Money Management for Women

money MANAGEMENT women for Sheila Freeman has worked as a financial counsellor for ten years and has a wealth of exp...

Author: Sheila Freeman | Helene Richards

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money MANAGEMENT

women

for

Sheila Freeman has worked as a financial counsellor for ten years and has a wealth of experience in counselling and teaching in the areas of debt management and budgeting. Also, as an active member of her local community, a director of a family business, and a wife and mother, Sheila is well placed to advise on the broad range of issues covered in this book. Helene Richards is a writer, editor and publisher, and her experiences as a wife a mother have all provided her with the necessary skills to make Money Management for Women an accessible, information-packed resource. Between them, Sheila Freeman and Helene Richards have confronted, either personally or professionally, most of life’s financial challenges.

SHEILA HELENE

FREEMAN + RICHARDS

money MANAGEMENT

women

for

Illustrated by Sean Richards

UNSW PRESS

Every effort has been made to ensure that the information in this book is accurate at time of printing. The information is not intended, however, as professional advice.

A UNSW Press book Published by University of New South Wales Press Ltd University of New South Wales Sydney 2052 Australia www.unswpress.com.au © Sheila Freeman and Helene Richards 1999 First published 1999 This book is copyright. Apart from any fair dealing for the purpose of private study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Inquiries should be addressed to the publisher. National Library of Australia Cataloguing-in-Publication entry: Freeman, Sheila, 1948– . Money management for women. Bibliography. Includes index. ISBN: 0 86840 641 4. 1.Finance, Personal. 2.Women—Finance, Personal. I.Richards, Helene, 1949–. II. Title. 332.024082 Designer Dana Lundmark Printer Everbest, Hong Kong

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the relevant copyright, designs and patents acts, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publisher. eBooks Corporation

Contents

Acknowledgments Introduction

vii ix

PART 1 IN THE BEGINNING, NOW AND FOREVER 1 Chapter 1 Your budget or money plan 3 Chapter 2 Better banking 24 Chapter 3 Live well for less 35 Chapter 4 Saving on regular bills 52 Chapter 5 Housing: rent, buy or build? 59 Chapter 6 Making a will 79 Chapter 7 Government support 90 Chapter 8 Contracts and consumer issues 96 Chapter 9 Sexually transmitted debt 102 Chapter 10 Taking care with credit 106 Chapter 11 Buying a car 115 Chapter 12 Gambling 126 Chapter 13 Life after debt 131 Chapter 14 Bankruptcy 141 Chapter 15 Insurance 151 Chapter 16 Taxation 161 Chapter 17 Traffic offences 167 Chapter 18 Superannuation 171 Chapter 19 Starting a small business 180

VI

• MONEY

MANAGEMENT

FOR WOMEN

PART 2 THE DIFFERENT LIFE STAGES Chapter 20 Young and single Chapter 21 Becoming a couple Chapter 22 Family life Chapter 23 Breaking up Chapter 24 Coping with life’s challenges Chapter 25 Ensuring a comfortable future

191 193 204 215 228 238 252

PART 3 WHERE TO GET HELP Addictions Aged care Banking Bankruptcy Cars Centrelink Contracts and consumer issues Credit Employment concerns Financial counselling and budgeting Gambling Housing Insurance Investment Legal matters Small business Social security/Centrelink Superannuation Taxation Traffic offences Relationships/Family matters Wills

263 264 264 265 265 265 266 266 266 267 267 268 268 268 268 269 270 270 271 271 271 272 272

Bibliography Index

273 274

Acknowledgments

We would like to thank the following: National Information Centre on Retirement Investments Inc. (NICRI) Carol, Alex, Jessica and Emily for lending us their home in Warrnambool to work on the book; Colin, Claire, Janet, John, Mary, Narelle, Pam, Sarah and Vicki for checking particular sections or editing our drafts; Sean for his illustrations; our families, for their continued encouragement despite takeaway food and papers cluttering the floors and tables.

Introduction

We give advice, but we cannot give the wisdom to profit by it. La Rochefoucauld

T

hough it is generally understood that money cannot buy happiness, status is associated with financial comfort. If you drive a good car, own a prestige home, dress well, and have an important job, you are regarded by some as someone to be respected. Unfortunately, the desire for material goods, combined with lack of money management skills, accessible credit and temptations all around, pushes many individuals and families into a life of constant struggle with debt. Historically, women have been oppressed or ‘protected’ by men, not least in the financial area. Raised to be wives and mothers, they had no idea how to handle money and were given no training to earn it. And though traditionally given housekeeping money to cover food and minor household expenses, it was not uncommon for a woman to go through life having all major financial decisions made by a man—at first her father, then her husband. Today, despite the fact that most women are in

X

• MONEY

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the workforce, many still leave financial decisions to their partner. Yet one in three marriages ends in divorce, and women live, on average, six years longer than men. Therefore during the lives of most Australian women there will be a time when they have to make major financial decisions for which they have had no experience or training; many will not have enough money to cover living expenses on retirement. With increased opportunity for tertiary education and professional employment, most young Australian women today have more financial freedom than their mothers, and there is less pressure on them to marry. Despite having more financially independent single women, however, Australia has an increasing number of financially dependent single mothers. If you are one of that rising number, you and your children are more likely than other Australians to be living in poverty, and often a cycle of misfortune begins which can carry on through succeeding generations. You can break that cycle. Think how much better you will feel when you are able to pay your bills, buy new shoes for the children, and spoil yourself now and then. If you are single but without children, you still need to ensure that you have long-term financial security. If you are part of a couple, you should retain some financial independence, though joint decisions can be made about issues which affect both of you, and be prepared for major changes to your financial status if you divorce or your partner dies. This book aims to explain how to control your personal finances and give you confidence in your ability to manage your money sensibly. Part 1 gives the basic tools to enable you to take responsibility for financial decisions, put your finances in order and build up some savings. It gives general information about issues such as insurance,

INTRODUCTION •

XI

gambling, buying your own home, and bankruptcy. Part 2 outlines the main financial decisions you may have to make during various stages, from your first part-time job while at school through to retirement and beyond. In this part we also suggest practical ways of coping when problems arise, such as unemployment, illness, addiction, family/marital break down, or death. Individuals or families who feel their financial situation is getting out of control should seek help before it becomes overwhelming. In Part 3 we list various organisations throughout Australia where advice can be obtained for a range of financial problems. For the purpose of brevity, the word ‘States’ is used throughout the text to encompass both States and Territories. This book is written in plain English, with any unusual terms clearly explained. Its aim is to empower you by giving you confidence in your own abilities, showing you how to control your finances and thus change your lives for the better.

PART 1 IN THE BEGINNING, NOW AND FOREVER

Chapter 1

Your budget or money plan I’m living so far beyond my income that we may almost be said to be living apart. Saki

I

f you are reading this book to learn how to get rich quickly, don’t bother. Even starting with $5000 and the best financial advice, it would take more than 30 years to get your first $1 million, assuming a 12 per cent return every year, and 50 years with an 8 per cent return. Nobody becomes a millionaire overnight unless she wins a lottery, marries a millionaire, or is the heiress of a very wealthy relative, and the odds of any of these happening to you are about eight million to one. If you do manage to beat the odds, you still need to manage your money well or you could lose the lot, so read on. People say, ‘I don’t know where my money goes’, or, ‘The money just disappeared.’ This will not happen to you if you budget correctly. Your purse might still be empty, but at least you will know exactly where the money went. Preparing a budget or money plan, whatever you call it, is boring but necessary for successful money management. If you adhere to the following steps closely, the result should be, at worst, that you have

4 • MONEY

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enough money to ensure that you always have a roof over your head, food in the refrigerator, and can indulge in an occasional luxury. At best, if you start managing your money with self-discipline and intelligence, you will live very comfortably. This will not happen overnight, but it will happen. Like most worthwhile things, it takes time and effort, but you will eventually enjoy the benefits—fewer debts, more savings, enhanced self-esteem, and the sense of achievement which comes from taking control of your personal finances. This chapter will remind you of the basics of money management and could give you a new start in life. It is never too early or too late to change. Money management is about learning how to spend—or how not to spend—your income. It is a bit like dieting: easy to make the initial commitment, but the hard part is sticking to it. If you make plans, set goals and are really disciplined, you can free yourself of the debt cycle and have a budget which meets your needs, but is flexible enough to cope with the occasional crisis.

WHAT IS A BUDGET? A budget is a detailed record of your total income and everything you spend your money on; budgeting is the process of deciding how much to spend, what to spend it on, and how to keep your spending within the limits you have set yourself. In the weekly struggle to pay essential bills, you need to plan carefully, use commonsense, and exercise caution and willpower to resist extravagant purchases. Sticking to a budget is not easy. Your top priorities should be to cover your basic needs—food, shelter, clothing—and only after that allocate money to other things, such as a car, a television, CDs, a holiday, and so on.

YO U R

BUDGET

OR

MONEY

PLAN

• 5

When doing your budget it is essential to remember the following simple rules: • You must spend less than you earn. • If you spend more than you earn, you will get into debt. • If you can earn more, you can spend more. However, most people carry a certain amount of debt, and as long as the repayments are within their budget, this is acceptable. Doing your first budget can be daunting. To make it easier for you, a sample budget sheet is given at the end of this chapter (pages 20–21). You could photocopy and enlarge this and fill in your details, or design your own to fit your personal situation. The sample yearly planner (pages 22–23) is a useful tool. If you fill in details of expenses as you go through a year, for example, car registration of $421 due in March 2000, you will be able to see at a glance when big bills are due.

HOW DO I BEGIN? Step 1 From your financial records, you can estimate your spending during the previous year. Check all receipts, credit card and bank statements, and cheque butts. Don’t forget cash spending. Which items of clothing, shoes, and make-up did you buy in the last twelve months? How often did you visit the hairdresser? What did you spend at Easter and Christmas? How many times did you pay cash for newspapers, magazines, books, CDs, takeaway food, restaurant meals, tickets to a film, videos, greeting cards, gifts for friends? These small expenses can add up to a major amount.

TIPS

If you don’t have receipts for gas, electricity or telephone bills, you can ring the relevant utility provider to find out your total payments for the previous twelve months.

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Major areas of essential expense in most households might be: • housing (mortgage or rent payments, maintenance costs); • utilities (gas, electricity, telephone, water); • council rates; • food; • transport (including car registration and insurance); • insurance (house and contents, health). When unsure of the exact amount of a particular expense, always over-estimate rather than underestimate the cost. Once you have all the above yearly figures, divide the total by 52. This will tell you what you need to put aside each week for your outgoings. Step 2 Total how much money came in during the year from all sources, such as government payments, salary, investments, rental properties, and how much went out. If expenses were less than income, you made a profit. If expenses were greater than income, you were ‘in the red’ for that particular year. Step 3 Divide your income for the year by either 52 or 26, depending on whether you were paid weekly or fortnightly. Leave enough in the bank to cover all essential expenses in Step 1, withdrawing only what you need for day-to-day living expenses, such as food, transport fares, petrol, and so on. Step 4 What is left over, if any, is your surplus, to be used for extras such as medical/dental costs, clothing, entertainment and special occasions, such as birthdays, Christmas, and so on. Step 5 Initially, use any surplus to pay outstanding bills, including credit card debts, bank loans, loans from family or friends. Family and friends do not

YO U R

BUDGET

OR

MONEY

PLAN

• 7

usually charge interest, but credit card charges vary from 15 per cent to 29.5 per cent per annum. Always pay the one charging the highest interest rate first.

TIPS

In the early stages of your budget, keep a small notebook in your handbag and record the details of every item you buy each day. Add them at the end of the day to see how closely you are adhering to your budgeted amount. If you are spending more than that amount, make an assessment of where you can cut back, and do so.

HOW DOES IT WORK?

PROFILE

Sharon, aged 23, an administrative assistant, shares a flat with her friend Amy. Sharon is paying off a car loan and has a credit card debt of $700. Her salary is paid into one bank account, and $20 per week is automatically transferred to a second account to cover her car registration and insurance. Sharon considered her income to be more than adequate to cover her expenses, and had no idea why she was unable to pay off her credit card bill. She wrote down her details. $ Income Weekly after-tax income 480.00 Less debit transfer 20.00 Expenses

$ 460.00 Rent (including utilities) 100.00 Car loan repayment 100.00 Food kitty 50.00 Parking fees 35.00 Petrol 30.00 Minimum payment on credit card 20.00 $335.00

This leaves her with a weekly ‘surplus’ of approximately $ 125.00

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As Sharon has no savings, this ‘surplus’ has to cover the costs of any car repairs or maintenance, alcohol, holidays, gifts, medical, dental or pharmaceutical expenses, entertainment, clothes, and shoes. ‘I don’t spend anywhere near that much,’ she claimed. ‘I have no idea where it all goes.’ She decided to keep track of her daily expenses, starting on the next Friday, as her payday is Thursday. $ Friday Train fare to city in morning 2.20 Takeaway fried rice for lunch 4.00 After-work drinks 18.00 Taxi home 11.50 Total Morning coffee after shopping Nightclub

$ 35.70 2.20 36.00

Total Sunday Brunch and coffee with friends Video hire (credit card) Total Monday Regular lunch with colleagues (credit card) Weekly payment to staff coffee club Total Tuesday Sandwich and cake Birthday gift and card for Amy (credit card) Total Wednesday Sandwich Replacement of torn pantihose Magazines Total Thursday Sandwich Half-share of takeaway pizza for evening meal Total Total weekly expenses

$ 38.20 12.00 6.00 $ 18.00 15.00

Saturday

2.00 $ 17.00 5.50 27.50 $ 33.00 4.40 4.00 5.40 $ 13.80 3.20 8.50 $ 11.70 $ 167.40

YO U R

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OR

MONEY

PLAN

• 9

As Sharon’s surplus was only: $ 125.00 at the end of the week she was left with a deficit of: $42.40 Because Sharon put the video hire, lunch, and Amy’s birthday gift on her credit card, she was left with a small amount of cash in her wallet. This meant that she was not made aware of her overspending, and her credit card debt was escalating even further. For the next few months Sharon used the following strategies to cut her expenses: • leaving her credit card at home; • taking lunch to work every day except Monday; • ordering an entree-sized lunch without wine on Monday; • buying only two drinks on Friday evening and obtaining a lift home with a colleague; • shopping sparingly with Amy, saving more than $9 on their weekly food bill; • having friends over for coffee at the weekend, rather than going out; • watching the film on television on Sunday night, rather than hiring a video. Sharon was delighted when, at the end of the week, after making only minimal changes to her lifestyle, she had managed to save more than $130 to put towards her credit card debt. After maintaining most of these strategies for two more months, Sharon’s debt was fully paid.

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Angie and Stuart, in their late 20s and currently renting, wish to buy a home valued at $280 000. Angie, a data processor, has a take-home salary of $420 per week, and Stuart is a construction worker whose takehome pay averages $650 per week. Their combined income averages $1070 per week. With only $5000 in their savings account, they need at least 10 per cent deposit ($28 000) if they wish to avoid mortgage insurance (see Chapter 5). They sat down to work out a savings plan. The first step was to itemise where their money was going. $ Income (weekly) 1070.00 Expenses (weekly) rent on townhouse electricity gas telephone Stuart’s mobile phone Internet food petrol — Angie (Ford Laser) petrol — Stuart (Holden V8, travels between construction sites) car registration 22 car insurance 2 2 break-down service clothing 22 cigarettes — Stuart (five packets a week) alcohol/entertainment (dinner/poker machines Fri. nights) birthdays/Christmas finance company (car loan, three months payments left) credit card (balance outstanding $1000) Tattslotto newspapers/magazines Total Weekly excess

250.00 15.00 9.00 12.50 11.00 15.75 90.00 30.00 70.00 13.50 12.00 3.00 30.00 35.00 145.00 20.00 125.00 35.00 20.00 12.00 $ 953.75 $ 116.25

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PLAN

• 11

Angie and Stuart were amazed at how much they were spending. How could they increase their savings? They decided to cut expenses in several areas: • Travel Instead of taking her car to work, Angie travelled by train at the cost of $18 for a weekly ticket, saving $12. Stuart took Angie’s car (smaller and therefore more economical on petrol) to work, saving approximately $25 (allowing $20 for petrol for use of the car at the weekend). • Cigarettes Knowing that it would be too difficult for him to stop smoking immediately, Stuart decided to limit himself to two packets a week, a saving of $21. • Entertainment/alcohol Instead of going to the local Returned Services League (RSL) for dinner and playing the poker machines on Friday nights, they went to the nearby Chinese/Malaysian restaurant, taking their own bottle of wine—a big saving of $100 per week. Cutting down in these three areas saved them $158.00 per week without much sacrifice. Together with their previous surplus of $116.25, this amounted to savings of $274.25 per week. Within three months Angie and Stuart had saved $3291, giving them $8291 in the bank. Also, at the end of that three months, their car loan was fully paid. With this money now freed for savings, their weekly saving capacity was $399.25, enabling them to meet their goal of $28 000 in a further 49.37 weeks (less than one year).

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HOW DO I STAY MOTIVATED? Motivate yourself by saving for something you want, even if at first it is just to be able to pay all your bills. Write down a ‘wish-list’ of your short- and longterm goals. Do you want a wardrobe full of designer clothes, a car, a holiday, to buy a house? Do you want to save for laser eye surgery, plastic surgery, or private school fees? Your objectives should be realistic and attainable. Once your wish-list is complete, make an estimate of the cost of each item and the time that you anticipate it will take to save that amount. List your goals in order of priority, and make a mental commitment to achieving them. If you are young, single, living with your parents and have just started your first full-time job, your wish-list might look like this: Priority no.

Item

Cost $

Weekly amount $

No. of weeks

How long will it take?

Got it!

1

CD player

349

30

2

2 week holiday in Queensland

1350

30

12

3 months

⻫

45

11 months

3

Car

5000

50

100

2 years

Aim for the CD player first; it is achievable within a short time and gives you an incentive to save more towards your next goal. On the other hand, if you are a single parent with three young children, your wish list might resemble the following:

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Priority no.

Item

Cost $

Weekly amount $

No. of weeks

How long Got will it it! take?

1

Trip to McDonald’s

60

6

10

10

⻫

160

10

16

4 months

⻫

2200

20

110

2 years

and film in next school holidays 2

Swimming lessons for children

3

Computer

Whatever your goals, motivate yourself.

TIPS

Put a photograph of the car, house, holiday or CD player you are saving for on your noticeboard, your refrigerator door, or the back of the toilet door—anywhere you will see it constantly, to remind you of what you are working towards.

Remember two important points: • Initially aim for something small—a special bottle of perfume, or a family visit to the zoo—so that you quickly have concrete proof of the benefits of sticking to your budget. • Your aims must be achievable—if you decide your top priority is a car and you are on a low income, do not write ‘BMW Sports’ or ‘Gold Mercedes’! You may find that, over time, your priorities change as your income or personal situation changes.

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WHAT IF I CANNOT STICK TO MY BUDGET? There is no need to feel guilty if you give in to an occasional temptation. Old habits are hard to break, and budgeting is hard work. Treat any mistakes as learning experiences. Feel proud of your progress, as working out a budget is an achievement in itself, and start again. If you continue to break your budget, however, you should look at it again to make sure it is workable.

HOW DO I COVER UNEXPECTED EXPENSES? Do not budget too rigidly. There will always be a few small costs you have not budgeted for, such as a contribution towards a farewell gift for a work colleague or an impulsive donation to a charity. If you have allocated every incoming dollar, there will be nothing left for these unexpected expenses. Once any outstanding bills have been paid, set aside any surplus for emergencies. Why not open a separate account at your bank? Once you have accumulated a set amount, for example, a minimum of $1000 for a single person and $2000 for a family, leave it in the bank. This is your emergency fund and its existence ensures that you are always prepared for unexpected illness, car repairs, appliance breakdowns, house maintenance, unemployment, strike action, unlisted school excursions, and so on. Also, as the cost of living is always rising, the knowledge that you have this money to fall back on can contribute greatly to your peace of mind. Once you have the desired amount in your emergency fund, the surplus previously allocated to that emergency fund could be added to the amount you are saving towards the first goal on your wish-list. Remember, if you do have to dip into your emergency fund, resume your contributions to this account until you reach your goal amount again.

YO U R

TIPS

BUDGET

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• 15

If you are working and your salary is paid into a bank account, an easy way to save this surplus is to arrange a direct debit into a separate account each payday.You will be surprised how quickly a substantial sum accumulates.

WHAT IF I AM NOT ON A FIXED INCOME? Budgeting is more difficult if your income fluctuates, that is, if you run a small business, work freelance from home or on commission, or have periods of short-term employment, as does Stuart in the previous case profile. (When a construction job finishes, Stuart is out of work.) There is a saying, ‘Save for a rainy day.’ Unfortunately, quite often for people with fluctuating incomes, it doesn’t just rain, it pours. Remember that, no matter what other costs you might incur, the bills for essential household expenses, as listed on page 6, will arrive on time. If you are not on a fixed income, you definitely need a budget, a yearly planner, and an emergency fund. When you receive a payment, spend only what you need to survive and pay essential bills, and put the rest into your emergency fund account. During those periods without an income, money can be transferred weekly or fortnightly from your emergency fund to your general budget account to cover your essential household expenses.

DO I NEED TO KEEP RECORDS? Your budget will not work properly unless you keep detailed records of your living costs, other expenses and income. Whatever your filing method, whether in a shoe box, drawer, filing cabinet, or under a magnet on the refrigerator door, always keep pay slips, bills, and receipts.

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HELP! HOW CAN I KEEP TO MY BUDGET? Organisation and self-discipline are your tools for keeping your budget—once you have worked out your budget, stick to it. Don’t dip into money allocated for bill paying. Trick yourself into saving by telling yourself that your separate savings account is a debt you are paying off, and that you have to make a set payment on your ‘debt’ each week.

TIPS Some people separate their spending money (that is, what is left after major bills have been paid) into jars or envelopes, marked ‘food’, ‘cigarettes’, ‘newspapers’, ‘entertainment’ (that could be a football game, a few drinks at the hotel), and so on. Use whatever method works for you. However, don’t leave large sums of money in your home—this is a security risk. Essential expenses are food, heat, water, mortgage, rent, and so on, and non-essential expenses are entertainment, clothes, books, holidays. The latter is where you make your savings. Working out a budget only needs to be done once. Make minor adjustments as your income and expenses change—such as rises in costs of gas, electricity, water—and as your priorities for savings change. If your circumstances change drastically, that is, marriage, birth of a child, loss of job, buying a house, you might need a new budget. You can make budgeting easier with a little organisation: • Arrange for regular payments of mortgage, medical benefits, insurance, gas, and electricity to be deducted from your bank account. (Check whether bank charges apply to this service—see Chapter 2.) By not handling this money yourself you will not be tempted to spend it on other things.

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• Keep all your paid bills in one folder so that you can keep an eye on your regular accounts. As most gas and electricity bills now show the previous year’s usage, you can easily compare your new account with previous ones. • If you have several bills, check the due dates and pay the most urgent bills first. Always pay your council rates on time, as late payments carry an interest charge of approximately 12 per cent, backdated to the date that the rates were declared, that is, about six months of interest payments. Be realistic in assessing priorities. Pay your rent to avoid eviction. Pay for your telephone, so it is not disconnected. Doctors or dentists do not have collectors at your door if you don’t pay them immediately; they re-submit the bill to you the following month. There are ways of handling outstanding bills when you have no possibility of paying them before their due date. Gas, electricity, telephone, council and water rates have payment options. For other services contact the creditor. You may have to spread payments over several months, even a year, or make a partial payment on each bill once a month. Discuss major purchases with your partner or a cautious friend. A major purchase is any item which will disrupt your budget. No matter how good your intention is to stick to your budget, you will often be tempted by: • • • • • •

television commercials colourful catalogues and junk mail door-to-door salespeople persuasive telephone salespeople offers of easy credit peer pressure.

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FOR WOMEN

When considering any purchase, no matter how small, always ask yourself, ‘Do I really need this item, or do I just want it?’

TIPS What if my basic living costs are more than my income? Don’t despair if your basic living costs exceed your income. Check your figures to make sure your spending is all essential and there is nowhere that you can cut down. If your living costs really are higher than your income, seek advice from a financial counsellor. A financial counsellor assists people to resolve financial difficulties by assessing their financial situation, advising them of their options and the probable consequences of those options, and negotiating on their behalf with creditors; for a list of contacts, see Part 3. How long do I need to keep to a budget? How long you keep to a budget depends on whether you are an impulsive spender and on your financial circumstances. You may need to follow your budget strictly for months, even years, until you have your finances under control, or you may need only a few weeks to establish your new spending pattern successfully. Whatever you do, we suggest you continue to keep regular records of expenditure. This will also help at tax time (see Chapter 16). I used to manage my money better when I earned less. What has gone wrong? The old saying that, ‘The more you have, the more you spend’, is true. Subconsciously you are aware that there is more money coming in, so you have adjusted your life to accommodate it. If you want to save the extra money, you need to do an appropriate budget and stick to it.

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What if I need a little treat occasionally? Don’t become fanatical about saving money. Allowing yourself a small reward now and then makes it a little easier to keep to the budget. There is a difference between making your income stretch as far as possible, and becoming a miser. If you want to donate $20 to The Red Cross or Community Aid Abroad, do it and cut back somewhere else. It is essential that you feel good about yourself; the idea is that you are in control of your money, the money is not in control of you. And an occasional ‘splurge’ on a film or dinner out may be worth the cost for the pleasure it gives you. Life is meant for living. As stated at the beginning of this chapter, budgeting can be a boring task. However, if your spending is out of control, you must change your lifestyle, and it will be much easier if you do it voluntarily before debt collectors do it for you.

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SAMPLE BUDGET SHEET (To the nearest dollar) INCOME (weekly/fortnightly/monthly) (circle one) Salary/benefit/pension $ Other income (for example, bank interest, $ family allowance, child support) TOTAL INCOME (weekly/fortnightly/monthly) (circle one) $_______ EXPENSES Housing rent/house payment council rates water rates maintenance/repairs furniture Food supermarket greengrocer/market milk and bread lunches, takeaway meals Insurance house and contents life medical Utilities gas electricity telephone mobile telephone Personal care clothes/shoes haircuts, and so on dental chemist (regular medicines)

$

YO U R

BUDGET

OR

Children child-care costs school fees uniforms textbooks pocket money child support other activities (sport, music, dance lessons) Transport fares petrol car registration and insurance parking costs motorists association (for example, RACV, NRMA) Miscellaneous alcohol/cigarettes entertainment/Lotto/holiday pets (vet. fees, registration) books/newspapers/magazines gifts (birthdays, Christmas, and so on) other (for example, credit cards, personal loans, church commitment) TOTAL EXPENSES After deducting total income from total expenses, SURPLUS/DEFICIT

MONEY

PLAN

$

• 21

SAMPLE YEARLY PLANNER HOUSING Rent/mortgage Council rates Water rates Maintenance Furniture INSURANCE House & contents Life/other Health/super UTILITIES Electricity Gas Mobile Telephone FOOD CAR 1 Registration Insurance Maintenance CAR 2 Registration Insurance Maintenance LOANS Personal Credit cards MONTHLY TOTAL $ YEARLY TOTAL = $

JANUARY

FEBRUARY

MARCH

APRIL

MAY

JUNE

JULY

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER DECEMBER

Divide by 26 (per fortnight) or 52 (per week). TOTAL = $

Chapter 2

Better banking

A bank is a place that will lend you money if you can prove that you don’t need it. Bob Hope

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e are becoming increasingly cynical about banks, particularly those of us living in small country towns and suburbs which have lost their local branches. We no longer believe banks to be customer-friendly, except perhaps towards big business; their aim seems to be to make a profit for their shareholders. Because it costs banks and other lending institutions far more to serve a customer over the counter than over the telephone or via computer, they are forcing electronic banking on their customers by charging higher fees for counter service. According to research by the Australian Consumers Association, the average bank customer can save up to $140 in a year by using electronic banking services. With the user-pays systems now followed by banks, we need to monitor our use of our accounts carefully. The type of account we use, how we withdraw, deposit, transfer and make payments, how much we keep in our accounts and how often we access those accounts, dictates how much we pay in fees.

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New services are constantly being offered by financial institutions and it is easy to become confused by all the options available.

WHAT IS THE DIFFERENCE BETWEEN A BANK AND OTHER LENDING INSTITUTIONS? In reality there is very little difference between modern lending institutions. Banks provide a variety of services to their customers—deposit, withdrawal and transfer of money and cheques in a variety of savings and investment accounts, currency conversion, traveller’s cheques, housing and personal loans, and credit and debit cards. Building societies were initially created as nonprofit organisations to finance home builders. Credit unions also began as non-profit financial cooperatives, usually formed by organisations for the benefit of their employees. New members have to buy shares (usually only a minor outlay) before they can open accounts. Building societies and credit unions offer most of the same services as banks, but may offer cheaper transaction fees; they are neither obliged to provide profits for shareholders and directors, nor do they have as many staff or branches as large banks do. To decide on the financial institution which best suits you, make a list of your requirements then telephone or call at several institutions and ask what they can offer you (see below). You need to know exactly what it costs you every month to have an account with them. Check that there is a branch close to home or workplace so that you can have easy access to your money.

HOW DO I CHOOSE THE MOST APPROPRIATE BANKING ACCOUNT? We recommend that you operate two accounts—one for everyday transactions and one for savings. Use

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your transaction account for weekly shopping and regular bills. Your budget sheet will tell you how much you need to pay in to cover these expenses. Your savings account should be a higher interestbearing account to make the most of your funds. If you arrange to pay in a regular amount to this account your balance will grow rapidly and there will always be something to fall back on in an emergency. If possible, arrange for account statements to be sent at the end of each month so that you can keep track of your money. When choosing a savings account, consider the following: • Are funds available ‘at call’? • How many free transactions are there each month? • What is the interest rate, and how is it calculated? • What is the minimum balance required to avoid account-keeping charges? • What is the cost of government bank taxes? • Does the account have a cheque facility, and what is the limit of free cheques? • Does the account have a range of electronic options, such as: • Automatic teller machines (ATMs)—this is where you use your plastic card to withdraw and deposit money at machines set in the external walls of your bank; this service is provided 24 hours per day. • Electronic funds transfer at point of sale (EFTPOS for short) this is where you use your plastic card and Personal Identification Number (PIN) at the checkout and funds are moved directly from your account to the retailer to pay for your shopping.This service is available at most supermarkets, petrol stations, and other

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retail outlets. At larger stores, you can also withdraw cash when you make a purchase. • Telephone banking—this electronic service enables clients to transfer funds, pay bills, and obtain account balances over the telephone. Remember that account fee structures can change, so always check your statements to ensure that you are not paying unnecessary fees, and that the interest rate is still competitive. Should you become unhappy with your bank’s performance, you can switch to a bank or building society which offers a better deal.

WHAT ARE THE DIFFERENT TYPES OF PLASTIC CARDS AVAILABLE? Credit cards, such as Bankcard, Visa, Mastercard, allow you to borrow cash, buy goods or pay bills; you receive a regular statement of these transactions from the credit card company and you have to pay that amount within a set period or interest is charged. Debit cards give you direct access to your own funds held by a bank. Smart cards, such as telephone cards, contain microchips and are the 1990s version of a change purse, used for low value transactions; each time you use them, the amount spent is taken from the card. Plastic cards can be linked to most accounts and most cards can be used in ATMs which currently allow a maximum withdrawal of $1000 per day. You can make special arrangements with some banks to increase this amount.

HOW DO I MINIMISE THE BANK CHARGES? Learn to take full advantage of your banking facilities while minimising the fees you pay. All lending institutions offer a fee-free basic banking service, but unless you are a very irregular user, some fees creep in. To minimise those fees, use electronic banking methods and not over-thecounter branch transactions.

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This might not be realistic for some elderly or physically handicapped customers for a variety of reasons—unwillingness to accept change, uncertainty about the reliability of electronic payment systems, lack of manual dexterity, the height of ATMs which makes them difficult to reach from wheelchairs. Bank queues are largely made up of elderly people who want to bank as they have always done—face to face with another person, and with the security of handling forms, passbooks and cheques, tangible things which also act as records of deposits and withdrawals. For most of us, however, electronic banking is quick, convenient, and cheap. Use of ATMs, EFTPOS, telephone banking, and internal banking via a personal computer, offer the most cost-effective ways to bank. Most bank customers can transfer money between accounts, pay bills, make mortgage repayments, and obtain account information via a tone-dial telephone, and there are few or no transaction charges attached. Most banks also offer exemptions from account-keeping fees to mortgage customers, students, and pensioners. There are several ways you can maximise your interest and can minimise account and transaction fees: • Shop around to find the bank, building society or credit union which offers you the best interest rates. Look at more than just the quoted or nominal rate; accounts that pay interest more frequently—for example, daily or monthly, rather than half-yearly—result in the best effective or compound annual rate. An account which calculates interest on a minimum monthly balance means that you must be very careful with the timing of your deposits and withdrawals, otherwise you could earn very little

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interest. Also, a lot of people have money, sitting in low interest bank accounts, which is being eaten away by fees. Open a no-frills account and keep within the limit (usually 10 to 12 transactions per month). Be wary about choosing a bank account which offers a lot more free transactions; this may be offset by a large monthly account-keeping fee. Avoid monthly account fees by keeping a minimum balance in your account—the amount varies from bank to bank, but normally ranges from $300 to $500. Steer clear of branch withdrawals—most banks will charge extra for over-the-counter transactions (between $1.50 and $2.50, whereas an ATM withdrawal generally costs a customer about 50 cents). Think seriously about the advantages and disadvantages of a cheque account—a debits tax applies to all accounts with a cheque facility. If you need the convenience of cheques, open an interest-bearing cheque account. Do not use bank cheques—banks charge a minimum of $5 for the privilege. Use EFTPOS to pay for purchases, for example, at the supermarket or service station, and avoid a withdrawal from the bank or ATM. Withdraw cash when using EFTPOS, or use a credit card for purchases and pay the balance by the due date to avoid interest charges. Check if you qualify for a fee-free transaction account. Most banks offer fee-free accounts to pensioners, students, and children. Avoid using ATMs of other banks.This can cost up to $1.50 for each transaction, and an overdrawn account can cost up to $35 each time.

