look at is
S1: axing that kind of thing unless, you know, you know,
S1: everyone needs a streaming service or two. So, you know,
S1: if it's only the $12, that's pretty good. And $30
S1: for the gym per month, which which sounds like a
S1: good investment to me.
S2: That sounds super cheap. I wish I could pay $30
S2: for the gym each month. Yeah. Yeah.
S1: So there's not you know, there's not it doesn't appear
S1: to be a lot of frivolous spending going on. And
S1: just to say that she tracks her spending using my worksheet.
S1: So that's that's amazing to hear. And just having that visibility,
S1: she's going to be seeing it. Any of the unexpected
S1: expenses that come up. And I just in general, I
S1: was going to caution jewels and just everyone, you know,
S1: unexpected things come up in life. And there's a very
S1: ambitious savings goal here to get the deposit within the
S1: 3 to 5 year time frame. And I just, you know,
S1: urge everyone to just just be aware that life happens.
S1: And sometimes there is the big expense that's going to
S1: come you know, maybe there's no mention of a car.
S1: You know, if you moving to Ballarat, you might you're
S1: going to probably need a car as well. So there's
S1: all sorts of expenses that come up. But I just
S1: love the commitment that we're seeing to sort of have
S1: start doing the savings. But just being aware that, you know,
S1: life does throw things at you. And one of the
S1: things Jules is doing is trying to build up an
S1: emergency fund, which I think is a fantastic goal, which
S1: can just help you cover some of those unforeseen expenses.
S2: And there's also the $50 a month going in each
S2: fortnight to its label, as is Future Jules. But it's Rize,
S2: which is the micro investment app, I believe. So it's
S2: good to see that. You know, Jules is also sort of,
S2: you know, she is doing a bit of investing on
S2: the side, which is, I think, a wise thing to
S2: do if you can afford it. But, you know, that
S2: is also money that that you could just put straight
S2: into savings. So that's sort of a decision to make
S2: as well. Like you could be putting another hundred bucks
S2: a month directly into a house saving. So it's sort
S2: of a toss up to think if you're going to
S2: get a better return for that hundred dollars every month
S2: through micro investing or if you're going to get it
S2: through just putting the cash in the bank.
S1: And I would just say to check the monthly fees
S1: that apply to some of those micro investing apps and
S1: just make sure, you know, add up how much that's
S1: going to be over the year. Depends how much you're
S1: putting in there as to whether those fees are worth it.
S1: So that's just something to to watch out and check for.
S2: I mean, all in all, it's great that Jules is
S2: tracking your spending in this way. I also think it's
S2: great that she has the opportunity to stay at home
S2: and live with their parents. You know, not everyone can
S2: do that. And it's a great way to save, obviously.
S2: And it's a way that so many people say for
S2: for that first time deposit. So it's also really good
S2: to think about other ways to get into the housing
S2: market without having to sort of go for that really
S2: onerous 20% deposit. Even in a place like Ballarat where
S2: you can get lovely houses for, you know, way cheaper
S2: than you get them in Melbourne, you're still looking at
S2: a fairly sizable deposit. So I mean just what sort
S2: of screams out there and like is there anyone that
S2: you can sort of go to to help sort of
S2: talk about this sort of stuff with?
S1: Yeah, Look, I mean, I think for Jules, the priority
S1: now is heads down, bums up, get through, study, get
S1: into your full time job that's going to really turbocharge
S1: what you're going to be able to save when you know,
S1: she is hopefully working in that full time job and
S1: earning that full time income. I would just encourage you
S1: to go to speak to a mortgage broker as soon
S1: as you feel like you're really serious about wanting to
S1: to say, you know, not you don't wait till you've
S1: got your whole deposit, You go and have a chat.
S1: Mortgage brokers don't charge you anything upfront, you know, if
S1: you then do get a loan through them, there can
S1: be commissions that they receive in the background. But you know,
S1: mostly they're very open to to helping you, to talking
S1: to you, and they can talk you through that. There
S1: are various strategies that can enable you to purchase if
S1: you don't even have that 20% deposit. The Government has
S1: the first home deposit scheme where you only need 5%
S1: of the purchase price and there's a limited number of
S1: spots available each year under that scheme. But that can
S1: be something that you get. The you only put down
S1: the 5% the Government sort of agrees to essentially go
S1: guarantor so you don't have to pay the lender's mortgage insurance,
S1: which can be a large cost. And yet many lenders
S1: are actually quite willing to write home loans to people
S1: who don't have the 20% deposit anymore. So if that's
S1: what's in people's heads to think, I have to wait
S1: until I get that. It's not necessarily true. I think
S1: once Jules has the regular income coming in and she's
S1: got this demonstrated history of of saving regularly, that's going
S1: to be more than enough to sort of think that's
S1: the time to go and talk to a mortgage broker about,
S1: you know, how realistic is this? How long do I
S1: need to save for? And I think, you know, mortgage brokers,
S1: you know, can can give you a really good steer
S1: on what where you might need to. And they even
S1: look at your expenses and ask you and sort of say, well, look,
S1: that does look high compared to other applicants that I've
S1: got and ways to save. So I think, yeah, heads down,
S1: bumps up with the savings now for Jules and I
S1: think she's doing a great job have having a budget
S1: on paper and and really it's just writing down She's
S1: estimated her income and expenses and she's tracking a spending
S1: that's going to evolve over time. She's going to get
S1: a better view of a budget and it's going to
S1: change when you start working the full time. And, you know,
S1: it's and it changes again when you're a homeowner because
S1: there's lots of other costs of home ownership to consider.
S1: And it's really cute. She's the 3 to 5 year
S1: time frame that she's mentioned is because she would love
S1: to move into the dream home in Ballarat while she
S1: still has her current guinea pigs. And I'm devastated to
S1: learn that guinea pigs don't actually live for much longer
S1: than eight years, 5 to 8 years, and they're already
S1: two years old. So you know that that is the pressure.
S1: That's the dream. As to why I would like to
S1: get into the dream Ballarat Palace. She described in an
S1: email to us and lived there with the guinea pig.
S1: So I think that's a wonderful dream board to have.
S1: Life might get a little bit more messy and be
S1: a little bit more challenging, but I think with the
S1: commitment to making regular savings and finding a good, you know,
S1: if it is the online savings account or if it's,
S1: you know, another method of saving, just starting to build that. Supplied.
S1: That's a fantastic base for building the financial future going forward.
S2: Yeah, absolutely. And look, I think big thanks to Jules
S2: for submitting her expenses and letting us have a look
S2: and and calling into the podcast, so to speak. We
S2: love how we look at it. We love we love
S2: giving you our thoughts and we'll be doing it again
S2: next week with with someone new and some some new scenarios.
S2: So hope you enjoyed hearing all about Jewel and Billy
S2: and Zetta and thanks very much for listening.
S1: Thanks everyone for listening. And yes, do keep the voice
S1: memos coming. If you just record it on your iPhone
S1: and email it to us that it all adds up
S1: at nine dot com today, you and we are listening
S1: to those and very much enjoying hearing of our own stories.
S1: See you next week. This episode of It All Adds
S1: Up was produced by Chee Wong. The information discussed is
S1: general in nature and does not take into account your
S1: personal financial situation, goals or objectives. You should always do
S1: your own research or get professional advice before making any
S1: major financial decisions. If you like today's episode, hit follow
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