the mozo blog

Guest Blog: Kylie Ofiu

On my recent trip to America I did a bit of research into what was the best way to  use my money while there. I found my bank didn’t charge much for transactions, but if I wanted to withdraw US dollars from them before leaving they would charge me an arm and a leg.

There are a few things you can do to save on fees and charges when travelling overseas.

1. Compare banks

Different banks charge different fees for different things. You might find one bank has high fees for using ATM’s overseas, (as much as $5) but their over the counter currency conversions are really cheap. Find out which one has the best deal for you and use them.

Banks often charge these fees, but also a fee when changing the currency as well as a commission for converting the currency which can be anywhere from 1.5% – 3.65%. You can compare these fees with the Mozo debit card fee finder.  Getting it right can save you a lot.

2. Negotiate

Try negotiating with your bank. If you find a better deal elsewhere ask your bank if they will match or beat it. It is cheaper for them to keep a customer rather than try and get a new customer, so it is in their best interests to keep you happy.

3. Get the right cards

I say cards because not all cards are accepted everywhere. There are 4 different types of cards you can use overseas: prepaid travel cards, credit cards, debit cards and you regular ATM card. A prepaid card is just like a credit card except you put your money on it before you go. Credit cards are great as they are easy to replace and many such as AMEX have excellent reward schemes attached. A debit card enables you to use your money, but it can be used as a credit card. A regular ATM card is your own money again, but the fees can be steep.

Compare different cards to find which will be right for you, or take a couple of options such as a credit card and a prepaid card.

4. Deal in large sums of money

To really avoid transaction fees deal in large sums of money. This can be risky as you are carrying around cash instead of a card, and you cannot get cash back if it is lost or stolen, whereas you can cancel credit cards, get them replaced and prove certain expenses were not made by you.

Taking out a large sum of money at one time instead of regular smaller sums means you will only have one transaction fee instead of several.

Kylie Ofiu is an author, blogger and writer. On her blog she writes about ways to make and save money.

Guest blog by Colin Williams

We recently launched a new investment section on Mozo and our money forum, Mozo answers has been abuzz with questions from the Mozo community about investment products and fees. We are thrilled to have guest blogger, Colin Williams on the Mozo Blog to spread his knowledge about financial adviser fees. Colin is the founder of humble savers and has over 25 years experience in the financial planning industry.

Financial Adviser Fees – What you need to know

Trying to decipher the fees charged by a financial adviser can be one of the most difficult tasks that you’ll ever undertake. Many investors simply give up trying to understand the all of the fees and choose a financial adviser based upon their personality (the one everyone likes!). This can be a big mistake.

Why understanding financial adviser fees is so important

If you have an investment portfolio of $200,000 and it earned a gross 8% (before fees) for the next 20 years, the combined financial adviser and product fees could eat away about 30% of your return.In total around $350,000 can be paid in fees!

Financial adviser fee structures

The vast majority of financial advisers in Australia are tied, in one form or another, to a major financial institution. These institutions have a similar approach to financial planning and as a result, clients will often have a standard portfolio and fee structure as shown below:

• A portfolio consisting of a number of managed funds (unit trusts)
• These managed funds will be held in an administration system, better known as a Wrap account or an All in One account
• An adviser fee for developing the Statement of Advice (Plan fee)
• An on-going adviser service fee, usually linked to the Wrap account.

Now, let’s take a closer look at all the fees related to a typical $200,000 investment portfolio. All fees are approximate.

The fees will vary from one financial adviser and one institution to another. The main purpose of this article is not to precisely question each fee, but rather to demonstrate how the combined fees will affect your investment portfolio.

The up-front fees. You are affectively down $4,500 (over 2%) before you make any investment earnings. These fees often look very high and in some cases they are. However, these up-front fees are not normally the major concern.

The big issue is the on-going fees. While an adviser fee of 1% does not sound so high on its own,when combined with the products, the total on-going fees can easily be around 2.55% of the investment portfolio.

Let’s put the total on-going fees into perspective

If your portfolio had a gross investment return of say 8%, the net return after the fees, in our example is 5.45%. Or to put it another way, more than 30% of your investment return is being eaten away in fees! This situation takes on a greater importance, as when your investment grows, so do the fees. This is highlighted in the table below.

