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Found 6 entries.

Paying Bills per Month Rather than per Year

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There are two trails of thought in my head these days. Firstly, the idea that I will retire at 40 once I am financially independent.

The second is that of simplifying and downsizing my life and my needs.

The funny thing is, sometimes these ideas aren't quite orthogonal and one influences the other, sometimes to it's detriment.

Paying Bills per Month

Recently, I changed banks. I did it for a few reasons, one of which was that I could do more of my banking online or over the phone. I rarely - if ever - need to go to the bank now and in fact they don't even have premises since they are physically inside Post Shops.

This bank switch has made my life simpler and easier and I like it.

Whilst I was switching though I also decided to change a couple of other things too. The main one being that where possible, I decided to change from paying some bills quarterly or yearly to paying them monthly.

The reasons for doing this I will come on to in a second but firstly, let's see why this is now a disadvantage.

Going Against My First Plan

Becoming Financially Independent means being careful and clever with your money. Yet paying for things monthly may go against the being clever bit.

For example I have to pay my rates quarterly. They are due at the start of the 3rd month of each quarter, therefore the money for the first two months sit in my account earning money for me. But by changing it to monthly payments means that I no longer get that advantage.

Also for other bills that are paid yearly, I may have to pay everything up front but usually you earn a slight discount for doing it that way.

Therefore in both of these cases, switching to a monthly payment plan is probably not the best thing to do financially speaking.

Going With my Second Plan

Overall however, paying these bills monthly makes things a lot easier and therefore makes my life simpler.

That is, instead of putting money aside into a Freedom Fund and having to calculate how much to put in it each month and then paying it at the beginning of each year I instead have a Bills Account which receives the correct amount every single month.

I know that a Freedom Fund isn't the hardest thing to do and I still have one for those bills I can't pay monthly but I also like the idea that I'm paying for something as I need it.

In Conclusion

Whilst paying for some bills quarterly or yearly may have a financial advantage, the ease and simpleness of paying them monthly outweighs pure monetary gain.

This may or may not work best for you but how do you do it and why?

Labels: budgeting, banking, spending

Inserted: 2009-05-12 21:18 (2 years, 9 months ago)

Shaving those Expenses: 10 Things to Think About Cutting Down

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After a few weeks trying to cut a number of expenses, I hereby offer you 10 things you can think about where you might be able to cut your bills or your monthly outgoings.

1) Lowering your Cable TV/Satellite Subscription

Or indeed, cutting it out completely. Think about it, how much time do you watch TV anyway. Not much? Then you don't need either Cable or Satellite. Watch it alot, then you probably need to cut down anyway.

I used to have Cable TV in a previous house which was about $60 a month, now saved.

2) Monthly Insurances

House insurance, contents insurance, life insurance, car insurance, income protection insurance, the list goes on. Every month you give money to someone else such that they can help you out if things go wrong. But how often do you check to see that you're paying the lowest price. You'd be surprised to learn you haven't reviewed your insurance in years.

I am planning an appointment with an insurance broker soon and I suspect I'll get to save somewhere between $20 and $30 each month on my insurances.

3) Utility Bills

With the shake up of most countries power over the past decade or so, it's pretty easy to find great deals on your electricity and/or gas usage. Just shop around and you'd be surprised at how much the smaller suppliers are charging compared with the old incumbents.

I've just change providers and will be saving about $25 a month.

4) Moving to a Lower Internet Plan

If you're not using your internet plan to the fullest, then you probably want to downgrade to the next plan down. This is especially true if you're not downloading lots of large files. You're probably using nowhere near what your plan allows you to.

I realised I was on a 20G plan and in only 2 months in the last 6 did I reach 8G or 9G. I've now lowered my plan to 10G and will probably look at the 5G and just pay for excess bandwidth if I use it. A saving of $25 a month right there.

5) Switching Banks

By switching banks you may be able to save various chunks of money here, there and everywhere. From service fees, withdrawal fees, other bank's ATM fees and a myriad of other fees which all add up, you might save a few bob.

I just switched banks, mainly for my mortgage, but by switching my current account and credit card too, I'll be saving $12 a month on account charges and about $15 a month on not getting credit card insurance. Also, $20 a year on the credit card fee and about the same to be in the rewards program. It all adds up.

6) Switch to Low Power Devices

Switching to low power light bulbs is an easy win, but think about switching your other devices to a low power one too. The washing machine and fridge would be two worth looking at.

Maybe it's not worth it if your current devices are still happy and working but when you have to replace them, it'll be well worth the time investigating the low power options.

