I read an article about quickflix.com.au in a business newsletter I read called smartcompany.com.au .

What Quickflix Do – Fixed Monthly Cost for DVDs

Quickflix provide DVD plans where you can borrow a certain number of DVDs a month by mail (and 2 or 3 DVDs out at the same time) and pay a fixed amount per month (currently from $10 to $30 per month). No late fees and free postage to post the DVDs back. See http://www.quickflix.com.au/PricingAndPlans for the full details.

Internet Business – A great way to be in business

I am always interested in how different businesses work. I think internet business can be a great way to run a business.

Lets compare the Positives (Pos) and Negatives (Neg) Quickflix with the Average Video Store.

Average Video Store – Neg – need to have a physical shopfront (pay $ rent).

Neg – Need staff in the store at all times (wages $).

Internet Business Store (like Quickflix) – Pos – Open 24/7. Pos -No physical store/rent. Neg – Postage Costs. Pos – no need to be ‘in store” at all times (could fill orders in a few hours each day).

Quickflix have recently reached 10,000 subscribers. As the minimum plan is $10/month – even with the cost of DVDs and postage I this means the site brings in a bit of income.

Other reasons that this is such a good business model is:

1. Quickflix – receives regular monthly income  (given monthly plans)
2. You can budget your video store spending per month

I would be tempted to do this (if I didn’t already have Foxtel at home).

No late fees and no returning to the video store (send back in the mail). Lots of people have late fees with video stores!

The Risk – not getting all the choice you want

I joined a Book Club years ago where you had to buy 5 books in a year.  I got some good books when I started (there was always a cheap deal to get you in) but once I received the catalog each month I found it pretty hard to find books that I really wanted to satisfy the 5 books that I had to buy.

Are you 18 or older and thinking about buying a property?

First Home Saver Account

What is it? A First Home Saver Account is a bank account where the government pays 17% contribution on money you put in PLUS bank interest.

But Are you thinking about buying a house in less than 4 years? – You might decide the account is not for you.  But you might want to read on just in case.

The Catch: You can’t transfer the money against your (new) home mortgage until you have met all conditions below.

Main Conditions:

To open the account

1. Only for your first home
2. Aged 18 or above

To use the funds for your first home

1. Hold the account for at least 4 years
2. Need to have 4 years where yearly contribution is  $1,000 or more.

To summarise: If you start a first home saver and buy a house after four years but haven’t put $1,000 in a year for at least 4 years – the money is kept in the account until you have.

What you get on the money you put in

1. 17% government contribution which comes after you lodge your tax return each year (nothing required to be put in the return the ATO/government works it out)
2. 2.       Regular Bank Interest – say 4%+

Other stats:

1. Maximum contribution amount per year you get 17% on = $5,000 (so max you could get each year is $5,000 x 17% = $850)
2. Maximum Length you can hold the account – no set date (if it takes you 15 years to save for a home – so be it!)
3. Maximum amount in account before 17% contributions stop = $75,000 (although can still earn bank interest after this)
4. Minimum age – 18

This was one of my top 5 tips for Generation Y when nomoney featured on A Current Affair in January 2010. Has anybody started a first home saver account? If so – please send me an email nomoneyau@gmail.com

First Home Saver Tips and Comments

Nomoney Comments on the first Home Saver

Are you saving for a home?  – If Yes then you probably want to buy it in under 4 years.

If you are not saving for a house – then you probably wouldn’t plan 4 or 5 years ahead and wouldn’t dream of setting up a First Home Saver Account. But maybe you should… If you are 18 or over and plan to buy a home – this is a pretty good deal.

At least the money isn’t going to super! –(like the original plans)

Questions you might have:

What If I want to buy a house in 3 -4 years but it might take me 4 – should I risk it?

Maybe…Talk with your lender/mortgage broker – maybe your lender might take the money into account (but you might have to shop around for a lender to do this and it might cost you extra interest or bank fees).

What If I want to buy a house in 1-2 years– should I open an account?

If you put $1,000 a year into the account you would get $170 (plus bank interest which you would get anyway). $170 Contribution x 4 = $680.