As you can see, if your investments earned a Gross Return of 8%, with no fees attached, the balance would be $932,191. With fees charged at 2.55%, your $200,000 has only grown to $578,045. The fees charged over this period will have been $354,146. ($932,191 – $578,045 = $354,146). Ouch I hear you say!

Can you reduce your fees without jeopardising your financial position?

There are alternatives, such as:

• Challenge your financial adviser on each and every fee linked to your portfolio. Ask for investment alternatives to be considered that could cheaper. For example, index funds and/or Exchange Traded Funds, better known as ETFs.
• Is your adviser prepared to work for a lower fee? Will they work for a flat fee? A fee per consultation?
• Do you need a Wrap account? Is there a cheaper administration system? Can your accountant do it cheaper?
• Shop around your portfolio. See three new advisers. Use the web to do your research. The Financial Planning Association provides a service that will help you find a local adviser.
• Your own research should include friends and colleagues. Often friends have gone through a similar experience and may well be in a good position to help you with finding alternatives.
• Can you do it all yourself?  There has been a massive take up in Self Managed Superannuation Funds, (also known as Do It Yourself Superannuation), whereby more and more people are taking on the responsibility for managing their own financial future.

As we often say here at humble savers, “Forewarned is forearmed”. There’s a real battle out there for your hard earned cash and you should do all that you can to build and protect your financial future.

About Colin Williams

Colin Willliams the founder of humble savers, which provides practical money saving tips and ideas. He has over 25 years of  experience in the financial planning industry working with some of Australia’s largest financial institutions.

Guest Blog: David Bryde – Greater Building Society

While the Reserve Bank this month dropped the official cash rate, fixed rate home loans have been coming down for a number of months. There are still some great opportunities for borrowers to lock in a rate that is lower than where variable rates currently sit.

Fixing is not for everyone but it provides certainty that you don’t get with variable rates. You won’t benefit from any further reductions in rates, but you’re insulated against any increases affecting your rate or repayment amount until your fixed term expires.

When it does expire you’ll have a choice of re-fixing or reverting to a variable rate.

What is the “Revert Rate Rort”?

If you don’t re-fix when your fixed term expires you will revert to a variable rate. You need to be aware that unless you’ve already been paying a yearly fee on your loan, most lenders don’t roll you on to their most competitive variable rate. More often than not, you’ll end up on their most expensive (standard variable) rate. Ouch!

It is unfair that an existing customer coming out of a fixed rate should be dumped onto a rate rarely sold to new customers. If you’re lucky, you may have an opportunity to convert to a cheaper variable product but it typically won’t happen unless you initiate the process and you may have to pay a fee to do so. Check these details before you sign up for your fixed rate loan. Ask your lender what rate you will revert to at the end of your fixed rate loan.

The Greater’s Great Rate Fixed Rate Home Loan and Ultimate Fixed Home Loan both automatically revert to rates lower than our standard variable rate (at no cost) should a borrower choose not to re-fix.

This is one of the reasons why the comparison rates on our fixed rate loans are usually much lower than our competitors, even if the headline (advertised) rate isn’t. Remember to always look at the comparison rate when choosing a loan. Mozo lists comparison rates as well as advertised rates.

About David

David Bryde is a Mozo Answers Industry Insider and Product Manager for the winner of Mozo’s 2011 People’s Choice Award for Best Home Loan Provider, Best Saving Account Provider and Best Building Society, Greater Building Society. He also contributes to the Greater’s Blog.

Guest Blogger: Kylie Ofiu

Sometimes you need a personal loan. I needed one last year when my car broke down. Even with the cost of interest and fees, getting a car loan was thousands of dollars cheaper than fixing up my old bomb and driving that.

We went looking at new cars. There were some great deals on which on the surface, looked fantastic such as low interest, but once I looked deeper into the contracts, the fine print would have cost us a lot.

There are two types of finance at car yards, the car dealer finance and factory finance and it’s important to understand there are differences between this type of finance and a regular car loan or personal loan from a bank or credit union.

Dealer Finance

Most car dealers will give you on the spot finance. Car dealers bet on the fact that you will see something and want it instantly. Whilst some car yards have their finance backed by major banks such as St George, others do not. When looking into dealer finance, there are a few things to watch for:

• Interest rates were often higher than if you went to the bank directly.
• You could not pay the loan out early. If you did, the interest for the full term of the loan would be charged anyway.
• Add-ons such as insurance are usually built in and more expensive than elsewhere.