7) Switch to Pre-Pay on your Mobile/Cell phone

Switching to pay only for what you use is a pretty good option in most cases. I know people who have switched to metered water and who are now saving a good chunk of money (people who would have in the past been subsidising the people who waste water unnecessarily). Why can't you do the same for your mobile? If you don't use it much switch to only pay for what you use.

I shall be switching to Pre-Pay soon and going from paying $20 a month subscription (+ calls) to paying $6 (to get a special offer) + what I actually use. I'm sure to save around $20 a month.

8) Lowering your Rent

Moving to a smaller place means you'd probably end up paying less rent. You might also have to get rid of some stuff that has been dragging you down the last few years. An increase in savings and an increase in life simplification will work wonders for your stress levels and your daily energy.

Moving from a three bedroom, to a two bedroom and now a one bedroom place has made me open my eyes as to what is important in life. Having stuff and clutter is not on that list. Also saving $220 a month isn't bad.

9) Moving to somewhere close enough to walk or bike to work

By moving somewhere where you can walk or bike to work means you get to save money and you'll probably end up saving time too (since biking is pretty quick once you get used to it). No buses or trains to wait for and no being angry at crazy and unreliable timetables.

Moving into town has meant that I not only have more money to save due to not having to bus ($100) but I also save now that I have sold my car. My fitness levels are up and my savings are bigger.

10) Anything else you regularly pay for?

Whatever you have that you pay for regularly is ripe to be analysed and figured out how much of that particular thing you actually need. Almost everything can be shaved slightly to give you those few extra dollars in your back pocket.

And as always, and for those of us who have seen the light about all of this, you know that shaving off a little of each bill here and there makes no difference to the quality of life but an enormous difference to your bank balance once added up.

So, get cracking on those regular payments and make sure you shave each of them and save a bit every month. By the end of the month, you'll be surprised at how much you're keeping instead of slipping through your hands.

Labels: banking, insuring, saving

Inserted: 2009-03-24 20:57 (2 years, 10 months ago)

Personal Finance is Not a Destination, it's a Journey

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You've heard the phrase:

Life is not a Destination, it's a Journey

And like life, the road to financial independence doesn't lead you to a destination but instead just takes you on a road leading to a place you'd rather be but never actually getting you there.

Each junction on this road can also be considered a decision making time, a time when you can re-evaluate and a time to look back and figure out what you want to do to keep moving forwards. Forwards of course means heading towards your goals because if you didn't have goals you wouldn't know which way to was the right way to go.

Re-Evaluating Your Outgoings

In this post, I'd like to just concentrate on one particular aspect of these junctions and that is about re-evaluation. In fact even more specifically, re-evaluating your monthly outgoings like bills and suchlike.

Back in one of my first posts, I mentioned in my article on budgeting that I'd been doing various things over the years such that I was spending less on various things. Some of the bigger items I had cut down on were:

• rent (by moving to a smaller flat)
• travel (by moving closer to work)
• food (by not buying as many take-aways and making my own food)
• lots of other little bits and pieces

A few months after that, I also took some steps to make my monthly outgoings even less. I ended up selling my car and instead buying a bike for travel. That action in itself saved me over $250 a month, which is about $3,000 a year.

Can't be bad.

Spring Clean your Outgoings

Even though it's coming into Autumn in this hemisphere, for most of the internet world it is now coming into spring. As well as spring cleaning your house it is as good a time as any to also spring clean your monthly outgoings. This can be done in two ways.

You may want to turn and toss every single little thing but mostly you can just give things a quick dusting to make sure you've still got what you expect. In some cases, you just need to review what kind of plan you're on whether it's electricity, phone or subscription services.

I am currently going through a bit of a spring clean and I figure that by the end of it, I'll be saving well over $1,000 a year extra. Let me go through some of the things I've done in the past couple of months and a few more things on the table in the next couple.

• stopping my DVD mail subscription service
• switching electricty/gas providers to a cheaper option
• switching banks (to one with lower mortgage interest and less charges)
• changing credit card (to one with no fees and lower interest - not that I'd pay them any)
• stepping my internet usage plan to one with a lower price
• changing my home firewall machine from one drawing 100-150W to one which draws 5W
• switching my home/contents insurance to a cheaper supplier/option
• turning off my normal phone and getting a VoIP phone number instead

By doing all of these things, I suspect I can save upwards of $1,000 every year and quite possibly closer to $2,000.

For a start there's a $250/yr saving with switching energy suppliers and a $300/yr reduction by switching to a lower internet plan.

