0:07

Hello and welcome to It All Adds

0:09

Up the podcast where we chat about money,

0:11

how to get it, how to spend it, and how to

0:14

invest it. I'm senior economics

0:16

writer Jess Irvine.

0:17

And I'm money at it, dumb pal. And this week

0:19

we're kicking off the first part of our new budgeting

0:21

series where we're looking at your finances

0:24

and telling you how you could be saving some extra

0:26

dollars.

0:26

Thanks to everyone who has already sent us

0:28

an email at. It all adds up

0:31

at nine.com.au dot EU showing

0:33

us your budgets and asking your

0:35

questions. And it's lovely to see

0:38

the range of people who are

0:40

getting in contact. So I hope that by

0:42

listening to this series there'll be

0:44

something in this for everyone, no

0:46

matter what your set up is.

0:48

Yes. And if you missed last week's episode,

0:50

that was my sort of grilling,

0:53

budget grilling. So if you want to listen to someone who

0:55

really doesn't know what they're doing, you can go back and see

0:58

that that you.

0:59

Are not too bad.

1:00

It was alright in the end, I think. But

1:03

our first cab off the rank this week is

1:05

Jules. She's a university student

1:07

and part time early childhood educator living in

1:09

Melton, Victoria. And just to set

1:11

the scene, let's hear a little word from Jules.

1:15

Hi, Jess and Don. This is Jules

1:18

from Melton. No, I

1:20

actually dream of Ballarat.

1:23

I'm a full time university student and part

1:25

time early childhood educator, and I'm

1:27

currently saving for my first home.

1:30

I'm saving at least $410

1:32

a month, and I'm hoping to have enough for a deposit

1:35

or a 2 to 3 bedroom unit or a house

1:37

in Ballarat. My favourite place

1:39

within the next 3 to 5 years

1:42

and while I'm saving, I've moved back in with Mum and Dad.

1:45

But I was wondering if you had

1:47

any extra tips or strategies

1:50

that I could use to

1:52

be saving a bit more or to

1:54

help me reach my goal faster. As

1:56

I said, I dream of Ballarat and

1:58

I want to make that dream a reality.

2:01

So I'd love to hear what you think.

2:05

I love it. I've been through Ballarat

2:08

on a holiday. I think it's a beautiful little

2:10

town and I love the jewels that she has

2:12

settled upon wanting to buy in a regional

2:15

part of Australia because it's definitely

2:17

going to be a little bit more affordable compared

2:20

to to say Melbourne. So

2:22

I think straight off the bat I think she's

2:24

doing really well with having a very clear

2:26

goal in mind of where she wants to live

2:29

and it not being the most expensive place

2:31

that there is, although of course it's it's just such

2:33

a big challenge these days to save

2:36

up for a first home and

2:38

just, you know, kudos to Jules

2:40

for putting the flag in the sand and saying

2:43

this is, you know what I want.

2:45

And, you know, so many people are so disconcerted

2:47

about how unaffordable things are to not even

2:49

try. So I would love for us

2:51

to support Jules to be able to

2:54

achieve that ambition. And I think, you know, over the long

2:56

term, hopefully with enough modest

2:58

expectations, it's something that is that

3:00

can be achievable for people.

3:02

Absolutely. And I think this is sort of

3:04

a great sort of case study,

3:06

I suppose, in in showing the

3:08

sort of things that that people do to save

3:10

for the houses, like, you know, living with their

3:12

parents, that sort of thing. Choosing a

3:14

regional area like these are the ways that

3:16

that this sort of goal of this sort of seemingly

3:19

unachievable goal of home ownership is is

3:21

quite it can become quite achievable. So

3:24

should we get into it?

3:25

Yeah. Look, you were crunching some numbers. I

3:27

immediately just jumped on domain dot com and I

3:29

was looking at three lovely beautiful

3:31

2 to 3 bedroom homes in Ballarat

3:33

and I want to move there now myself.

3:36

And I was sort of looking at, you know, of course

3:38

the quality of the property can vary, but maybe

3:40

we're looking at sort of a 500

3:42

ish thousand dollar purchase

3:44

price currently for something

3:47

in that range. And Dom, you

3:49

were crunching some numbers on what sort of deposit

3:51

you might need or how long that might take.