You might get $680 extra cash (for $4,000 investment) but might not be worth it for the hassle involved (setting up the account, making sure transfers are made, getting the money out).

Although it Is better than nothing.

Open a First Home Saver account asap.

Save, beg or  borrow $1,000 each year into the bank account until:

1. You are ABSOLUTELY 100% sure you won’t be getting a house within 4 years
2. The 4 years are over

After you are sure you will meet the conditions above then

Transfer up to  $5,000* a year  until:

1. You buy your first home
2. You reach the $75,000 cap (although I don’t think there are any penalties in going over this – but you might wish to not keep all your eggs in one basket.

*As the 17% on contributions is only paid $5,000 – you may choose to put the excess over $5,000 into another account with higher interest and then transfer the next year.

The above is based on my understanding of the information provided by the government  and the ASIC calculator. You should do your own research and seek professional advice.

These are general comments – which may not work in your financial situation – see our disclaimer page. 

Please consider sponsoring me to eat for $2 a day (August 2 -6th) My target is $1000, for every $250 above this mark I will stay below the line ($2 a day) for another day.
To find out more please visit http://www.everydayhero.com.au/team_mercer

Why $2 a day

Obviously many people in Poverty live on virtually nothing each day.

But how do you get to $2 a day? 

I found that in calculating the $2 per day they took a few factors into account like purchasing power & Australian $ (see http://livebelowtheline.com/about/why-1-25/ for more info).

$2 a Day – is it even possible??

My next question (OK -  after asking if he was crazy) is whether it is even possible to eat for $2 a day.

To make it even harder, in the rules http://livebelowtheline.com/rules/ there are no freebies and no using the pantry or vege garden!

I found a blog post of a girls shopping list on how she plans to live on $2 a day ($10 over 5 days) here http://livebelowtheline.com/2010/07/08/my-shopping-list-and-meal-plan/  There is a group meal plan (purchasing $30 worth of food for 3 people) and an individual plan.

So yes it appears possible (although very, very hard!)

What to take away from this

Well reading the shopping list article makes you realise again how lucky we are in Australia.

Its also made me think about how much I spend on junk food and fast food (I’ve cut down a bit in the last few months but still spend a bit).

Sponsor Team Mercer

If you want to sponsor my mate (OK so it isn’t tax deductible but still worthy) - his link is here http://www.everydayhero.com.au/team_mercer 

I would laugh if everyone sponsored him and he had to go a few extra days on the diet like he has promised above.

But to check out the regular site (e.g. if you are strong willed enough to sign up for the challenge) is www.everydayhero.com.au

A new financial year could mean a new start or a fresh look at things. Or I suppose it could mean nothing at all.

One thing I’ve been thinking about in the last week is habits.

Habits

Before my nephew (4) and niece (1.5) go to bed there is a ritual. They say their goodbyes, and go and clean their teeth. Then we read a story  in bed (ok 2 or 3 stories) and then say goodnight.

I’ve  watched by nephew clean his teeth a few times and – lets face it, he doesn’t do the best job. He is all over the place! I asked my mum (his nana) whether someone should clean his teeth for him & do a better job. She says its fine – the reason for getting him to clean his teeth is more about the habit.

Habit and routine make up a lot of what we do.

Example: Cross your arms. Notice which arm is on the outside and which is closer to your chest. Then go back to normal and then try to cross your arms with the other arm on top. Very difficult!

Save 10%+ – no matter what you earn

I have encouraged lots of friends to transfer 10% of what they earn and put it into a separate bank account (and don’t touch it!). For more about this – read my first article.

Lots at uni say – I don’t earn enough to make it worthwhile. Even if it is only $10 a month, putting aside 10% is a habit and  setting up the habit now will make it easier when you start earning real money. (Ok maybe this isn’t worth it if you pay $5 bank fees a month)

My Savings

My first experience of savings was a Commonwealth Bank Dollarmites account. I think everyone in Kindergarten got one and we would deposit $1 or $2 a week in class and watched it build.

I was 12 or 13 when I got a paper run .The money was paid directly into the account and I saved most of it (and took money out when I wanted to buy something).