If I get rid of my phone, that's a $420/yr difference, minus about $120/yr for a VoIP phone, that's still a $300/yr saving.

I suspect I'll also save about $360/yr on home/contents insurance and realistically my bank fees/credit card fees will be lower by about $100/yr or more.

Just totting that up, that's a yearly saving of $1,300 without even lifting a finger (ok, I have to phone a few people but not much more than that).

See What You Can Do

If you've been living frugally for a while you might have already done all of these things and more, especially if you've been settled into one house for a while. In which case, maybe you don't need to review your situation.

However, it doesn't hurt to go through each of these things every so often just to see if something can be done. Let's say a new competitor is now supplying energy to your vicinity, it would be a shame to miss that opportunity.

Even just shaving off a little at the top of each and every bill you get can save you a significant amount of money per year. Add 10, 20 or even 30 years worth of compound interest on top and those small insignificant amounts start to add up to some serious money in the future.

So far my increase in savings have been well worth the effort I have had to put in and there are still more of those things on the list for me to go through and switch around or reduce. Overall, I'm pretty pleased already.

What other bills can you think of which can be easily reduced by either cutting back on a plan or switching supplier?

Labels: banking, insuring, saving

Inserted: 2009-02-25 01:15 (2 years, 11 months ago)

Does your Bank have a Broken Business Model?

It seems that everything is moving online these days. Your communication moved online quite a few years ago, morphing from your old letter writing days into your emailing days. Commerce came online quite quickly too and instead of flicking through books at your local store, you went and looked online for them. Music has gone that way too, your news articles and your TV programmes are now online and your banks have been there for a while.

In a lot of these cases, those commercial entities have also retained a bricks and mortar presence on the high street too, for those people who want to walk into a branch, speak to a real person and see and feel cash in the hand.

Personally, I'm not one of these people. Back in 2001 I changed my bank from a traditional high street bank to a totally virtual one. That's right, it had no branches.

Reasons for Change

When I look back on that now, I think I was a bit of a pioneer. I know that every single bank in the world has an online facility but back then, doing it solely online was a bit unique.

But the thing is, I didn't switch banks because I wanted to be online but because my old bank was most annoying. They did things I didn't want them too, they annoyed me whenever I spoke to them and they charged me through the nose for all kinds of minuscule actions.

To me, it seemed like they thought I was the privileged one to be banking with them. Of course, I begged to differ and when the time was right (I'd paid my Graduate Loan off) I changed banks.

The Advantages of Living in the Virtual World

When I started looking for a new place to bank, I was immediately surprised at how little the purely on-line banks charged for their services. I was also happy to see that my normal, everyday current account, would be earning interest at a massive 5%! In comparison to other bricks and mortar banks, this seemed like lunacy (for them) but since it was loaded to my advantage I took the opportunity without so much of a second's thinking time.

By this stage, I'd realised that by doing everything online, or via phone, they were able to run their business at a lower cost to them and therefore at a lower cost to their customers. It was also very refreshing that whenever I spoke to anyone on the phone, I was made to feel good about being a customer, good about myself and they knew who the most important person in that relationship was.

Fast Forward Six Years

After a change of country, I also had to change bank. This wasn't something I wanted since I was very happy with my virtual bank but obviously it was a necessity due to my change of location.

I went with a traditional bank but that didn't last long. Whenever I wanted to transfer money from NZ to the UK it ended up being a labour intensive and very stressful time. It seemed like it would have been easier to organise a trip to the moon (for me and my cat) than for the tellers to fill in the form correctly.

I also felt like the staff were a little too inquisitive to the tune of being intrusive rather than helpful. I guess I just wanted a personal account manager and not a friend. I want my relationship with my bank to be warm but not too personal. Don't ask me why - I guess I just see that business is business.

After two years, I switched to what seemed like a more clued up and modern bank. So far I have been really happy with the service I have received from them but times-they-are-a-changin'.

The Broken Business Model

Recently, I have had to speak to my account manager on a number of occasions, mostly because my fixed mortgage is up at the end of November and I will need to renew at some stage. Of course, this means I have been doing my homework and looking online to see what the current mortgage rates are from all the banks in NZ.

It turns out that my bank's mortgage rate was quite a bit higher than one of the other banks and I told my account manager this. It wasn't just a small bit lower but at the time almost a percentage point lower!

It is no surprise that this other bank, the one with the lower mortgage rates, is mostly online too (and leverages the NZ Post Shops for any physical transactions).