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PROFILE

Bert lives solely on his pension so never has much money in his bank account. He pays his bills by cheque. He had a bank balance of $112.95 when he wrote out a cheque for $100. Between writing the cheque and its presentation, the bank took $15.20 out of Bert’s account in fees. His cheque bounced, he was charged a further $35 and had to pay the recipient of the cheque $8. The bank then charged him another $15 for being overdrawn. Bert lost a total of $58 because of a situation directly created by bank fees. Remember to check your statements in case you are being charged newly introduced fees.

DO BANKS MAKE MISTAKES? No matter how efficient a business is, mistakes do happen. Don’t assume that your bank account or loan statements must be right. Check for unauthorised debits and interest or fee overcharging. Check the terms of your original loan agreement, keep all statements, and any letters notifying the date interest rate changes took effect, so that you can keep accurate records. Most lending institutions readily refund any overcharging.

PROFILE

Alice checked her bank statement and found that one cheque for $200 had been entered twice. She approached her bank and the entry was reversed, but the bank could not explain how the mistake occurred. Had Alice not been so careful, she would have been $200 poorer.

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WHAT IS THE BEST WAY TO PAY MY BILLS? In Australia and New Zealand, cash remains the most convenient and popular form of payment for everyday, low value transactions, and the cheque the most popular form of non-cash payment. The cheque is still the payment instrument of choice for small business. For regular bill paying, however, there are other methods of payment, such as direct debit, telephone, and so on. Cheque A cheque is a written instruction to a bank to pay a stated amount of money to a third party. If you have a cheque account, a book of cheques is issued for your use. Cheques are widely acceptable and can be used to pay bills in person or through the post. An open or cash cheque may be paid into the bank account of the payee, that is, the person receiving the cheque, or exchanged at the bank for cash. Proprietors of shops might give cash for a cheque if the payee is known to them. Open cheques are not safe as they can easily fall into the wrong hands. To prevent this happening, draw two parallel lines diagonally across the front of a cheque and write the words ‘Not Negotiable’ between the lines. The cheque must then be paid into a bank account and is not to be negotiated or exchanged for cash. If a cheque is lost or stolen, immediately advise your bank so that payment can be stopped. If you don’t have your own cheque account and need to pay a particular bill by cheque, you can obtain a bank cheque drawn on itself by a bank. However, banks charge a fee for this service. A cheaper option is a money order, obtainable from post offices. Direct debit You can give a standing instruction to your financial institution to make periodic payment for you, for example, your mortgage. Check to ensure that you are not paying a large fee for this service.

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Telephone banking At the moment, the fastest, cheapest, most convenient and easiest method of doing your banking is by telephone. A touch telephone allows you to pay bills, credit cards, transfer money, and find out the amounts in personal savings, cheque, and term deposit accounts, as well as credit card balances. The first step is to arrange a password with your bank. All you then have to do to use the service is: • dial the bank’s telephone banking operation; • punch in your password using your telephone’s number buttons as you do on an ATM; • choose the service you need from the ones listed by the recorded voice; • use the number buttons again to enter the amount you wish transferred or paid, and so on. If paying bills, make a note of the date paid and the receipt number. Advantages of telephone banking are: • convenience: you can do most of your everyday banking from work or home without queuing at the bank, filling out forms, parking hassles, postage costs. Most telephone banking services are open seven days a week, 24 hours a day; • safety and security: there is no need to carry large amounts of cash from your bank to your creditor; also, even if someone has obtained your password, they cannot transfer money from your account to theirs on the telephone. Bills paid by credit card can be settled by transfer from your regular account on the telephone. BPAY™ scheme With this national service you can use your telephone to instruct your bank to make payments on your behalf to a wide range of billers, including telephone and energy suppliers, and major department stores. Any bill with the BPAY™ logo

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can be paid over the telephone through your bank. To use this system, you need to contact your bank and arrange connection. The Internet can be used for online shopping, banking, and payment services. You can also apply for home loans and overdrafts on the web sites of most Australian banks, and on some sites you can access account information, transfer funds to different banks, and pay bills through BPAY™ access. The benefits are the same as telephone banking— it is fast, convenient, easy, and saves time.

HOW CAN I ENSURE THAT MY CREDIT CARD DETAILS OR PIN IS NOT BEING USED FRAUDULENTLY? The EFT (Electronic Funds Transfer) Code was introduced in the mid- to late 1980s to balance the rights and duties of cardholders and card issuers in ATM and EFTPOS transactions. You must report all lost or stolen cards, or any unauthorised use of a card or PIN, immediately. You are not liable for unauthorised transactions after the loss or theft of a card is reported. It is important to note the cancellation number given by your financial institution. If it can be shown that you contributed to the loss in some way, for example, having your PIN written on your card, or in your purse with your card, you are considered responsible. If it is unclear whether or not you contributed to the loss you are liable for only $50. In cases where it is obvious that you did not contribute to the loss, you are not liable in any way. When punching in your PIN ensure that no-one is looking over your shoulder; recently a group of schoolboys secured card details and PINs by watching customers at ATMs through binoculars and then set up a card manufacturing racket!

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WHAT ARE MY RIGHTS IF SYSTEM OR EQUIPMENT MALFUNCTIONS CAUSE ME TO LOSE MONEY? The card issuer must take responsibility for loss caused by system or equipment malfunction.

CAN I GET A BETTER INTEREST RATE FOR MY SAVINGS THAN IN MY BANK ACCOUNT? If you have saved more than $1000 over your emergency fund, you could place it in a term deposit. A term deposit is one of the most popular forms of investment in Australia and is an effective way to save up for a major purchase, such as a car, holiday, or house deposit. Your money is invested with a bank for a fixed period (three months, six months, five years, and so on) at a fixed rate and, unlike many other accounts, cannot be withdrawn without notice. Term deposits offer a higher interest rate than transaction accounts and interest is calculated daily; you can stipulate whether you want the interest paid monthly, quarterly, six-monthly, or when it matures. To take best advantage of this type of investment, work out how long you will need to meet your savings goal and lock your money away for that length of time. Check with the major banks, building societies and credit unions for the best interest rate to suit the length of the term deposit. You can start a term deposit with as little as $1000, although larger amounts and longer terms attract higher interest rates. The disadvantages of term deposits are: • You are locking your money away for a specified period, preventing you from taking advantage of any more competitive rates offered during that period. • If you need to withdraw your money early, a penalty may be imposed by the institution.

Chapter 3

Live well for less

If you resolve to give up smoking, drinking and loving, you don’t actually live longer, it just seems longer. Clement Freud

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t takes time and effort to save money, but small changes to your lifestyle can make a surprising difference to the cost of everyday living. We have listed a selection of money-saving ideas in the following pages. You may think them pennypinching and reminiscent of the depression era, but many are worthwhile in environmental, as well as monetary, terms. For example, water is a very precious commodity and the more of it you save the more there is for the whole community to share. Try some of these ideas. After a little practice you’ll be doing them automatically, and saving a few dollars on a regular basis could turn you into a wealthy woman! If you are not working, time is something you have plenty of. It can be very satisfying to use it in productive and creative ways—renovating furniture or hunting for bargains for yourself or your home— and it can also be fun; these are pleasures the rich don’t have.

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WHAT STEPS CAN I TAKE EVERY DAY WHICH WILL SAVE ME MONEY? • Make full use of the free facilities available at your local library—daily newspapers, books, magazines, audiovisual tapes, pre-school storytimes, school holiday and after-school activities, computers (often with the Internet) and printers. • Use other resources in your local community— playgroups, toy libraries, babysitting clubs. It is much cheaper to join a toy library and babysitting club than buy toys or pay for babysitters. • If you buy a newspaper each day, take up the offers of regular delivery at a set price, a saving of well over $100 a year. • Pack a cut lunch for work or school; this will save several hundred dollars in a full year. • Try cutting out one or two packets of cigarettes each week. Saving $5 a week is more than $250 in a year. • Avoid giving in to your children’s pleadings for expensive, high status gear—these fads are usually short-lived, and then they will want whatever the next ‘craze’ happens to be. • Why become a victim of advertising? You are not going to be any richer or happier by buying the right under-arm deodorant or wearing the latest fashion colour. • Lay-by your Christmas, birthday and other gifts at sales during the year.You can pay them off a little at a time and no interest will be charged. • Do not give in to all the media pressure to buy big for Valentine’s Day, Easter, Mothers’ Day, Fathers’ Day, Christmas ... the list is endless, and you will be always out of pocket. Remember, it is the thought that counts, and a home-made cake or bunch of flowers from your garden will

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be treasured just as much as, or more than, a store-bought gift. If you want to do something special for a friend but have no money, make an attractive booklet of ‘coupons’ which promise a variety of deeds such as babysitting, running errands, weeding her garden, walking her dog, and so on. • Leisure activities need not be expensive.Walk to a nearby park, visit friends for a barbecue, feed the seagulls at the nearest beach, fly a kite, picnic in the park, stroll through a local art gallery, visit a craft market (without taking your purse), go fishing, organise a neighbourhood game of cricket or football, or have a street party where everybody brings their own food and drink. • Buy greeting cards in mixed packs, or from cheaper outlets which offer several cards for $1 or $2.To pay $3.50 for a greeting card which will be discarded is a waste. Creative homemade cards are always appreciated by the receiver and satisfying to make for the giver. • Before you buy clothes, check the label. ‘Dryclean only’ garments will cost a fortune to keep clean. • Do not carry large amounts of cash and, if you are easily tempted, leave your credit cards at home; if you have neither cash nor credit cards available you cannot use them. • Start a ‘piggy bank’—each night, empty any loose change from your purse or pocket into a jar or moneybox.You will be surprised at how quickly these coins, which you will not miss, accumulate into a sizeable amount. • If you have a vehicle, carry a variety of coins in a separate purse for parking meters. If you only need 40 cents for 40 minutes parking time do not put in $2 for two hours.

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These suggestions may not seem worth all the effort involved, but remember, a $20 saving each week will amount to $1040 in a year.

DO I NEED A CAR? The two most expensive items on a budget can be house mortgage or rental payments, and car repayments and running costs. With fuel consumption, depreciation, maintenance costs and government fees, a smaller 4-cylinder car costs between $100 and $150 per week to run, and a 6- to 8-cylinder vehicle costs between $140 and $230 per week, not including car repayments. Usually the larger the car the higher the petrol cost—four-wheel drive vehicles can cost twice as much to run as a small car. Compare your car’s overall costs, including car repayments, insurance, registration, driver’s licence, fuel, road tolls, parking fees and fines, and driving offences, with the cost of public transport, or even taxis. With public transport you pay fares only. If you live a long distance from your workplace and have few public transport options, you might need a car. Otherwise, it may surprise you to discover how much money you could save if you walked, rode a bicycle, or caught public transport to work or to school, and how productively you can use that travel time. Consider other factors than cost when thinking of your transport options. The cost of running a car and the convenience of having your own transport must be balanced against the savings in time, as public transport is not always reliable. Car pooling is another option. Ask your neighbours and colleagues who live nearby if they are willing to share the costs of petrol and parking fees However, the bottom line is, if your car is costing more than you can afford, sell it. Buy smaller and cheaper, or use public transport to travel to work, and a taxi when you really need to go somewhere by car.

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HOW DO I SAVE MONEY ON MY GENERAL SHOPPING? • Make use of opportunity shops, fêtes, and garage sales. Bargains in books, clothing, and furniture can be found if you look carefully, but you should check items carefully for faults before you buy them. If you can do an ‘invisible mend’ on that jumper, buy it. Otherwise leave it; it is not a bargain if there is a large hole in the middle of your chest. • There are books available in most States which list factory and discount outlets and give information on where to find the best discounts on almost any item you might want. The Bargain Shoppers’ Guide to Melbourne, and The Bargain Shoppers’ Guide to Sydney are for sale at newsagents and should be available at your local library. • Check the Trading Post and the ‘For Sale’ columns in your local newspaper for secondhand furniture, baby equipment, toys, cars, and so on. Also, you can use these avenues to sell excess belongings; however, these newspapers may charge for advertising your goods on a ‘no sell, no pay’ basis. • Plan to buy at stocktaking, closing-down and end-of-season sales, for example, airconditioners and fans are reduced in price at the end of summer to make room for heaters and clothes dryers for winter. Always know the normal price of the item you plan to buy, as some ‘sale’ prices are not genuine reductions. • Join a co-operative for fruit, vegetables, and cleaning products. • If possible, shop when the children are at school or kindergarten; children see enticing displays and immediately put pressure on you to buy the goods. • Shop at markets just before closing time on

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Saturdays when stall-holders are anxious to offload their fresh meat and vegetables. • Learn to haggle! You will get a better price at most markets, bazaars, and second-hand shops. • Grocery clearance houses sell a variety of goods at substantially reduced prices because items are past their use-by dates or their packaging is damaged.

HOW CAN I SAVE ON FOOD? Food takes a sizeable amount out of all household budgets. It is often easier to cut down on food costs than on other areas of spending, as sensible shopping and imaginative cooking can save dollars. At the supermarket • Use one supermarket, rather than go to several different stores to pick up ‘specials’. Unless they are next door to each other, this will cost you more in petrol, or fares, and possible impulse buys, than you save. • Limit the number of shopping trips to one a week, if possible. Avoid calling in for just a few items every few days—less time in the store means fewer impulse buys. • Look on the higher and lower shelves, as the expensive brands are at eye level, while the more economical items and brands are placed on higher or lower shelves so that they are harder to find. • Be aware of marketing ploys that encourage you to buy, such as attractive packaging, special lighting, music, enticing aromas, food tasting and positioning of goods.The ‘psychology of shopping’ is widely used—for example, slow background music which makes people walk slower through the store and lighting which creates the feeling that products are cheaper. A high percentage of purchases in supermarkets are unplanned.

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• Make a list, and keep to it. If you do not have the time or inclination to write one every week, make up a basic list of everything you buy regularly.Take that list to the supermarket to jog your memory, or make extra photocopies and each week highlight those items you need to buy, adding any extras not on the basic list. • Work out a menu plan for the week, but do not make it rigid. A flexible menu—two meat meals, one fish, one pasta, two chicken, one vegetarian—allows you to take advantage of the best buys in meat, fish, fruit, and vegetables. • Avoid shopping when you or your children are hungry; have something to eat before you go to avoid having to listen to repeated requests for snacks. • Know the prices of food in your local shopping centre, so that you can recognise genuine ‘specials’.The ‘specials’ are usually expensive brand items; check the price against other brands or the generic (house) brand products. • Buy a ‘special’ only if it is an item you would regularly buy, or is on your list that particular week. Be wary of dented or rusty tins; the food may be spoilt.Avoid buying something ‘in case you need it one day’. Do not buy dairy products that are close to their use-by date unless you plan to use them immediately. Meat, fruit, and vegetables on ‘special’ can be good value, but make sure that they are not past their prime or of inferior quality. • Buy food of good nutritional value. As a general guide, spend 10 per cent of your supermarket budget on non-food items such as toothpaste, shampoo, disinfectant, and so on, and divide the rest as follows: — 55 per cent for cereals, breads, grains, pasta, fruit, and vegetables; — 25 per cent for meat, chicken, fish, eggs, milk and dairy products; — 10 per cent for margarine, butter, oil and

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other items, including biscuits, sweets and chips. Cut back on ‘junk’ foods. Lollies, soft drinks, packet of chips, sweet biscuits and cakes are expensive, high on kilojoules and will increase your weight and your dental bills. Generic or house-brand products can be a good buy, especially for basic foods such as sugar, margarine, flour.Tinned fruit and vegetables are usually acceptable quality and an economical choice, though you may get slightly less produce and more liquid compared with regular brands. However, house-brand cleaning and laundry products tend to be weaker, so you use more—not economical in the long run. Note: If you are committed to ‘Buy Australian’, be aware that house-brand goods tend to be imported. Check the net weight of the different sizes of items and compare costs as larger sizes are not always the best value. It might be cheaper to buy two packets of four toilet rolls than one eight-pack. Use a calculator to divide the cost by the number of rolls, then multiply by the number of rolls in each pack to find which is the best buy. Invest in a freezer, if possible, to store ‘specials’, particularly meat. Most perishables, including bread and milk, can be frozen. Cheaper cuts of meat can be as nutritious as fillet steak when cooked as casseroles, meat loaves, hamburgers, and so on. However, meat with a lot of bone and fat, such as shanks, might not be as economical as its price makes it seem. Be wary of pre-packed fruit and vegetables as inferior pieces may have been packed in the bottom of the bag. Compare prices of frozen and tinned vegetables with fresh as fresh is not always the best buy. Frozen vegetables compare very well with fresh

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for nutrition. Canning does cause some vitamin and, possibly, some flavour loss, but tinned or frozen produce is excellent for use in soups, casseroles, and so on. • Check prices as they are scanned at the checkout because, if an item is scanned incorrectly, you are entitled to that item free of charge.This applies to only one item. At home Plan to use all of the food bought by freezing leftovers or having a weekly ‘clean out of the refrigerator’ night to use them up. Vegetable scraps can go into the freezer for soup, and bread crusts used for breadcrumbs or croutons. If you throw away the crusts from three loaves of bread a week, this is the equivalent of 12 loaves a year. • Cook or prepare food at home as often as possible as takeaway, ready-prepared food and bought lunches can wreck your budget. Make up several quick, easy meals, prepared with ingredients from the pantry, and freeze for another day, so you will be less tempted to buy takeaways. • Cut down on the amount of meat you serve— 120 grams per person per day is plenty—and don’t serve meat every night. Experiment with vegetarian and pasta dishes, cheese and eggs. Baked beans on toast is filling and nutritious. Occasionally replace some of the meat or chicken in casseroles and stews with dried beans or lentils. • Take your own food and drink to ‘events’; takeaway food and snacks are particularly expensive. • Use breads and cereals as snacks for hungry children; they are inexpensive, filling, and good food value.

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• Drink tap-water rather than expensive bottled water which is not necessarily healthier than tap-water in most of Australia. • Use loose tea in a pot or a tea infuser to make your ‘cuppa’. Loose tea is much cheaper than tea bags—you get twice the tea for half the price!

CAN I SAVE MONEY ON MEDICINES? It is easy to run up big bills at the pharmacist, particularly if you have a chronic illness, or an accident-prone family member. However, there are ways you can save on your health bills: • Shop around. Prices vary among pharmacies, even for prescription items. • Antacids, simple analgesics, fibre supplements, vitamin pills, and condoms, are cheaper to buy from supermarkets than from pharmacies. For example, a ‘No Frills’ packet of paracetamol is one-quarter of the price of the pharmacy product. • Use adult preparations for older children— a 25-kilogram child can take half a paracetamol tablet, rather than the equivalent dose of more expensive syrup. • Ask your pharmacist for cheaper generic brands of prescription drugs. • Government concession cardholders are entitled to additional subsidy for Pharmaceutical Benefits Scheme (PBS) medicines on presentation of their cards. • If you and your family need a lot of medicines in any year, there is a PBS safety net to help protect you financially. Keep a record of your spending on PBS medicines. If you reach the safety net threshold, you can apply for a safety net entitlement card and your medicines are

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cheaper, or free for the rest of the calendar year. • If you have private health insurance with pharmaceutical cover, a ‘private’ prescription for a larger quantity of medication, rather than the amounts supplied on the PBS, can save money.

WHAT ABOUT SAVING MONEY ON CLOTHES AND SHOES? • Make the most of charity shops, garage sales, seconds outlets, school fêtes.You may not find exactly the outfit you are looking for, but if you can sew, the possibilities are endless. Charity shops often have racks of evening wear made from beautiful silk, satin, velvet and laces; use the fabrics to make unique clothing for yourself or your children.They also stock an assortment of men’s suits which can be adapted very easily into smart trouser suits for women, or the top worn as a jacket. • Upmarket clothing recycling shops often have designer garments at less than half their original prices.They are usually well-made garments which last for many years without dating. • Organise an ongoing children’s clothes swap among family and friends, so that clothes are handed down from older to younger children. • When buying new, buy versatile fashions which do not date. Choose several quality garments— jacket, pants, skirt, and a few shirts or tops— which you can mix and match for different occasions. • Many shoe manufacturers have seconds outlets where shoes can be bought for much less than in the shops. • Handbags and accessories can be bought at major markets.

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HOW CAN I LOOK GOOD WITHOUT SPENDING A FORTUNE? • Hairdressing and beauty colleges, natural therapy schools, and so on, offer cut-price, and sometimes free, treatments to customers who are willing to be worked on by students. • Ignore the repeat instructions on the shampoo bottle—one wash is enough. Shampooing twice is pouring money down the drain. • A small amount of conditioner, the size of a 10 cent coin, is enough for shorter hair. • The most expensive skin creams and moisturisers are not necessarily the best; sorbolene cream or Vitamin E moisturising creams are excellent and inexpensive all-over moisturisers, and large packs can be bought for approximately $2 in the discount shops. • There is no need to wear lashings of lipstick, blusher, mascara, shadow, and so on—cultivate the natural look with only a light foundation and neutral lipstick. • Finish worn-down lipstick by using a lip brush. • Vaseline is a good substitute for lip gloss and will remove eye make-up, including waterproof mascara. • Keep nail polish in the refrigerator—it keeps longer. • Baby oil is an efficient remover of eye make-up. • Do not cover your brush with toothpaste; a small amount is enough to clean your teeth. Any more is not only wasteful but can also be unhealthy, especially for children, who tend to swallow it. • Carefully cut open plastic tubes or bottles to use up the last of the hand cream, shampoo, toothpaste, and so on. • Save soap scraps and put them into a large

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sponge that has a slit cut along its length in the centre. Use the sponge in the shower or bath. • Use natural remedies whenever possible, rather than expensive shop-bought creams. Dab Vegemite, which contains Vitamin B, on mouth ulcers. Cultivate an aloe vera plant—the sap assists healing and is particularly good for burns, insect bites, and nappy rash. Chew parsley as a breath freshener. Read about other natural remedies at your local library.

WHERE DO I FIND BARGAINS ON HOUSEHOLD GOODS? • Second-hand stores, charity shops, and garage sales, are good sources for furniture. Many charming items, and occasionally a valuable antique, have been found when stripped of several layers of paint. However, examine old furniture in a good light for signs of woodworm, rust, rotting legs, and so on. • Auctions and factory outlets can yield inexpensive, but good-quality, furniture in excellent condition, including televisions, computers, desks, and filing cabinets. Dates and times of auctions are announced in the general auctions sections of the daily newspapers, or you can telephone the auction houses directly. Look under auctions in the Yellow Pages. • Ask to see electrical goods running for a reasonably extensive period if they are for sale privately or at second-hand shops.They are not usually covered by a warranty. • Auction houses are a good source of cheap whitegoods, but again might not be covered by a warranty; also you might have to transport them home yourself. • Older reconditioned washing machines can often be bought cheaply from repair shops.

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HOW CAN I SAVE ON CLEANING AND LAUNDRY PRODUCTS? Cleaners, laundry items, and personal products are often in the first aisle of the supermarket where customers tend to buy more. It is easy to overspend in this area because most of us are particularly conscious of the need for the highest standards in both personal and domestic hygiene. Many cleaning products are unnecessary for cleanliness and are damaging to the environment. To simplify your cleaning routine and save money, follow these suggestions: • Buy a general-purpose cleaner and use it for most cleaning jobs.You do not need separate products for floors, toilets, baths, and ovens. • Wash windows with old newspapers dipped in warm water; polish with dry newspaper. • Eliminate or cut down on unnecessary products such as toilet dyes, paper napkins, fabric softeners, paper towels, and air fresheners. • Disinfectants are rarely necessary.Thorough cleaning and drying of surfaces retards growth of bacteria. • For an effective toilet cleaner use one cup of vinegar in the toilet bowl. Leave it for a while and brush in the usual way. • Always measure soap or detergent. Never pour straight from the pack. • Use a liquid detergent for dark clothes only. Liquids are convenient, dissolve easily, and clothes do not come out with powder streaks, but they generally cost more than powders.

HOW CAN I ECONOMISE ON GIFTS? Gift-giving need not cost a lot of money. A handmade card, or an inexpensive purchase, thoughtfully chosen, can please just as much as a more costly

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item. Discount shops are a good source of small gifts such as coffee mugs, pots for plants, kitchen items, hair accessories, wrapping paper, and much more. Here are some suggestions: • For a garden-loving friend, cultivate cuttings from plants in your garden or in the gardens of friends and neighbours. Once fully established, these plants can be repotted into a bright, but inexpensive, pot. • Shop continuously for gifts. Buy items on bargain tables or ‘on sale’, for particular friends or relatives. Put them away until needed, but not so well that you forget you bought them.

I LIKE TO SOCIALISE WITH FAMILY AND FRIENDS— CAN I DO THAT WITHOUT OVERSPENDING? There is no need to put on a lavish banquet to entertain friends and family. There are many ways you can get together without breaking your budget: • Arrange a barbecue; you supply the venue and salads, and your guests bring their own meat and alcoholic drink. No top-of-the-range gas or electric barbecue is needed for this; a hot-plate or grill tray set over some built-up bricks does the same job. • Have an after-dinner games night.You supply the venue and nibbles, your guests bring their own alcohol and, if necessary, their favourite board or card games. • Organise a picnic in a park; everyone attending brings their own everything. • Write to television channels asking for free audience tickets for your favourite shows. (You may have to wait to reach the top of the waiting list.) • Invite two or three friends or couples over, with each bringing a course, for example,

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starters, soup, dessert; you supply the main meal. • Go out for lunch rather than dinner; main courses are usually cheaper at midday than in the evening.

IS IT POSSIBLE TO SHARE SOME LIVING COSTS WITH OTHERS? There are a variety of cooperatives within most communities which pool resources and consolidate chores. Check at your local neighbourhood house or community centre. If there is nothing in your neighbourhood that offers the service you want, start your own. • Persuade other mothers to start a car pool to ferry children to and from school. • Start a babysitting club. • Trade work. If you hate ironing, but love gardening, do a deal with a friend; she does your ironing while you weed her garden. • Start a book-swapping club. Members pass on books they have enjoyed, so all members benefit financially by not having to buy their own copies, and also discover new authors and writing styles. Some communities have a bartering system where labour is exchanged, but no money is involved. The LETS (Local Exchange Trading System) began in Canada in 1983 and has been adopted in various parts of Australia. With this system, one member might earn points for typing a résumé, another for cleaning a house, another for fixing a leaking tap. Members are paid in ‘quolls’—one quoll being approximately equal to one dollar—and a central administration keeps track of quoll balances. Members usually pay a cash joining fee to cover

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administrative expenses, which cannot be bought with time; they receive a directory listing local members and the services they provide, and a cheque book to pay for the services. If there is no LETS operating in your area, why not start one yourself? However, be realistic. You will still need a monetary income to pay for your food, rent, and utilities.

Chapter 4

Saving on regular bills I’m not worried about making my ends meet, I’d just like to get them to wave to one another. Anonymous

Y

ou can achieve substantial savings in your utility bills by forming energy-saving habits. Following even a few of those listed below will make a difference to how much you pay.

HOW CAN I REDUCE MY WATER USAGE? There are many commonsense ways you can minimise your water use: • Use a glass of water to rinse your mouth after brushing your teeth, rather than having the tap running.This could save thousands of litres a year. • Don’t rinse dishes before loading them into your dishwasher; use the rinse/hold setting instead. Pack the dishwasher carefully and only use when the machine is full. Opening the door after the rinse cycle eliminates the need to use the drying cycle, thus saving up to one-third of the energy consumption. • Handwash dirty dishes only when you have enough to warrant a full sink of water. • Check that the thermostat on the hot-water

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service is not set too high, particularly during summer. Shower, rather than take a bath; an average bath takes about 68 litres of water. Limit your shower to three minutes. At five litres per minute, you will use 15 litres, saving 53 litres by not having a bath. Install a water-efficient shower head. Turn off dripping taps. Siphon bath and laundry water outside for use in the garden. Water only your plants, not the lawn; it will go brown in summer, but will recover. If you must water your lawn, put an empty ice-cream container near the sprinkler.When the water is 10 millimetres deep in the container, your lawn has had enough water. Put a timer on your sprinkler or, better still, install a drip system and a timer in your garden. Park your car on the lawn to wash it; spray quickly with the hose (except in those States where restrictions apply) to loosen grime, then use a sponge and bucket to wipe away the dirt. Rinse again quickly with the hose and wipe. Wash fruit and vegetables together in a plastic bowl of water, rather than hold individual items under a running tap.The water can be then thrown on the garden.

Put half a brick in the toilet cistern, or invest in a dual-flush system, either of which can save five litres per flush.

TIPS HOW CAN I SAVE ON MY POWER BILLS? General appliances: Televisions, videos, stereos and computers can add substantially to your power bills; switch them off when they are not being used.

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Lights • Switch off the lights in rooms not being used. • Use only essential lighting. • Use light globes of the appropriate wattage, for example, replace 75 watt globes with 60 watt for lamps. • Turn off lights outside, except for safety and security needs—they only attract insects. • Use the new low energy, long-life globes instead of traditional globes. Cooking • Boil only as much water as you need in your kettle. • Turn off electric hot plates and ovens a few minutes before the food is cooked. Stored heat finishes the cooking. • Pre-heating a gas oven is unnecessary. • Use your electric frypan, microwave oven, pressure cooker, crock pot, if you have them— all reduce cooking times. • Cook complete meals in the oven. • Cook double the quantity of food and freeze enough for another meal. Refrigerators, freezers, airconditioners • Keep the refrigerator thermostat set between 3 to 4 degrees Celsius. For every one degree lower, the refrigerator will cost 5 per cent more to run. A freezer temperature should be between 18 degrees and 15 degrees Celsius. • Avoid opening the refrigerator door more often than necessary, or standing for long periods holding the door open. Men and teenage children are usually the main offenders here. • Defrost old-style refrigerators and freezers regularly; ice build-up reduces efficiency.

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• Take care not to place a refrigerator or freezer close to the stove, in direct sunlight, or in a hot enclosed area—it will have to work harder and therefore use more energy. • Keep the coils at the back of refrigerators and freezers free of dust and check seals regularly. If you can slip a piece of paper between the refrigerator and the seal when the door is shut, it is time to renew the seal.

TIPS

• Allow food to cool slightly before refrigerating. • Empty the refrigerator and freezer and turn them off before going away, leaving the doors open to prevent mould. • Install airconditioners away from direct sunlight. • Close curtains and doors, and shut windows, when airconditioner is running. Laundry • Wash in cold water; hot water damages some fabrics, and clothing washed in cold water is just as clean. • Save washing until you have a full load. • Recycle your water if your washing machine has a suds-saver facility, for example, water used for a white wash can be reused for coloureds. • Hang your washing in the fresh air. On wet days, hang the clothes under a carport or in a garage, or indoors on a clothes airer. Clothes dryers are expensive to run. Heating • Keep your heating appliances clean and dustfree for safety and efficiency. • Put on an extra layer or two of warm clothing instead of turning the heater on or up, if you feel cold. • Close windows, curtains (preferably ones with insulated lining) and doors to keep warm air in, and keep doors of unheated rooms closed.