When I got part-time jobs when I was 14/15 I well used to saving. I got paid in cash and deposited most of the money each week into the ATM at the station (Yes – you can deposit into ATMs outside a branch, I am always surprised when people don’t know this!).

When I got a full time job I did find it a bit harder. When you are paid monthly you want to leave a bit of cash just in case. But as the habit had already been set, I was used to it. Otherwise I’m sure I would have spent what I made.

So good luck on setting up good habits!

Car Insurance & Rego - easy as ABC

I got my car insurance in the mail a month ago (3^rd party – the one that is required by everyone so that victims of car accidents can be cared for if the driver doesn’t have any money).

 I couldn’t believe it… the insurance company no longer accept credit card payments. WHAT!?!!? Am I expected to pay cash?

I am usually pretty easy going with stuff like this but I really could not be bothered to walk there or provide a cheque (who has cheques anymore?). Like anyone, I don’t like it when you are charged an extra  1.5% for using your credit card, but at least you have the choice of using the card.

So I decided to change insurance providers. They can GET STUFFED!

Finding a new insurance company online
Lucky there are not that many insurance providers around.

I came up with www.greenslips.com.au which provided a link to a calculator to calculate various premiums for company’s that provide green slips.

In the end I decided to go with the company that I use for my Comprehensive Insurance (AAMI). On the few occasions I have dealt with them they have been smart and efficient.

They were actually one of the more expensive options from the calculation. But I must admit – I am happier to give the money to people who I already know and trust and who make my life easy.

 How to change Green Slips

You need:

1. Your Rego Notice from the RTA
2. Exact type of car (I found this on my comprehensive motor vehicle insurance invoice).

 I did the application for the green slip on the internet. In the end I  needed to call the insurance company because the last step didn’t work. But it was an easy process.

E-safety check (pink slip)

If you car is over 4? years old – you need to take it to a mechanic to check. Most mechanics would be registered to do this I imagine, but you can check the list on www.rta.nsw.gov.au

 Paying rego

Once the insurance and e-safety check were paid, paying the rego was actually pretty simple. Going on to www.myrta.com.au, click pay rego, enter your rego and billing number (on rego notice).

Then you get into the main screen and there are ticks or crosses if you have paid your Green slip and E-safety check (if required). If everything is ticked you are good to pay by credit card.

 Done – rego paid for another year!

P.s. I hate rego month – I’ll have to come up with some good savings tips for next month!

Well…I figure if James Cameron can spend umpteen millions on Avatar, then at least I can pay $15 at the movies (or $25 to purchase the DVD).       

But it got me thinking about how people spend(and avoid spending) their money (and what the definition of tightarse is).

 Just so we are clear – nomoney.com.au is NOT about being a TIGHTARSE.

I think that is why most young people avoid learning about finances. They either assume:

1. That learning about finances is boring and hard. Or they assume that:
2. it will turn you into a tight-fisted, scrooge mcduck who doesn’t go out/buy stuff because it costs money.

What nomoney.com.au IS about is being SMART with your money so that one day you will reach your goals.

Smart Saving

Being SMART means saving some of your money. Set a goal of at least 10% (see my article The one trick to Saving).

But if you are like most (and I fall into this category) – you spend what is in your bank account.

A few ways I try to spend wisely

Obviously my ways might not work for you (you may love your lunch out). If not you may wish to think about other ways.

I don’t purchase coffee – my work has a coffeemaker.

I bring my own lunch – I just buy a loaf of bread each week and either spreads or salad bits.

At the shops – I look at the specials

I try to plan my nights out – so I can avoid taxis where possible

A few ways I just spend money (and don’t worry too much!)

I also thought I’d include a few ways that I don’t worry if I’ve spent too much – as life is too short!

-          Having fun with friends – going to the pub, out to dinner, having fun.

-          Car costs – insurance, servicing, petrol, etc.  It is pretty expensive running a car – but that is the price of being able to go where you want.

-          Gifts –charity, presents for friends.

What about when both the guys are dedicated to seeing young people live the life they want by educating them about their finances?