You can negotiate and request those clauses to be removed or amended to reduce the cost. Also go in to the dealer at the end of the month. Dealers get commission on loans as well as the cars and at the end of the month, they will be keen to secure a bonus and be more likely to negotiate.

When we were looking, we were offered extras worth thousands in an effort to secure the loan and sale because it was the end of the month. We spoke to a few different dealers, all with offers and one even said, “Look, it’s the end of the month and I haven’t made my bonus. If you buy this, I get a bonus”.

Factory Finance

Car companies sometimes offer factory finance. Instead of the finance through the car yard, the company (e.g. Toyota) offers the finance. The interest rates are often low, with insurance included. The payments are also lower and at the end of the loan, you need to make a lump sum payment or hand the car back.

These cheap deals are often only on certain models, not the entire range of cars and the interest saved is usually less than if you negotiated a lower price with finance from elsewhere, so they are not always a great deal.

By knowing what to look out for, what to negotiate on and the differences in loans, you are much better prepared to secure a good deal and save yourself thousands.

Kylie Ofiu the author of 365 Ways To Make Money, a blogger and freelance writer. On her blog, Kylie Ofiu she discusses real ways to make and save money.

Guest Blog: Kylie Ofiu

Many of you are undoubtedly aware of credit card purchase protection. I know not everyone has it, but when you look at what is on offer from some of the companies now it can be well worth it.

Traditionally credit card purchase protection has only really covered you if goods were lost or stolen in a set time frame, but now there are so many more features included, such as price protection, and some even offer it for free with the card.

What kind of features and why should you bother?

What if you could be guaranteed to never miss out on a sale? No matter what, you will always get the best price on an item. How? Well there are some cards now which allow you to claim back the difference in price if you purchase an item for a certain price than see it on sale later, sometimes for just 1 -3 weeks after, sometimes much longer.

For example, you purchase some swimmers at David Jones, then the next week you see the exact swimmers on sale for $50 less. You contact your credit card company, use the credit card purchase protection and you get refunded the $50! How amazing is that? Even if there was a small monthly fee for it, as is the case with some cards, it would still be worth it.

Even larger items like washing machines are included which means you could save hundreds of dollars by paying with your credit card and keeping an eye out to see if what you bought goes on sale later.

What is even better is it’s all done online and as long as you are keeping track of your finances, what you buy and how much you pay, it will be easy to use your credit card to make your money work hard for you.

**Mozo EDITOR’S NOTE**

Some of the credit cards offering shopper’s purchase protection include:

• Bankwest Breeze – claim the difference if you buy goods within 21 days. Also available with Breeze Gold and Breeze Platinum cards.
• GEM Visa Card has an optional insurance cover. The premium is just 1% of the monthly closing balance (capped at $50).
• NAB Gold Card – complimentary price protection insurance . Get reimbursed the difference between the price you paid for a new item and a lower printed advertised price for the same item.

Kylie Ofiu blogs about ways to make and save money at her site Kylie Ofiu She is also the author of 365 Ways To Make Money and a freelancewriter.

Guest Blog by Kylie Ofiu

Recently on the Mozo Facebook page there was a poll “Which song about money best describes you?” It was no surprise really that at the time of writing “Money’s Too Tight To Mention” by Simply Red was winning. For many, times are tough financially.

Have you ever stopped to think though, just how music affects you and how it could affect your financial situation? Music can be very inspiring and motivating. The fun beat with catchy lyrics makes songs easy to remember and often we are singing or humming them without even realising it. Many people believe that what you think about is what you attract into your life. If you are listening to upbeat, positive songs, you are more likely to be upbeat and positive. If you are listening to songs with a negative undertone, that is more than likely how you are going to feel.

Lots of us have music we work out to. It often has a fast beat which motivates us to work faster and harder. Why not have a money mix? Find songs that inspire you to do better, make more money or improve your financial situation. They are not as easy to find as songs about being broke, but here are a few suggestions:

• Opportunities by Pet Shop Boys
• If I had a million dollars – Bare Naked Ladies
• I made it (cash money heroes) – Kevin Rudolph
• Everything is Everything – Lauryn Hill

A money mix will make you feel better and help you focus on the positives, which in turn leads to finding solutions to problems. In a financial sense, finding solutions to problems could mean finding a new way to make money or a way to save money you might not have noticed had you been focussing on the negative.