As soon as I had told me current account manager that I was thinking of moving my mortgage to the online bank, my first thought was that he would say something along the lines of "Well, we can't compete with that" since it was completely obvious that was the case. Instead, he proceeded to tell me how they looked after their customers more and that they gave out better advice than those on-line type banks. That they had more personal contact (which I don't necessarily see as an advantage). Also the fact that running a branch costs them $100,000 a year!

Whoa there. Say that again! I felt like saying "Actually, it doesn't cost you $100,000 a year, it actually costs ME lots of MY money each year." And with that statement I decided there and then to leave my current bank.

Unfortunately for him (and me) my old account manager left his bank and went to work for what will eventually be my new one. Add to this the fact that my new account manager is one of the most annoying people in the world ... let's just say that I shall be moving due to many different reasons.

But one reason stands head and shoulders above everything else.

Saving Me More Money

At my new bank, I shall be saving more of my own money that I work very hard for. Here's a very quick list of advantages and I'm sure it's not a complete one:

• the interest on my mortgage will be much lower
• I have no 'relationship' fees
• there will be no transaction fees (same with the old one)
• no charges for having a credit card
• the interest on my credit card (not that this concerns me) is lower - just in case
• any savings accounts I have will earn extra interest

Due to these reasons, I shall be changing from the broken business model that is the high street bank to a purely online one. The cost of running a virtual bank is much less than a traditional one and therefore, I get to see more of those savings in my own account. My baseline will be increased due to this one decision and each and every month, I will get to keep more of my money.

It is considered difficult to change bank but in all honesty, it's no worse than changing job or even buying a car. It is important to me that I get a good and honest relationship with my bank, I want it geared towards me rather than them and I want to enjoy whomever it is I talk to about my finances. I have found that my relationship with any new bank is immediately successful since they're just happy I'm switching over, especially so because I came to them.

In conclusion, I shall be changing banks for the fourth time in 10 years during the next few months and I know that this one will be better for me in many more ways than each of the last two banks.

Are you happy with your current bank or are you thinking of switching? What would stop you from changing even if you weren't happy?

Labels: planning, banking, saving

Inserted: 2008-11-15 23:03 (3 years, 2 months ago)

The Power of Snowflaking

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Let me tell you the story about a snowflake. Jimmy was it's name and it was very small. One day it decided to snow and Jimmy came into existence along with many other snowflakes formed around the same time. They looked at one another and thought "My, aren't you a nice snowflake" however some of them looked at each other and thought "Wow, you're bigger than I am". Jimmy looked at everyone and thought that they were all bigger than him.

The larger snowflakes tended to keep to themselves, since they were bigger than the others. They weren't very nice either. So in the end, the smaller snowflakes - including Jimmy - decided to gather together so they could become larger and more powerful than the bigger ones.

After a short while, they all fell to the floor only to be gathered up together by the children playing. Jimmy got swept off his feet by a young child with huge mittens. Firstly, they were gathered into a snowball, then rolled into a head and finally into a huge torso. Right in the middle, next to the middle button, Jimmy lay looking out and feeling safe. This snowman was eventually so big, the relative size of all the individual snowflakes didn't matter and the snowman itself was greater than it's individual parts. Jimmy knew that those bigger snowflakes wouldn't worry him now., safe in the knowledge of being with all the other snowflakes.

And that is what the power of snowflaking is.

So, yes, thanks, but what is it?

Snowflaking is a term used in the personal finance field. It is pretty easy to understand and also very powerful. It's also very easy to do.

It is a technique to help you pay down debt or increase your savings. Essentially what you do is, at every opportunity you have for scraping aside money into a separate savings account or a current debt, you do it. It doesn't matter how big or small the snowflake is, it all adds up to that snowball effect and before you know it, you're looking at a whole heap of snowflakes. Once these start adding up, these snowflakes become snowballs and by then the momentum has started.

You can start in a variety of ways but as always, the most important thing is to start. That's the hardest step. Once you've started you'll find more reasons to snowflake.

Many people clip coupons to save money at the supermarket. If they receive $1 off a tube of toothpaste, then they will snowflake that dollar into whichever debt or fund they choose. Others will see that cycling to work one day a week is a bus fare saving which also gets siphoned off somewhere else (not into other expenses of course). If you manage to get a bonus from work, that gets scraped elsewhere and yet others see a pay-rise as a permanent snowflake (but then you're more into savings schemes).