Answer: You get my interview with Scott Pape, the Barefoot Investor (for more about Scott see bottom of the page).

The Interview: Is in three parts

Click to open or right click ’save target as’ to save the files to your computer/Mp3 player.

The life of Scott Pape -the Barefoot Investor mp3

Young People-How the barman can be the richman mp3

Barefoot tips for nomoney listeners mp3

I tried to upload the full interview –but there is so much good stuff in here the internet just wouldn’t take it. (ok, maybe its because the file exceeded the upload limit).

What we talk about:

The life of Scott Pape -the Barefoot Investor mp3

-          A week in Scott’s life as The barefoot investor -Scott talks about going to USA and meeting Warren Buffett

-          Scott’s upbringing and his  first job  as a stockbroker

Young People-How the barman can be the richman mp3

-          How if you work in a bar – if you are smart with your money you can be richer than those you pour drinks for.

-          Simple way of saving – the Barefoot Investor ‘Mojo’ account

-          Its not about the money – its about living your life how you want

-          Books recommended by the Barefoot Investor (see below)

Barefoot tips for nomoney listeners mp3

-          Some good financial tips for young people including:

• Singles and those just starting out
• Couples

-          Stuff to check from the barefoot investor

 The Barefoot Investor – Scott Pape
The Barefoot Investor, is a best selling book in Australia, and has been rewritten, translated and released internationally.

For four years Scott has also had a nationally syndicated weekly column in all major Newscorp Ltd papers, and is also a contributor to yahoo7, and Mens Health Magazine.

He is a television presenter and has appeared on Channel Nine’s the Money Show, What’s Good For You, and The Nest on SBS. He is also a radio commentator for Triple M, and a regular contributor to ABC radio.

A holder of his Australian Financial Services License, Scott’s passion is helping people with money. He spreads his message at corporate keynotes, schools, indigenous programs and prisons throughout the country.

There are so many examples of discount/free offers around today: 2nd one free, once you’ve purchased offered more stuff to buy at discount, cheap or my article: freemovieticket, etc.

Seems that everyone is offering discounts or freebies now. A few industries in particular I thought of are: Restaurants, Accomodation/Travel, Service Stations, Seminars, Internet Purchases, Professional Services (initial meeting free),etc.

Always look a gift horse in the mouth

Whenever there is a free deal or discount or something that seems to good to be true -I always ask why. Once I think through why the company offers the deal I think about whether it is worth accepting. Just because it is “free” does not mean it is worth accepting. You only want to accept something free if it is valuable to you. (otherwise you might accept a Trojan Horse)

My Top 9 of Why companies offer freebies or discounts in general

TYPE 1: To benefit the company

1. Sample to Sell Next Time To get you to sample their new/more expensive product so you might buy it next time.

2. To build a future relationship -A common way of doing this is to get you on their mailing list/website so that you are more likely to buy from them next time (or a website - gain advertising revenue for them when you visit the site).

3. They still make a Profit Because they will still make a profit despite the discount (e.g with the my article: freemovieticket Hoyts will still make a profit from friends tickets and food/drink sales).

4. To Upsell: Because at the free consultation/visit/seminar they will try to sell you on their expensive product. (and the small percentage of people who sign up for the expensive product will offset their costs of the free stuff)

5. Makes You Like Them It makes them look good so that you notice and decide that you like the company and buy from them in the future.

TYPE 2: To rip you off (see tomorrow’s article on how to avoid getting ripped off and what to do if you get burned)

6. To get your personal details for phishing/credit card fraud.

7. To charge you more than you expected (a quick snippet of tomorrow’s article: I signed up to get a free report for $2 USD – then they started charging me $49.95 USD a month.  CBA refunded the amounts charged but only from when I cancelled by email)

TYPE 3: To benefit the community

8. Companies are sometimes run by kind people who like to give back to the community/charity (and by giving back they might also benefit by further profits - see reason 5. Makes you like them).

there are probably many more reasons and variations of these.

What I do 

Free Product/PDF to sign up to newsletter – If I like the newsletter I generally go for this.

Anything else -I have a good think about it!