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• Let in as much sun as possible during the day in winter and close curtains and blinds at sunset to retain the heat; in summer, close the curtains and blinds to keep the hot air out. • Cut heat loss substantially with double-glazed windows. • Seal all gaps, use padded draught-stoppers along the bottom of interior doors, and block off all unused fireplaces. • Put insulation in your roof; your house will feel warmer in winter, cooler in summer, and you could save hundreds of dollars each year in heating and cooling costs. Telephone • Keep a money box beside the telephone and put in 50 cents for each call; this will cover the major part of your bill. • Walk over and pass on messages personally instead of telephoning neighbours. It is cheaper and better for your health. • Compare prices and use the telecommunications company which offers the cheapest deal. This may mean that you have different providers for local and long-distance calls. • Treat STD (long-distance) calls differently from local calls. Keep them short and telephone when rates are cheaper. Providers now offer discount rates at regular intervals, but read the small print with these deals. A provider might offer 30 minutes for $8, but it is costed in halfhour blocks—if you talk for 32 minutes, the charge is $16. Cheaper still, write letters to your friends living interstate and overseas. • Use prepaid telephone cards because you then know exactly what you are spending. Always ask yourself, ‘Is this call necessary?’ Mobile telephones are a luxury, unless needed for business purposes or if you travel on your own, particu-

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larly at night. Mobile calls are charged for each block of 30 seconds, so if your call takes 40 seconds, you are charged for 60 seconds.You pay for your calls and a monthly access fee.The cost of calls varies, depending on your contract. Shop around and always read the fine print. • Always double-check your bills; overcharging does occur.

WILL UTILITY SERVICES BE CUT OFF IF I CANNOT PAY MY BILLS? If you cannot pay your telephone account, contact the company to arrange a repayment plan. If you cannot pay your gas and electricity bills, you can arrange to pay an agreed amount each fortnight or each month. Provided that you contact the utility company within a set time of receiving your bill, suppliers generally offer you additional time to pay. Contact your supplier or check your bills for details of other paying systems. People living in Victoria can apply for a utility relief grant which provides a once-off grant in certain emergency situations to cover a gas or electricity bill (and water in some areas); it is not a form of ongoing relief. Water is an essential service; water companies must follow several steps before threatening customers with legal action. They cannot disconnect your water supply, but can restrict it, that is, have your flow turned down so that the shower runs very slowly. Before a water company can restrict service, they must: • send a bill, followed by two reminders and one restriction warning notice; • provide advice about government concession schemes and other payment plans; • contact you personally to advise that you risk having your service restricted.

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PROFILE

Mrs A. has a debilitating mental illness and requires her husband’s constant care. The couple survive on a carer’s pension of $550 per fortnight, and sometimes cannot afford basic foods such as bread and milk. The utilities companies allow Mr and Mrs A. to pay small amounts each fortnight off their telephone, gas and electricity accounts. However, when their water account rose above $700, Mr A. was told to expect a court summons in seven days and was reminded that if he didn’t pay his account his water supply could be restricted. A financial counsellor negotiated for Mr A. to pay $25 a fortnight off his water bill.

Chapter 5

Housing: rent, buy or build Why the emphasis on home ownership when life itself is only leased? P.K. Shaw

RENTING A PROPERTY Once you are earning a reasonable wage, you will probably want your own space. For most of us, our first home will be rented. Though some people talk scathingly of rental payments as ‘dead money’, it should not be looked at in that way. It is simply another economic transaction—the price you pay for shelter. Renting is a lifestyle choice for some people and a financial necessity for others. What are the advantages and disadvantages of renting instead of buying? As a tenant, you have certain advantages over home buyers: • you are not tied down to a particular area; • you have mobility and are free to move for a job transfer, for example, without having to sell a house; • you are not responsible for repairs or maintenance on the property, or council rates;

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• you can rent a better home in a better area than you can afford to buy; • you are protected by Tenancy Acts. Some disadvantages of being a tenant are that you have: • limited choice of properties, particularly for large and low income families; • high rents which can amount to a small fortune in the long term; • insecurity of tenure—you can only be assured of living in the property for the term of your lease; • restrictions on changing a rental property to suit your taste; • the risk of having poorly maintained properties and rogue landlords. What can I really afford to pay for rent? Before you start scanning the classified advertisements or visiting real estate agents, look at your budget. What other costs will you have, such as gas, electricity, telephone and food, not forgetting the initial costs of bond, rent in advance and connection fees for utilities? Will you still have money for entertainment, clothes, petrol, fares, and so on? As a rough guide, you should commit no more than 25 per cent of your income to rent. How do I decide where to live? This depends on your budget and your personal circumstances. Do you want to live closer to your family than to your workplace? If you work in the city, can you afford inner-city rents, or will it be cheaper to live in an outer area and commute? Once you have chosen a general area, go to several agents and look at properties they have available within your price range. Before signing a lease, ask yourself:

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• Is it close to public transport? • Is it close to a shopping centre? • Is it on a main road with the bedroom at the front? If so, will traffic noise prevent me sleeping? • Is there a safe car park or car space? • Will I feel secure in this locality? • Are there any restrictions I will resent, such as no pets, no hanging of washing on the balcony, or no paintings on the wall? What are my rights and responsibilities as a tenant? A responsible tenant pays rent on time, asks permission from the landlord before making any changes, and avoids damaging the property. Your rights are outlined below but, as States have different laws about rental properties, rooming houses, and caravan parks, use this as a guide only. If you have further questions, contact the Tenants’ Union in your State (see Part 3). Bond money Also called ‘key money’ or ‘rental bond’, this money is held by the landlord or his agent, generally in a specific trust account as nominated by your State’s Residential Tenancies Act as a security against damage and, in some regions, unpaid rent. The amount of your bond is usually the equivalent of four times the weekly rent for unfurnished premises. If the property is in good condition when you vacate it, your bond money should be refunded in full. Rent in advance A landlord usually requests either two or four weeks’ rent in advance, as well as the bond. Condition report Before starting a tenancy, obtain a report which details any damage to the rental property such as oil stains on the driveway, leaking toilet cistern, cracked shower screen, marks on the carpet

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or walls, and so on. Both you and your landlord, or agent, should sign the report. Show this condition report to the landlord or agent when the tenancy is terminated, so that they cannot withhold your bond money because of these pre-existing conditions. Any disputes can be taken to the relevant tribunal. It is a good idea to take photographs of any defects, using a camera which imprints the date on which they were taken. Utilities The tenant is responsible for paying for gas, electricity and telephone, including any deposits required and, in some States, for either excess or total usage of water. Lease You sign this document at the beginning of a tenancy; by signing it, you accept responsibility for paying rent for the property for a specified period. Always obtain a signed copy of your lease. If you wish to leave before the end of the lease agreement, you must advise the landlord or agent in writing, and negotiate a termination date with them. If agreement cannot be reached, you must apply to your tenancy tribunal. It is a breach of contract to just walk out and stop paying rent; the landlord can apply to the tribunal for compensation and, if compensation is awarded against you, the landlord can pursue you through the magistrate’s court. Discrimination It is unlawful for a landlord or agent to discriminate against a tenant or potential tenant on the grounds of race, colour, ethnic origin, sex, marital status, or pregnancy. Paying the rent Always obtain a receipt for rent payments. If at any time you are unable to pay your rent on time, explain your situation to the landlord or agent. They may be willing to negotiate an arrangement which allows you to meet any arrears, for example, paying an extra amount each week until you are up to date. Do your budget before offering a set amount and do not overcommit your-

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self. If you renege on the arrangement, your landlord might not be willing to negotiate with you again. If you are not paying your rent, or have damaged the property, or are using the property for something illegal, the landlord has the right to issue a notice to vacate and ask the tribunal to have you evicted. If this happens without just cause, seek advice from a tenancy union, financial counsellor, or a local community agency (see Part 3). Insurance: Insuring the building is the landlord’s responsibility, but it is your responsibility to insure your own contents. Don’t undervalue what you own. If you do an inventory of your belongings, including clothing, CDs, videos, and so on, you will be amazed how much it would cost to replace them. Insure all contents with a fire and theft policy. Bond/rental assistance In most States the Department of Housing has a rental assistance scheme to assist with rental bonds; some include rent, removal costs, and service connection. This assistance is subject to a strict means test. Check with your local authority. Emergency repairs If an urgent repair is needed and you have been unable to contact the landlord or agent, you can go ahead with the repair, though in some States the amount is limited to $1000. Landlords are obliged to reimburse tenants within a reasonable time, so keep receipts. An emergency repair can be: • • • • • • •

a burst water service; blocked or broken toilet system; a serious roof leak; a gas leak; a dangerous electrical fault; flooding; damage from storm, fire, or impact.

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If a leak or burst water service, and so on, damages your possessions, the landlord’s insurance should cover the damage. If general repairs are needed, approach the landlord first. If you obtain no satisfaction, you can go to the tribunal. Once again, seek advice. Sharing You must have the landlord or agent’s permission before bringing in other tenants to share the premises. Entry by the landlord or agent Tenants have the right to their privacy and, except in the case of emergency repairs, landlords are required to give notice of intent to visit. Usually you cannot refuse access if notice is given by the landlord for carrying out repairs, inspecting the property, or showing the premises to prospective tenants or buyers. Check your relevant Residential Tenancies Act. Notice to vacate In Australia the amount of notice required differs between States. Check local requirements. What are my rights as a tenant if I have a dispute with my landlord? If you live in public housing, contact your local tenants’ association or similar organisation that settles disputes between tenants and landlords (see Part 3).

BUYING A PROPERTY Australia has a high home ownership rate. So entrenched is the drive to own a house that some of us start saving for a deposit as soon as we start our first job. Others buy because they are tired of paying rent to pay off someone else’s mortgage, or they consider property a good investment. This is not necessarily true in the late 1990s with relatively low inflation; the capital gain on a home may not outweigh the overall cost, that is, purchase price plus

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interest on loan, stamp duty, legal fees, agent’s commission, rates, ongoing maintenance, and other outlay. You might be better off renting your dream home and investing in shares instead. If you are a prospective home buyer, you must be fully prepared for what will be the biggest purchase of your life. Make a careful list of your goals, limitations, and capacities, before you start looking. How do I start? The first step is saving enough for a deposit. This can be difficult if all your money is going out in rent. You need a minimum deposit of 5 per cent, plus costs. Most lenders require at least 10 per cent of the purchase price of the home as a deposit. If you have a smaller deposit, lenders may require you to take out mortgage insurance. This is a one-off payment to a mortgage insurer when you first take out the loan. It protects the lender, but not you, if you are unable to repay the loan (see case profile in Chapter 14). The next step is working out what you can afford. The golden rule is, don’t overcommit yourself. The amount you should borrow depends on: • • • • •

the amount you have saved for a deposit; your income; your other financial commitments; the prevailing interest rate; the value of the house or unit you wish to buy.

Make your calculations carefully, as there are many hidden costs involved in buying a house. • Stamp duty This tax on property transactions, payable by the buyer to the relevant State revenue office, is set on a sliding scale based on the value of the property. Savings on stamp duty can be made when you buy ‘off-the-plan’ (see below). Also, in some States, low-income

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families and concession card holders are eligible for a stamp duty discount or waiver on the purchase of their first home, subject to a means test. • Government fees Mortgage discharge, mortgage registration and land title transfer are three fees to be paid if you are buying or selling property.The exception is if the property is being given as a gift to the new owner, in which case a flat fee applies. • Service fees on your loan Service fees can add up to hundreds of dollars in extra repayments over the life of a loan.When looking for a loan, ask potential lenders to calculate the total amount of fees and charges, so that you can compare the real cost. Do not plunge into home ownership unless you are certain that mortgage repayments are well within your budget for the full term of your loan. Ask potential lenders as many question as you wish, request a computer print-out of your payments long term, and check the figures carefully. If you plan to have a child, with one parent as full-time carer, take this potential loss of income into account. Borrowing more than you can realistically afford to repay can lead to an unhappy, penny-pinching lifestyle, relationship problems, and the real prospect of losing your home in a mortgagee sale. Remember that, as well as your mortgage, owning a home costs in other ways—house and contents insurance, council and water rates, upkeep and repair, heating and cooling costs, and so on. How do I choose the right home loan? Sorting through the financial terms and estimates can be extremely confusing. Approach a range of financial institutions: banks, building societies, credit unions, insurance companies, and friendly

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societies, which all offer home loans. Lenders today offer flexible conditions and most make provision for early repayment if the borrower’s financial circumstances change for the better. These institutions will assess your ability to repay, generally by working on your average take-home pay and assuming that you can repay about one third of that amount on a home loan. Take along a pay slip or letter from your employer as proof of income, your savings passbooks, and a list of your assets such as cars, furniture, jewellery, superannuation, and so on, and liabilities. When choosing the best home loan for your needs, think about flexibility as well as interest rates. A loan which allows your salary to be offset against the interest charged each week might be much cheaper than one that does not, even if the interest rate is higher. Make sure that there are no ‘buried’ fees; some lenders outsource legal and valuation work which are itemised as separate charges and are not included in the quoted establishment fee. Also check when the bank adds the interest; although most charge interest monthly, others do it every time you make a payment and that can add an extra $3500 over the life of a $100 000 loan. How can I be sure I am not taking on too much debt? When choosing a loan, the most important considerations for would-be borrowers should be that: • • • •

The interest rates are reasonable. The loan terms and repayments are flexible. Any ongoing charges are upfront. There are no hidden fees.

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Some lenders make a big deal of waiving upfront fees, low interest rates, and so on, while not mentioning the extra charges in the fine print. Make sure you know exactly what you are in for by asking the following questions: • Are there any ongoing administration charges for the loan? • How easy is it to increase or decrease the repayments? • Can occasional lump-sum payments be made? • Can I increase repayments if my financial situation improves and scale them down again in difficult times? • What happens if interest rates change? • Is there a transfer fee if I want to switch the loan to another property, any early payout penalty, or exit fee? Obtain four written quotes which give the total cost, including upfront fees and continuing fees. Compare the cost for a two-year period. Resist being pressured into taking out a loan, and don’t accept a patronising attitude, discrimination, or bad service from any financial institution.

TIPS

If you use a computer, there are software packages which calculate everything from the initial contact with real estate agents to a property checklist, budgeting for your loan, estimate of stamp duty, comparison of loan repayments, total costs, and so on. Check with computer software dealers.

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PROFILE

The real cost of a loan Sonia buys a house for $165 000, borrowing $156 000 (about 95 per cent of the cost). With monthly repayments of $1029 during 30 years including an $8 monthly service fee, the total interest charged would be $210 924, and the total cost of the house almost $370 000. If she had had a larger deposit, borrowing $132 000 (80 per cent), her repayments would be $873 per month for 30 years, resulting in a total interest bill of $178 596, and a total cost of approximately $310 000. If she made fortnightly repayments of $437 instead, the term of her loan would reduce to 23 years and an interest bill of approximately $132 000. Are there ways I can pay off my loan sooner? Most loans are taken out over 20 to 30 years, but many people pay them off earlier. Here are some ways to shorten the term of your loan: • Make fortnightly, rather than monthly repayments, as there are only twelve months in a year, but 26 fortnights; this can save thousands of dollars and reduces the period of your loan. • Pay off a lump sum whenever you are in a position to do so.This reduces the term of your loan and the amount of interest you pay overall. • Increase the amount of your regular repayments. • Restructure your mortgage to a home equity or salary account loan whereby your income pays off the mortgage each week; you then withdraw money from the home loan as with a normal savings account, allowing your remaining money to reduce the interest.To make the most of this type of account, use a separate credit card offering an interest-free period for other expenses, then just one transaction is

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needed from your salary account to pay off the credit-card bill before it falls due. NOTE:This type of mortgage is only for the budget-conscious; your mortgage can end up larger than when you started, as regular mortgage payments are not deducted. What happens if I cannot keep up my repayments? If you have difficulty meeting your home loan repayments, perhaps because of illness, or unexpected retrenchment, and so on, there are several avenues you could explore: • Your bank or financial institution may be willing to renegotiate your loan repayments; • Government mortgage relief schemes operate in some States, whereby you are assisted with payment of arrears and mortgage payments may be subsidised.You will be asked to repay the mortgage relief once payments are completed. • You can access your superannuation for mortgage repayments (see Chapter 18). If no help is available and you can no longer afford the home in which you are living, you could: • sell the house and buy a less expensive one; • keep the house, rework your budget (see Chapter 1) and cut back drastically on other expenses; • take in a paying guest if you have a spare room and put their rent towards the repayments. Location, location, location! Is it so important? When buying a property it is important to choose an area that you like and that suits your lifestyle. Make a list of what facilities you need, such as supermarkets, kindergartens, schools, child-care centres,

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doctors, hospitals, public transport, shops, elderly citizens’ clubs, sporting complexes, churches, parks, and restaurants. House and land packages in outer suburbs may be cheaper than homes closer to the city, but these estates sometimes lack facilities. If you have, or plan to have, children, you might want to buy in a community which will later offer employment opportunities for them. Would an older home in an inner-city suburb better suit your particular situation? When you have decided on a desirable area, list your requirements with several local real estate agents, as well as searching through newspaper advertisements yourself. Be honest with the agents about the amount you can afford. Before making an offer on a house, check that no freeways are planned too close to the property, that it is not directly beneath an airport flight path, that it was not built over a tip or quarry, or on toxic soil, and so on. How do I choose a real estate agent? Make inquiries around the area you have chosen about the reputation of its real estate agents. Choose agents with credible reputations for service and results. If you are uncomfortable dealing with a particular agent, go elsewhere. How can I make sure that I am not buying a ‘dump’? Do a thorough inspection Most vendors ‘pretty up’ their houses before putting them up for sale and some major structural defects could lurk beneath that attractive facade. Houses in certain suburbs are prone to problems particular to the area, for example, rising damp, and cracking walls, damp, electrical faults, timber rot, and pests are more frequent in older homes. Before committing yourself to buy, ask an expert with building and pest control qualifications, or an

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architects’ advisory service or similar, to make a thorough inspection of a house. A report on an average-sized home costs about $300. Conduct your own inspection, noting the following: • Musty smells could be caused by poor ventilation, damp below the floor, roof leaks, or lack of insulation. • Crooked or cracked walls may indicate weak foundations. • Freshly painted or wall-papered rooms could disguise recently filled cracks, a sign of possible structural problems. • White or brown deposits on brick walls are signs of dampness. • Rotting skirting boards and architraves, or lifting paint and wallpaper could be caused by rising damp. • Hollow sounds when you tap walls and tiled surfaces could mean plaster or tiles are loose. • Water stains and mould growth on ceilings might indicate excessive condensation or leaks. • Cracks at cornices could indicate problems such as inappropriate removal of walls. • Sloping floors, gaps between floors and skirting boards, and sticking doors suggest sinking piers or stumps. • Burns near electrical switches, fittings and fuses indicate electrical faults. You should also: • test water pressure in taps by turning on several at once; • fill baths and sinks to see if water drains properly; • jump lightly on timber floors at regular intervals to detect any rotten boards;

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• look under floor vents of ducted heating systems for signs of water or rust as leaking water can make the system useless; • check with the council to ensure that any renovation or extension has had a building permit. How do I make an offer? Before you make an offer on a property, know exactly how much you can borrow and have a commitment, in writing, from a lending institution. If the house is for private sale, research the values in the area and offer what you think is a fair market value for the property, either to the vendor directly or through the estate agent, whichever is applicable. Most sellers add a certain amount to their lowest acceptable figure in setting an asking price, and expect to come down. You can offer an amount well below the listed price, especially if your research shows that the set price is unrealistic. If your offer is accepted, you need to put a deposit on the house, the balance payable on the day of settlement, usually 30, 60, 90 or 120 days later. If you change your mind about buying, you may have a three - to five-day cooling-off period, depending on the price of the property and your State’s legislation. If the house is to be auctioned, attending a few auctions beforehand ensures that you are familiar with auction procedure. Inspect the property carefully before the auction date because properties sold at auction do not come with warranties and are sold as they stand. Find out the conditions of sale before the auction. When bidding is slow, auctioneers might pull out ‘phantom’ bids on behalf of the vendor. It would take a brave woman to do it, but you can stop the auction and ask who you are bidding against or whether the auctioneer is bidding on behalf of the vendor. Have a price limit fixed in your mind and do not exceed that limit. If you feel that you might be

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tempted to offer more than you can afford, ask an estate agent, solicitor or reliable friend to bid for you. Remember, a bid, once made, cannot be retracted. If yours is the final bid before the fall of the hammer and the vendor accepts your bid, you must be prepared to sign the contract of sale immediately and pay a deposit. Sales at auction are not subject to a cooling-off period. Can I do the conveyancing myself? Some buyers prefer a solicitor to look over the contract while others choose conveyancing companies. Conveyancing fees range from $400 to $2000. You can do the conveyancing yourself; it takes time, but might save hundreds of dollars. You need to check the title particulars and the zoning of the area to make sure it fits in with your requirements, that any work pertaining to the property was approved, and that there are no encroachments on the land by other properties.

TIPS

Some banks sell straightforward conveyancing kits for less than $100.These kits supply the necessary forms, with instructions on filling them in, where to lodge them, and the statutory fees payable.

Do I need to take out insurance from the date I exchange contracts, or the date of settlement? As soon as you sign the contract of sale, you have effectively assumed an insurable interest in the property. If you have not organised insurance before you sign, you could ring up that day and get a cover note, just to be safe. The vendor also retains an insurable interest in the property until settlement date. What is meant by ‘buying off the plan’? Buying ‘off the plan’ means buying when the development is still in the planning stage. You buy a prop-

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erty at current prices when the real estate market is rising, stamp duty is substantially reduced (you could save thousands of dollars) and there is the possibility of making a nice profit from a later sale. Buyers generally put down a 10 per cent deposit when contracts are exchanged. There is usually no cooling-off period and settlement takes place when the project is completed. You may be able to make minor modifications to the plans to suit your tastes, select from a range of finishes, and may get a discount for getting in early. It is best to have a lawyer check through the contract and do the conveyancing before you sign when buying off the plan. The contract should precisely describe what you, the buyer, will get, including detailed plans of the whole building and common areas, if in a shared complex, and a clear statement of finishes and inclusions, brand names of appliances, type of coating on bench tops, and so on. The contract should also specify the degree of freedom the developer has to vary plans, finishes, and inclusions. Some possible pitfalls with this method: • There can be extra costs involved in the financing; some financial institutions will not lend money for an off-the-plan property as their home loans have to be settled within a short time, and off-the-plan developments can take two years or more to be completed and the loan settled. • The completed project may not match expectations. • You may buy too early and the price for later buyers in the same complex may be lower.

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I am single and am considering buying a unit. Do you recommend this? We encourage you to join the increasing number of single women who are buying real estate, but only if you have done your budget carefully and are sure that you have enough surplus to pay off a mortgage. Many single people who are not partners are buying their own home together, as two incomes are better than one when it comes to paying off a mortgage.

PROFILE

Twenty-six-year old Layla bought a two-bedroom unit for $120 000. She borrowed $94 000 and was committed to a fortnightly repayment of $310 for 20 years. After her loan repayment, tax, superannuation, and so on, was taken out of her pay, she was left with about $500 per fortnight to spend on food, entertainment, clothes, utility bills, and so on. Feeling nervous about the long-term commitment, and the possibility that retrenchment, unexpected illness or bill might mean she could not meet her repayments, Layla decided to take in a flatmate. She saved the $180 she received fortnightly from her tenant in a separate account and each time it reached $1000 she paid this amount off her mortgage. By doing this, Layla reduced the period of her loan and saved herself many thousands of dollars in interest. Is it better to buy an established home or to build a new one? Whether you buy or build depends on your personal circumstances. Most new estates are far from the central business district and may not yet have all the amenities you require (see ‘Location, location, location’ above). However, buying land and then building later, or buying a house-and-land package, may be the only way you can afford to own your own home.

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BUILDING You have bought your block of land and intend to build your home. Visit display homes, the more the better, and decide which design combines all the features you require. Return several times, taking with you various people whose good sense you trust. If you are still happy with the design, go for it. If you prefer to design your own plan, obtain a minimum of five quotes from builders. Make a list of everything you want, and ask questions. Ensure that all your requirements are included in the quote, and beware of the phrase, ‘That’s extra.’ Ensure that the builders and subcontractors are licensed, insured, and will provide receipts for all work done. Keep all contractors to a completion date, or impose a penalty for not meeting that date (subject to weather). Before signing a contract, ensure that there are no hidden costs, such as connection fees for electricity. Go through the contract carefully. Most new homes do not include flyscreens, wire screen doors, security doors, fans, light fittings, window coverings, blinds, extra power points, landscaping, clothes line, concrete path to clothes line, letterbox. All these extras add to the total cost. Make sure the contract includes the clause, ‘Subject to bank finance being obtained’, and do not sign it until your solicitor has checked it thoroughly. Different States will have different rules and laws governing builders and buildings. Find out from your local authority or council whether the builder of your choice is licensed and if any complaints or disciplinary action has been taken against them. In Victoria, new homes carry a seven-year guarantee after completion, and even if the builder goes broke the guarantee will continue. Warranties will be different in other States.

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What happens if I have a dispute with my builder? Each State has its own dispute resolution authority which has inspectors to investigate complaints. If a dispute is not settled, you can proceed to the appropriate tribunal. You should have legal representation at a tribunal hearing, preferably someone who has expertise in the area of building disputes.

Chapter 6

Making a will

Where there’s a will, there’s a relative. Anonymous

A

will is a document which states how you want your property and other assets to be distributed after your death. Assets are items of value owned by you, such as property and investments. Anyone aged 18 or over can make a legal will. If you want to leave your cherished things to your favourite people, you can only ensure this by leaving clear instructions in a legal will. A will protects what you have worked hard all your adult life to acquire and should prevent any challenge to your estate. It ensures that relatives are not disappointed or embittered and that your family is not fighting about what you leave behind, preventing any additional pressure during the stressful time of bereavement. Another way to prevent conflict about your will is to bequeath individual beneficiaries a specific percentage of the estate, rather than leaving particular assets that may change in value over time, leading to possible resentment. A beneficiary is anyone who inherits something from an estate, no matter how small.

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WHAT HAPPENS IF I DIE WITHOUT MAKING A WILL,THAT IS, INTESTATE? If you die without a will, that is, intestate, your partner or next of kin must consult a solicitor who then prepares ‘letters of administration’, that is, documents which authorise an estate to go through probate and be distributed. An administrator will handle the distribution of your estate, and assets will be distributed according to a strict formula, as set down in intestacy legislation. Close family members will eventually receive the bulk of your assets, but as administration costs are charged to your estate, your family may not receive the amount they otherwise would have. Also, because your estate will be distributed according to the law of succession, your life savings could be given to blood relatives whom you dislike or who may be strangers to you. Currently more that half of all Australians die without leaving a will, often resulting in legal and financial problems for those left behind.

WHAT IF I WRITE MY WISHES DOWN ON A SCRAP OF PAPER, BUT DO NOT HAVE TIME TO HAVE IT WITNESSED? Legislation is not uniform across Australia. In Victoria, new legislation (Wills Act 1997) allows the scrap of paper to be taken to the Supreme Court for judgment on whether the deceased intended that scrap of paper to be their will and whether it correctly interprets their intentions for their estate.

CAN A LEGAL WILL BE CHALLENGED? A legal will can be challenged. Once only a surviving spouse or natural children could dispute a will, but now stepchildren, grandchildren, de facto and same-sex partners can make a claim. If a challenge is issued, the court will take financial factors into account—the amount of previous financial support

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given by the deceased to the claimant, the claimant’s current income, the value of the estate’s assets. A court can provide, from the estate, maintenance and support to any person the deceased had a responsibility to look after.

I WANT TO LEAVE MY ESTATE TO A BELOVED FRIEND, BUT HAVE GREEDY RELATIVES WHOM I KNOW WILL DISPUTE MY WILL. CAN I STOP THIS FROM HAPPENING? Your will is your way of having your particular wishes put into effect. If your will is challenged, the court will only make provision from your estate for a person if it concludes that you had a responsibility to support that person.

IF A WILL WAS MADE DURING A FIRST MARRIAGE, AND THERE IS A REMARRIAGE, BUT THE WILL HAS NOT BEEN CHANGED, WHO BENEFITS FROM THE ESTATE? Getting married automatically revokes a will, unless the will was made before the marriage in anticipation of that marriage. If you do not change your will to make allowances for that second marriage, you will be considered to have died intestate and your estate will be divided accordingly. Claims from your second husband and any children will be considered by the courts.

WHAT IS AN EXECUTOR? An executor is the person named in a will to be responsible for carrying out the instructions in the will, that is, the administration of the estate. He or she may have to organise the funeral, file for probate, pay outstanding accounts from the estate, sell any assets, notify the beneficiaries and distribute their inheritance to them; in some circumstances, the executor may have ongoing duties, such as investing

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money to provide continued support for dependants, such as young children or elderly relatives. Your executor/s should preferably be someone you trust, who has the necessary financial and administrative skills to handle the distribution of your assets. Ask your chosen executor/s if they are willing to perform that duty before you name them in your will, as it can be an onerous and time-consuming task. Once named, you should give the executor/s a copy of your will and keep the other copy in a safe place, perhaps with your solicitor or your bank. It is also wise to tell your next of kin where you have left your will. The aim of making a will is to make it easier to sort out your estate after your death, but it is not much use making one if no-one can find it! If you do not wish to burden a friend or relative with this responsibility, your executor could be: • a solicitor or accountant; you should include in your will a clause authorising their fee for this service to be deducted from your estate; • the Public Trustee of your State; however, a substantial fee will be charged to your estate for the administration of your will; • a private trustee company; again, a fee will be charged to your estate for performing this duty. The Public or State trustees also administer deceased estates when people die without a will, or have no relative willing or able to handle it.

HOW DO I MAKE A WILL? If your will is complicated—for example, if you have substantial or diverse assets, or if you or your partner has children from previous relationships— have the will prepared by a solicitor for a cost of anything between $60 and $300. Seek quotes from a few solicitors; some will draft or update a simple

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will for as little as $25. The Public Trustee usually does not charge to draft a will, provided that it is appointed as executor, but it does charge a fee for administering the estate. Professional advice means the document will be easily understood with no ambiguities to provoke a legal challenge. If your will is straightforward, you could do it yourself. You have some options: • use a do-it-yourself will form available from newsagencies; • obtain a will kit as advertised on the radio; • buy a ‘Prepare Your Own Legal Will’ pack sold from post offices Australia-wide; • write your own. Whichever method you choose, you must ensure that: • before you sign it, the will is dated and two witnesses are present at the time of signing; • the will states that any previous wills are revoked; • an executor is named; • all your assets are listed, including personal belongings, life insurance policies and superannuation. Include details of when policies were acquired as some may be subject to capital gains tax; • your liabilities such as mortgages or other loans are listed and the will specifies how debts are to be dealt with; • your instructions are set out very clearly; • your witnesses’ names and addresses are printed at the end of the document; • every page is signed by you and your two witnesses;

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• your witnesses are not beneficiaries or spouses of beneficiaries. (There is an exception in Victoria where witnesses can be beneficiaries.) Think carefully before you write your will and do not alter or amend this will after it is signed and witnessed. Minor changes can be made by adding a codicil, which is a separate document, modifying or adjusting the will, witnessed by two people. (If major changes are necessary, you should draw up a new will.) If you do not wish particular relatives to benefit from your estate, be clear about this and name them in the will. Remember, when a will is challenged, all costs are paid by the estate, so avoiding unnecessary conflict is in all beneficiaries’ interests.

WHAT ARE SOME OF THE COMMON PROBLEMS THAT CAN ARISE WITH WILLS? Problems can arise in the following circumstances: • If your will is not kept up to date. For example, if you leave a property to one child, but later sell that property and buy another, you must remember to amend the will; where children are mentioned by name and another child is born, you must add the newborn’s name to the will or risk leaving that child out of the inheritance. • Divorce, remarriage, and blended families.Wills are more open to dispute in these situations. • De facto relationships.The law varies across Australia, but benefits automatically passed on to a married partner or dependants may not extend to de factos. In Victoria, for example, unless you are provided for in your de facto partner’s will, or unless you can prove you are

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‘a person for whom the deceased had a responsibility to make provision’, you could end up with nothing. If he has children from a previous marriage, no matter how long it is since he has seen them, the property could pass to them. • Same-sex relationships. In Australia, except for the Australian Capital Territory, the term ‘spouse’ does not apply to a surviving lesbian or gay partner. In New South Wales, a same-sex partner can apply for a share in the deceased’s estate if the couple had lived together and shared finances to a degree where there was at least some financial dependence.To avoid expensive legal expenses, gay and lesbian couples need to be exacting when drawing up wills and make provisions to compensate for the law’s failure to recognise their relationship.

PROFILE

Lisa, 26, unemployed, and Andrea, 42, a doctor, had lived together for eight years. Andrea worked long, erratic hours and supported Lisa, who looked after their home (bought by Andrea before they met). Andrea died from a heart attack and had not made a will. After Andrea’s funeral, her two brothers informed Lisa that they were selling the house and that she should make other living arrangements. After consulting a lawyer, Lisa made a claim on Andrea’s estate. In court, Andrea’s family claimed that she and Lisa had shared the house only as platonic friends. However, the court ruled that Lisa was entitled to a share of Andrea’s estate. The extent of the court and legal costs meant that the house had to be sold.