What songs inspire you?

Kylie Ofiu is the author of 365 Ways To Make Money, a freelance writer and blogger. She shares ways to make and save money on her blog Kylie Ofiu.

Kylie Ofiu, Guest Blog

This week is the first week of spring and is the perfect opportunity to spring clean your finances. Too often we set and forget many things such as our insurance which can cost us a lot of money. If I left my insurance as is each year instead of comparing it would have cost me $200 this year alone, let alone the $1,500+ difference there was when I was under 25. That’s right, one year by comparing and changing just my insurance company I saved $1,500 on that bill. By reviewing your finances with the following 5 steps can save you hundreds, even thousands of dollars! This year I have saved $510 just on step one.

1. Compare your providers. Compare all your bills such as car insurance, phone and electricity to see if you really are getting the best deal. You might not need everything in your contract and could downsize or switch providers for a better deal.
2. Transfer any debt. If you have a credit card you are struggling to pay off, check to see if there are any interest free or low interest offers on and transfer your debt. Cancel the old card and use the interest free time to pay down your debt. Do this with any debt, personal, home and car loans too.
3. Check direct debits. Sometimes we set up direct debit for bills or subscribe to offers and then forget about them. They money keeps coming out of our account whether we are still using the services or not. Go through your statements to see if you have an unnecessary direct debits coming out of your account.
4. Work out a budget. A budget is a plan for your money. It doesn’t need to be complex. Write out your expenses, divide them by how often you get paid (e.g. 52 for weekly) then compare the total expenses to your income. If they are more than your income, see where you can cut back. Then stick to it!  Try an online budget calculator.
5. Set up automatic savings. Ask payroll at your work to direct debit savings from your pay before you even get it. This way you won’t miss it. Alternatively set up a direct debit through your online banking to transfer a set amount out the day after pay day.

It doesn’t take long to go over your finances and save yourself money. A quick comparison online and changing is all you need to save yourself money.

Kylie Ofiu is an author, freelance writer and blogger. Her blog Kylie Ofiu is all about ways to make and save money as well as her goal to be a millionaire by 30 (April 2015).

With stock markets around the globe in free-fall this week, we asked the Mozo community what advice they had to protect hard earned super and savings. Mozo Answers Guru Katie responded with a provoking question of her own. We thought it was worth sharing with our blog readers, and wondered what other Australians think…         

Is superannuation a con?

Many people are starting to wonder. Nothing can really protect people from the uncertainty of the stockmarket in relation to superannuation. Unfortunately, unless you are one of the really lucky few who are reaping the benefits in retirement from a (now unavailable) superannuation scheme that is indexed against the CPI on DEFINED BENEFITS, you will join the majority of us punters on the “Super Roller Coaster”!

The tax benefits, whilst substantial if you are prepared to stick it out for decades, may not offset the severe losses experienced by many in a undulating market which has set some people back to the same level they were on five years ago!

If you do the math and invested $200,000 in a term deposit five years ago at the, then, available 8% you would be $80,000 better off even when you deduct tax. Whilst the gains MAY be made over 30+ years, the share market (forming the base of superannuation investment) is a gamble. Of course, one must NEVER change their options or attempt to withdraw Super when it is at its lowest as it will compound your losses severely. However, I really do believe that Super is over-hyped and under-performing.

The REAL danger with Super is that it is also subject to ongoing political interference. Don’t be surprised if, in the near future, the federal government will prevent anyone from taking LUMP SUMS and change the laws so that everyone will need to eke out a pension. As huge numbers of Baby Boomers are retiring, the federal government will be prodding and poking away at the methods of superannuation payments to ensure they will not have the burden of paying out massive lump sums over time.

Personally, I believe that it is preferable to invest in an investment property over time which, at least, will provide you with a steady rental income. Alternatively, take the lump sum as soon as you hit 60 (or 65) and put it in a Term Deposit. The HIGHS may not be as good as the occasional uplift in Super, but you can sit on the money (without worry) and sleep at night knowing exactly how much you are going to get each month.

That means a lot when you’re retired – who needs the stress?