3:53

Yeah, So to do a 22% deposit

3:56

for something, obviously 20% for over 500,000

3:58

is 100,000. So that

4:01

is if you do that 20% mark,

4:03

obviously you can get a home loan

4:05

with, with less than, than 20% of

4:07

a deposit, but you will be paying lender's mortgage insurance

4:09

which makes your repayments a bit

4:11

more. But you're looking at about that

4:13

$100,000 mark. So

4:16

with the current rate that you're saving, Jules,

4:18

it's looking like it's going to take quite a while too,

4:21

to save up to that mark, obviously. But as

4:23

Jules has mentioned to us, she's currently on a part

4:25

time salary and expects

4:27

to be working full time in a year

4:29

or two. So that will sort of drastically increase

4:31

the amount that that she's saving. So

4:34

yeah, and there's there's a lot of things to think about

4:37

here, I suppose, like you're not necessarily needing that 20%,

4:39

20% deposit and

4:41

perhaps going a little bit a little lower or doing a sort

4:43

of a first home buyers scheme. That's also something you can

4:45

look at as well. I mean, my

4:47

sort of initial thoughts when I saw this is that

4:50

considering that Jules says that she wants to buy

4:52

a house in 3 to 5

4:54

years, that's a decent timeframe away in

4:57

terms of that money that that she's saving

5:00

this $410 a month that she said

5:02

that she saves. Maybe there's something

5:04

that she could be doing with that that's not just putting it

5:06

into a bank account. Like, you know, you could be putting

5:08

that into a term deposit or something like an

5:10

ETF or some sort of, you

5:13

know, other investment like that which

5:15

would see your money appreciate in

5:17

a sort of a more significant way

5:19

than than just to sort of leave it in the bank.

5:21

Yeah. Although I mean, I was looking at

5:23

some online savings accounts

5:25

because this is like also a radical thing for

5:28

for younger generations, if I can include

5:30

myself in that, is that you can actually put money

5:32

in the bank and earn interest. You

5:35

know, look, I just Google canstar

5:37

or finder and best savings

5:39

accounts, 4% is

5:41

about the interest rate that you can expect

5:43

to get on your savings at the moment. And

5:45

to get that, sometimes you usually have to be making,

5:48

you know, regular contributions and sometimes

5:50

you have to be contributing $2,000

5:52

a month, which is going to be ambitious.

5:54

But there's even like one with

5:56

St George where you just you're popping

5:59

in $50 per month. If you're over

6:01

21, you can earn a bonus

6:03

total interest rate of 4%,

6:06

you know, with, with I don't think any

6:08

fees associated. So you

6:11

know, I think people if you are sort of looking

6:13

at that five year horizon, maybe

6:15

you can be looking at shares and you can ride

6:18

out some of those fluctuations in values

6:20

because if you've been trying to save for your first home

6:22

in shares for the last year, you might

6:24

be very disappointed because share returns

6:27

have been very modest,

6:30

if not negative. So, you know, I'm

6:32

actually all about putting money in the bank.

6:34

Don't you know, it's guaranteed

6:36

if you have under $250,000,

6:39

you know, you won't lose your money and and you get

6:41

the interest rates that are on offer and

6:43

rates are still going up. So

6:45

and there's a lot of pressure on banks to

6:47

be passing that on even from

6:49

here. So maybe four, four and

6:51

a half, will we see a 5%,

6:54

you know, savings rate? Hopefully

6:56

we will. But as you say, term deposits

6:58

too, could be a good option, although you tend to

7:01

need to have a big whack to sort of

7:03

pop in up. For that.

7:06

Something else I was thinking about is this that at the first

7:08

home super saver scheme, which

7:10

the government has, where you can put additional

7:13

sort of contributions into your super and

7:15

then take them out as sort of like a tax

7:18

free sort of savings for a

7:20

house and use that that sort of additional money that you

7:22

put in as a deposit and you get all obviously

7:24

all the gains of all the, you know, hopefully

7:27

gains that you would have gotten on your on your super. But

7:29

you were mentioning just that that might not be so applicable

7:32

because that some sort of not so

7:34

much of a tax break when you got a lower income.

7:36

Yeah, well, contributions to super are taxed

7:39

at $0.15 in the dollar.

7:41

So if you are on a lower income and

7:43

you maybe most of your income is,

7:45

you know, zero tax, you pay zero

7:48

tax up to your first $18,000

7:51

of income and then you get

7:53

popped on the 19th century marginal

7:56

rate. So, you know, it's a saving

7:58

$0.15 in the dollar versus

8:00

$0.19. But what I think,

8:02

you know, when Jules is in

8:04

that full time position and her annual

8:07

income is going up, and I

8:09

think she said she is going to or interested

8:11

in being a kindergarten teacher. I'm not sure

8:13

what the salaries are actually for that at the moment.