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WHAT ELSE SHOULD BE CONSIDERED WHEN MAKING A WILL? • You can only leave to others what is yours. Assets owned in joint names automatically flow to the joint owner when one party dies, therefore if your house is owned jointly with your spouse or partner, you cannot leave it to your children. • If there are children from previous relationships, you and your partner may be wise to buy a home as tenants in common.This means you can will your share to whom you wish and so can your partner. If one partner dies, the other may have to either buy the other half from the heir or be forced to sell. • Superannuation and life insurance do not automatically become part of your estate, so you must specify on the policies who the beneficiaries will be. • Consider the tax and social security implications for your beneficiaries. Could an inheritance push a pensioner over the assets limit, making her ineligible for continued support? To avoid this, a testamentary trust can be created in a will; assets are put in a trust with only the income distributed to the beneficiary, so that she gets the benefit of the estate, yet retains pension rights. • Consider a family trust if you are disposing of a large estate.This is an ideal way to ensure assets are transferred tax-effectively to your children and perhaps to your grandchildren. Discuss your options with a legal adviser.

WHAT IS PROBATE? Probate is the official proof that a will is authentic, that is, the acceptance by the Supreme Court of your State that the will is valid and that it is the last will in existence. It is not necessary to obtain probate if the estate is valued below a specified amount.

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WHAT IS A POWER OF ATTORNEY? Power of attorney is a formal document which authorises someone you trust to make decisions on your behalf and to protect your best interests when you are unable to do so. • A general power of attorney gives the appointee authority to look after your financial and legal affairs, for example, because of your absence overseas. • An enduring power of attorney authorises the appointee to make legal and financial decisions on your behalf when you are unable to make reasonable judgements. • An enduring power of attorney (medical treatment) gives someone the authority to make decisions about your medical treatment only after you lose the ability to make your own decisions, for example, loss of consciousness or dementia. Before you sign a power of attorney, you need to understand fully the implications of your decision, and ensure that the person you appoint also understands his or her duties. Power-of-attorney forms can be bought from newsagents or stationers—it is not necessary to consult a solicitor. Can the same power of attorney be used throughout Australia and overseas? Power-of-attorney legislation may differ across Australia. Usually power of attorney may be used overseas provided that it complies with the requirements of the country in which it is to be used. When does the power of attorney cease? A power of attorney can end or be revoked in various ways, for example, when the specified period of the power of attorney expires, when notice is given that the power of attorney is withdrawn, if the principal or attorney dies or if the principal or attorney

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becomes mentally incompetent. Powers of attorney become null and void after death and your will replaces it.

WHEN SHOULD I MAKE OR AMEND MY WILL? You should make a will, or change an existing will, when: • you turn 18, if you have any assets; • you travel; • you marry or enter a de facto or same-sex relationship; • you have a child; • you divorce or your de facto/same-sex relationship breaks down; • you buy property, investments, or a business; • the sole beneficiary, for example, your spouse, predeceases you; • you retire.

WHAT HAPPENS IF A SAME-SEX OR DE FACTO PARTNER DIES WITHOUT A WILL? De facto or same-sex partner relationships do not have the same protection as married partners. Currently, the surviving partner is not included in the scheme of intestacy in the Administration and Probate Act, which means that the deceased’s estate goes to his or her next of kin. If no relatives are found, it could go to the government. However, the surviving partner can make a claim against the estate if it can be shown that the survivor contributed to any material improvements or purchases. All de facto and same-sex partners should make a will if they want their partners to inherit.

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PROFILE

Todd won a $100 000 lottery prize. When he died 10 years later without leaving a will, his de facto partner, Susan, could not claim the estate, according to the law, because Todd had a child whom he had not seen for 40 years. A search was made and the child inherited.

Chapter 7

Government support We talk a lot about human rights, but I don’t know of any human right that is more important than a job. William Norris We are fortunate in Australia to have a reasonable level of social welfare for citizens who, for whatever reason, cannot support themselves financially. Centrelink, previously known as the Department of Social Security (DSS), administers a wide range of income-support payments benefits and services: • • • • • • • • • • • •

Age Pension Wife Pension Carer Payment Mature Age Partner Allowance Family Allowance Maternity Immunisation Allowance Double Orphan Pension Newstart Allowance Work for the Dole Abstudy Assistance for Isolated Children Scheme Widow Allowance

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Special Benefit Remote Area Allowance Maternity Allowance Disability Support Pension Bereavement Allowance Mature Age Allowance Parenting Payment Family Tax Payment Child Disability Allowance Youth Allowance Austudy Payment Pensioner Education Supplement Sickness Allowance Mature Age Allowance Mobility Allowance

These benefits were available at the time of writing but the names, amounts and eligibility requirements of allowances change constantly. All benefits have eligibility conditions, for example, for a sickness benefit, you need a doctor’s certificate or report. The disability support pension is for people who cannot work for at least 30 hours per week because of psychiatric, physical or intellectual impairment. To qualify, you must be unable to work full-time for the next two years and must rate at least 20 points on the Centrelink impairment tables. There are other qualifications, so if you feel you have a claim, apply and seek legal advice from a solicitor, financial counsellor, or from a welfare rights centre. War Widow’s pensions are administered separately, by the Department of Veterans’ Affairs; this pension is not income- or assets-tested and includes several fringe benefits such as free medical treatment and reduced pharmaceuticals costs.

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The complexity of the system, and the everchanging amounts of benefits payable in different situations, makes it difficult to determine a person’s entitlement. However, all pensions and benefits require you to be an Australian resident. If you believe you qualify for any benefit, submit a claim. You can obtain information on all pensions and benefits from your local Centrelink office.

HOW OLD DO I HAVE TO BE TO APPLY FOR BENEFITS? Age for eligibility depends on the benefit. Some are accessible from the age of 16, for example, Youth Allowance, but if you are below 21 the benefit is less than for someone above 21. According to Australian law, at the age of 18 you can drink, drive (but not at the same time), vote, be tried in an adult court, gamble, and buy cigarettes; in fact, you are legally considered an adult, but not when you apply for benefits at Centrelink. See case profile on page 94.

HOW DO I APPLY FOR SUPPORT? In order to apply for support, make an appointment at your nearest Centrelink office. The amount of benefit you receive is calculated according to strict guidelines. In other words, the more income and assets you have, the less benefit you receive. Depending on the nature of the payment you receive, you may be entitled to a range of concessions: a health care card (re-issued every 12 weeks), rent and telephone assistance, a pharmaceutical allowance, utility and public transport concessions

WHAT IS A HEALTH CARE CARD? If you are receiving a social security payment or you are on a low income, in most cases you will qualify for a health care card,

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which entitles you to a range of concessions on gas, electricity, public transport, health, and so on.

HOW OFTEN WILL THE PENSION BE PAID? Your payment is paid once every two weeks into a bank or building society account specified by you.

DO I PAY TAX ON MY PENSION? All income is taxable, including your income support payment. If you have worked for part of the year, it would be wise to have a small amount deducted from your pension or benefit for tax, as your previous wages and your social security payments will be added together, making your taxable income higher, and could result in a tax bill or smaller refund.

I HAVE LOST MY JOB. HOW SOON CAN I APPLY FOR THE UNEMPLOYMENT PAYMENT? As soon as possible after you become unemployed, make an appointment at Centrelink to apply for a payment. Take with you at least three types of identification. Proof of identity is divided into primary documents, such as birth certificate or passport, and secondary documents, such as a school report. At least one proof of identity must be a primary document. A full list of identification documents is available from Centrelink. You are ineligible for payments until you have completed the necessary forms and until the required number of weeks have passed, depending on how you lost your job and what pay out you received.

HOW MUCH IS MY ENTITLEMENT? The amount of payment depends on a variety of factors, including how much you have in the bank, whether you are paying rent, your age, and so on.

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PROFILE

Sharon made great progress after leaving home— sharing a flat, buying a car, good job, great social life—but was unexpectedly retrenched. Her income was reduced from $480 per week to nothing until she qualified for benefits from Centrelink. Being 23 and considered an adult by Centrelink, she qualified for Newstart Allowance of $321.50, plus rental assistance of $74.80 per fortnight, a total of $396.30. Her rent and car repayments total $380.00 a fortnight, leaving her with only $16.30 for food and other living expenses. When Avanka, aged 20, previously working full-time and living at home, became unemployed, she was entitled to Youth Allowance of only $174.80 per fortnight. If she had been living away from home, she would have received $265.50 per fortnight. This amount increases slightly with rent assistance.

I MIGHT HAVE CASUAL WORK OCCASIONALLY. HOW WILL THAT AFFECT MY PAYMENTS? If, at any time during your unemployment, you earn an income, advise Centrelink on your next claim form. You must give the amount of gross income, not taxed income, otherwise you could be overpaid. If this happens, Centrelink will restructure your benefit until it has recouped the debt. You are liable for this debt until the day you die. It does not disappear if you become bankrupt. If you are informed that you have been overpaid, seek advice from a community legal centre, financial counsellor, or welfare rights centre in your State (see Part 3).

I HAVE BEEN ASKED TO REPAY MONEY TO CENTRELINK. CAN I APPEAL? If you are unhappy about any decision made by Centrelink, you can ask that the decision be reviewed by an Authorised Review Officer. If the problem is still unresolved, an appeal can be

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lodged with the Social Security Appeals Tribunal (SSAT), which is an independent authority. If required, an interpreter will be provided at no cost to you. At these tribunals, you can represent yourself or be represented by a friend, relative, social worker or advocate, such as a financial counsellor. If you take a lawyer, you will bear the cost. It is best to seek advice from a social worker or financial counsellor before attending the tribunal. Finally, if you are unhappy with the decision of the SSAT, you can take your case to the Administrative Appeals Tribunal within 28 days of the SSAT’s decision (see Part 3). Another avenue for complaints about government departments is the Commonwealth Ombudsman, who will not charge a fee to investigate your case.

WHAT ABOUT EMERGENCY RELIEF? Usually Centrelink does not supply funds in emergency situations, although a Special Benefit is available to eligible people in severe financial hardship who are not currently receiving a payment. Contact Centrelink for further information.

TIPS

Emergency support is available in the form of money, food vouchers, clothing, bedding, and household goods, from a large number of charities such as St Vincent de Paul,The Red Cross,The Smith Family,The Salvation Army, and so on. Check the Yellow Pages for your nearest branch.

Chapter 8

Contracts and consumer issues You can trust in God, but you should get a signature from everyone else. Anonymous

W

henever we buy or sell major items such as a car or home, when we take out insurance, even when we buy a raffle ticket in the street, we are parties in legal agreements or contracts. An outline of what a contract entails is given below.

WHAT IS A CONTRACT? A contract is a legally binding agreement. For an agreement to be legally binding, the following elements must be present: An intention to create legal relations A contract is not legal simply because there is an agreement; all parties to the agreement must intend to enter into a legally binding agreement. This intention should be explicitly stated, though it can be inferred from the circumstances. For example, a group of office workers shared in a weekly lottery ticket for some time; each person paid the same amount towards the ticket, but the ticket was bought in one name (Ms A.) only. One week the ticket wins a large prize—must the winnings be divided equally between all contributors, or can Ms A., who

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bought the ticket, keep all the prize-money? The court must take into account all the circumstances and the objective of the agreement to decide whether the contributors intended to enter into a legally binding agreement to share winnings. An offer by one party and an acceptance of this offer by the other In a contract, an offer by one party is accepted by the other party. For example, a used car salesperson offered to sell a vehicle for $1000, without a roadworthy certificate, to Ms R. For a legally binding contract to be formed, Ms R. must accept exactly what has been offered. If Ms R insists on a roadworthy certificate, she is not accepting the original offer, she is making a counter-offer which the salesperson can then accept or reject. An offer can be withdrawn before the offer is accepted, provided that the person making the offer advises the other party that the offer has been withdrawn. The salesperson in the above example could say to Ms R. that he will ask his boss if a road worthy certificate could be supplied. If Ms R. changes her mind while the salesperson is consulting with his boss, and advises the salesperson accordingly, there is no legally binding contract. A consideration must be paid for the promise made Consideration is the price paid for the promise of the other party. This price need not be money, but it must be something of value. Both parties must have the legal capacity to act Some people may not be free, or may not have the authority or legal capacity to enter into a valid contract. Examples are: • • • • •

intellectually or psychiatrically disabled people; people under 18; bankrupts; people acting on behalf of a company/corporation; prisoners.

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For more information on the above, contact a solicitor or your community legal centre (see Part 3). The genuine consent of the parties The consent of each party to a contract must be given with free will and a genuine understanding of what is involved in the contract. A mistake or false statement, and any duress or undue influence, can affect the legality of the contract. The objectives of the agreement must be legal Contracts which are not legally enforceable include: an agreement to commit a crime, an agreement which hinders the administration of justice, or an agreement which is considered immoral. If any of the above elements are missing from the agreement, it is not a contract.

DOES A CONTRACT HAVE TO BE IN WRITING TO BE LEGALLY ENFORCEABLE? Contracts which must be in writing to be legally enforceable include contracts to buy and sell land or to buy a car, and door-to-door sales contracts. However, it is always better to write down the terms of an agreement, to keep with any quotations, brochures, pamphlets, receipts, or other documents which were supplied at the time of the agreement, in case a dispute arises. A written contract can be drawn up by listing all the terms agreed between the parties; each party should sign and date the document at the end.

WHAT SHOULD I DO BEFORE SIGNING A CONTRACT? Follow these guidelines before signing a contract: • Read every line of the contract carefully, including the small print. • Do not sign a contract that is not completely filled in.

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• Put a line through any blank spaces. • Check all additions and calculations. • Be aware of the implications of your role in this contract. Are you: — the sole borrower? — a co-borrower? — guarantor? • See Chapter 9, ‘Sexually transmitted debt’. • Check the bottom line for the total cost of the purchase, and ask yourself—‘Can I afford this?’

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If you are uncertain about a contract, obtain independent advice before signing it, for example, from a financial counsellor, a solicitor, a community legal centre, the Office of Fair Trading or Consumer Affairs.

WHICH LAWS PROTECT CONTRACTS? The Consumer Credit Code, introduced in 1996, gives all States within Australia a uniform credit code. That credit code applies to all credit contracts which are not for a business or investment purpose, no matter how much or how little credit is provided. It covers all forms of lending, including housing loans, (the only exception is pawnbrokers) and allows variable interest rates. Under the code, all important information about a credit contract must be disclosed. Potential borrowers should be told the interest rate on a loan, the fees and charges, what insurances are included, and the amount and term of repayments. The code allows you to shop around and to bargain, and gives you rights when things go wrong, for example, in times of hardship you can go to the credit tribunal to request a temporary variation to get you back on your feet. Seek assistance from a financial counsellor or community legal centre. If you feel a contract is unfair, either when you

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entered, or because of a change in the term, fee, or interest rate, the contract can be examined by the tribunal. If the contract is judged to be unjust, the tribunal can provide you with relief. This relief may also assist in dealing with a related sale contract, depending on the circumstances.

WHAT ARE MY RIGHTS IF I AM UNHAPPY WITH A SERVICE PROVIDED BY A TRADES PERSON? If you have expressed your dissatisfaction to the trades person and they have still not complied with your wishes, for example, tiles not laid in the pattern you require, you can go to the Small Claims Tribunal or its equivalent in your State, such as the Consumer Claims Tribunal. This also applies to inadequate service in other areas, for example, a pair of jeans which shrink in the wash. Any consumer with a complaint that does not exceed a certain amount (which ranges between $5000 and $25 000 depending on your State) can use the tribunal.

WHO CAN I TAKE TO THE TRIBUNAL? Any supplier who has supplied or agreed to supply you with goods and services, for example, insurance (not life assurance), electronic funds transfer, motor vehicle, can be taken to the tribunal. In Victoria you can take a licensed motor car trader to the Small Claims Tribunal if the car bought did not exceed $10 000. A claim must be lodged within two or three years from the date the service was supplied. This time line differs regionally. Ask at your local court for the appropriate form. If you need help to fill out the form, contact a consumer worker in your area. A lodgement fee of between $10 and $100 applies, depending on the State and the reason for lodgement. Some regions offer discounts for pensioners and students.

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WHAT HAPPENS AT THE TRIBUNAL HEARING? The case is heard by a referee, usually a magistrate. Evidence is given under oath, and generally in private. It is up to you to prove that the supplier is at fault, so take all necessary documents, witnesses, expert reports, photographs, and so on. If any of your witnesses cannot attend, have them fill out a statutory declaration. Some courts permit videotaped evidence, but check the availability of a recorder beforehand. Before attending a tribunal hearing, seek legal advice. You cannot take legal representation with you, except in exceptional circumstances, but you can take a consumer worker, financial counsellor, or other assistant.

WHAT ARE THE POSSIBLE OUTCOMES OF THE TRIBUNAL? If the tribunal finds in your favour, the supplier will be ordered to: • pay up to a certain amount of money to you. Once again, this depends on your claim and the State or Territory in which you live; • repair or perform the work to your satisfaction; • supply the services; • return, replace or supply goods. No costs are awarded. The settlement order given by the referee is final and binding, and there is no appeal under normal circumstances.

Chapter 9

Sexually transmitted debt When bills come in the door, love flies out the window. Anonymous

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e are regularly warned about health hazards such as unsafe sex and sexually transmitted diseases, but hear little about a nasty wealth hazard which can be inflicted on us by our partners—sexually transmitted debt (debt incurred because of a sexual relationship). When in love, we see our partner through rosecoloured glasses. We believe that we will be together forever; he/she would never abandon us and leave behind children, debts, mortgage, and so on. In reality, relationships break down every day and women are left to pick up the pieces. Often they have signed for a loan for goods which are not theirs, which they did not need, and which were not their responsibility; at their partner’s request, they agreed to be a guarantor or joint borrower. Though men have also incurred debt in this way, more of the victims are women.

Be open at the start of a relationship about what you will not agree to, financially and otherwise, and stick to your position.

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WHAT AM I COMMITTING MYSELF TO IF I SIGN AS GUARANTOR? A guarantor is legally obliged to pay the borrower’s debts if the borrower cannot or will not pay. The lender has a legal right to the guarantor’s house, savings, and any other assets. The lender can sue both the borrower and the guarantor together, but must try to get the money from the borrower before making the guarantor pay.

WHAT ARE MY LEGAL OBLIGATIONS IF I AGREE TO BE A CO-BORROWER? If payments cease, the lender can choose which coborrower to sue, and usually chooses whichever one has the higher income or most assets, or the one who can be found at the time.

AM I STILL LIABLE FOR MY PARTNER’S DEBTS IF HE IS DECLARED BANKRUPT? If the borrower is declared bankrupt, or dies, you, as guarantor or co-borrower, are legally liable to pay jointly owned debts.

AM I STILL LIABLE FOR MY PARTNER’S DEBTS AFTER WE ARE DIVORCED? Financial institutions are taking an increasingly hard line on recovering outstanding loans and, even after divorces, are pursuing women for debts incurred by their husbands, not because they were married but because the debts were incurred in joint names.

I DID NOT FULLY UNDERSTAND WHAT I WAS TAKING ON WHEN I SIGNED THE PAPERS. CAN I GET OUT OF PAYING? The only exception to payment is if you can clearly show that you did not fully comprehend what you were agreeing to, and prove that the bank or lender should have been aware of this. Lenders are obliged

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to explain the full ramifications of what you are signing. You are deemed to have knowingly assumed responsibility for your partner’s debts where: • you sign an agreement to guarantee your partner’s debts; • you permit your partner to use the house as security for a business loan or overdraft; • you become a director of your partner’s company. If you believe that you signed a contract under duress, seek legal advice from a financial counsellor or community legal centre.

PROFILE

Stan asked Sylvia, his wife, to mortgage the family home as security for credit provided to his business. Though Sylvia had no involvement in the business and received no financial benefit from it, she exposed herself to considerable financial risk by agreeing. When Stan’s business failed, Stan and Sylvia lost their home.

WHY DO WOMEN SIGN SUCH CONTRACTS? Victims of sexually transmitted debt include many highly educated and normally astute business women. We are all vulnerable when emotion is involved. The most common reason women sign such contracts is because they love and trust their partners. They may feel obliged to help them whenever they can, may feel pressured by them—‘If you really love me, you’ll sign it’—or by representatives of the financial institution providing the credit. Some sign against their better judgement, just to ‘keep the peace’.

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HOW CAN I AVOID THIS HAPPENING TO ME? Be aware that any time you, as a couple, enter into a liability arrangement—loan, mortgage, hire purchase, lease—each of you is jointly and separately liable for that debt. Before you sign anything, consider the possibility of being left with the responsibility of repaying the loan. For example, your relationship breaks down and your partner leaves in a car for which you took out a joint loan; if he fails to make any loan repayments, you continue to be liable for them. You could be in debt for years for an asset which you no longer have. You are not, however, liable to pay debts he incurred only in his own name. If a finance company is not prepared to lend to your partner without someone with assets (you) to guarantee the loan, be wary; it is telling you that it does not think that he will be able to pay. Think carefully before you agree to be guarantor for, or co-borrower with, anyone, no matter how close the relationship. Examine all documents before you sign them (see Chapter 8, ‘Contracts’) and base your decision on business grounds. If you are uncomfortable about signing, seek legal advice first. The golden rule here is, ‘Keep money matters and love affairs separate!’

Chapter 10

Taking care with credit Why is there so much month left at the end of the money? Anonymous ‘Plastic’ money is here to stay, and credit cards can be beneficial if used correctly. However, the major cause of personal bankruptcies today is the overuse of credit cards and high interest personal loans. If possible, limit yourself to one credit card. Some cards have annual fees, some offer 55 days free credit, some must be paid in full at the end of the month, others can be paid off a little each month. Choose the one which best suits your lifestyle and budget.

WHAT IS CREDIT? You are given credit when you borrow cash or take out a loan to pay for goods and services. As credit is offered by financial institutions to make a profit, you pay a charge, that is, interest for the use of the credit. The cost of credit varies greatly depending on your ‘credit rating’, whether you are employed or unemployed, and if you have assets. If you are a high credit risk, you have to pay high interest, in some cases 29.5 per cent.

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If used intelligently, credit can make your life easier. If not, it simply makes it easier for you to get into trouble because it allows you to spend more than you have. All credit contracts, where the credit is for predominantly personal, household or domestic purposes, signed after 1 November 1996, are covered by the national Consumer Credit Code (see Chapter 8, ‘Contracts’).

WHAT IS A CREDIT RATING? Credit-reporting agencies around Australia collect and record information from stores, finance companies, and so on, to build up files on credit transactions. Credit agencies give your credit history on request; they do not ‘rate’ your reliability as a borrower. A ‘credit rating’ is an assessment, made by financial institutions on the basis of your credit record, of the risks attached to granting you a loan. An individual’s record in these files is requested by financial institutions when considering a loan. A ‘bad’ record because of bad debts, defaulting on a loan, legal actions such as a judgment or bankruptcy, and so on could result in refusal of a loan. It is important to build up a good credit history as it could help you to obtain finance for a home, a car or to go into business. If you use credit carefully, keeping your debts under control and paying promptly, you will have a good credit rating. You can obtain your own credit record from the Credit Reference Association of Australia (CRAA) (see Part 3). The CRAA currently holds personal records on more than 11 million Australians. If you have a credit card, mortgage, or loan, there will be a file on you. You must apply in writing, giving your name, date of birth, current address, your addresses for the past three years, and your driver’s licence number. However, be aware that, if you had a bad debt in your

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past, applying to the CRAA will give your creditor your current address. Creditors ‘purchase’ the services of the CRAA by annual subscription, therefore CRAA will give over your details on request.

WHAT FORMS OF CREDIT ARE AVAILABLE? Credit /bank/retail store cards Credit cards enable consumers to continually borrow up to a fixed limit. The cards are convenient as there is no need to carry a large amount of cash or to write out cheques. Most credit cards offer an interest-free period if the total account is paid before the due date (usually 30 days). General-purpose credit cards, such as Visa, American Express, MasterCard and Diners Club Card, are widely accepted in Australia. Some department stores also issue their own credit cards which can be used only for purchases within that store; again, there is usually no charge for the use of credit if the account is paid in full within the billing period. However, you can be charged up to or more than 21.5 per cent interest on outstanding money if the full amount is not paid. Personal loans You usually obtain a personal loan from a bank, building society or credit union; you can borrow up to a certain limit, about $10 000, with no mortgage attached. Most personal loans are taken out for items such as a holiday, a car, or the more expensive household goods. The advantage of a personal loan over a credit card is that you have a set repayment amount each month, and further purchases cannot be added. If you are a regular customer and a good credit risk, you may be able to negotiate a lower interest rate from your bank. Personal loans can be secured or unsecured. If you want to borrow more than $10 000, the lender may want security, usually in the form of a mortgage on your house or your car. Avoid asking your parents to put their house up as security or go

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guarantor for your loan; if a lender is asking for security, what it is saying is that you cannot afford the loan, and it will sell your parents’ home if you do not pay. Fortunately, the use of guarantors is declining since the introduction of the Consumer Credit Code. Finance company loans Beware. Most finance companies charge very high interest. Car dealerships offer their own finance, and their rates usually are negotiable as they want to sell you a car. If you buy electrical goods or furniture on credit, the interest can be up to 29.5 per cent if you use the store’s own credit facility. Some do offer an interest-free period, but they are anticipating that you will not finalise by the due date; interest will then be charged from the beginning of the contract. In most instances regular payments must be maintained during the interest-free period or you will start receiving letters of demand and then telephone calls. Lay-by You use lay-by as a means of purchasing goods without paying the full price immediately. You leave an initial deposit, usually 10 per cent to 20 per cent of the purchase price, though some stores disregard deposits altogether during sales. You make regular payments over a period, with no interest being charged, and collect the goods when you make the final payment. Lay-by is a great way of buying, particularly for birthday and Christmas presents, or for yourself, as items can be put away at sale price, stored, and collected just prior to that special occasion In some regions, you can cancel laybys, usually in writing, but a cancellation fee may be deducted from monies paid. If you fail to make the required payments, the trader can cancel the contract, although you should be given fourteen days’ notice in writing. The trader is under no obligation to return your money. Door-to-door sales A door-to-door sale is when a

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trader sells goods or services outside of the normal place of business—for example, at your home, a neighbour’s house, a trade fair, or exhibition. Unsolicited telephone calls and home visits from people trying to sell a product are increasing. Also, because of the newly deregulated communications networks, many people have been caught by unscrupulous individuals selling telephone contracts door to door. Beware of persuasive salespeople or of being rushed into an unwanted purchase. Say quickly, ‘Sorry, I’m not interested’, and close the door, or hang up the telephone. If you let the person in, you are fair game. Always ask door-to-door salespeople for business identification, that is, their names and the names and addresses of the traders for whom they work. Take time to consider a purchase before signing a contract. Ask yourself, ‘Do I really need this item or do I just want it?’ Compare prices, consider your ability to meet the repayments, and discuss the purchase with your family. Do not feel pressured to sign on the dotted line when the salesperson says, ‘This special offer finishes today at 5.00 pm.’ Tell the salesperson to come back tomorrow. Do not buy from catalogues or from telephone salespeople without seeing the product. Remember that if the offer sounds too good to be true, it probably is. Pawnbrokers Pawnbrokers do a roaring trade, particularly near gaming venues. Items of value, such as a piece of jewellery, electrical goods or musical instruments, are ‘pawned’ to the broker for an amount of money, usually a percentage of the item’s value, and a monthly ‘charge’ is incurred. If this charge is not paid, the pawnbroker has the right to sell the item. Avoid going to pawnbrokers. They are not covered by the Consumer Credit Code, and the interest

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on possessions left with them is usually so high that items are often ‘lost’ and resold by the pawnbroker. Television/Internet sales You are watching your favourite daytime chat show, and an advertisement comes on for a computer. You have been meaning to buy one. It looks great, the price seems low and all you have to do is supply your credit card number. Is this door-to-door selling? They are coming into your home uninvited. Is the company aboveboard or are they the original ‘Dodgy Brothers’? Do not order anything without checking the company out first, either with Consumer Affairs or the Office of Fair Trading in your State. Be equally wary with offers for goods for sale via the Internet.

WHAT PROTECTION IS THERE WHEN I USE THE INTERNET TO PAY FOR PRODUCTS OR BILLS? Be wary of giving out your credit card numbers on the Internet as it is not secure and can be abused. Internet crime does occur and if hackers do invade the system, there may be little you can do in practice to assert your rights.

WHY DO SOME COMPANIES ASK FOR AN IMPRINT OR DETAILS OF MY CREDIT CARD, SOMETIMES BEFORE I USE THEIR SERVICE? Companies give various reasons for inquiring about your credit card before sale. For example, hire-car companies would use the details from your credit card imprint to get information about you if you do not return the hire car, or if you return it in a damaged condition. Another company might use your card to obtain confirmation from the card issuer that you have enough credit to pay their account. You can refuse to give an imprint but the company could then refuse to provide service. It is your choice, and depends on how comfortable you are about providing those details.

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Never sign a blank imprint of your credit card; you are effectively signing a blank cheque. An unscrupulous company could bill you for whatever price it chooses and you would have little redress in these circumstances.

IS THERE A COOLING-OFF PERIOD WITH CREDIT CONTRACTS? Most States have a 10-day cooling-off period for door-to-door sales only, so the contract can be cancelled within that time. The seller must supply documentation to the buyer showing: • The name and address of the trader/seller. • The name and address of the buyer. • A description of the goods. Also, a termination notice, a formal notice that the contract has been cancelled, must be given. If you decide to terminate the contract during the coolingoff period, complete the termination notice, take a photocopy, and post the original by certified mail to the supplier’s address.

HOW CAN I USE CREDIT CARDS TO MY ADVANTAGE? • Shop around for a credit card which does not charge annual fees, unless one card offers benefits that you particularly want. • Do not be tempted to operate too many credit cards. If you only have one, it is easier to keep track of your spending and you only have one account to pay on the due date. • Reduce bank charges by putting all your spending on your credit card; at the end of the month, make one transaction from your bank account to pay off the balance.

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• Though the ‘Buy now, pay later!’ line is tempting when you really want a particular item, remember that a credit card is not buying you the goods, but merely delaying payment; sooner or later, you will have to settle the account with real money. • Obtain maximum benefit from credit facilities without attracting charges by paying the account in full within the interest-free period, that is before the due date. Interest rates are high if you cannot pay your account in full.Your balance will increase because of the added interest and you will be then paying interest on your interest.

HOW DO I MINIMISE THE RISK FOR PERSONAL AND OTHER LOANS? • Make sure that you can afford the credit. Add together the total cost, including any interest, insurance, stamp duty on the loan, and maintenance and depreciation on the item. Is the item you are buying worth the expense? • Take out one loan at a time.Too many loans increase the risk of getting into financial difficulties. • Shop around for the best terms. • Get together the highest deposit you can afford; do not ever borrow the deposit. • Repay the loan as quickly as possible; substantial savings can be made this way. • Read the small print before signing a contract and be sure you fully understand the terms.

I AM ON A LOW INCOME. SHOULD I USE A CREDIT CARD? Low income earners, especially people who receive social security payments and those who pay high rents or mortgages, need to be particularly vigilant in their use of credit cards as they have little margin for errors. A credit card is useful for buying a bargain and, if

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you always pay the account in full by the due date, you will have interest-free credit for a time. However, if you tend to overspend, imprudent use of a credit card could wreck your budget and lead you into financial difficulties. Over and above the normal interest, some providers now charge an extra $20 if a credit card holder does not make a minimum payment on time. There are temptations at special times, such as Christmas, to overspend, especially if you have a credit card. No parent likes to disappoint the children. However, the school year follows shortly afterwards, and money for clothes, uniforms, shoes, books and school fees needs to be found. Overspending at Christmas could lead to serious difficulty in meeting your debts in the new year. If your credit cards tempt you to live beyond your income, hide them or close the account and hand in your card.

HOW REPUTABLE ARE THESE COMPANIES OFFERING EASY PERSONAL LOANS WHICH I CAN ARRANGE BY TELEPHONE? Some companies advertising easy loans are scams, offering loans to pensioners and low income earners with bad credit records or those who have equity in, or own, their own homes. Repayments only cover the interest so, if the contract is for 10 years, at the end of that time you would have to repay the original loan in full or re-finance.

WHERE CAN I GET HELP ABOUT CREDIT? Free telephone services in some States, such as Credit Helpline or Credit Line, give advice on credit issues and put people in touch with financial counsellors who help consumers negotiate with credit providers. You can also take your case to the credit tribunal. This option is most often used when credit providers are using aggressive tactics to get their money back. See Part 3 for contact numbers.

Chapter 11

Buying a car

If you think nobody cares if you’re alive, try missing a couple of car payments. Earl Wilson

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part from a house or unit, a car is probably the largest single purchase you will make.

SHOULD I BUY A NEW OR A USED CAR? You should only buy a new car if you can afford one. With a range of smaller, lower priced cars on the market, it is possible for most people, with careful financing, to buy a new vehicle for about $15 000. However, a new car depreciates in price, from 15 per cent to 40 per cent of its value, almost as soon as it is driven out of the showroom. Also, a new car drains between $100 to more than $220 in weekly running costs. If you can afford to buy a new car, choosing the right car is the next important decision. Write down what you need from a car, based on your lifestyle: • Do you need a compact, easy-to-manoeuvre car, or one powerful enough to take rough country driving? Four-wheel-drives cost far more to own and to operate than a family sedan or wagon.