Any Excuse Will Do

I have noticed something about snowflaking and it is this. If you practice the technique then no matter what you do throughout each month, you'll find any excuse to snowflake that money off elsewhere. Take these examples as interesting reasons to snowflake rather than as a guide. Yes, I have actually seen people use these so you can see, it really is for whatever reason you decide:

• shift over the cost of that coffee you didn't have
• move aside what you saved in the supermarket
• was your lunch ultimately frugal, siphon off what you didn't spend
• did you find a dollar in the street, put it in your savings
• pay off some more debt with that money you were given in your garage sale
• transfer the extra you received in your paycheck this month
• cast aside what you used to spend before you gave up your bad habits!

My example this month is that I have been online selling some of my old DVDs that I no longer watch. Every time I get a sale, I've been shifting that money over into my emergency fund. The thing is, instead of moving the sale amount minus the commission, I have moved the whole thing and considered the commission an expense for the month.

And I have another confession. Over the years I have gathered a number of booklets of stamps which I always lose and then end up buying another booklet, only to lose that and never use the all. Whilst simplifying my life I have found all of these booklets again and stashed them in an envelope near to where my jiffy bags are. So instead of taking off the cost of postage (which is added on at each auction) I have also been moving that over to my Emergency Fund.

And finally, just so it didn't feel left out, I have done the same for the jiffy bags I had to buy and consider that a monthly expense too.

It turns out that within a month, I am now about $118 richer in my Emergency Fund due to the addition of those four things (DVD, commission, stamp, packaging) all being siphoned off. If I had only shifted the profit, I'd be looking at a much lower $90 (but still better than just spending it).

Compound Interest Strikes Again

And that is when the magic happens. Okay, that $118 isn't going to make a big difference now but in the future, with all the other snowflakes I cast aside from my expenses, that'll start to begin growing exponentially making my money work even harder for me. Once you start, you won't be able to stop and your debt or savings will move in the right directions faster than you thought possible.

So come on. Help Jimmy out and make sure he finds his rightful home amongst all the other snowflakes. After all, if you don't, he'll just end up melting and then you won't know where he's gone. Put him aside safely and watch as he helps build your snowflakes into your snowballs.

Why not give it a go and let me know how you get on. What other things will you snowflake?

Labels: banking, saving, repaying, selling

Inserted: 2008-10-27 23:28 (3 years, 3 months ago)

Five Ways the Internet Saves You Money

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Having just read 5 Ways the Internet Saves Me Money, I decided to do my own list since mine would be very different from hers. Hers predominantly focused on shopping, either online or acquiring vouchers for use in real life. I'll not be talking about shopping at all (though I might mention something about selling) :-)

By doing just one of these things, you can save some money. By doing all of them, your savings really start to add up.

Five Ways the Internet Saves You Money

1) Reading News Online - In the past, I have bought either newspapers or magazines for my news. Daily newspapers were a staple of my house when growing up but since university I haven't regularly bought a newspaper. In the past, I also used to buy technical magazines (computing, photography, woodwork) but now I find that there are many more articles online and you just have to search for the quality ones. Also, especially in computing, the news in the magazines is about 2 months late compared to reading it on the web.

2) Online Banking - I had a meeting with my bank the other day and he tried to explain why their mortgages were at a higher rate than the online banks (a subject of another post). Predominantly it came down to the fact that they had branches and the other bank didn't. By using the internet themselves, the bank saves money and therefore passes those savings on to you. You'd also be using the internet in that arrangement too.

3) Keeping up with Friends and Family - Using email, instant messaging, VOIP phones and other forms of communication online, you'll save on postage, phone calls and all those other forms of communication which cost money.

4) Not Buying Books - Think of a hobby you do and think how much money you have spent on books for it. Unless you started the hobby in recent years, you've probably spent a fair bit. Now, try searching for information on that hobby on the internet. I'm sure you already have and I'm sure you found a lot of information. In some cases, enough that you wouldn't have needed to buy those books in the first place.

5) Selling Your Stuff Online - Whilst this seems a little bit of a cheat, selling stuff really can save you money (as well as gain some too). Just one example is the charges you have for throwing things away; save by selling stuff instead. Not to mention the fact that you'll also be getting money in return for those things.

Compromise

Before I finish, I'd just like to say that using the internet can be a bit of a compromise. I use it a lot, therefore, I want it to be fast. I pay for a medium internet plan with my cable company so whilst I do pay more than I could for a lower end plan the savings via all these other avenues trade off what I pay extra.

I decided to focus on just five ways the internet can save you money and I will write a follow-up post with more ideas later on. Let me know in the comments any other ways the internet can save you money too.

Labels: banking, selling

Inserted: 2008-10-03 23:09 (3 years, 4 months ago)