8:15

But if you're getting to the point where you're over

8:17

the threshold for the 32.5%

8:21

tax rate, then you're popping

8:23

your money straight into your super and paying

8:25

$0.15 in the dollar rather than

8:28

taking it home and having the tax man take

8:30

32.5 cents

8:32

in the dollar can be a great way to turbocharge

8:35

your savings, and yet you're allowed to pop money

8:37

into your super account and withdraw it

8:39

later on. As long as you've checked with your super

8:41

fund that they will let you do this and actually release

8:44

the funds to you. You can save up to

8:46

$50,000 in total split

8:48

across a number of years and withdraw

8:51

that to use as your first home

8:53

deposit. So possibly something

8:55

worth checking out there or having a Google

8:57

first home super saver

8:59

scheme. So

9:02

we've probably covered off on some ways

9:04

or places to put Jules's

9:06

savings once she has diligently accumulated

9:09

them. And it does look like she is regularly

9:12

saving, which is fantastic. She did provide

9:14

us with some of her figures,

9:16

so she's on a roughly a monthly

9:19

income take home of of

9:21

1950. So as

9:23

we said, she's studying and so this is a part

9:25

time income and that's sort of the

9:28

the base amount that she expects to get from her

9:30

regular part time job as an early

9:32

childhood educator. And big shout out

9:34

to the early childhood educators

9:36

out there. It's amazing.

9:39

Absolutely. It's often you should be paid

9:41

double what you're paid, but

9:43

thank you for the wonderful work. So

9:46

of that she's tallied up that she's got

9:48

monthly bills, probably of about 821

9:51

per month. And so she's got

9:53

that savings she wants to make. And it does

9:55

look like she is in a bit of a surplus

9:57

after that. But let's have a look at some of her major

9:59

costs, because I was wondering if we could save you money. One of the best

10:02

ways to save money is to reduce your expenditures.

10:05

We did identify that there's a

10:07

big monthly direct debit for

10:09

a phone, her phone plan

10:11

and the the handset, which

10:14

is $174 per

10:16

month, that's already sort of

10:18

locked in for the next 23 months.

10:20

But can you talk us through is it is it a good idea

10:22

to buy the handset and sort of be paying

10:24

that off monthly or,

10:27

you know, what's the best way for people to save on a phone

10:29

plan if they haven't already locked in?

10:31

Yeah, it's a bit tough once you've already sort of committed

10:33

to it. But yeah, I mean, I've always been a big believer

10:36

in the buy a phone outright and

10:38

go on a prepaid plan. Obviously,

10:40

buying a phone outright is a significant

10:42

outlay and this is why these plans

10:44

exist, because it means you don't have to pay anything upfront,

10:47

but you end up paying, you

10:50

know, the full market value of the

10:52

phone and then some of the sort of 12

10:54

to 24 months that you've got onto these plans.

10:56

So I mean, hundred $74 a

10:58

month for your phone and

11:00

handset is is quite a lot of money. But

11:03

so this is where it's always a good idea to look at sort of second

11:05

hand phones unlocked, phones, all that

11:08

sort of stuff. Like that's how you sort of save a bit of money on

11:10

these on these big direct debits every

11:12

month because you get prepaid plans like 30 bucks,

11:14

like 30 bucks a month. That's that's

11:16

cheap chips. So this is definitely

11:19

sort of an area, I think that, you know, Jill's

11:21

if you had your time again, maybe that's something that you could

11:24

could look at. But obviously that's locked in now. So this

11:26

there's not a great deal. I also want to talk about

11:28

the $60 of guinea pig expenditure

11:32

a month, because Jill's very kindly also send

11:34

us in some lovely photos of her pet guinea pigs,

11:36

which I wish we could show

11:38

you on the pod, but obviously we can't. But

11:40

it's imagine some very cute guinea pigs.

11:42

Two beautiful girls called Billie and

11:44

Zita, and they're very cute guinea pigs.

11:47

And I didn't know how much guinea pigs cost to

11:49

feed, but apparently they eat a lot of hay socials

11:52

and spending about $30 per

11:54

month on hay. And then they get pellets

11:56

and also fresh fruit, fruit and

11:58

vegetables as well, which is adding up to $60

12:01

per month, 60.

12:02

Bucks a month. Not that bad. You know, other pets

12:05

cost a lot more. So, look, 60

12:07

I think there's no issue there with the guinea pig

12:09

expenditure. I just wanted to point it out because it was.

12:11

Just.

12:11

Unusual.