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• Consider the differences between manual and automatic vehicles, hatchbacks (easy to load, lots of boot space, versatile), and sedans (more passenger space, can tow heavier loads). • Do you need a commercial van or station wagon for business? How much stock do you normally carry? Boots need to be big enough to store your family’s luggage for holidays. • Do you need passenger seats or is a two-seater adequate for your needs? A small two-door car is ideal if you are single, but not if you have children. It is awkward to lift children in and out, particularly if they still need child restraints. A large ‘people mover’ suits a bigger family. • Think long term if you have children.Those tiny bodies grow to adult size and will not like being squashed into a too-small back seat. • Take your own height and weight into consideration. Long legs need plenty of room between the seat and pedals; small people need to see over the dashboard. Use your head, not your heart Buy for reliability, not for image. You may feel good behind the wheel of a red, two-seater sports model, but the sedate seven-seater van might suit your needs better. Decide on a price limit Price narrows down your choice to car types and features you can afford. The

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purchase price is just the beginning. Hidden costs include depreciation, stamp duty, interest on your loan, registration, insurance, repairs and maintenance such as tyres and petrol. Always get as much information as you can about ongoing costs, such as parts, maintenance, and fuel consumption. Do you need optional extras, like stereo sound system, airconditioning, anti-lock brakes, airbags, bullbars? Stick to your price limit; do not be persuaded by a keen salesperson into buying a bigger and better model. Alternatively, dealers expect you to make an offer on the price of a new car. Get prices from several dealers and play one off against the other until you get the best possible deal. Consider warranties A new car warranty can give you freedom of mind and, in some cases, security to invest in other ventures, as the manufacturer will cover most things for the next three years.

WHAT IS THE BEST WAY TO BUY A NEW CAR? Once you have decided on the type of car you want, and the amount you are prepared to spend, take a friend with you when looking. He or she might think of a question you have forgotten, or point out good or bad features you have missed; also, he or she will be less likely to fall for a smooth sales pitch, and more likely to keep things in perspective. Points to remember: • Have your loan already negotiated with the finance institution before visiting the car showroom.You will then resist deals which could lead you to spend more than you can afford. • Do not buy on impulse.Test-drive the vehicle; stop-start it in heavy traffic, and have a lengthy run on an open road. Check the running costs of that particular make and model with your State automobile club or a motoring magazine.

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When purchase price, fuel consumption, maintenance costs, and government fees are taken into account, running even a small car drains at least $100 a week from your income. • Shop around and know your facts, so that you can barter with the dealers; they may be willing to drop their price several hundred dollars. Consider a smaller vehicle without unnecessary extras; you could save up to $2000 a year by buying a smaller model of the same make. • Read the sales contract thoroughly before signing, and never sign a blank form (see Chapter 8). There is no cooling-off period when buying a new car.You cannot return the car if you change your mind after a few days.

WOULD IT BE BETTER IF I BUY A SECOND-HAND CAR? If money is tight, a used car may be a more sensible purchase than a new one. Used cars can be bought in many ways: from a dealer, a friend, through advertisements in newspapers, at an auction of ex-government vehicles, and so on. Many buy cars on the Internet, using their computers to select the style of car, the colour, the specifications, and even the preferred dealer to close the sale! Whichever way you choose to buy, inspect the car thoroughly before committing yourself. • Consider a ‘near-new’ vehicle. ‘Near-new’ is a cartrade term used for vehicles twelve to thirty-six months old with low kilometres on the clock. They are good value. By buying a twelve-monthold car you could save up to 20 per cent on the price of a new model. Look particularly for company cars used by their executives or sales staff, or cars previously used by public servants. Many average 20 000 kilometres a year or less and may still have some warranty left.

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• Know exactly what you are buying. Do not rely on anyone recommended by the vendor, or any prepaid inspection which might come with the car. Have the car thoroughly inspected by a trustworthy mechanic known to you or recommended by someone impartial, and always maintain a healthy suspicion when talking to the owner or dealer. Lift the bonnet and check for oil drips while the engine is running; check the levels of coolant, oil, and brake fluid; check for rust by lifting the carpet in the boot and, if you are appropriately dressed, slide under the car with a torch. Otherwise you could lose thousands of dollars and end up with an unroadworthy vehicle. However, a car with defects can still be a good buy, provided you are given a realistic assessment of what needs to be done and how much that will cost, and that the purchase price takes these defects into account. • Consider warranties. Some used-car warranties only cover certain components, and can vary from three months to three years.You may have to pay extra for a more complete warranty, but again it can take a lot of risk out of the purchase. • If you are buying a car privately and there is no warranty, have the car professionally inspected before you sign any papers. Most State automobile clubs offer a vehicle inspection service for about $100.They give the car a test-drive and you receive a written report on the car’s mechanical condition and the state of its body (rust or accident repair). • Be wary of signing any papers that limit your right to challenge the dealer’s terms or claims. For example, in some States, if you sign a red waiver notice, you give up your right to a threeday cooling-off period. • Beware of unlicensed backyard dealers. Before buying, check that the dealer has a State car trader’s licence and make sure the licence number is included in any contract you sign.

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Unlicensed dealers, auction houses, and private sellers are not compelled to provide a warranty or to ensure clear title on the vehicle. • Be aware that if you buy a car without a roadworthy certificate, you will have that extra expense.

WHAT IF I CHANGE MY MIND? Usually a buyer can cancel the contract if: • the dealer/seller has falsely represented the odometer reading; • the contract fails to state the terms and conditions of the purchase; • the car is substantially different from the notice of particulars attached to the car; • the delivery of the car is delayed by more than 14 days after the delivery date stated in the purchase contract. In States that have a cooling-off period, a buyer of a used car must cancel the car sale agreement within three clear working days (not including Saturdays, Sundays or public holidays) in writing. It is best to deliver the notice by hand and take a friend to act as witness. Keep a copy of the notice. If the contract to buy the car is cancelled within three days, the buyer is entitled to the return of the deposit or trade-in, although a penalty of 1 per cent of the full purchase price or $100, whichever is the greater, applies. For example, if the full price of the car is $10 000 or less, the seller retains $100. If a finance company is involved, it must cancel its contract also.

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IF I BUY A USED CAR, HOW CAN I MAKE SURE THAT IT IS NOT STOLEN? Most States have a motor vehicle security register (see Part 3 for contact numbers) which you can check to ensure that the seller of the car has a clear title and is entitled to sell it. Clear title means that the car is not stolen or liable to be repossessed by a finance company or bank because the previous owner didn’t keep up the payments. You can get this information over the telephone. Have the registration number, engine and chassis numbers handy when making the call. For your peace of mind the registry issues a certificate for about $7 at time of writing. Always inspect the register for the background on a used car. If the vehicle is later found to have been stolen or is repossessed, you not only lose your car, but also the money you have paid for it! When neither the seller nor the buyer are car dealers, the seller must: • give the buyer the certificate of registration; • give the buyer a current certificate of roadworthiness unless the car costs less than $3000; • send the completed notice of disposal to the relevant authority, stated on the notice, within seven days; Also, the buyer must send within seven days: • • • •

a completed notice of acquisition form; the appropriate transfer fee and stamp duty; a current roadworthiness certificate; a certificate of registration.

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WHAT IS COVERED IN A USED CAR’S WARRANTY? The Motor Car Traders Act, which covers all licensed motor vehicle dealers, requires a used car dealer to repair, at no cost to the buyer, any defect that appears in the car during the warranty period. Even if the defect occurs after the sale, as long as it appears before the warranty period is up, the dealer is obliged to fix it, unless it was specified in a defect notice attached to the car at the time of sale. Other defects not covered by the warranty include those which arise from accidental damage occurring after the buyer has taken delivery, defects caused by the buyer’s negligence or misuse, and defects in tyres, batteries, or any prescribed accessories. You can also forget about the warranty if you have had possession of the car for a continuous period of three months or more before the sale. For example, employees of car dealers who buy a vehicle from their employer are not covered by the statutory warranty.

WHERE SHOULD I GET A LOAN? The most common ways to buy a car are through the car dealer’s finance company, a bank or other financial institution, or with a home equity loan. The interest payable on a home equity loan of 6.5 per cent to 7 per cent is almost half that of a personal loan. Borrowing through the dealer is usually somewhere in between with a new car, or higher in the case of some used cars. With a car loan, you are borrowing money for something which depreciates fast. Make as large a deposit as possible, so that you have to borrow less money. During the term of the loan, try to make additional payments and clear the debt quickly. Do not let the car of your dreams turn into a nightmare.

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Remember: • shop around for the best terms; • do not borrow more than you can afford; • read the small print on the contract.

IS THIRD-PARTY INSURANCE ENOUGH COVER? Compulsory third-party insurance is paid by motorists with their annual motor registration. Third-party insurance compensates occupants of vehicles, and others, for injuries suffered in car accidents, but it does not include insurance for your car, other cars, or property. If you hit a very expensive vehicle and you are at fault and uninsured, the cost of repairs could ruin you; your home and other assets could be at risk. We believe no car should be on the road without at least ‘bomb insurance’, that is, third-party, fire, and theft. If your car is under finance, your contract may state that it must be comprehensively insured for the term of the contract. Comprehensive insurance covers both you and any car you may hit. For further information about car insurance, see Chapter 15.

ARE THERE WAYS TO KEEP RUNNING COSTS OF A MOTOR VEHICLE DOWN? Following the hints below will result in small savings which, added together, will amount to major savings over twelve months. • Buy small as car size, mass and engine-type affect fuel consumption—the bigger the car, the more you pay at the pump. On average, every half tonne of car uses about 700 litres of fuel to pull it about for one year. • Drive within the speed limits because cars operate

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more economically at 60 kilometres to 80 kilometres per hour. At 110 kilometres per hour a car will use 25 per cent more fuel than at 90 kilometres per hour. Be kind to your car because the largest factor in fuel usage is the way that you drive a car. Accelerate gently and use the brakes only when necessary. Avoid stop–start driving and make sure the handbrake is fully released. Heavy acceleration uses more fuel than necessary and produces excess emissions. Maintain a safe distance from the vehicle in front to reduce braking. Switch off the engine when stopped for lengthy periods such as at railway boom gates. Plan your trips and combine stops along the way. Travel at less busy times to dodge congested traffic, avoid narrow roads with trams or light rail, and do not make short trips on a cold engine as cars are thirstiest—and most polluting—when cold. Service and tune cars regularly to maker-specifications and save up to 10 per cent in fuel consumption. Six-monthly servicing is recommended even when travelling low kilometres. Check tyres weekly, inflate them to the highest pressure recommended by the manufacturer for fuel economy and improved handling. Correct pressures reduce effort in cars without power steering. Only use airconditioners in extreme heat; they are a 10 per cent drag on fuel. Do not carry unnecessary loads and be aware of the extra drag created by roof-racks. Consider other means of travel and save money by using public transport, rather than driving, particularly to the city, or to big sporting events. A car pool can reduce costs and road congestion. Walking or cycling to local destinations will save money and contribute to cleaner air.

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Some car manufacturers, through their dealer network, offer free courses which teach an understanding of how a car works and some basic mechanical and maintenance knowledge, which could save you money in the medium to long term. Enquire at your local car dealer or the car manufacturer of your choice.

Chapter 12

Gambling

A racehorse is an animal that can take several thousand people for a ride at the same time. Author unknown

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ambling is part of the Australian way of life: we sell raffle tickets for our schools; we put our money in the slots at fun parlours and try to beat our own or our friend’s score; when we turn 18, the whole gambling world is open to us, from the Totalisator Agency Board (TAB) to the casino, or the poker machines (pokies) at the local hotel or Returned Services League (RSL) clubs. And what other country in the world stops to listen to a horserace? Gambling within your means can be fun—a bet on the Melbourne Cup, a lottery ticket—but it can become addictive, threatening your finances, employment, family, and other relationships. About 1 per cent of the Australian population are problem gamblers. Gambling becomes a destructive cycle: in order to solve financial and other difficulties, problem gamblers often take ever-increasing risks; to hide their addiction, they isolate themselves from their families and friends; and because they then feel

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more alone and helpless, they continue to gamble because it seems to be their only source of comfort and support. Gambling causes poverty and some women experience domestic violence because of the strains that financial problems place on their relationship, no matter which partner has the gambling addiction.

HOW CAN YOU TELL IF SOMEONE HAS A GAMBLING PROBLEM? Addictions to cigarettes, alcohol, or other drugs are usually readily identifiable, but gambling symptoms do not usually show until it is too late—when your partner has not paid the car repayments and the ‘repo’ (repossession) men are knocking on the door to repossess the car, or the rent has not been paid and the eviction notice arrives, or, worse still, the mortgage is in arrears and the bank is threatening to sell you up. Some indicators might be: • • • •

a pre-occupation with gambling gambling more than he/she can afford showing little interest in family matters increasing isolation or time spent away from the family • withholding pay slips, bank statements, or outstanding bills • unusual concern about money matters • loss of time from work.

IS THERE HELP AVAILABLE? Help is available for individuals, couples, and families who are affected by gambling. Areas of assistance include: control over the impulse to gamble; controlled gambling strategies; improving relationships; financial planning; increasing communication

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skills; increasing self-confidence; treatment and support groups; relaxation; self-help skills. Some people help themselves by handing control of their finances over to a relative or good friend.

PROFILE

Joan, aged 50, gambled her life savings and had to sell her house to pay outstanding debts. She now lives with her daughter, Louise. Joan gave her credit card, and control of her money, to Louise, who pays all Joan’s bills and does her shopping. Louise will continue to do this until Joan feels ready to take control of her finances. If you need help with a compulsive gambling habit, contact G-Line. See Part 3 for a listing of other avenues of assistance.

HOW DOES GAMBLING AFFECT THE WIDER COMMUNITY? Problem gambling costs the individual, the family, and wider community as it can lead to family break down, fraud, crime, and suicide. Ongoing counselling for the gambler and family members, unpaid debts, police and court work, and imprisonment all cost society. Victorian Government figures released in 1997 reveal that one in four problem gamblers turned to crime, such as writing bad cheques, burglary, embezzlement, fraud, and robbery with violence, to support their addiction. These people are not career criminals; they are ordinary people who resorted to crime out of desperation. This case profile highlights the need for both partners in a relationship to be aware of their financial position, and to know that there is money to pay the bills when they are due.

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PROFILE

Alice, aged 28, is married to Greg, 29, an accountant with a large car dealership. Alice is not employed, staying home to look after their two children, aged four and seven. One day, Alice drives into the garage and finds her husband hanging from the beam. There is no note. Alice is devastated, wanting to know why. It becomes obvious when the cheque for the deposit on Greg’s funeral bounces; there is no money in the account. Then Greg’s employer visits Alice and explains that Greg had misappropriated $260 000 from the company and was facing prosecution. Finally a writ arrives from the bank; no payments had been paid on the mortgage for more than nine months. A workmate then tells Alice that Greg had been betting heavily at the casino. To try and recoup his lost savings, he was stealing from his employer and was found out. Alice was fortunate that Greg had sufficient life insurance to repay his employer, bring the mortgage up to date, and pay the funeral expenses. Unfortunately, Alice then had to survive on the sole parent pension until such time as she was able to find full-time employment and child care for the children. She and the children needed ongoing grief counselling.

PROFILE

Joanne, married with two children, worked part-time as a bankteller. In her spare time, she began visiting a local gaming venue. Despite many losses, her few wins enticed her to return again and again. Without realising it, Joanne became addicted to poker machines. The losses continued until all the family savings had gone. Joanne then devised a plan to misappropriate a customer’s money from her account. The customer, Mary, was 91 years old but still quite sprightly, living at home by herself. When her bank statement arrived, she queried it. Joanne visited her and ended up stabbing Mary numerous times. Mary was not found until the following morning. Miraculously, she survived the stabbing. Joanne was apprehended and sentenced to two years jail.

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The sad outcomes of this case were that Mary could not continue living on her own, and Joanne, an average wife, mother and employee who had never been in trouble before, spent two years in jail away from her family.

WHY DO WOMEN GAMBLE? A recent report found that: Approximately 57% of EGM [electronic gaming machines (or pokies)] players are women and women are under-represented in other forms of gambling. Loneliness, isolation and boredom were the main motivation for women service users to gamble. Expenditure was the most commonly cited reason for women gamblers to seek assistance. Women who access problem gambling services are more likely than men to either receive sole parent benefits, live with other people and/or be married. (Sarah, Brown. Queen of Hearts: The Needs of Women with Gambling Problems)

WHY NOT GAMBLE, PROVIDED THAT I AM IN CONTROL? Of course you can enjoy an occasional flutter at the casino or a regular period playing the poker machines, but you might be surprised at how much money you are wasting with little likelihood of getting a return. It is not only problem gamblers who lose more than they can afford. Even if you are only spending $7 or $8 on a weekly Lotto ticket, in twelve months that amounts to a minimum of $364. If you put what you are losing into a bank account, towards paying off your mortgage or another loan, setting up a savings account for a child’s education, or adding it to your superannuation, at least the money is still yours.

Chapter 13

Life after debt

If money talks, mine only says goodbye. Anonymous

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n Australia in the 1990s, many people are living in the shadow of debt and insolvency. With credit so accessible, higher limits on credit cards, and temptation all around, it is all too easy to become trapped on a financial treadmill. Unemployment, illness, marital breakdown, addictions, inadequate income or larger-than-usual bills can push people into a situation where they cannot meet their commitments. If you are overwhelmed by debt, options are available. Seek assistance from a financial counsellor before legal costs become involved, and your credit rating is affected.

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WHAT CAN I DO IF I LOSE MY JOB AND CANNOT KEEP UP MY REPAYMENTS? Advise your creditors of your position as soon as possible and check your credit statements; some credit contracts have unemployment insurance, so that your debt is paid for up to three months of unemployment. To obtain a claim form, contact your creditor. If you owe money on credit cards, these cards come under the Consumer Credit Code. If the credit provider will not negotiate, the code stipulates that you can go to the credit tribunal to seek a temporary variation of your payments. However, seek advice from a financial counsellor first. The key word in this situation is ‘negotiation’. If you do not feel comfortable negotiating with creditors yourself, a financial counsellor or trusted friend might negotiate for you.

WHAT SHOULD I SAY TO MY CREDITORS? Explain that: • you know that you have a problem and you wish to remedy it; • you could take some time to repay the debt, but you are willing to arrange a repayment plan; • you will work out the amount you can afford to repay and will contact them in a few days. Most creditors will negotiate, as it is in their best interests to get at least some of their money back. However, some creditors are not prepared to wait.

WHAT SHOULD I DO THEN? • Work out your budget first by following the steps in Chapter 1. If you are spending more than your income, assess your priorities. • Cut down on non-essential spending.

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• Cancel your credit cards. • Sell some assets, if necessary, but not anything on which you owe money without contacting the creditor first. • Find out from Centrelink about concessions and rebates available to people on low incomes. • Check if you are eligible for emergency assistance from agencies such as the Smith Family, Red Cross, St Vincent de Paul, Salvation Army, and other such bodies. • Estimate what you can afford to pay off your debts. Do not promise $100 for each of the next four weeks and then find that you cannot pay the rent! The creditor is usually happier if you pay an amount within your budget. If you get into debt again and can show creditors a history of progressive payments in similar circumstances, they will be more willing to negotiate with you.

MY CREDIT-CARD FACILITY RANG BECAUSE I HAVE NOT ANSWERED THEIR LETTERS; MY ACCOUNT IS IN ARREARS AND THEY ARE THREATENING ME WITH LEGAL ACTION. WHAT CAN I DO? First of all, stay calm. Do not feel intimidated or threatened by them, and do not promise them terms just to get rid of them. Understand that both you and your creditor have rights. Negotiate.

WHAT HAPPENS IF I CANNOT MAKE ANY REPAYMENTS? As discussed in Chapter 8, contracts, except for credit cards, are either secured or unsecured. If your loan is secured, the creditor has more options, such as repossessing your car, or your home. Usually a creditor will send a letter of demand, requesting payment of the debt by a particular date. If you do nothing to resolve the issue to the satisfaction

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of your creditors they then have the right to take legal action against you to obtain payment. If you are being harassed by telephone calls or personal approaches by a creditor or debt-collection agent, you should seek help from a financial counsellor or your nearest legal centre.

WHAT LEGAL PROCEDURES CAN A CREDITOR TAKE? Initially, if the debt is below $40 000, your local court (called variously the magistrate’s court, court of petty sessions or court of summary jurisdiction, depending on your region) will issue a summons or complaint against you, giving you notice to appear in court. If you receive such a summons, you should seek legal advice immediately as any defence must be lodged within 21 days. This can vary regionally. If you do not respond to the summons or complaint, your creditor will obtain a judgment order (a court decision that a debtor does owe the money) against you. Judgment interest (penalty interest on your debt) can also be charged. This can vary, depending on the money market. In the past it has been as high as 19 per cent and as low as 12 per cent. Your creditor also charges legal costs which could be hundreds of dollars. If you have a judgment entered against you, various businesses might approach you offering consolidation of your debts and/or negotiation with your creditors, for a fee. Do not sign any agreements or contracts until you have established that the companies are reputable and can do what they promise. Financial counsellors’ advice is free, but in some areas you could wait for your first appointment.

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WHAT HAPPENS ONCE JUDGMENT HAS BEEN OBTAINED? Your creditor might summons you to attend court and to give a complete statement of your financial position. This procedure, called an oral examination or examination summons, is really a fishing exercise to find out what you have, if you are working and, if so, where, how much you earn, and other details. If you receive an examination summons, you must attend at the time and court specified. Only the creditor can cancel the oral examination. A warrant can be issued for your arrest for failing to appear at an oral examination. Bail is usually given, but sometimes a surety (an amount of money to be held in case you fail to appear) may be requested. This is to ensure that you attend the examination and attend court to explain why you failed to appear when summonsed. An oral examination is usually conducted by the registrar in an office, not by a magistrate in the court. The registrar or the creditor’s lawyer will ask questions about your financial situation. Take a wage slip, bank statements, or other papers that prove your circumstances, and a budget showing all your income, assets, expenses, and other outstanding debts. If asked how you are going to pay the debt, offer only what you can afford, no matter how small the amount. If you do not know how you are going to pay, say so. After the oral examination, your creditor will know where you are working, and can apply to the court for an attachment of earnings (AEO) or garnishee order. This means that the court can order your employer to extract money from your salary to pay the creditor. You cannot have more than one AEO at any one time, and social security payments cannot be attached by an AEO if you have no other income.

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Depending on your region, you will be sent details of the hearing date and a statement of affairs to fill in—particulars of your income, assets, expenses, debts, and so on. This completed statement must reach the magistrate’s court at least three days before the hearing. Your employer is notified of the hearing and is asked to provide details of your salary. Though not compulsory, attendance is advisable as it gives you an opportunity to explain your financial circumstances. Seek assistance from a financial counsellor. In some regions, you may not know that you have a garnishee order against you until you receive your wages.

HOW MUCH MONEY CAN BE DEDUCTED FROM MY SALARY TO REPAY DEBTS? The magistrate at the hearing decides whether to grant an AEO and, if granted, the amount of money to be paid to the creditor. This can mean further hardship, as you might not have enough left in your pay packet to cover basic living expenses and other commitments. In some States a maximum of 20 per cent of your after-tax income can be deducted from your wages for this purpose. If your financial circumstances change, either you or your creditor can go back to court to have the order changed. The AEO lasts until the debt is repaid or until you leave your job (this may differ regionally). If you change jobs, a new AEO must be obtained. In Queensland, as the creditor has to apply at five-week intervals for a fresh garnishee order and the costs involved are added to the original debt, this can cause severe financial hardship for the debtor. If an AEO is obtained against you, it can be embarrassing and could lead to the break down of your relationship with your employer. You cannot be dismissed from your employment because of a gar-

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nishee order being issued. If you do lose your job for this reason, contact your union or seek legal advice immediately.

CAN A CREDITOR TAKE MY POSSESSIONS IN LIEU OF THE DEBT? If you have not paid your debt after the above legal processes, a warrant to seize property or writ of execution can be issued by a court authorising the sheriff, an officer of the court, to: • seize property (assets and goods) owned by you; • sell these assets; • give the proceeds to the creditor to settle your debt. The sheriff brings the warrant to your home and will want to see your property in order to decide what to take and sell. You do not have to let the sheriff in, but legally they can enter through an open door or window, or enter an unlocked garage or other building not attached to your home. Sheriff and bailiff powers differ in each State, with some excluding the sheriff from taking goods which are necessary for basic household comfort. In Victoria, household goods protected from the sheriff included a refrigerator, one television, one set of stereo equipment, beds, clothing, washing machine, clothes dryer, kitchen/lounge room suites, any property owned by someone else, tools of trade up to the value of approximately $2600, and one car (fully owned) and valued at less than $5000. In New South Wales the sheriff can take your television, furniture, and stereo system. The sheriff lists items taken, gives you a copy of that list, and leaves the items with you until the sale. If you do not want the items to be sold, you could:

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• pay the debt; • negotiate payment with the creditor; • apply for an instalment order (see below). If the goods are sold, costs such as storage, removal, auction fees, and others, are deducted from the sale price before the creditor is paid. Any money left over is given to you. If the goods are not sold or do not realise enough money to pay the debt, the creditor may then apply to the Supreme Court for a warrant of seizure and sale, which directs the sheriff or bailiff to seize your real estate (house and land) to sell at auction to pay your creditor. The sheriff will notify you about the warrant and advise you of the time limits for sale of the real estate if you do not pay the debt. The sheriff will then organise the auction, setting a reserve price according to its valuation. Remember, the sheriff can only sell the proportion you own. If your property is in your name only, the property can be sold. Any mortgage and outstanding rates are paid from the proceeds of the sale, the creditor(s) receive their money, including all legal costs, and any money remaining goes to you. If the house or land is in joint names, but the debt is yours, only your half of the house can be sold. Consequently few are sold, because who wants half a house? If the real estate does not sell for the reserve price, the creditor can obtain an order from the Supreme Court to sell at a lower price. You should get legal advice quickly if you are threatened with a warrant to seize property or a warrant of seizure and sale.

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CAN I STOP THE SHERIFF FROM SELLING MY ASSETS? At any time before the sale of the property you can stop the sheriff selling your assets by seeking an instalment order at the court where the original judgment order was made. An instalment order prevents your assets or wages being taken by a court order and allows you to pay off the debt in set amounts at set intervals. You are liable for any legal or other costs involved. In completing the forms, do not over-estimate what you can afford to pay. If you are unsure, seek assistance from a financial counsellor. You need to show the court that you can pay the debt and any interest within a reasonable, as assessed by the court, period. A creditor can also apply for an instalment order, forcing you to repay fixed amounts at fixed intervals. While an instalment order is in force, and you are making payments in accordance with the order, the creditor cannot take further proceedings against you. However, if the creditor has already obtained and served a bankruptcy notice on you (see Chapter 14) and you have not complied, the instalment order will not stop that creditor’s request for your bankruptcy. In some States, a person whose sole income comes from social security benefits cannot be forced to enter into an instalment order. Check with your local court. Remember that every time a creditor takes further legal action, costs, in some cases quite substantial, are incurred. That is why it is best to contact creditors as soon as possible, or seek assistance from a financial counsellor.

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CAN YOU SUMMARISE MY OPTIONS? When you are in debt, you can: • pay the amount owing by cutting back drastically on your expenses, selling off goods, and so on; • not pay, and take whatever legal procedures follow; • ask that the debt be waived, that is, written off; • enter into an arrangement with the creditor to make small progressive payments; • offer a lesser amount in final settlement; • seek a moratorium (a legal authorisation to delay payment); • apply for an instalment order (see above); • enter into voluntary bankruptcy (see Chapter 14). Always remember that you do have rights, you do not have to put up with harassment from creditors, and you can seek advice from a financial counsellor ...it is free.

Chapter 14

Bankruptcy There was a time when a fool and his money were soon parted, but now it happens to everybody. Adlai E. Stevenson

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ankruptcy, once associated with high-flying entrepreneurs, has now become an option for anyone who cannot pay their debts. In the 1990s, the number of bankruptcies rose dramatically in Australia, with a record 26 316 being declared bankrupt in 1998.

WHAT IS BANKRUPTCY? Bankruptcy is when you cannot pay your debts and so declare yourself, or are declared by a creditor or creditors, to be insolvent, that is, without sufficient funds to cover your debts. Control of your finances is handed over to a registered bankruptcy trustee that arranges the sale of your assets and distributes the proceeds to your creditor(s). If your debts are out of control and you have exhausted other legally available options (see Chapter 13), bankruptcy might be your best course. You will generally be discharged after three years. Proper advice from a financial counsellor or the Insolvency and Trustee Service, Australia (ITSA), an agency of the Federal Attorney-General’s Department, is essential. Offices of ITSA are listed in Part 3.

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WHY ARE SO MANY PEOPLE EXPERIENCING FINANCIAL CRISES? Primarily it is because people owe more than they have. The easy availability of credit, high interest personal loans, and the pressure to consume, push people into taking on more debt than they can repay. The rise in small business failure and increased availability of gambling venues have also contributed to bankruptcies. Also, a lot of recent job losses have been in previously ‘safe’ sectors, such as government departments, banks, education, insurance companies; those employees have borrowed money, believing that their employment was secure. Bankruptcy happens to people on all levels of income, as demonstrated below: • Wendy, a well-paid executive, borrows excessively to maintain the lifestyle that she feels is appropriate to her position — a house overlooking the harbour, luxury car, regular overseas holidays.When she loses her job, she has no savings to fall back on. • Samantha, a single mother, has two small children who have outgrown their cots. She buys two new beds, including mattresses and sets of linen, through a store’s credit facility. The $980 debt soon escalates when payments are not made and 29.5 per cent interest rates are added.

COULD SOME PEOPLE AVOID BANKRUPTCY? Many bankruptcies could be avoided if creditors were more flexible about debt repayment. Some people declare bankruptcy because they can no longer bear the creditors’ continual harassment. In our current economic climate, a variety of factors, such as unemployment, separation, death, addictions or gambling problems, can precipitate a debt crisis. Creditors need to be more understanding and

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more willing to negotiate repayments. This would benefit them as well as their debtor because they would be assured of some financial return. If the debtor enters into bankruptcy, the creditor might get nothing.

HOW CAN I BE MADE BANKRUPT? A creditor can declare you bankrupt by serving a bankruptcy notice citing an unpaid debt on which judgment has been obtained (see Chapter 13). If payment is not made in full before this notice expires, an act of bankruptcy has been committed. The creditor must petition for your bankruptcy within six months of serving the notice. You can enter into voluntary bankruptcy by completing a debtor’s petition and a statement of affairs. These forms are available from financial counsellors, registered bankruptcy trustees, and ITSA. On the statement of affairs, you must list all your debts, the names, addresses and postcodes of all your creditors and the amounts owing, and give full details of your income and assets, including houses, cars, bank accounts, investments, and any money owed to you. There are severe penalties if you do not disclose all of your assets and liabilities. You are officially bankrupt when the forms named above are lodged with ITSA and you are given your bankruptcy number.

CAN I CHANGE MY MIND? There is no ‘cooling-off’ period after the debtor’s petition and statement of affairs have been lodged with ITSA. If you are considering bankruptcy, but need time to think through all the implications, you can lodge a signed statement with ITSA, stating that you intend to declare yourself bankrupt. This is called presenting a declaration of intent to lodge a debtor’s petition, and can be done only once per year. You then

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have a seven-day ‘cooling-off’ period, giving you a chance to decide, and during which time your creditors cannot take any direct action to recover their debts. However, giving an official receiver a declaration of intent (‘act of bankruptcy’) allows your creditors to start bankruptcy procedures against you.

HOW MUCH IN DEBT MUST I BE BEFORE I CAN GO BANKRUPT? You can become bankrupt voluntarily for any amount, but creditors can only petition for your bankruptcy if the amount you owe is more than $2000, including legal costs and interest. This may seem a small sum to warrant such a drastic step, but people on low incomes struggle to repay such an amount.

WHAT IS THE USUAL PERIOD OF BANKRUPTCY? The usual term of bankruptcy is three years from the date the two previously mentioned forms are filed, but you could qualify for early discharge, which means that the term is shortened to six months. If the trustee lodges an objection, your bankruptcy can be extended to five years or up to eight years.

HOW DO I GET AN EARLY DISCHARGE? You can apply for early discharge after six months. All restrictions must have been adhered to, but there are two main criteria: • Your unsecured debts do not exceed 150 per cent of your income in the year immediately before your bankruptcy; • You are not required to make contributions to your bankruptcy trustee. (Contributions are based on the number of your dependants and your net income. Once your income from all sources reaches a certain amount, you will pay 50c for every dollar you earn over that amount.) To obtain early discharge, the necessary forms can be obtained from your trustee.