The Freebie: Get a free movie ticket on your birthday (for birthdays before 31 July)

From the site info ”You can then visit any Hoyts cinema on your birthday, and present your free birthday ticket along with valid photo ID to see any movie, in any way you like – including La Premiere, Directors Suite, Xtremescreen, 3D and even Hoyts IMAX®!”

How to get it:

1. You must register at http://celebrate.hoyts.com.au/ to print the “free ticket”. (no use just rocking up to Hoyts and saying – “its my birthday - I want a free ticket”)

2. On your birthday – take your free ticket and valid ID to Hoyts.

Why I believe Hoyts offer a free movie ticket

Got paid yesterday into my bank account. I got back from lunch and in 19 minutes I had allocated it all. I will have $9 in my bank account after my monthly direct debits (private health & church & $3bank fee) go through the account.

But the good news is – a lot of my pay has gone towards paying off my credit card debt (see my woeful tale of how I got sucked in here and how my credit cards spun out of control here ).

But (and here is where people will say I am crazy)…

I put $250 into savings this month – rather than paying off my credit card debt.

(note that if you can pay your credit card balance it might be best to do this – but if you are already paying interest on your credit card read on..)

Despite having a mortgage, car loan, credit card debts (of about$5,500) I put money into savings. And I will tell you my reasoning.I believe that…

1. The savings habit is more important than the net saved

Basically I believe that if you put every cent into your credit card every month (and like me watch what you spend so you pay it off quicker) – then by the time you finish paying it off – things will start appearing on your credit card. Either you will think of things to buy OR other things will pop up (you’ll need to go to the doctor/dentist, get your car serviced or registered, etc.)

And you won’t end up saving. But if you save a small amount (10% of your pay as mentioned in The one trick to Saving) you can get into a habit of saving. (Just as an aside – the one trick to saving was the very first article I posted because I believe it is the ONE MOST important tip I would offer to anybody)

2. You might not be much worse off

I wanted to see how much worse off I would be – so I created a spreadsheet just to see HOW much extra interest you would pay if you paid your credit card off VS. saved and put the balance into the credit card. (the spreadsheet I might give free to those who Sign up to the newsletter -do it now! or maybe put it so you can buy for cheap from the site)

So if I paid $1,750 a month off the credit card and then saved that amount vs. If I saved $250 a month and paid the balance ($1,500) off the credit card. Here are the variables:

The First example shows what happens if once the credit card is paid off I put the $1,750 into savings for 12 months. (this is a BEST BEST case scenario – your are never going to put the whole amount you were paying off your credit card into savings).

To make things more realistic the Second example is the same as the first except after paying the credit card off you will save Double what you initially saved (which is much more likely to happen in real life). So instead of saving $1,750 I would save $500 in this example (double $250).

What the numbers mean

Besides the obvious simplicity of the spreadsheet (see below paragraph) – to me this means that if you save little and save often you will be building up a money tree. Rather than a yo-yo effect of splurging, living cheap to pay credit card, then splurging, etc. where you might never get a chance to save.

Obviously you will be worst off in the first few months doing this – but after a year or two – you might realise that setting aside a portion of your income that is YOURS ONLY – makes you feel good and happier to pay off your credit card as much as possible.

You might also find that there is no difference in paying 10% and not (I mean that you will still have no money at the end of the month!).

Added bonus (my flatmate puts it much simpler than I do)

It takes you longer to get out of debt but you have the added bonus of having saved more (e.g. if it takes me 5 months to get out of credit card debt and I save $250/month then I have $1,250 saved vs. if it takes me 4 months if I don’t save then I start from $0 saved)  .

How numbers can be misleading (and why this spreadsheet might not be accurate)

The above spreadsheet does not take the following into account:

1.credit cards accrue credit daily (I assumed monthly), 2.interest income is taxed (I’ve assumed no tax paid), 3. interest free days for credit cards (assumes you have a balance where you are paying interest).

Send an email to nomoneyau@gmail.com and let me know what you think.

Also remember that THIS MIGHT NOT WORK FOR YOU. THIS IS ONLY ONE IDEA. (our disclaimer is at bottom of the About Nomoney page)