12:12

It's so cute. And she's

12:14

also paying $390

12:16

a month aboard. So that's a payment

12:19

to her parents to sort of cover some of the

12:21

costs. And so I think that

12:23

is a great you know, not everyone can live

12:25

at home completely rent free with the with

12:27

the parents. So wonderful that she's

12:30

contributing. And that's, you know, building

12:32

discipline as well of sort of paying for

12:34

those housing costs, which will be much

12:36

higher. Yeah. If she's successful in getting

12:38

into home ownership, I also

12:40

see there's there's $12 for Google,

12:43

a slash YouTube monthly direct debit.

12:45

So that's the kind of thing you could maybe look

12:47

at is axing

12:49

that kind of thing unless, you know, you

12:52

know, everyone needs a streaming service or

12:54

two. So, you

12:56

know, if it's only the $12, that's pretty

12:58

good. And $30 for the gym per month,

13:00

which which sounds like a good investment

13:03

to me.

13:03

That sounds super cheap. I wish I could pay

13:05

$30 for the gym each month. Yeah.

13:08

Yeah.

13:08

So there's not you know, there's not it doesn't appear

13:10

to be a lot of frivolous spending going on. And

13:12

just to say that she tracks her

13:15

spending using my worksheet. So

13:19

that's that's amazing to hear. And just having that

13:21

visibility, she's going to be seeing it. Any

13:23

of the unexpected expenses

13:25

that come up. And I just in general, I was going

13:27

to caution jewels and just

13:29

everyone, you know, unexpected things come

13:31

up in life. And there's a very

13:33

ambitious savings goal here

13:35

to get the deposit within the 3 to 5 year

13:38

time frame. And I just,

13:40

you know, urge everyone to just

13:42

just be aware that life happens. And sometimes

13:44

there is the big expense that's going

13:46

to come you know, maybe there's no mention of a

13:48

car. You know, if you moving to Ballarat, you might

13:51

you're going to probably need a

13:53

car as well. So there's all sorts of expenses

13:55

that come up. But I just love the commitment

13:58

that we're seeing to sort of have start

14:00

doing the savings. But

14:02

just being aware that, you know, life does throw

14:04

things at you. And one of the things

14:06

Jules is doing is trying to build up an emergency

14:09

fund, which I think is a fantastic

14:11

goal, which can just help you cover

14:13

some of those unforeseen expenses.

14:15

And there's also the $50 a month

14:17

going in each fortnight to its

14:20

label, as is Future Jules. But it's Rize,

14:22

which is the micro investment app, I believe.

14:24

So it's good to see that. You

14:27

know, Jules is also sort of, you know, she is doing a

14:29

bit of investing on the side, which is, I

14:31

think, a wise thing to do if you can afford it. But,

14:33

you know, that is also money that that you could just

14:36

put straight into savings. So that's sort of a

14:38

decision to make as well. Like you could be putting

14:40

another hundred bucks a month directly into

14:42

a house saving. So it's sort of a toss

14:44

up to think if you're going to get a better return for

14:46

that hundred dollars every month through

14:48

micro investing or if you're going to get it through

14:50

just putting the cash in the bank.

14:53

And I would just say to check the

14:55

monthly fees that apply to some of those micro

14:58

investing apps and just make sure,

15:00

you know, add up how much that's going to be over

15:02

the year. Depends how much

15:04

you're putting in there as to whether those fees are worth

15:06

it. So that's just something to

15:08

to watch out and check for.

15:11

I mean, all in all, it's great that Jules is

15:13

tracking your spending in this way. I also

15:15

think it's great that she has the opportunity to stay at home and live

15:17

with their parents. You know, not everyone

15:19

can do that. And

15:21

it's a great way to save, obviously. And it's a

15:23

way that so many people say for for that

15:25

first time deposit. So it's also

15:28

really good to think about other ways to get into the housing

15:30

market without having to sort of go

15:32

for that really onerous 20%

15:34

deposit. Even in a place like Ballarat

15:36

where you can get lovely houses for, you

15:39

know, way cheaper than you get them in Melbourne, you're still looking

15:41

at a fairly sizable deposit. So I mean just

15:43

what sort of screams out there and like is there anyone

15:45

that you can sort of go to to help sort of talk about this sort

15:47

of stuff with?