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ON WHAT GROUNDS COULD MY BANKRUPTCY BE EXTENDED? Your trustee can lodge an objection to prevent your discharge from bankruptcy and can extend your period of bankruptcy to five or even eight years if you do not abide by the restrictions imposed on bankrupts. Some of the major grounds for objection are: • failing to disclose all property, income and expected income; • being a company director; • borrowing more than $3360 (indexed) without informing the lender that you are an undischarged bankrupt; • not disclosing all debts on your statement of affairs; • travelling outside Australia without your trustee’s consent; • failing to pay any required contributions; • failing to cooperate with your trustee; • failing to disclose, on your statement of affairs, property disposed of, or money spent, up to five years before your bankruptcy.

IF I AM OFFICIALLY BANKRUPT, ARE ALL MY DEBTS GONE? Debts that cannot be cleared by bankruptcy include: • traffic fines for parking, speeding; • court fines; • unliquidated debts, for example, a car accident where liability has not been accepted. In these cases, it is best to wait for judgment to be entered before entering bankruptcy; • child-support debts (however, penalty fees for late payments can be cleared by bankruptcy); • taxation debts;

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• social security debts; • money obtained illegally.

CAN I BORROW MONEY WHILE I AM BANKRUPT? If you want to borrow more than $3360 while you are bankrupt you must inform the potential lender that you are bankrupt; it is an offence not to do so. To avoid breaching the Bankruptcy Act, have it written in your loan contract that you are an undischarged bankrupt.

WILL I LOSE EVERYTHING? All assets, including your house, lottery wins and other prizes, will be disposed of for the benefit of your creditors, except for necessary household furniture, personal effects, life insurance, superannuation, your main form of transport, such as a car or motorcycle up to a value of $5000, or tools of trade up to an approximate value of $2000.

ONCE I HAVE DECLARED BANKRUPTCY, DO I KEEP MY EARNINGS? If you earn above a certain amount, you must pay regular ‘contributions’ to your trustee for the benefit of your creditors. Contributions are assessed on your bring-home pay, any child support/maintenance payments, and the number of your dependents. If you leave your job during your bankruptcy and receive a lump sum, this will be considered as income for the purpose of calculating your contributions. To give you some idea of how a bankruptcy might come about, we summarise two such profiles.

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PROFILE

Anne has been married twice. Her first marriage ended after 17 years, the second lasted only two years, during which time she spent all her settlement money from the first marriage. After several more failed relationships, Anne met Kevin and they used his savings of $10 000 as a 10 per cent deposit on a house-and-land deal of $100 000, bought in both names. Anne also borrowed $13 000 from a finance company to buy a new small car. One year later, Kevin left. With a weekly bring-home pay of only $360, Anne continued her car repayments, but fell behind with her mortgage payments of $220 per week. The bank eventually started legal proceedings which resulted in a mortgagee’s auction. By this time, with no payments made and interest accumulating, the amount owed to the bank was $115 000, $15 000 more than the original purchase price. The house sold for $95 000, leaving an outstanding debt (shortfall) of approximately $24 500 after legal and estate agent fees and rates were paid. As Kevin and Anne had paid only 10 per cent deposit, the bank had insisted on mortgage insurance (see Note overleaf). After the shortfall was determined, the mortgage insurers contacted Anne requesting payment. Anne, recently retrenched, consulted a financial counsellor who wrote to the insurers, advising them that Anne was unable to make any contribution as she was unemployed. The insurers requested a token payment of $5 a week— a never-ending debt. Anne’s total debt (the house shortfall plus two credit card debts totalling $5500) amounted to approximately $30 000, not including her car payments. The financial counsellor suggested three options: • Do nothing, in which case the three creditors would each issue a summons, obtain judgment and continue to charge judgment interest. Judgment against a debt is valid for 15 years, which means they can legally charge interest for 15 years. • Ask for a moratorium (a legal authorisation to

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delay payment of money due) from each creditor which means payments are not made for an agreed time, usually three or six months, after which Anne’s position would be reviewed. • Enter into voluntary bankruptcy. Anne, considering her age (53) and low employment prospects, opted for bankruptcy, but she wanted to retain her car, which was two years’ old and worth about $8000.The finance company agreed that, as long as Anne met all payments, she could retain the car.This was in their best interests, as repossessing and selling the car would leave them in a shortfall position. Owing to Anne’s low income and the amount of her debt, she qualified for early discharge from bankruptcy. This was a traumatic time for Anne, coping with the loss of her relationship, her house, her selfesteem, and going bankrupt within a relatively short time. However, once the choice was made, bankruptcy was a relief. She found full-time work, retained her car, and now manages her income well. For her, bankruptcy was the right choice. Note Mortgage insurance is there to protect the bank, not you. If you do not pay, the insurance will pay the bank for any shortfall and the insurer will then chase you for the shortfall. This insurance would have cost a once-off fee of about $1000.

PROFILE

Alice and James, married for 15 years, with two children, have lived in the same house since their marriage. During the 1980s, James left his trade as plasterer to open a takeaway food business with a partner. They found it difficult to survive, so James obtained a personal loan, secured against his and Alice’s home, as well as an unsecured overdraft. When the business still did not improve, James borrowed from two more

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lenders, once again using the family home as security. The business was closed. Alice found part-time work and James returned to plastering, but was only working three or four days each week. The family used their credit cards to survive and their debts escalated. A financial counsellor outlined their options, one of which was bankruptcy. Alice, tired of threatening telephone calls from creditors, saw this as a positive move, but James was determined to keep his home. At this point their assets were valued at approximately $108 500, and their debts totalled $132 100, so they had a shortfall of $32 100. The financial counsellor informed creditors of their situation, obtained moratoriums where possible, and entered into repayment arrangements. The creditors that held a security over the family home were paid first. After two years, the couple’s combined income was still not covering their monthly repayments. When their creditors visited to look over the house, James finally contacted the financial counsellor to discuss bankruptcy. On signing his statement of affairs, James wished he had done it two years earlier. Both Alice and James were assessed as not having to make contributions towards their bankruptcy and were eligible for early discharge. Alice and James were confronted with different issues during this time. James found it hard to deal with the breakdown of his business partnership, the pressure on his marriage, the loss of his home and what he perceived as his failure as a breadwinner. Alice had found it very stressful having to respond to creditors continually, and was aware that their financial difficulties were having an adverse effect on their children; she also felt the pressure on their marriage and the loss of their home. For both Alice and James, however, bankruptcy was the right choice; they had been given a second chance and their creditors could no longer harass them for payment.

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You should not consider filing for bankruptcy unless all other avenues are closed. Though it no longer has a stigma attached, bankruptcy can be a traumatic process, and you need to balance the pluses and minuses before you make a decision. You suffer a number of losses—self-esteem, possessions such as a much-loved home and assets acquired through years of hard work, and sometimes a relationship, as partners cannot always cope with losing their share of the assets. There are feelings of denial, anger, and grief. Bankruptcy can also be a relief. Your debts are gone and any excess money which previously went towards repayment of your debts, is now free for your personal use. It is a bit like a divorce—traumatic at the time, but it gives you a chance to make a fresh start. There are options to bankruptcy. Low income earners with little or no property can make a binding agreement with their creditor(s) (called a Part IX agreement), where they offer to pay so many cents in the dollar to wipe out an outstanding debt. However, Part IX is very difficult to obtain due to strict criteria on income, assets and debts. Seek further information from a financial counsellor or ITSA. (Part IX is currently under review by ITSA.) A Part X agreement is similar to Part IX but is usually used by small businesses, companies, or people who have property or a reasonably high income. Seek assistance from an accountant or ITSA. Beware If you became bankrupt once, it could happen again unless you learn some money-planning skills. See a financial counsellor to discuss ways of avoiding debt in the future.

Chapter 15

Insurance

An insurance policy is like old underwear. The gaps in its cover are only shown by accident. David Yates

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nsurance can be summarised as the payment of money (a premium), in exchange for compensation (cover), for damage to person or property. An insurance contract usually includes a specified amount (called an excess) to be paid by you; this excess, for example, the first $300, is deducted from the total amount of the claim. Insurance can be bought to cover most aspects of our lives, but if you bought insurance to protect you from everything that might happen, you would not have any money left to live on.

DO I NEED INSURANCE? If you consider how much it would cost to replace your possessions, it is definitely worth having them and yourself insured. You might not be able to afford the extent of cover you would like, but any insurance is better than none. Work out what you can afford, shop around, and get as much cover as you can for your money.

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WOULD YOU PLEASE SUMMARISE THE TYPES OF INSURANCE AVAILABLE? Car insurance • Compulsory third-party insurance accompanies car registration and covers you only for any injury you cause to anyone while driving that car; this is the only level of insurance that you are legally required to have. • Comprehensive insurance covers accident damage, however it happens, fire, or theft, damage to your own car, and any damage caused to other cars or property by you. • Third-party insurance covers you for damage done to another car in an accident, but not to your car. • Third-party, fire and theft insurance extends your third-party insurance to cover compensation for fire damage, or if your car is stolen. • Extended third-party insurance again extends your third-party insurance to cover payment for damage caused to your car by an uninsured driver.The insurance company will then try to recover the cost of repairs from that driver. Many people find themselves in financial difficulties when they are involved in a car accident and do not have comprehensive cover. If still paying off their car, they must continue these payments as well as pay for repair costs. Car insurance for young people, particularly males under 25, is extremely expensive because they are considered to be in the high risk category. Females under 25 pay less than their male counterparts as their accident record is not as high. Some young people avoid paying high premiums by having their parents register and insure their car, even though their under-25 child is the main driver; this is insurance fraud.

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TIPS

If you are young and own an older, cheaper car, consider only taking out third-party, fire and theft insurance, rather than comprehensive; you could save hundreds of dollars on premiums.

Look for insurers that offer extras, such as roadside assistance, use of rental car, free legal advice, discounts for non-drinkers or drivers with long-term safe driving records, on top of the basic cover. House and contents insurance Do not under-estimate the amount of cover you need. If your house burns down, or is burgled, and you are under-insured, you could suffer a significant financial loss. Increase your premiums to accommodate any rise in value of your property and possessions. These could be renovations or additions, such as a new garage, carport, fences, decking, updating furniture, computer, airconditioning, and so on. Include in your estimate the total cost of replacing ordinary household items such as light fittings, carpets, clothes, crockery, cutlery, saucepans, and so on, as well as televisions, computers, videos, stereo systems, furniture, and other major appliances. You will be amazed at the total cost.

PROFILE

Rebecca and Enzo lived in a well-furnished 20-square house (three bedrooms, study, rumpus and living rooms) with their two young children. They had house insurance of $100 000 and contents insurance of $20 000. One day a fire destroyed the house during their absence. The house was repaired within the insured limit but insurance assessors estimated that replacing the contents of their home—furniture, curtains, television, video, CD player, stereo system, kitchenware, computer, and so on—would cost them over $50 000, a shortfall of more than $30 000.

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There are two basic types of home insurance policies: • indemnity policies cover you for the market value of what you have lost, that is, the replacement value less an amount for depreciation or ‘wear and tear’; • replacement (or new-for-old) policies which cover you for the agreed value of your house or its contents, so that you are usually able to replace what you have lost with new items. If you can afford the higher premiums, take out new-for-old insurance, rather than indemnity, and always read the small print to find out exactly what is covered, or you may suffer problems with your claims, as happened in the profiles below: • When Sally’s five-year-old computer was stolen, she expected her insurance company to replace it with a new one, at a possible cost around $2000; instead they estimated that her computer was outdated and almost valueless and she received only $300. • When Linda and Bruno’s toddler left the tap on and flooded the carpet, they anticipated new floor coverings; instead, their insurance company opted to dry out the carpet which was so old and threadbare that it literally fell to pieces. They received only enough money to buy one large rug. • Lois made a claim on her insurance company for smoke stains and cracks on her living room walls, caused by her heater. Her claim was disallowed because her policy stated that damage must be caused by flames.

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Personal valuables, such as jewellery, may have to be covered separately, as there are limits on how much a single item is insured for under general home and contents policies. Jewellery is the most common article stolen from private homes as it is the easiest to sell. Some insurers prefer you to supply valuations for particular items you wish to insure. If you work from home, you may need special cover for your computer, facsimile machine, and other equipment. You can also be insured for loss or theft outside the home, for example, if you are robbed on the street or you leave your engagement ring in a ladies’ rest room. Some insurers offer this cover with their home and contents policy, others offer it separately. Medical/health insurance For some years Australians have been opting out of private health, and relying on Medicare for their medical needs. They feel that health insurance is expensive, the costs always seem to be rising and, even if you have 100 per cent cover, you still have to pay substantial bills because a doctor charges more than the Medicare schedule fee, leaving a gap not covered by insurance. If you are young, healthy, and not planning a pregnancy, private health insurance is probably unnecessary for you. The main benefits of private health cover are: • access to private hospitals and to a doctor or surgeon of your choice, although you could be restricted to certain private hospitals; • reduced waiting time for elective surgery; • other expenses not covered by Medicare, such as dental work, ambulance costs, optometry, and physiotherapy, may be met.

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With most health policies there are waiting periods of up to a year before you can claim, and many health funds do not offer overseas cover. If possible, find out if your fund has a ‘no-gap’ agreement and, if you do not make many claims, choose a policy with an excess as these have lower premiums. Keep payments up to date, or your policy could be cancelled just when you need the cover. It may be beneficial for high income earners to take out private health insurance, rather than pay the additional Medicare levy now being imposed on those with incomes above $50 000, as they will receive a 30 per cent rebate from the Federal Government for their outlay. Another option is ‘self-insurance’, that is, saving the money you would normally have paid into a health fund. If you don’t need it during the year, it can be carried over to the next. Had you contributed that amount to a health insurance fund, you would have received no return for it and would have to pay again the next year. We recommend paying for ambulance cover, unless you are a pensioner or health care card holder, in which case you do not pay for ambulance transport; the cover is not expensive and ambulances trips are very costly. Life insurance No matter what your age, you should consider taking out insurance cover for illness, disability, or death. Even if you are caring for young children at home and are not currently in a job, your partner would be in severe financial difficulties should you become disabled or die; he/she would have to keep working to support your family, thus incurring costs for child-care, after-school care, housekeeping, and so on.

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• Term insurance, renewed annually, pays your dependants or your estate an agreed amount when you die. Some policies may specify that, after you reach a certain age, say, 65, the cover ceases.Term insurance is useful for those who wish to cover the family years, when they have dependent children, mortgages, and other financial commitments. Some policies include a terminal illness benefit, which pays your benefit before you die, so that you can pay your medical expenses. • Whole-of-life and endowment policies are more expensive than term insurance because they combine life insurance and a savings/investment component, so you can borrow against the policy or withdraw from it.When you reach a nominated age, the policy matures and you receive a lump sum. Most work-related superannuation schemes include some death cover. Income/disability insurance and trauma insurance If you insure your car, house, and health, why not your income, probably your most valuable asset? If you or your partner becomes ill and cannot work, will you be able to meet your family expenses and other financial commitments, such as your mortgage, and regular bills? Income insurance pays benefits of up to 75 per cent of your income, should you be unable to work because of unexpected illness or injury. You usually have to pay tax on this benefit, but you can claim the premium as a tax deduction. If you have dependants and/or debts requiring regular payments, income protection insurance is worth considering. You might be covered already, as many superannuation funds provide total and permanent disability cover as well as life cover. However, this cover

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could lapse if you have not contributed for two years; check your policy. Even if you are single and without dependants, it may be worth insuring yourself to cover loss of income in case you become ill or have an accident. Total and permanent disability insurance pays a lump sum in the event of a ‘permanent incapacity’ which renders you unable to return to work. Check different insurers to see what they classify as total and permanent disability. Premiums vary, depending on the degree of disability covered. Examples of different levels of disability are: • you are disabled and cannot return to your usual occupation; • you need rehabilitation or retraining to return to a normal occupation; • you are permanently incapacitated and unable to return to any occupation. Also, ask if your payments increase over time with inflation. Trauma insurance pays a lump sum if you suffer from a major illness such as heart attack, cancer, or stroke. As men are more likely to suffer from these conditions, the premiums for women are usually lower. Personal legal insurance With legal aid available to only a limited range of people, personal legal insurance is one way of gaining access to a legal system which is otherwise too expensive for most of us. For approximately $120 per year, you can be covered for events including personal injury, employment disputes, a limited range of criminal matters, up to $20 000 towards tax and legal fees incurred during a tax audit. There is an excess payable and some things are excluded in the policy, such as pre-existing matters, matters where the amount in dispute is

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less than the excess, claims between persons covered under the same policy, wills and estate matters, Family Court matters, and new conveyancing costs. Travel insurance Travel insurance is essential; it covers you for most of the misfortunes which may occur when you are on holiday, such as loss of luggage, damage to property, cancelled flights, medical expenses. Accidents can, and do, happen, particularly to young backpackers doing adventure activities such as whitewater rafting, bungy jumping, and so on. Without insurance, the cost of overseas medical and hospital treatment could leave you in debt for decades; hospitals in the USA charge on average $A1500 per day, excluding medication and specialised treatment. Read the small print: your policy may not cover you for pre-existing medical conditions. As with all insurance, you should shop around. • Some insurers offer discounts to customers who hold other policies, such as home and contents, with them. • Travel insurance can be bought on the Internet for prices up to 40 per cent lower than elsewhere. Check with your credit card company—some offer emergency back-up cover if you use your credit card to pay for your flight.

TIPS HOW DO I CHOOSE THE RIGHT INSURANCE POLICY? Premiums charged by insurance companies do vary, so choose the policy which meets your particular needs; the cheapest policy is not always the best.

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• Always read the small print in insurance policies. • Review your cover each year and shop around for the best value. • For house and contents insurance, keep an updated inventory of household belongings, pricing each item at what it would cost to buy new, rather than on the original purchase price. • Know exactly what you are covered for and if there are limits on claims. For example, will they only pay up to a certain amount for any one item? Must you put in a claim within a certain time after a robbery? • Make sure you are not under-insured. • Be aware of your responsibilities, for instance, your insurer may require you to have special locks fitted on your doors. If you do not adhere to this requirement, your claim could be refused. For unusual or complicated insurance, that is, if you own something of high value or which is particularly rare or unusual, it may be useful to go to an insurance broker. Brokers know which companies might serve your need, and could also help if you need to make a claim. There is generally no charge to you, as insurance brokers are paid commission by insurance companies. Always be honest when giving your details to an insurance company. Failing to do so could give them grounds to refuse any claim you make.

TIPS

Chapter 16

Taxation A tax loophole is something that benefits the other guy. If it benefits you, it’s a tax reform. Russell B. Long

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ustralians demand high standards from public health, education, community, police and other emergency services, and most of us are willing to pay taxes to guarantee access to efficient telecommunication, power, water, sewerage, and transport systems, and to ensure that pensions and other welfare payments are adequate for elderly and disadvantaged fellow Australians.

WHEN DO I START PAYING TAX? Once you earn above $5400, you should submit a tax return at the end of that particular financial year. However, as you will receive a low income tax rebate of $150 a year, you effectively start paying tax at an income of $6150 per year. For single aged pensioners, the tax-free threshold is $11 700 a year and $9 888 a year for a married pensioner. After the end of each financial year, 30 June, you have four months to submit your return. If you employ a tax agent, you have a later due date which can vary between February and as late as June the following year.

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Even if you employ a tax agent, you are the one responsible for getting the return in on time and ensuring it is correct. There are penalties for late or ‘dodgy’ tax returns. Don’t wait until the last minute. Doing your tax is much easier if you are organised and start early. • The secret to an easy tax return is keeping accurate records.Throughout the year, put all your receipts and other tax-related paperwork together, in a shoe box, if you must, though a file or folder with individual compartments is much better. Having receipts, invoices, statements, and so on, filed separately saves a lot of time when you sit down to do your tax. • When doing your return, check that you have all the group certificates from the current year from your employers, including any casual employment, or that you have the relevant statements from Centrelink. • Ask for a statement from your bank or other financial institutions showing any interest you have earned. • Only claim for items for which you have receipts. Make sure that your receipts are legible, and keep them for five years in case you should undergo a tax audit. • Go through your TaxPack carefully as you fill out your form.The TaxPack explains clearly what you can and cannot claim. • If your affairs are complicated and you are unsure about what to do, contact a tax agent. The agent may deduct the fee from your refund or request payment before the return is lodged. If you do put your tax affairs in the hands of an agent, check their credentials. Ask to see their registration certification or call your regional taxation authority. By law, unregistered tax agents are not

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allowed to charge a fee. Unregistered tax agents often file incorrect tax returns and, should their activities be audited, it may cost you money. Beware of tax agents who: • door-knock offering their services; • operate out of hotels, clubs, or even their cars; • use TaxPack instead of the special tax agent return forms; • ask you to sign a blank form; • charge a percentage of the tax refund as their fee. If the Australian Tax Office (ATO) reviews your return and discovers that you have incorrectly calculated deductions, you have to pay the tax shortfall. (The tax shortfall is the difference between the tax paid, based on the information supplied in your return, and the amount of tax that was due under the law—in other words, the amount of tax underpaid.) Interest is also charged for the loss of revenue on the unpaid tax, and an additional penalty may be imposed.

HOW CAN I REDUCE MY TAX BILL? There are two ways taxation can be reduced: by rebates subtracted from the tax once it has been calculated and deductions subtracted from gross income in determining the level of income on which tax will be calculated. Most taxpayers struggle to find more than a few expenses which they can claim. However, the following measures may help even average wage-earners to reduce their tax liability by 5 per cent or more. • Work-related expenses Generally speaking, money spent as part of your job can be claimed as deductions.You can claim up to $300 on work-related expenses without having to

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•

•

•

•

•

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produce receipts. Protective clothing, compulsory uniforms, self-education directly related to your job, car expenses if the vehicle is used for work, some travel expenses, union fees, professional association fees, job-related literature, stationery, computer disks, calculators, and even brief-cases, are all examples of work-related deductions. Remember, you only get part of your expenses back, so do not spend an unnecessary dollar to save 40 cents or 50 cents. Donations made to most charities qualify as tax deductions, but not raffle tickets. Always keep receipts. Family trusts can be used legitimately to minimise tax.A small business bringing in $100 000 per year could pay more than $39 000 in tax. If operated as a family trust, however, with husband and wife having equal shares, the business could pay about $30 000 in tax, a substantial saving. Salary packaging, that is, having part of your salary replaced with benefits such as extra superannuation contributions or a company car, can reduce your tax. Money paid into superannuation is taxed at only 15 per cent, or 30 per cent for high income earners. However, remember that superannuation funds cannot be released until retirement. Income-splitting Putting income-producing investments in the name of the lower income earner is the easiest tax-planning tool to use. This can be done for all income-producing investments from simple bank savings accounts through to shares, mortgage trusts, and fixedinterest securities. Negative gearing is when interest paid on money borrowed to buy shares, property, and some other income-producing investments is tax-deductible.When applied to real estate, negative gearing indicates the difference between the income and expenditure on the

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property; if income exceeds expenditure, the property is said to be negatively geared, and tax benefits cushion the level of the loss. • Extra superannuation contributions, especially for the self-employed, can reduce tax; however, superannuation funds are not available until retirement. • Spouse superannuation contributions can now be made by taxpayers to their spouse’s superannuation (see Chapter 18). • Children’s investments Putting some investments in a child’s name can reduce your overall tax bill as children can receive up to $416 from investments tax-free. Some people expecting tax bills delay submitting their tax returns until the last legal moment, which could be well into the next year if using tax agents, thus earning interest on their money in the intervening period.

WHERE CAN I GET FREE ADVICE ON TAX MATTERS? The ATO Tax Help service is available for people who, because of age, disability, language difficulties, or inability to pay a tax agent, need assistance in filing their tax returns. The ATO also offers a Fax from Tax service, accessible by calling 132 860, which will fax information sheets such as: • • • • • •

The Tax Rebate for Low-Income Aged Persons; How does Superannuation Work?; PAYE—For Employers; General Information on HECS; Sales Tax—Small Business Exemptions; Family Tax Assistance Summary.

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There is no cost for the information and the telephone call is charged as a local call. The ATO home page gives information on recent rulings and changes that may affect taxpayers. Membership of the Australian Taxpayers’ Association ($195 per year) entitles you to a fortnightly news booklet. See Part 3 for contact numbers. Also, many software packages are available which can assist you with your income tax and allow you to experiment with different combinations to see how you can save the most.

Chapter 17

Traffic offences

The best car safety device is a rear-view mirror with a cop in it. Dudley Moore

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ines can be imposed for hundreds of civil offences, but most fines are for parking and traffic offences. The amount of the fine may seem minor, but the cost can escalate rapidly if you do not pay, sometimes to the point of jail terms being applied. Serious traffic offenders can also lose their licences. The more common misdemeanours which incur penalties, ranging from $20 to $500, include:

• Parking fines Parking in a clearway, disabled, or no standing zone; double parking or parking opposite double lines. • Traffic fines Speeding; drink-driving; failure to obey traffic lights, give way or stop; seat belt offences; driving an unregistered vehicle; using a mobile phone while driving; overtaking a tram (in Melbourne); pedestrian offences; riding a bicycle without a helmet; other bicycle offences. • Public transport offences Fare evasion; offensive behaviour; drinking alcohol on a public transport vehicle.

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• Other Failure to vote; offensive or drunken behaviour; littering; other council by-law offences. If the fine was for a driving offence, you will lose points against your licence. The number of points lost depends on the type of offence. For exceeding the speed limit by less than 15 kilometres per hour, you lose one point; exceeding the speed limit by 30 or more kilometres per hour, you lose six points and automatically lose your driving licence. Your licence can also be lost if you lose 12 points within a three-year period. Points ‘drop off’ your record after three years.

IF I RECEIVE AN INFRINGEMENT NOTICE, WHAT ARE MY OPTIONS? Once you receive a notice to pay a fine, you can: • pay the fine within the specified time which varies between States. For example, it is 28 days in Victoria, and 21 days in Queensland. If you pay within the time-frame, no further costs are involved. If you are willing to pay but will not have the money by the deadline, you can contact the issuing office, for example, the council, before the expiry date and apply for extra time to pay. • lodge an objection.You can lodge an objection and have the matter heard in front of a magistrate who will either dismiss the case, reduce, or increase, the fine. If you decide to object to a fine, first seek legal advice from a solicitor or a community legal centre. • do nothing. By doing nothing, extra penalties will be added and your initial fine of, say, $50 might reach $200 before a warrant for your arrest is issued.

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WHAT WILL HAPPEN IF I DO NOT PAY THE FINES? If you have not paid your fine within the time specified on your infringement notice, you will receive a courtesy letter (which adds about $15 to the fine), giving you a further 28 days (or whichever is applicable in your State) to either pay the fine and costs, or go before a magistrate. If you still do nothing, a notice of enforcement order will be sent to you, with further costs added, and once again you have 28 days to either pay, enter into an arrangement to pay, or go before a magistrate. If the fine still remains unpaid, a warrant is issued, incurring further costs, giving the sheriff’s office the power to seize your goods or arrest you. You still have the option of paying the fine and all costs by applying for time to pay or referring the matter to a magistrate. To avoid seizure or arrest, you must act immediately by: • Paying the fine and all costs. • Contacting the appropriate office—the PERIN (Penalty Enforcement by Registration of Infringement Notices) Court in Victoria, the Infringement Notices Bureau in NSW, or the equivalent in your State—to pay the fine by instalments. An income/expenditure statement may be required. • Applying to convert to a community based order (if applicable), that is, doing unpaid work within the community and not paying the fine. You do one hour of work for every $20 owed, to a maximum of 500 hours.To obtain such an Order, you need to apply to the court where the fine was imposed to be assessed as ‘suitable’ for community work. • Applying to have the fine order revoked.

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HOW CAN I HAVE THE FINE REVOKED? To have the fine revoked you must take it to the magistrate’s court. This can be done by filling out the back of the enforcement order, and returning it where indicated on the form within the specified time, giving your reasons for wanting it to go to the magistrate’s court. A valid reason might be: • The infringement notice or courtesy letter went to your previous address and you dispute the enforcement costs. • At the time of the offence, an emergency was taking place or you were affected by medication or an illness. • The car was sold before the offence was committed. • You did not commit the offence.

WHAT HAPPENS IF I IGNORE THE SHERIFF’S WARNING? If you do not respond, the sheriff has the authority to: • Suspend your licence. • Seize and sell your property to pay for the outstanding fines and costs (see Chapter 13). • Have you imprisoned. One day’s jail is imposed for every $100 owed so if your fines and costs total $570, you would spend six days in jail.The amount of time served for outstanding fines could differ between States. Fortunately for our jail system, more than 90 per cent of people pay their fines immediately and never have to consider these possibilities. If you receive a fine and are genuinely unable to pay, negotiate with the relevant authority.

Chapter 18

Superannuation

Money is like an arm or a leg—use it or lose it. Henry Ford

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ustralia’s superannuation system is so complicated and rules change so frequently that it is difficult even for financial advisers to understand at times. The following information is an overview only. For more details, read one of the many excellent books available about the subject, or talk to a financial adviser.

WHAT IS SUPERANNUATION? Superannuation literally means money set aside for retirement. It is an important issue for all Australians as, with increasing unemployment and the rapid ageing of the ‘baby boomers’, there are a diminishing number of taxpayers to fund social security payments, including the age pension. By the time some of us reach retirement, the age pension might no longer exist, so some form of superannuation is essential as a means of compulsory saving for our old age.

WHO CONTRIBUTES TO SUPERANNUATION? If you are employed, aged between 18 and 70, and earn more than $5400 per year, your employer must

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contribute to a superannuation scheme on your behalf; this amount is in addition to your earnings. The employer contribution will increase to 8 per cent in 2000 and 9 per cent by the year 2003. Employees do not have to contribute to superannuation but, if you want your payout to support you in retirement, you need to make substantial contributions of your own.

HOW DO I KNOW IF I HAVE ENOUGH FUNDS TO RETIRE ON? The amount needed for retirement depends on your age, assets, and income. As compulsory superannuation did not start until 1992, many older workers are unlikely to have saved enough for a good retirement income. If you are more than 40 years of age, earning below $40 000 a year, have not been contributing to superannuation all of your working life, and your only asset is your home, pray that the government does not abolish the age pension, as you are going to need it. If you do decide to retire in 15 or 20 years, the assets test could be so restrictive that you might not qualify for any pension. To retire on 75 per cent of your income, you need to have paid approximately 15 per cent of your salary into superannuation for 30 years. Few women, therefore, have adequate levels of superannuation. Our irregular pattern of work (part-time or casual, dropping out to start a family, and so on) means that, though we may have accrued some employer contributions to superannuation, the overall sum is nowhere near enough to support us in retirement. In these days of high divorce, we cannot rely on sharing or inheriting our partner’s superannuation, and as a rule we live longer than men and retire earlier; therefore we will have a longer retirement period to provide for.

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WHAT CAN I DO TO IMPROVE MY FINANCIAL POSITION? This question is difficult to answer without knowing your personal details. Talk to an accountant or financial adviser about the best option to suit your particular situation, or consult one of the many books on the market which can tell you how much you should be contributing to superannuation each year to acquire an adequate retirement income. For example, if you earn $500 a week ‘bring-home’ pay, are now aged 45 and plan to retire at 60, you will need a minimum of $390 000 in superannuation to have a yearly net income of $26 000 (only until aged 75). How far will $26 000 go in another 15 years when you turn 60, or in 30 years when you are 75? You could make more substantial personal contributions in order to build up your superannuation, or invest in other options, such as shares, with potentially greater returns, but also greater risk.

CAN I CHOOSE MY OWN SUPERANNUATION FUND? Traditionally, most large employers have operated their own superannuation schemes. However, the Federal Government is currently proposing to introduce fund choice legislation for all Australians, so that every employee can choose their own superannuation fund, and can decide how and where their contributions are invested. It could be in a growth fund, giving the biggest possible return, in a conservative fund with little risk, or in a combination of high and low-risk options. Remember, the bigger the return, the higher the risk to your contributions. If you are young and single, without major debts, you can afford to take the riskier alternatives. If you are close to retirement, however, with a substantial amount in your superannuation fund, opt for safety. With the high risk option, a few years of low returns could diminish your overall benefit just when you need it.

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Choosing a superannuation fund is possibly the most important financial decision you make, besides buying a home. Do not rely on glossy brochures. Look for competitive fees and charges and good long-term investment returns. Some funds offer other benefits such as life insurance or home loans. The proposed legislation will not apply to employees covered by State awards, but will apply to new employees from 1 July 1999 and all existing employees from 1 July 2000. Employees must be offered at least four funds which must include one of the following: • a public offer fund available to the public via a prospectus; these usually have high fee structures; • retirement savings account (RSA), offered by a financial institution providing banking facilities for the employer; • a relevant industry or award fund.These have a lot going for them with regard to cost structure, insurance cover and investment management, and cater to the needs of the trade union movement; • corporate fund where one exists; • a choice of any other fund.

WHAT CAN I DO IF I AM SELF-EMPLOYED? Self-employed people must arrange their own superannuation if they want an assured income on retirement above the age pension. Options could be: • Buying a rental property If the government does not change the rules, you can negatively gear the house and the tenants pay the mortgage. Eventually you own the property, producing an income, or you can sell the house when you retire and invest the proceeds. • Buying blue-chip shares Consult a financial adviser or contact the National Information


Centre on Retirement Investments Inc. (NICRI) for free independent information. • Starting a personal superannuation fund with a lending institution and making regular contributions. • Beginning your own investment folio in consultation with a financial planner.