15:48

Yeah, Look, I mean, I think for

15:50

Jules, the priority now is heads down, bums up, get

15:52

through, study, get into your full time job

15:54

that's going to really turbocharge what

15:56

you're going to be able to save when

15:59

you know, she is hopefully working

16:01

in that full time job and earning that full time

16:03

income. I would just encourage you to

16:06

go to speak to a mortgage broker

16:09

as soon as you feel like you're really

16:11

serious about wanting to to say,

16:13

you know, not you don't wait till you've got your whole deposit,

16:16

You go and have a chat. Mortgage brokers don't

16:18

charge you anything upfront, you know, if you then do

16:20

get a loan through them, there can be commissions

16:23

that they receive in the background. But you

16:25

know, mostly they're very open to

16:28

to helping you, to talking to you, and

16:30

they can talk you through that. There are various

16:32

strategies that can enable you to

16:34

purchase if you don't even have that

16:37

20% deposit. The

16:39

Government has the first home deposit

16:41

scheme where you only need 5%

16:44

of the purchase price and there's a limited number

16:46

of spots available each year

16:48

under that scheme. But that can be something

16:50

that you get. The you only put

16:53

down the 5% the

16:55

Government sort of agrees to essentially

16:57

go guarantor so you don't have to pay the

16:59

lender's mortgage insurance, which can be a

17:02

large cost. And yet many lenders

17:04

are actually quite

17:07

willing to write home loans

17:09

to people who don't have the 20% deposit

17:11

anymore. So if that's what's in

17:13

people's heads to think, I have to wait until

17:15

I get that. It's not necessarily true.

17:17

I think once Jules has the regular income

17:20

coming in and she's got this demonstrated

17:23

history of of saving regularly, that's

17:25

going to be more than enough to sort of

17:27

think that's the time to go and talk to a mortgage

17:29

broker about, you know, how realistic is this?

17:32

How long do I need to save for?

17:34

And I think, you know, mortgage brokers,

17:36

you know, can can give you a really good steer

17:39

on what where you might need to. And they

17:41

even look at your expenses and ask

17:43

you and sort of say, well, look, that does look high

17:45

compared to other applicants

17:47

that I've got and ways to save.

17:49

So I think, yeah, heads down, bumps

17:51

up with the savings now for Jules

17:53

and I think she's doing a great

17:55

job have having a budget on paper

17:58

and and really it's just writing down She's

18:00

estimated her income and expenses

18:02

and she's tracking a spending that's going to evolve

18:04

over time. She's going to get a better view of a budget

18:06

and it's going to change when you start working

18:08

the full time. And, you know, it's and it changes again

18:10

when you're a homeowner because there's lots of other costs

18:13

of home ownership to consider.

18:15

And it's really cute. She's the 3 to

18:17

5 year time frame that she's mentioned is because

18:19

she would love to move into the dream home in

18:21

Ballarat while she still has her

18:24

current guinea pigs. And I'm devastated

18:26

to learn that guinea pigs don't actually live for much longer

18:28

than eight years, 5 to 8 years,

18:30

and they're already two years old. So you

18:32

know that that is the pressure. That's

18:34

the dream. As to why I would like to get into the

18:36

dream Ballarat Palace. She

18:38

described in an email to us and

18:40

lived there with the guinea pig. So I think that's a

18:42

wonderful dream board to have. Life

18:45

might get a little bit more messy and be

18:47

a little bit more challenging, but I think with the commitment

18:49

to making regular savings and

18:52

finding a good, you know, if it is

18:54

the online savings account or if

18:56

it's, you know, another method

18:58

of saving, just starting to

19:00

build that. Supplied. That's a fantastic

19:02

base for building the financial

19:05

future going forward.

19:07

Yeah, absolutely. And look, I think big thanks

19:09

to Jules for submitting her

19:11

expenses and letting us have a look and and

19:14

calling into the podcast, so to speak.

19:16

We love how we look at it. We love we love giving

19:18

you our thoughts and we'll

19:20

be doing it again next week with

19:23

with someone new and some some new scenarios.

19:25

So hope you enjoyed hearing all

19:27

about Jewel and Billy and

19:29

Zetta and thanks very much for listening.

19:32

Thanks everyone for listening. And yes, do

19:34

keep the voice memos coming. If you

19:36

just record it on your iPhone and

19:38

email it to us that it all adds up

19:40

at nine dot com today, you and we

19:42

are listening to those and very much enjoying hearing

19:45

of our own stories. See you next week.

19:51

This episode of It All Adds Up was produced

19:53

by Chee Wong. The information discussed

19:56

is general in nature and does not take

19:58

into account your personal financial situation,

20:00

goals or objectives. You should always

20:02

do your own research or get professional

20:05

advice before making any major financial

20:07

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20:20

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