WHEN SHOULD I START PAYING INTO SUPERANNUATION? Many people in their late teens or early twenties spend most of their income on enjoying life, believing it is too early to save for their future. Their only superannuation, if they are working, is the compulsory benefits paid by their employers. If this is you, be warned. Life goes so rapidly that you could have the responsibilities of marriage, children (20 years of education bills), and your own home (not necessarily in that order) sooner than you think. After paying all the bills, you will have little money left for saving. When the children stop being financially dependant, or if you are childless, make it your first priority to pay off your mortgage and any other debts and then increase your voluntary contributions to superannuation. Ask your employer if you can ‘salary sacrifice’, paying part of your salary directly into your superannuation fund. This is tax-effective, as marginal tax rates are up to 48.5 per cent, compared to the superannuation tax rate of only 15 per cent. For example, on a salary of $35 000 per year, every $1 put into superannuation has 15 per cent (15 cents) taken out in tax and you are left with 85 cents invested. If you leave that $1 in your pay, you will lose approximately 26 cents to tax and have 74 cents in your pocket. That will not even buy a newspaper.

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I HAVE HAD MANY JOBS AND DO NOT KNOW WHERE ALL MY SUPERANNUATION FUNDS ARE. WHAT CAN I DO? People who have changed jobs or moved home without advising their superannuation companies in the past 10 years may have superannuation funds they have forgotten about. Contact the ATO Lost Member Register in your State and see if you are registered as ‘lost’. You could also contact your past employers and check where superannuation benefits were paid. Once all your superannuation funds have been found, consider consolidating the policies into your current superannuation fund. All superannuation and rollover funds charge fees such as establishment, entry, exit, policy, contribution, and administration charges. Consolidating your money reduces your fees and you can see your overall financial position more clearly. Most funds will do the ‘collecting’ or ‘roll over’ for you if you complete the necessary forms. Check with each fund first, however, as you may incur exit and/or entry fees, or lose some life insurance cover. With the increasing tendency for companies to ‘downsize’, and to employ more casual and contract workers, you are likely to change jobs regularly. Whenever you leave one job and start another, rollover your existing superannuation to your new fund.

CAN I WITHDRAW MY VOLUNTARY SUPERANNUATION BENEFITS? Voluntary superannuation is usually considered ‘non-preserved’, so if you leave your job or terminate self-employment, many funds allow you to withdraw your money. This is at the discretion of the trustees. Some funds allow immediate withdrawal. Others have a qualifying period, for example, you must have been in continuous receipt of a Centrelink or Veterans’ Affairs pension or income-support


allowance for at least 26 weeks. You will need a letter from Centrelink or Department of Veterans’ Affairs confirming this. After 1 July 1999, all superannuation contributions must remain until retirement. Any voluntary contributions prior to July 1 remain unaffected.

CAN I WITHDRAW MY COMPULSORY SUPERANNUATION BENEFITS TO PAY OFF MY HOME? Government policy restricts withdrawal of superannuation savings, so that the money is available for genuine retirement purposes. Politicians are the exception to this rule. You can only withdraw compulsory or ‘preserved’ superannuation when you retire or in very limited and specific circumstances, such as cases of severe financial hardship. If you believe that you qualify for early release of your superannuation benefits on the grounds of financial hardship, contact the trustees of your fund or apply through the Australian Prudential Regulation Authority (APRA). You are only eligible for early release if you need money for any of the following: • medical treatment for you or a dependant which is not covered by Medicare; • medical transport for you or a dependant; • modifications to your home or motor vehicle because of severe disability, yours or a dependant’s; • palliative care for you, or a dependant, or expenses associated with death/ funeral of a dependant; • mortgage repayments to prevent your mortgagee from selling your home. A single amount of between $1000 and $10 000 may be withdrawn in any one year; an amount less than $1000 may be withdrawn if there is less than

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$1000 available. Special circumstances apply to members who are older than 55 years and 39 weeks. Check with your superannuation fund.

ALTHOUGH I AM NOT WORKING CAN I START A SUPERANNUATION FUND? Taxpayers can now obtain a tax rebate if they contribute towards superannuation for their non-working or low income-earning spouses. If you earn below $10 800 per year, the first $3000 contributed by your partner attracts a $540 rebate. Reduced rebates apply, cutting out when annual income exceeds $13 800. ‘Spouse’ in this context means someone to whom you are legally married or with whom you are living in a genuine de facto, but not same-sex, relationship. You may prefer a self-managed superannuation fund where you control your own investments, such as shares and property. This can involve appointing yourself or your spouse/partner as trustee. If you choose this option, maintain a balance by placing half your money in safe investments and half in more high-risk investments. Obtain advice from a financial planner with experience in the superannuation area. To help people through the superannuation maze, the Australian Taxpayers’ Association’s Do It Yourself Superannuation Manual details all you need to know about setting up your own fund and avoiding pitfalls. When you start a superannuation policy, you must fill in the Designated Beneficiary Form correctly. If you do not, you are leaving a nightmare for your family if you die. Most people do not realise that death benefits are not normally paid into the estate and the eventual allocation is at the discretion of the trustee. The distribution of death benefits can be very complicated, especially if there is more than


one marriage, de facto relationships, and children by several partners.

WOULD I BE BETTER TO INVEST MY MONEY ELSEWHERE? Some people prefer to make their own investment choices as, with superannuation, you are taxed on your contributions, on the income from the investment, and again on the benefits that flow to the fund. On the one hand the government is encouraging us to fund our own retirements, while on the other taking as much as it can!

WHO DO I CONTACT IF I AM UNHAPPY ABOUT MY SUPERANNUATION FUND? The Superannuation Complaints Tribunal is an independent body set up by the Federal Government in July 1994 to resolve complaints about superannuation funds and approved deposit funds. It deals with unfair, improper or unreasonable decisions made by fund trustees, including delays in payments, miscalculations of benefits, and errors in annual statements.

Chapter 19

Starting a small business When you see a successful business, someone once made a courageous decision. Peter Drucker

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ustralians start their own businesses for a variety of reasons: they may have been made redundant and received a sizeable payout, been unemployed for ages and need extra income, are tired of working for someone else and want to become self-employed, or maybe they are following a lifelong dream. Women, in particular, may want to be their own bosses because they need flexible hours which fit in with their family responsibilities.

WHERE DO I START? Your first step is to decide on the type of business in which you are interested. Ask yourself the following questions: • How big or small a business do you want? Will it be the extension of a hobby or an area in which you have no previous experience? • Do you want to work from home or from outside premises? Working from home has some benefits such as convenience, low overheads, no need for ‘power-dressing’, no travelling in peak-

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hour traffic or on public transport, but there are also drawbacks.You may have to contend with the family answering the business telephone, conducting business with the sound of children playing and other domestic noises in the background, isolation (no-one to bounce ideas off), and so on. Do you want to buy an existing business, create your own or purchase a franchise? Are you, your partner and/or your children prepared for the time and energy a new business needs to get off the ground? Will you have enough money to live on until the business begins to make a profit? Are you prepared to fail? Most new businesses fail in the first five years, often because of lack of experience, insufficient research, or inadequate legal and business advice.

Remember, for a new business you may need to buy equipment, pay rent, and appoint staff, and may not make any profit for several months, even years. An existing business may cost more, but may be the less stressful option; it will have established customers and orders providing ongoing income. Second, you need to research and read widely. If you want to provide a bed-and-breakfast service from your home, for example, you need to obtain information about permits and other council requirements, how to promote your business, what quality of service and facilities are expected, and so on. You may have an idea for a business which has not been tried before, like the innovative businesses outlined below: • Three artists produce miniature paintings of Australian wildlife and landscapes on bottle tops and sell them to tourists, an inexpensive and highly portable business which has proved very successful.

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• Two former nurses discovered that there was no official system for cleaning crime scenes after police procedure is finalised.They set up a unique cleaning service which is in demand Australia-wide. • Two young women, tired of the corporate world, leased a van and began a flourishing delivery service.They buy fresh fruit and vegetables from the market and deliver them to customers who are unable or unwilling to do their own shopping. If you want to pursue a similar idea, do your homework. Is there a need for this particular service? If not, could you create one with enterprising marketing? You can never have too much information or advice, and help is available from many places such as: • Your local library and book store, where books are available which cover the topic in detail; libraries also have computers with access to the Internet that has useful information on starting a small business. • Centrelink, which may offer government schemes which can assist with training or setting up your business if you are on social security benefits. • The Small Business Association in your State, which can inform you of workshops or seminars that may assist you, grants for which you may be eligible, or other assistance schemes, such as the Women in Business Mentor Program run by the New South Wales Office of Small Business. • TAFE colleges may run small business courses. • Other small businesses, which may assist by offering advice, supplying goods, selling your product, and so on.

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• A solicitor and/or accountant. Before entering into any type of business, seek expert legal and financial advice, or you could find yourself losing your business, all the money you put into it, and possibly facing bankruptcy. Third, prepare a business plan. To borrow money to finance your venture, you must present your potential lender with a precise outline of costs, shortterm and long-term objectives, estimates of returns, marketing and organisational plans, as well as a list of your personal income, assets, and debts. Finance is easier to obtain if you are well organised and can demonstrate a good understanding of what you are undertaking. Costs might include: buying or leasing premises, if not working from home; office equipment such as a computer, an answering machine and a photocopier; telephone and facsimile lines; letterhead and other stationery; buying initial stock, and so on. If you need to employ staff, you will need to estimate the overall cost not only of the salary but also compulsory superannuation payments, holiday pay, worker’s compensation, and so on.

PROFILE

Maria and Carl wanted to live in the sun and saw the perfect enterprise advertised in the ‘Businesses for Sale’ section of their local newspaper. For Sale (Queensland):Ten catamarans including trailer and licence to operate on local river. Each catamaran has the earning capacity as follows: in the water 8 hours per day and hired out at $15.00 an hour.

Carl did some quick calculations: 8 hours 2 $15.00 hour = $120.00 a day 2 7 days a week = $840.00 210 catamarans = $8400.00 a week. Maria and Carl pictured themselves sunning on the riverbank while the catamarans made them a fortune. They went ahead and

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bought the business. However, they neglected to do their research. The catamarans were often out of the water for repairs/maintenance, and the river was not on the main tourist route, so most of the catamarans remained idle. Then the rains started. It was not long before the catamarans were not a viable option to work or sell.

WHAT ARE THE ADVANTAGES OF A FRANCHISED BUSINESS? In general, a franchise has a greater chance of success than other small businesses. You can work for yourself and tailor the work to suit your lifestyle, without the degree of risk usually involved in owning an independent business. You are linked to a proven system with an established reputation and are usually provided with support in management, marketing, and training. Franchises range from small mobile services, involving a van or trailer, such as Jim’s Mowing or Hire A Hubby, to the much larger retail businesses such as Pizza Hut and McDonald’s. The saying goes that if you purchase a McDonald’s franchise, your bank manager will treat you like a millionaire. To minimise the risk to yourself, do your research: seek proper advice, attend a course run by the various franchise consultancies, talk to at least three already established franchisees in the same line of business. Base your decision on substantiated facts and figures, not on verbal promises. Most franchise agreements involve a substantial initial fee, with a percentage of profit going to the franchiser; some franchisers also charge a continuing franchise fee, usually a percentage of sales. You must be prepared for a long-term arrangement. Some franchisers ask for a commitment of 20 years, in writing. Franchisees are protected by a mandatory code of

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conduct regulated under the Trade Practices Act 1975. Under the code, franchisers must disclose all relevant information to potential franchisees, details of existing franchises, any past or pending litigation against the franchiser, payments to agents, information about the franchise territory and site, suppliers, marketing, payments, establishment costs, financing arrangements, earnings information, and so on. The code also allows a seven-day cooling-off period.

WOULD IT BE SAFER TO BUY AN EXISTING BUSINESS? By buying an existing business, you have the advantage of taking over a going concern with established customers, suppliers, equipment, and so on. However, you need to do your research. Why is this business being sold? Have the figures examined by your accountant, going back some years. Do not think you can pull an ailing business out of the doldrums. If the location is wrong or there is no demand for a product or service, the business will never succeed, no matter how hard you work. It is important that you understand the following terms when discussing the background of any business. Goodwill is the reputation of the business built up by its previous owner(s). You pay extra for the goodwill, with the amount payable usually based on profits in twelve to eighteen months. Freehold means that you have to buy the building and land. Leasehold means that you are only taking over the lease of the premises for a set period. Some lawyers say that a business is only as good as the lease. Be wary if there is only a short time before the lease expires—the owner may not wish to enter into a further term and your business will have to relocate, causing extra expense and loss of business.

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When buying a business, obtain a new lease to suit your needs, for example, a two year lease with an option of four years, gives your business a security of six years, but commits you for only those first two years. If you are given an ‘assignment’ of a lease, that is, the previous owner of the business remains the official lease-holder of the premises, and your business fails, the holder of the ‘head’ lease, the previous owner, is liable for any outstanding rent. The same applies if you sell your business. If you assign the lease to the new owner and the business fails, you will be responsible for the lease payments. With most leases you are liable for all rates payable on the property. Check who is to perform maintenance. If you have a shopfront, the plateglass window may be your responsibility. If so, have it insured. Plate glass can be expensive to replace, especially if the business is in a vandal-prone area. Before signing a lease, always seek legal advice.

WHAT IS THE DIFFERENCE BETWEEN A SOLE TRADER AND A LIMITED COMPANY? As a sole trader you are liable for all debts incurred by your business, whether covered by personal guarantee or not. Once your business makes a profit you pay tax, and possibly provisional tax, which is tax for the following year. The ATO will estimate that, as you made $x profit during 1998/99, your profit for 1999/2000 will be $xx; they will calculate the tax payable and bill you for that amount. As a sole trader you may need to have insurance to cover accident or illness, and public liability. This can prove expensive. As a limited company, you are liable only for debts for which you gave a personal guarantee, such as signing for goods or the lease of premises. If your business fails, debts without a personal guarantee

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die with the company, but creditors will chase you for any personal guaranteed debts. Limited companies have tax benefits: you become an employee of your own company, pay PAYE tax, and the company pays tax on any profit. Company tax is a lower rate than PAYE tax. Your company should also pay worker’s compensation and superannuation for you and any other employees.

AS MY FRIEND IS INTERESTED IN STARTING A BUSINESS, SHOULD WE CONSIDER A PARTNERSHIP? Think very carefully before entering into a partnership. Many close friendships have come to grief when a partnership fails. If you really need a partner, choose someone with similar goals; it is difficult to work long term if your partner has a vastly different lifestyle, way of working, or approach to money management. Some people feel comfortable owing large amounts of money; others do not. All terms of a partnership should be put in writing at the start of the business; salary and profit shares, ownership percentages, responsibilities and levels of authority should be clearly defined. If your business partner is also your romantic partner, remember that if the relationship sours, so might your business. Also, both partners are solely and jointly liable for any debts, as with a sole trader. If the business fails, be assured the creditors will chase the partner with more assets, or the one employed.

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A NEIGHBOUR HAS ASKED ME TO JOIN HER PARTY PLAN. WHAT DOES THIS INVOLVE? A party plan, also called multi-level marketing, involves people joining a group that is given training to sell a specific product(s) bought from a central distributor and then the people in the group ’sell’ the product by recruiting friends, relatives, colleagues, acquaintances, and friends of friends to also sell the product(s). Usually most of the income derives from all the people the person has signed up, not from personal sales. That person receives a percentage of the other sellers’ sales, as well as from the sales of any people they recruit. Below is a diagram of how multi-level marketing works: You (1) You sign up 4 people 1 + They sign up 4 people each 4 + They sign up 4 people each 16 + Total number of people selling and earning

1 + 1 + 1 = 4 4 + 4 + 4 = 16 16 + 16 + 16 = 64 you money = 84

As with partnerships, many friendships have been lost and families divided because of feelings of pressure to buy the product or to become part of the system advocated.

WHAT ARE THE MOST IMPORTANT ELEMENTS IN RUNNING AN EFFICIENT BUSINESS? Accurate record keeping is essential. You can do this with manual book-keeping, or there are many software packages available which enable you to track what is happening to your business. You should always be aware of: • your creditors—those to whom you owe money;

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• your debtors—those who owe you money; • your bank balance. It is embarrassing, as well as damaging to your business, if a cheque ‘bounces’ because of lack of funds in your account. The next time you use that creditor—if there is a next time—he or she may insist on cash. Also, if it happens too often, your credit rating will be damaged. If you borrowed money to start the business and this is being repaid by direct debit, make allowances for that payment coming out of your account when you write cheques. Always offer exemplary customer service. Efficient friendly service with a smile impresses your customers; they will come back for more and recommend you to their friends.

TIPS

PART 2 THE DIFFERENT LIFE STAGES

Chapter 20

Young and single The only place you find success before work is in a dictionary. Anonymous

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he first step in your financial education begins when you receive your first pocket money and make decisions as to how to spend it. The second step in your financial education begins with your first job. As you grow older, you will want money for music CDs, fashionable clothing and footwear, concerts, and so on. To finance your wishes, you may need part-time work. The legal age for employment in most States is 15.

WHERE CAN I FIND PART-TIME WORK? Supermarkets and fast-food outlets are the biggest employers of young people. Usually they offer several shifts per week during school terms and more frequent work during school holidays. The wages are low, but the experience can be invaluable. Type up a résumé, or ask someone with a computer to do it for you, and then apply directly to the stores in your area. You should also leave résumés at local shops, restaurants, and small businesses.

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WHAT DO I PUT IN MY RÉSUMÉ? A résumé or curriculum vitae should give your name, address, telephone number, date of birth, year at school, any school achievements or outside activities such as form captain, editor of school newsletter, sports, drama, music, any skills such as computer literacy or another language, and any volunteer work or relevant work experience, as even casual babysitting indicates your willingness to work. Your local library or Centrelink has publications which explain how to write a resume.

WHAT HAPPENS NEXT? Interested employers will contact you. Larger companies may require you to sit an aptitude test. If you are then granted an interview, aim to make a good impression by arriving on time, looking confident, and dressing smartly. This does not mean that you need designer clothes, but the ones you choose should be clean, ironed, and uncrumpled. Good grooming is important: your hair should be clean and tidy; fingernails should be clean; make-up minimal; perfume light; shoes unscuffed and polished. Opt for conservatism; consider taking out your nose or lip stud as they may give the interviewer a negative image. Though employers are not allowed to discriminate, unfortunately it still happens. Do not hesitate to use friends and family members as a clothing library; borrow a smart suit, shirt, even shoes and handbag if you need them.

TIPS

Some unscrupulous employers take advantage of job-seekers. Beware of unpaid trial work or paying for kits or goods which you then have to sell, and make sure you will receive award wages.

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HOW CAN I MANAGE FINANCIALLY WITH JUST A FEW HOURS OF CASUAL WORK? Resolve not to keep asking your parents for money and take responsibility for managing your own finances. If you learn to do this when you are young, by the time you are old enough to take on a mortgage, car loan, and other expenses, you will already have the necessary skills and self-discipline to juggle repayments, everyday expenses, unexpected bills, and so on. Even with only a small income do a budget (see Chapter 1) and set saving goals. You might be able to save only 10 per cent of your wage, which is not much when you are paid the junior rate and working only eight hours per week, but out of a net wage of $45 you would save $4.50, making $234 in twelve months. That is $234 more than you had a year earlier, and you are learning to manage money. One of our daughters, now 23, was an excellent money manager; from the age of 15, she worked part-time at a fast-food store. Combining this job with periods of full-time employment during holidays enabled her to complete her university degree without any HECS debt and to save enough money for more than a year of combined work and travel after graduation.

I HAVE LEFT SCHOOL BUT CANNOT FIND A JOB. WHAT WILL I LIVE ON? Go to Centrelink as soon as you finish school. After a qualifying period you will be eligible for Newstart or Youth Training Allowance, and will be given a health care card which allows you to bulk-bill Medicare and to obtain concession on prescription drugs. The health care card is reissued every 12 weeks. You might also be eligible for transport concessions and ambulance cover. You receive benefits fortnightly and the amount can vary if you earn above a certain amount of income in the preceding week(s).

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WHERE SHOULD I LOOK FOR WORK? Avenues for job-hunting are: • Centrelink Take advantage of their free jobsearch facilities which include access to a photocopier, facsimile, computer and printer. • Newspaper employment pages • Yellow Pages Do not wait for jobs to be advertised; choose local businesses which operate in areas of particular interest to you and send your résumé to their personnel manager with a letter. • Connections Ask friends, relatives, and neighbours if they know of any available jobs. • Employment agencies • The Internet Résumés can be lodged and job advertisements accessed on the Net. If you have computer skills, consider temporary work, which can often lead to a permanent position. If you have musical or dramatic skills such as comedy or clowning, consider busking, but check council regulations first. Inquire at Centrelink about the New Apprenticeships Scheme. Apply for an apprenticeship or traineeship in your area of interest, even if it is carpentry or plumbing. Ignore sexist stereotyping. The job market is extremely competitive, so prepare yourself for many, if not hundreds, of rejections. Try not to take these personally and persevere.

WHAT FINANCIAL RESOURCES ARE AVAILABLE FOR UNIVERSITY STUDENTS? Getting into a tertiary course is easy compared with coping with the costs involved. Insufficient finance can mean living in substandard accommodation, eating only basic food, and doing low-paid menial work at erratic hours. Austudy or Youth Allowance

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is available to students from low income families, but eligibility tests are tight; there is little support available for students from families on an average income. Living away from home does not automatically render you eligible for a full allowance; no student is considered ‘independent’ unless aged 25, married, orphaned, a single parent, or coming from eighteen months’ full-time work. Even if granted Austudy, you will find it difficult to support yourself. You still need to pay union fees, library charges, and buy textbooks, so part-time employment will be a necessity for most students. Discuss your options with Centrelink. The defence forces finance university study in exchange for enlisting for a specified period. Could I get a loan? While few banks offer formal student loans, some do so on a case-by-case basis. Individual tertiary institutions may offer university loans, most of which do not charge interest and have flexible repayment methods; however, the money must be used for study-related expenses and has to be repaid within a defined period, or there will be interest added. Also, borrowers generally have to provide a guarantor for the loan. As with any credit, you need to consider your ability to repay. What is HECS? This is the Higher Education Contribution Scheme, a subsidised scheme to cover the cost of university tuition, as opposed to full fee-paying. It is a compulsory contribution which, if not paid upfront, accumulates until your taxable income reaches a minimum level. The amount of HECS paid depends on the course studied. By paying your HECS debt upfront, you receive a 25 per cent discount. However, the more popular option is deferring the debt until you are earning the

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specified level of income. No interest is charged on an outstanding HECS debt. There is also a voluntary payment bonus option: you make a lump-sum payment (minimum amount $500) and get a 15 per cent bonus; that is, for every $1 you pay, your debt is reduced by $1.15.

WHERE WILL I LIVE WHILE I DO MY COURSE? Options for student accommodation vary from the family home to student villages to university colleges to shared houses. Check student noticeboards for requests for housemates or accommodation, or ask the student housing officer at your university or TAFE college. The closer you live to your tertiary institution the less you have to pay in fares or petrol. If high rents force you to live some distance away, make sure your accommodation is near public transport.

WHEN I AM WORKING, SHOULD I PAY BOARD AT HOME? This depends on your family circumstances. Talk to your parents about a variety of options. Wealthier families may choose not to charge any board, or may accept a small amount to help defray household expenses. Other families may take full board, but bank all or part of it in a special account for the child; when the child marries or moves to a flat, the money saved is there for the wedding, or to pay the bond, buy furniture, and so on. Paying board can be another step in your financial education. If you were living away from home, you would have to meet everyday costs such as rent, food, clothing, utilities. Why not make a realistic contribution to your family’s household expenses and take some of the financial responsibility from your parents? Work out an acceptable amount for full board, including costs for bed, food, laundry, a

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contribution towards power and water use, and telephone calls. Make sure you leave yourself enough to cover your other expenses, such as fares, lunches, clothes, entertainment, and personal expenses. Also take your income into account. A first-year apprentice will not earn enough to cover full costs at home as well as entertainment, clothing, and so on.

WHEN SHOULD I MOVE OUT OF HOME? Move out of home when you can survive alone! Once renting, you have to pay rent on time, buy food, pay power and telephone bills, as well as fund your personal entertainment. Do a budget first to see if you can afford to rent (see Chapter 1). You may have to practise money-saving strategies, as outlined in Chapters 3 and 4. See Chapter 5 for an outline of your rights and responsibilities as a tenant. If you must move out of home, but cannot afford to go solo, consider sharing a house or flat with compatible friends.

HOW CAN I AVOID SHARING WITH THE ‘HOUSEMATE FROM HELL’? You can avoid a lot of conflict and stress if you find the right person to share accommodation. It works best if lifestyles, interests, and ages are similar. Try to avoid an ‘odd couple’ situation. Different standards of cleanliness or tidiness can cause extreme trauma. Smoking and pets can also cause problems. Interview any potential co-tenant, check references from any previous housemates and landlords, and make sure he or she can pay their share of the bond and rent before committing yourself.

WHAT ARE MY OPTIONS FOR A WORKING HOLIDAY? Australians can apply for working holiday visas in many countries including Britain, Ireland, Canada, Korea, Malta, and The Netherlands. Contact the

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countries’ embassies or consulates and check their conditions. Other countries such as France, Switzerland, Spain, and South Africa, require proof of a job offer from an employer in that country. If the value of the Australian dollar is low, the best option is to earn money in better-performing economies. British pounds or American dollars will enable you to travel further. Obtaining a visa to work in the USA is difficult. Many young people choose the easier way of going through organisations like Camp America or Camp Counsellors USA. As part of the deal, these organisations arrange your temporary work visa and you work for a specified period in a summer camp, as nanny/au pair with a family, or in the ski fields. Contact travel agents or embassies for information.

ARE THERE ANY WAYS OF TRAVELLING CHEAPLY? • Cultivate your local travel agent and ask to be kept informed of off-season rates and special deals. • Find a job with an airline, as employees and their nominees pay only 10 per cent of the full economy fare when they fly. Conditions apply, however, and you could be left in an overseas airport waiting for a vacant seat. • Become an international courier, that is, handdeliver a document or parcel.You must be more than 18 and pay for your own travel insurance. It is best to book several months in advance; however, you may not be able to fly on your preferred date.

HOW DO I HANDLE FINANCIAL TRANSACTIONS WHILE I AM TRAVELLING? For both convenience and protection, use a combination of credit cards, cash and traveller’s cheques. • Credit cards are convenient and easy to use,

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are a ready source of money, and lessen the need to carry cash. However, you pay a fee for each withdrawal and there is always the possibility of an automatic teller machine (ATM) ‘eating’, or rejecting, your credit card. Also some credit cards are not widely accepted in developing or remote countries.Take two credit cards and carry them separately. If you lose one, you can use the other until the first is replaced. • Cash is convenient, but carries an extra risk. It is not replaceable if lost or stolen.Take only a small amount of local currency with you as the exchange rate on cash is usually worse than on traveller’s cheques. • Traveller’s cheques are widely accepted, often attract a better exchange rate, and can be replaced within 24 hours if lost or stolen. As with credit cards, traveller’s cheques alleviate the need to carry large amounts of cash.

WHAT ARE SOME GENERAL TIPS FOR TRAVEL? Before you travel there are a number of matters to attend to: • Write down everything you need to do before departure. Use a time line, and tick each task when done, for example: — six months before, apply for passport; — three months before, have medical and dental check-ups; — one week before, confirm flight and departure times. • Arrange a cheaper telephone rate by using special numbers or pre-paid telephone cards. • Take out travel insurance (see Chapter 15). • Make a will and leave an enduring power of attorney (see Chapter 6); take a photocopy with you. • Photocopy your itinerary, passport, airline tickets, credit cards, traveller’s cheque numbers,

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travel insurance documents, and important telephone numbers and addresses. Keep one copy with you, separate from the originals, and leave another copy at home. Make up an ‘in case of emergency’ card with your blood type, details of any allergies or special medical conditions such as asthma, and names and numbers of your next of kin and doctor. Do not take expensive jewellery. Do not take too many clothes. Pack items which you can wear in layers, some smart clothes which can be mixed and matched for interviews/work, a waterproof jacket and some comfortable walking shoes. Take an extra supply of prescribed medication, prescriptions and a doctor’s letter in your personal luggage, and an extra pair of glasses. Make sure your backpack is strong, waterproof, and comfortable to carry. Take money belt or pouch, torch, sewing kit, pegless clothes line, small container of washing powder, first-aid kit, alarm clock, locks for your luggage, padlock for lockers in hostels, sleepingbag, adaptor for electrical appliances, and water purification tablets. Register your name and password with a free email services and you can send and receive email worldwide from the various Internet cafés in the bigger cities.

Be security conscious when travelling • Keep your passport and valuables in something that can be worn out of sight, either around your neck or beneath your clothes. • Sleep with your passport and valuables inside your sleeping-bag, if backpacking. • Use the hotel safety deposit box, never leave

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your luggage unattended, and never leave valuables in your hotel room. (If you do leave luggage unattended, unpack and repack, checking for any “foreign” packages.) • Avoid using ATMs after dark, or in lonely situations. Find one in a busy area and remain cautious. • Don’t display large amounts of cash. Special tips for women travelling alone • Socialise in public places. Never invite strangers of either sex into your hotel room. • Lock your hotel door, windows and any connecting doors securely at all times. Do not answer your hotel room door without knowing who is there. • Leave an itinerary with family or friends and keep in regular contact. If they do not hear from you, they can take appropriate steps. • Dress conservatively, particularly in Middle Eastern countries, and wear low-heeled or flat shoes, so you can run away from danger. Remember, contact the nearest Australian Embassy or Consul if you need assistance, for instance, if you become seriously ill, or are detained by the police.

TIPS

Never carry packages or luggage through Customs at airports, bus depots, or across land borders for anyone else. This is a favourite ploy of drug traffickers and many gullible travellers have suffered severe penalties because they were caught carrying prohibited substances.

Chapter 21

Becoming a couple

Marriage is a wonderful invention; but, then again, so is a bicycle repair kit. Billy Connolly

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ou meet, you fall in love, you decide to move in together—a common scenario. Splitting up a few months or years down the track is almost as common. In that first flush of passion, you think you will be together forever, but the reality is that live-in relationships break up more readily than marriages, and one in three marriages end in divorce. Those irritating little habits (he blows his nose at the table or leaves his dirty underwear on the floor, she has 20minute showers using all the hot water or uses his toothbrush) are bearable in someone you see only a few times a week, but they can become intolerable on a permanent basis. Each partner brings individual life experiences into the relationship, and people from different ethnic backgrounds may have contrasting cultural expectations and attitudes. Also, if one partner has a wealthier background than the other, incompatible spending habits may cause conflict. It is fine to have opposing points of view, as long as you both can

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accept these differences and are prepared to compromise. Ground rules need to be set before entering into any commitments. You are in love, but love tends to disappear when the bills arrive. People have different ways of dealing with money and you will not reform your partner; a spendthrift will always spend, a miser will spend rarely. Financial difficulties are a major cause of relationship problems. Resolve to deal with financial issues before they become a major source of friction. Can you afford to move out of home? Discuss financial issues before you move in together. If you have both been living with parents, you may have no idea of the real cost of living. Write down the cost of your rent, your everyday expenses, your debts such as car repayments or credit card debts, estimated cost of food, electricity, gas, telephone, clothing, and other outlays. Speak to your parents, or other young couples who are living together, if you are unsure exactly how much these things cost. If you start your relationship in rental accommodation, make a list of what each of you is bringing to your new home: Sally double bed television cutlery/crockery linen microwave

Brad refrigerator stereo system desk computer and printer couch...and so on.

If you share the cost of new furniture, whitegoods, and so on, list these and their cost. If one brings a pet, put it on the list. Amiable break-ups often become messy because both partners want ‘custody’ of a dog or cat. Copy the list. Each partner should sign both

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copies and each should keep a copy in a safe place. Once this is done, forget who owns what. Do not remind each other that, ‘This is my bed’, or television, or mug. If you move into his house or flat, or he into yours, where all household goods are owned by one partner, this should be acknowledged in writing by the incomer. If you decide to rent, think carefully about whose name will go on the lease (see Chapter 5). A lease can be in one or both names. If your name is on it, you are responsible for the full term of the lease. Will you both contribute to the bond and rent in advance? If the relationship breaks down, who will move out? Who will pay the rent, gas, electricity, and telephone bills? Initially you may wish to retain separate bank accounts and split all bills down the middle, except for those bills run up by only one person, for example, petrol, fares, magazines, mobile telephone bills, and Internet costs. If your relationship becomes stronger and the commitment greater over time, there are further decisions to be made.

DO WE NEED TO DO A JOINT BUDGET? When you have a committed, long-term relationship, discuss your plans and your goals—for example, marriage, buying a home, children—and work on a budget and savings plan, using your joint income and expenses (see Chapter 1). Remember, it is not necessary to have the best of everything. There are ways of economising, and your relationship may flourish by working together towards a savings goal (see Chapters 1 and 3). This stage of the relationship is when you might discuss a joint savings account and possibly consider making or changing your wills.

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Both of you should have access to some ‘fun’ money that is not included in your budget and which you do not have to account for.

TIPS IS IT ANY DIFFERENT IF I AM A PARTNER IN A DE FACTO OR SAME-SEX RELATIONSHIP? De facto or same-sex relationships do not have the same legal protection as married couples. Ensure that your assets are protected in case of a relationship break down or the death of one partner (see Chapter 6). You can buy a property together as either co-borrowers or tenants in common. As a co-borrower, if one borrower dies, that share automatically goes to the other party. Tenants in common have separate shares in the property, and if one tenant dies, that share does not automatically go to the other party, but can be willed to heirs.

DOES IT COST MUCH TO BECOME ENGAGED? The first cost with an engagement is the ring, which is generally paid for by the man. Consider his financial situation when making your choice. However, if he surprises you with the traditional down-on-bended-knee-after-pulling-a-tiny-box-out-of-his-pocket thing, accept his choice of ring with grace. The next cost is the newspaper notice, if you place one; you will be charged a specified amount per line. If you want an engagement party, who will pay for it? If you expect parents to contribute, you and your partner should approach your respective parents, in private. The party need not be extravagant. Pick a date and venue (preferably the home of one of you), and send out computer-designed invitations. If parents’ homes are not large enough, consider putting up a

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marquee in one of their backyards, or extending a large tarpaulin out from the back fence to give shelter for food, bar, and chairs. Weather permitting, you could have a barbecue, or a ‘spit roast’, where a caterer supplies meats, potatoes, salads, bread, desserts, and so on, for between $7 and $10 per head You supply the venue, tables, chairs, and drinks. If you want a formal meal, supper or a cocktail party, costs can be kept down by asking family members to assist with food; you and your fiancé could contribute to the drink bill, particularly if your friends are heavy drinkers of spirits. Look for ‘specials’ in the weeks before the party; champagne for the toast is usually ‘cheaper by the dozen’. A cocktail party could prove expensive, as topshelf alcohol is required. Be conscious of alcohol levels, and supply light beer and soft drinks as well.

CAN WE AFFORD TO GET MARRIED? The wedding is where the real expense begins. Have an idea of the style of wedding you want before approaching your parents. Once you know your spending limit, you can begin planning. The date depends on your work commitments, how long you need to save money, the season you prefer, and the availability of your chosen celebrant and venue. Select several dates in order of preference. The ceremony can be on a beach, in the snow, on top of a mountain, on a yacht, under water, parachuting from a plane, in a church, synagogue, country club, reception centre, historic mansion, private home, hotel, restaurant, winery ... you are spoilt for choice. Choose the place which best reflects the special atmosphere you want. A notice of intention to marry form must be completed no less than one month and one day before the wedding and not more than six months before. Both bride and groom must provide birth certificates.

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If you prefer a church service, call your local minister or priest and find out if the church is available on your chosen date. Ministers of religion charge a fee, usually several hundred dollars, to perform the ceremony; this fee might include flowers in the church, pew decorations, and the organist’s charge. Church costs are generally the groom’s responsibility. Some churches do not have a regular minister, so you may have to bring your own. To marry in a local park or garden, you may need to book and pay a fee to the council. If you need a celebrant, ask colleagues, family members, and friends, for recommendations. Celebrants charge approximately $200 for the service. When planning an outdoor wedding, have another venue arranged in case of rain. Ask when you book your reception if the service can be held there in bad weather.

TIPS

If you are hiring a marquee, consider the need for power, heating or airconditioning, and be sure it will adequately protect your party from strong wind and rain. The wedding party Remember, it is your wedding and the attendants should be your choice. It is customary to give gifts to your attendants and traditionally, the groom pays for these. The reception Unless you have doting parents willing to make your dream wedding a reality, you may have to modify your dreams to accommodate economic reality. Small, simple weddings are just as meaningful as grand formal affairs. If money is tight, choose as guests those friends and family members who are most important to you. As with the engagement, the cheapest reception venue is the private home of a family member or friend. Consider a casual reception, such as a barbecue, spit roast or smorgasbord. You would have to arrange a liquor licence.

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Reception centres offer a variety of options: • a wedding breakfast, where you marry early in the morning and share a breakfast-style meal with your guests—the cheapest option; • a cocktail party, with finger food served with drinks; • formal sit-down dinner, the most expensive choice: $45 to $150 or more per head for 100 guests; • supper. Contact several venues and ask for quotes in writing; compare facilities and costs before making a decision. Most reception centres are cheaper on Sundays. The band at a reception centre will cost extra. For Jewish weddings, ensure that the venue allows for kosher food to be brought in or that it has the capability of preparing kosher food on site. Remember to allocate seating so that people in conflict are not sitting close to each other. The dress Style and price are entirely up to the bride. One bride we know wore a white satin nightdress with an overdress made from lace curtain material and looked spectacular. Options from cheapest to most expensive are: • buying and altering a second-hand dress from a charity shop, costing from as little as $20; • making your own, which will cost the price of the pattern, material, and any trimmings such as ribbons or beading; • hiring from a specialist hire company—prices vary, depending on the age and quality of the gown; • buying a second-hand wedding or debutante dress through a newspaper or other advertisement. As wedding dresses are very hard to sell, many unique and beautiful gowns can be found this way, priced from $250 upwards;

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• made by a dressmaker—the price, including material, for dress and veil could be $1300 plus; • buying from a bridal shop—dress and veil may cost $1500 plus; • designer-made—price for dress only will vary from $2200 to $15 000. Photographs The cheapest option is a do-it-yourself album. Ask all guests to give you copies of their photographs, and invite a few guests who are more experienced photographers to take some formal photographs before and after the ceremony. These days at least two guests will own video cameras; films of the ceremony could be their wedding gifts to you. Professional photographers will charge between $1000 to $3000 for the day. Get several quotes before choosing. Extras... Suits The groom, best man and groomsmen are responsible for the cost of their suit hire. Rings The bride should pay for the groom’s ring and vice versa. Car hire Limousines, vintage cars, horses and carriages, motorcycles — there are a variety of vehicles available to transport the wedding party, but they can be a major expense. Not only do they drive you to the church, they wait while photographs are taken and then take you to the reception; overall, this takes about three hours at approximately $100 per hour. A cheap option is to ask two or three friends or relatives to drive you. The vehicles need not be the same make, but should be the same approximate size, shape and colour—black, white or burgundy are good choices. Buy a few metres of white ribbon to decorate the bonnet, make sure your chauffeurs wash and polish their cars on the day, and you have saved a few hundred dollars!

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Invitations and place cards The least expensive option is to buy a pad of pro-forma invitations and write in the details, though you may feel this is a bit too cheap for such a special occasion. Why not make your own? With a computer, laser printer, some publishing software if you want graphics, and good parchment paper, your home-made invitations will look as good as professionally printed ones, at half the cost. Place cards can be bought from a newsagent and handwritten, preferably by someone with calligraphy skills. You only need one invitation for each married couple or family. Flowers Unless you have a florist among your family or friends, get quotes from local florists for all bouquets, corsages, and buttonholes. Ask to see samples or photographs before you decide, and if possible give the florists samples of your dress materials so that colours do not clash. The cake Shop-bought wedding cakes cost from $300 upwards. If you are economising, ask a talented relative or friend to make one. One friend could make the cake and another ice it as their wedding gifts to you. Consider alternatives such as a croquenbouche, which is a pyramid of profiteroles held together by a chocolate sauce, at an approximate cost of $1.50 per ball. This would also be the dessert, thus saving the cost of one course.

THE HONEYMOON Traditionally the honeymoon is the groom’s responsibility. It need not be expensive, and many couples prefer just a weekend away.

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PROFILE

Daniella and Leo had a wedding budget between $10 000 and $15 000 ($10 000 supplied by their parents). After obtaining quotes, their expense sheet was:

$ reception centre: 100 guests @ $65 per head 6500 band 900 cake 400 invitations/place cards/postage 300 cars: three limousines @ $100 per hour for three hours 900 church service 200 photographer 1500 3 bouquets, 4 buttonholes and 2 corsages 350 bride’s dress and veil (made by local dressmaker) (bridesmaids bought their own gowns) 1300 groom’s suit rental (groomsmen hired their own) 200 gifts for wedding party 600 bride’s hair 50 bride’s make-up (operator comes to house) 35 rings 650 wedding night at city hotel 400 honeymoon 2000 Total cost $16 285 This would be considered a medium-range wedding. As you can see, weddings are expensive. Remember, set your budget at the beginning and keep to it!

CAN WE COVER OURSELVES AGAINST A WEDDING-DAY DISASTER? Even the best plans can go awry. Some possibilities are: ruined photographs, unexpected illness, damaged or stolen wedding gifts, cancellation. You can insure your wedding day. Check with insurance companies.

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SHOULD WE HAVE A PRENUPTIAL AGREEMENT? At present prenuptial agreements are not binding in Australian courts, but can be a good way to formally establish some financial ground rules. If you have property or assets which may be at risk if the marriage fails, seek legal advice before signing anything.

Chapter 22

Family life

Train a child in the way he should go, and when he is old he will not depart from it. Proverbs 12:4

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aving a child is one of life’s most rewarding, and most expensive, experiences. The demands on your pocket are constant so, if possible, do some financial planning beforehand.

Start to put aside as much moneyas you can spare before you become pregnant.

TIPS CAN WE AFFORD TO HAVE CHILDREN? Money is going out even during the pregnancy, with maternity clothing and medical expenses; after the birth, apart from food, clothing, nursery furniture and toys, there are other costs. There is the loss of income if you, or your partner, choose to stop work or cut back to part-time, or the cost of child care if you return to work. You need to re-do your budget. Include any loss of income, and assess whether you can cover your normal expenses and loan commitments, and have

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money over to meet the baby’s needs. Recent media stories estimate the cost of children to be several hundreds of dollars per week per child! Do not let the potential cost frighten you. The decision whether to have a child should be made for personal fulfilment, emotional and economic reasons, rather than on a purely economic-rationalist basis. As we have said before, sticking to a budget and sensible money management can save thousands of dollars.

HOW MUCH WOULD IT COST TO ADOPT A CHILD FROM OVERSEAS? There is a stringent application process for intercountry adoption. It can take up to three years and cost between $10 000 and $26 000, depending on the child’s country of birth. Most countries require that adoptive parents stay for at least a week in the child’s country of origin. The overseas adoption process begins with an information night and ends, eighteen months or more later, with a return trip to collect your child. The costs are high, usually well above $15 000. Ask for information from your State Government or health and community services department.

SHOULD I TAKE MATERNITY LEAVE OR RESIGN? Maternity leave allows you to keep your options open, giving you time to evaluate how you are managing financially on one wage, whether you are comfortable being a full-time carer or need the stimulation of a work environment, and if you can bear to leave your child in someone else’s care. You can change your mind and resign later. Employers must give you a maximum of twelve months unpaid maternity leave. You are only entitled to paid leave for any holiday or long-service leave you may have accrued.

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WHAT WILL I NEED FOR THE NURSERY? Resist the urge to buy all those cute nursery bits and pieces as children grow out of them quickly, and only buy the basics before the birth, as friends and family will bring gifts afterwards. Also, buy equipment only as your baby needs it.

TIPS

If you know other mothers with children slightly older than yours, ask if they are interested in passing on children’s clothing and nursery equipment when their child outgrows them.

It is cheaper to borrow from a family member or friend, or buy from a samples and seconds outlet, second-hand dealer, or through the newspaper. Buying new can be a big financial burden. If you borrow or buy second-hand, always check the equipment for faults and loose or broken bits. However, never buy a second-hand car seat, as even the slightest bump in a car can damage one. If buying new, choose items which meet Australian Standards; they should be marked accordingly. Some local councils offer baby capsules for hire for a low fee, that is six months for approximately $35, with a small refundable deposit.

WILL I NEED A BASSINETTE AND A COT? Bassinettes are supposed to make the baby feel safer, as though still in the womb. However, they are usually only used for the first six months as, once the baby is able to sit up, he or she could fall out. Bassinettes are unnecessary if money is tight. Small babies sleep quite happily in a plastic laundry basket or a drawer. A cot can be used for a number of years before the child ventures into a single bed.

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IS IT CHEAPER TO USE CLOTH OR DISPOSABLE NAPPIES? Cloth nappies are cheaper to use than disposable ones, financially and environmentally. Using about 10 nappies each day makes 3640 nappies for one baby in one year. Where is all that plastic going? Disposable nappies cost about $25 per week, or $1300 for a year. Cloth nappies can be bought for $30 for 12; only 36 are needed, so your total cost is about $90. Washing nappies is inexpensive; pure Velvet Soap can be grated into the washing machine, or you can use a special nappy soaker. Best of all, cloth nappies can be kept for your next baby. Disposable nappies are wonderful for emergencies, for holidays, or for outings.

SHOULD I RETURN TO WORK? If you feel unable to return to full-time work after caring for your baby, discuss the following options with your employer. Part-time or job sharing Can your hours be reduced, or would they consider job sharing, that is, splitting your job between you and another person? Depending on the needs of the individuals, one could work mornings and the other afternoons, or you could alternate working three days one week and two days the next week. Additional costs for your employer could be involved, for example, if there is a ‘hand-over’ time, and for additional superannuation and worker’s compensation. Working from home Does your job involve computers, or work that can be done at home and taken in during the week? If you feel confident that you could do your work from home, do a proposal for your employer, pointing out any advantages. Though it may be politically incorrect to suggest, you could find that it is neither financially nor personally worthwhile for you to resume working. Do

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your figures; add up the costs of child care, travel, work clothes, lunches, contributions to office collections, hair care, the takeaway meals because you do not have time to cook, the clothes, cakes, and so on, that you buy because you do not have time to make them, the people you hire for the housework that you do not have time to do. Also consider the stress factors of parenting and ask: is your salary vital, or could you manage with a lower standard of living? If you decide to have a break from work but plan to return in a few years, keep up with developments in your area of employment. Do some part-time study to upgrade your qualifications, or regularly update your computer skills.

WHAT OPTIONS DO I HAVE FOR CHILD CARE? Child care can prove expensive and possibly not worthwhile in financial terms, though you may consider that the advantages of working, such as income, adult companionship, and staying on the career path, worth the cost. There are advantages and disadvantages to each of the options below. • A friend or doting grandparent is usually the least expensive and the happiest arrangement, though you may feel that you are imposing too much of a burden on the carer. If you do leave your child with a family member or friend, make sure they have a child-safe home, for example, cleaning liquids out of reach of the child, no dangling cords on kettles, and so on. • Family day care, cheaper than child care centres, involves council-regulated carers, usually mothers, looking after several children in their own homes. • Child-care centres, which offer all-day care on a full-time or part-time basis, are the most expensive option. Ensure that the centre is registered by the relevant authority.

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• A nanny in your own home, once only an option for high income families, is still a high cost option, particularly if you only have one child. If you prefer to have your child looked after at home, why not consider sharing a nanny with one or two other families? Council-run occasional and after-school child care is also available, for a small cost. Also, some companies, but still very few, provide child-care facilities for staff. Finding the right child care is important, and depends on quality of care, cost, availability, transport, and flexibility. Lower income families, families with two or more children, single parents, and parents with erratic employment, can find formal child care very expensive, despite the subsidies available through Centrelink.

HOW MUCH WILL MY CHILD’S EDUCATION COST? The cost of education varies between States and usually goes up each year, so there are no exact figures. The cost also depends on whether you choose public or private education. Primary school expenses are kept to a minimum, but can be more than $1000 a year in some regions; private schooling costs far more. Also, there are hidden costs, for example, fund-raising activities such as fêtes, chocolate drives, raffles, and competitions. Secondary school fees are higher than primary school, and you may have extra costs such as uniforms, books, excursions, camps, musical instruments, and computers. Talk to other parents and teachers if you are unsure as to where to place your child. Take into account factors such as peer group, self-discipline, willingness to work, natural intelligence, and so on. Your child may do just as well at public school as at a private one, and if all your money is going into

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private school fees, there is nothing for the entertainment, brand-name clothes and shoes considered necessary by some wealthier children. Your child could be isolated and unhappy at a private school as a result. Most private schools offer scholarships for full fees or part-fees. Check with the individual school about sitting for entrance exams. There are ways to ease the costs of schooling: • Put money aside regularly for the next school year, so that you are not hit with unpayable bills each February. • Buy ‘pre-loved’ school and sports uniforms; most schools offer a second-hand service. • Check with the school about sources for buying good-quality used books. Some schools have an arrangement in which, for example, students going into Year 8 sell their previous year’s books to students coming into Year 7. • Buy large quantities of pens, pencils, exercise books and paper when you have money to spare; stationery is cheaper bought in bulk. • Make school lunches. • Walk, if you live near the school. It is economical and good for the children’s, and your own, health. If your children catch public transport, they may be eligible for free travel passes. Concession fares can be bought as well. • Plan for school excursions. Find out at the start of term about any trips coming up and save accordingly. • Pay school fees in instalments; most schools will work out a suitable arrangement if you are experiencing financial difficulties. Tertiary education is now ‘user pays’, and most students elect to pay through the HECS (see Chapter 20).

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Consider saving for your child’s tertiary education by putting aside regular amounts in a special account each year.

SHOULD I GIVE MY CHILDREN POCKET MONEY? Having pocket money teaches your children at an early age how to save—the first step in their financial education. Opening a school bank account, and encouraging children to deposit some of their pocket money weekly, allows them to see their savings grow. If they want a particular item, encourage them to save for it by offering to contribute a dollar for each dollar they save. Encourage them to do a small service around the home to ‘earn’ their money, such as bringing in the garbage bin, or washing the dishes. Most small children spend their first cash on sweets, and continue to do so for several years. Suggest that they might find it easier to save—and buy what they want—by spending one pay and saving the next, that is, every second pay is left to accumulate in a special purse or jar, or their bank account. How much pocket money should I give my children? Give only what you can afford. Many families simply cannot afford to buy the expensive brand-name clothing and footwear so desired by the young, which is why most young people find part-time work as soon as they can.

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MY CHILD IS WORKING. SHOULD I CHARGE BOARD? This is also an individual decision. Some parents give their children a few months to establish some savings before asking them for board. Some take a nominal amount, while others charge the full cost of their keep. If your family is struggling financially, working children should contribute to household expenses. You may feel it is your duty to support your children until they leave home, but many adult children do not leave home until well into their 20s or even later. They save for their holidays or new car or house by living cheaply at home. If they do leave home to travel overseas or live with a partner, they may return when the relationship breaks down, they run out of money, or they lose their job and cannot maintain a home on unemployment benefits.

HOW CAN WE AFFORD A FAMILY HOLIDAY ON A STRICT BUDGET? To prepare for your holiday, you may need to put money aside for months, even years, depending on where you want to go and for how long. House swapping is one option for a cheaper holiday. For a joining fee, you receive a book which lists people, in Australia and overseas, willing to exchange houses, and sometimes cars and pets. The accommodation is free, but each party pays their own travel expenses, telephone calls, food and entertainment. Once tents, sleeping-bags, and cooking items are paid for, camping holidays can be both cheap and a lot of fun. Camping gear can be bought second-hand. Hiring a caravan or cabin on-site is another option. Publications listing a variety of holidays and costs are available from newsagencies or through your motoring club. Youth hostels accommodate people of all ages, including families, and offer low cost accommodation

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in Australia and overseas. Contact the Youth Hostels Association in your State. Another option is to rent a holiday house with friends and share the costs of the rent and food. Each couple could take a turn going out for dinner while the other couple babysits.

DO WE NEED HEALTH INSURANCE? Since the introduction of Medicare people have left private insurance cover at a rapid pace. The Federal Government is now trying to win members back by offering 30 per cent tax rebates and charging high income earners with a higher Medicare levy. People left the private health system because of the inequality of the system. In the past, two people could go into a public hospital for the same operation, have the same surgeon, the same anaesthetist, share the same room, and eat the same food; the public patient paid nothing while the private patient received bills and was of pocket for the gap fee, that is, the difference between the bills and what the private insurer paid. Some families with children may feel more secure having health insurance. However, a cheaper option for children is to take out school insurance which covers them for accidents outside the school as well. Check out all the funds and see what they have to offer before making a decision.

WHAT CAN SINGLE PARENTS DO TO IMPROVE THEIR FINANCIAL SITUATION? Raising children alone can be difficult and sometimes the non-stop responsibility can be overwhelming. You never get a break and often suffer from chronic tiredness, particularly when the children are young. If, on top of this, you have financial difficulties, your life may seem intolerable. Do not isolate yourself. Ask at your local school

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or community centre about courses on parenting skills; childminding is usually offered to enable parents to attend these sessions. You will meet other people in a similar situation and may be able to form a cooperative in which members mind each other’s children, operate a roster for school runs, and so on. For your finances, start from scratch by doing a budget (see Chapter 1). Cut as many everyday costs as possible and arrange regular payments for your telephone, electricity, gas and water bills (see Chapter 4). If there is little left for life’s luxuries after paying your rent or mortgage, consider renting a room to someone, perhaps another single mother in the same position as yourself, or a student who needs a room close to the university or college. If possible, share with someone who is known to you or who has been recommended by a relative or friend, and take references from previous landlords. Sharing is never easy. Set ground rules from the beginning. Are you charging a flat rate for rent, utilities, food, and so on, or are you each paying half of all costs, excluding any rates if you are buying or own the property? Be aware that this additional income could affect your social security payments. Another way to reduce costs is bartering. For example, if you keep chickens and someone else grows vegetables, swap your eggs for her vegetables; no money changes hands. Or a friend may sew clothes for your children; in return, you babysit or knit for her. You can barter most services.

HOW DO BLENDED FAMILIES SURVIVE? Families ‘blend’ when two people with children from previous relationships move in together. This can work extremely well, or it can be hell on Earth; however it works out, it will be nothing like the Brady Bunch. If this is definitely what you and your new partner

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want, adults and children will need to make a lot of adjustments, both emotional and financial. Firstly, where are you going to live? If you are both home owners, who is going to move? One partner may feel uncomfortable in a home once shared with a previous partner. Children may resent having to leave their house, school, neighbourhood and local friends. Consider starting over with your new partner in a house, or at least a bed, new to both of you. Your home should be large enough to accommodate all members of both families, those living with you and those visiting regularly. Do your children and your partner’s children like each other? If they don’t, yet are expected to share bedrooms, expect fireworks! More people sharing a home means less privacy for individuals, and less time for children to spend with their natural parent. If one partner’s children only join the household at weekends or on specified holidays, how will this affect the family dynamics? Expect jealousy, resentment, feelings of rejection, moodiness. Be patient; don’t minimise the pain and anguish suffered by children having to adjust to new domestic arrangements. Who pays for what? Make a list of what each partner brings into the relationship. Keep records of all money paid out, including who paid the electricity bill. This sounds clinical when you are happily ensconced in a new relationship, but it may be helpful if the partnership fails, because if your partner moved into your home there could be a claim on the home. Work out a budget or money plan which includes any previous debts incurred by each of you and set joint financial goals. Be realistic about the cost of the extra children in the household, and decide if you are pooling resources or each paying expenses

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for your own children. Are you combining debts or each continuing to pay off his or her existing loans? Ensure your will reflects your change in circumstances. If you should die, do you want your new partner and his children, as well as your children, to inherit your estate, or your children only? Who will be guardian of your children? These issues are most important and should be discussed and resolved, preferably with a solicitor.

Chapter 23

Breaking up

Emotional security is just as important as financial security. P.K. Shaw

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eople live ‘happily ever after’ in fairytales, but in real life many of us will have to cope with a broken relationship. In Australia, one in three marriages fails. Whether you are married or living in a de facto or same-sex partnership, relationship break down is traumatic, even if you initiated the break. If you are left with children, rent, and other bills to pay, how will you survive? This question is particularly important if you had previously relied solely on your partner’s income for support. If you left home because of domestic violence, make an appointment immediately with a Centrelink social worker, who may be able to offer financial assistance, help with emergency accommodation, and advice about applying for a restraining order if you wish. If you feel that counselling might help solve the difficulties in your relationship, seek assistance from Relationships Australia. Contact numbers are given in Part 3.

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MY PARTNER AND I HAVE JUST SEPARATED. WHAT SHOULD I DO FIRST? If your ex-partner has access to your credit card, you may want to cancel it, as you are liable for any current and future debts on it; if your partner goes on a spending spree, you may find yourself paying. Be aware that with joint loans you are both responsible for the repayments. You may also want to close any joint savings accounts to prevent your ex-partner withdrawing the funds. You can apply for the sole parent pension by filling out the appropriate forms at Centrelink. They will also expect you to apply for child support from your ex-partner within 28 days of being told about this requirement. In certain circumstances, such as fear of violence from your ex-partner, you may be exempted from taking child-support action. Make a note of your separation date as it could be important later.

WHAT IS CHILD SUPPORT? It is government policy that both parents are responsible for supporting their children, and the Child Support Agency (CSA) was established in 1989 to assist in the collection of child-support payments. You can make a private agreement with your expartner about maintenance payments for your children. If this is not an option, the CSA decides on the amount payable, using a set formula based on your ex-partner’s taxable income, after allocating an amount for basic living expenses. The percentage payable for child support depends on the number of children involved, as follows: one child 18 per cent; two children 27 per cent; three children 32 per cent; four children 34 per cent; five or more children 36 per cent.

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If the custodial parent earns above-average income, this is considered when the assessment is made, as are the number of nights per year the children spend with the non-custodial parent. It will be several weeks after assessment before child-support payments start, as they have to be collected and then go through what can be a very confusing and frustrating system. If you disagree with the assessment and believe that you are entitled to more (for example, because your ex-partner has not revealed the full extent of his income, or has arranged a salary package which includes a company car, entertainment allowance and other bonuses in lieu of wages), you can appeal and have the assessment varied. The paying parent can also appeal. You can appeal for a variation of the assessment if you have a child with special needs, for example, a disability or medical condition which requires costly medication, physiotherapy, or other treatment.

MY FORMER PARTNER IS A WOMAN AND WE HAD A CHILD, USING DONOR SPERM. CAN I GET CHILD SUPPORT FROM HER? The Family Law Act now enables parenting orders to be applied to non-biological parents; for example, a non-biological parent leaving a same-sex relationship could be ordered to pay child support for a child conceived during their relationship, using in-vitro fertilisation (IVF) or donor sperm.

WHAT IF THE EX-PARTNER DOESN’T PAY? If your ex-partner refuses to pay child support, do not retaliate by refusing access to the children. This will only strain your relationship further and add to your children’s hurt and confusion. Contact the CSA if child support is not paid for some weeks. There are several legal steps they will

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take. If your partner still does not comply, the CSA can take legal action to sell assets or deduct money from bank accounts, tax refunds, or wages. There is a complaints service if you have a complaint against the agency (see Part 3).

HOW DO I DIVORCE MY PARTNER? Since the introduction of the Family Law Act 1974 there is only one ground for divorce — irretrievable break down of the marriage — and you must have been separated for twelve months. This is why you should make a note of the separation date, and confirm this, preferably in writing to your partner. If it is not appropriate for either person to leave the marital home for the separation, it is possible to live separately under one roof; however, the Family Court will closely examine any claim. Seek legal advice in all cases of separation and divorce. If you have children, counselling may be required by the courts. After separation, alter your will if your ex-partner was a beneficiary. For dividing shared property, think clearly and do not be overwhelmed by feelings of remorse or revenge, or the well-meaning advice of family and friends. If you have children, protect their interests, as well as your own. Clothing, food, and educational needs cost a lot of money, and these costs should be shared fairly by both parents. If possible, keep on polite, if not friendly, terms with your ex-partner; your relationship may be over, but some contact will be necessary to negotiate your children’s access visits with their father. Any financial arrangements made should be legal. What will happen to a verbal ‘agreement’ if their father remarries and has another family? Will your children be conveniently ‘forgotten’? An application for divorce can be signed and lodged the day after the twelve-month separation

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has expired. It takes a number of weeks to come before the Family Law Court. To save on legal expenses, do-it-yourself divorce kits are available at your local legal aid office. You will incur a cost for filing for divorce, the amount of which may differ across the States.

WHAT DOES ‘PROPERTY’ MEAN? ‘Property’ is personal possessions, real estate and anything else of value. It can include your house and other property, cars, boats, shares, bank accounts, furniture, jewellery, art works, land, antiques, and so on. It also includes any collections you or your partner may have acquired.

PROFILE

Judith and Max separated after 24 years of marriage. During the marriage, Max had collected automobile memorabilia and had bought and restored four vintage cars. At their hearing, Judith was awarded a 50 per cent entitlement to the collection.

AS I HAVE NOT WORKED FOR A LONG TIME, AM I ENTITLED TO A SHARE OF OUR PROPERTY? When deciding settlement, the court considers the contributions made by both parties as well as their future needs; the input of the person who looked after the home and family is considered just as important as the input of the person who earned the income. All assets obtained during the marriage and during any previous period of living together are seen as joint property. The length of the marriage is also taken into consideration.

OUR SEPARATION IS FRIENDLY. DO I NEED A LAWYER FOR MY DIVORCE? Many couples hope to have an amicable divorce, but good intentions often disintegrate, particularly if it

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takes a long time to come to settlement. The best and cheapest settlement is the one reached quickly and without lawyers, as legal involvement tends to promote, rather than resolve conflict, and legal costs can be extremely high. Sometimes the only ones who make any money out of a divorce are the lawyers.

PROFILE

When Kristina and Vijay’s marriage failed after two years, they had about $20 000 equity in the home they were buying. The court ruled that each partner was to receive 50 per cent. Unfortunately, however, Kristina incurred barrister and solicitor costs of $17 000. The house was sold, realising little money, Kristina had to go into voluntary bankruptcy, and her lawyers received nothing. Under what circumstances do I need a lawyer? Sometimes people are so bitter and hurt by a breakup that they will do anything to stop their ex-partner from retaining any property—destroying valuable assets or giving them away, gambling money away, going on an extravagant spending spree, and so on. If you feel you cannot trust your ex-partner, put any agreement in writing and appoint a lawyer.

I SEE MY MARRIAGE COMING TO AN END. WHAT SHOULD I DO? List all your assets, including household furniture, bank accounts, and superannuation policies, and then list outstanding debts (such as mortgages on your house or car) and who incurred them. If your husband is employed or runs his own business, obtain copies of tax returns and, if possible, copy any computer accounting onto a disk. This is when you need to know how much you spend on maintaining the family home, on education,

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car expenses, birthdays, Christmas, holidays, and entertainment for yourself and the children. This is why it is critical that every woman is aware of her and her partner’s assets and liabilities throughout their time together. Divorced women can get a share of their ex-husband’s superannuation assets, but superannuation cannot be accessed until after retirement. If your husband has a large superannuation policy, it may be better to negotiate a settlement where he retains his super and you retain the home. If you do keep the house, remember to change the title deeds of the property and the house and contents insurance into your name in case of a claim. Do the same with car registration and insurance, if you keep the car. Settlement, and how funds are distributed, depends on how long you have been married, how many children you have, who brought what into the marriage, and who was the main earner. Do not minimise your own contribution: you were probably cook, chauffeur, book-keeper, counsellor, arbitrator, nurse, nanny, cleaner, and so on. Any financial settlements must be finalised within twelve months of a divorce.

WHAT ABOUT MAINTENANCE FOR MYSELF? You can apply for maintenance if you cannot support yourself adequately because you are caring for young children, for example, or you are unemployable because of age or ill health; the granting of maintenance will depend on your husband’s capacity to pay. You must apply within twelve months of your divorce.

WILL WE HAVE TO SELL THE HOUSE? If your home is in joint names and is your only major asset, it may have to be sold and the proceeds divided between you. To stay in the house you must

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negotiate with your ex-husband. It might mean giving up your claim to one of the assets, for example, a holiday house or boat, in return for retaining the house, or you may have to pay off your husband’s share in instalments over a specified time. You may wish to stay in the marital home that still has a mortgage, but can you afford to do so? For example, if the house is valued at $150 000 and the mortgage is $50 000, each partner’s share in the home is $50 000. If you have no available funds, you will need to qualify for a mortgage of $100 000 in order to buy out your partner’s share, and then meet repayments.

IF WE BOTH WANT CUSTODY OF THE CHILDREN, WHO MAKES THE DECISION? Try to work out a custodial arrangement satisfactory to both of you without resorting to the court. The children’s happiness should be your primary aim and both of you may have to compromise to achieve that. It is best that they stay in the same house, or at least the same neighbourhood, so that they remain at their schools and keep their close friends. The trauma of their parents’ separation is disruptive enough without further disturbances. Ask yourselves: whose routine is best suited to caring for the children? Which parent has the most time? Whose job has the most flexible working hours? With which parent do the children get on best? If the children are old enough to understand, ask them: What do you want? If you cannot reach agreement, you may have to go to court, which can be traumatic and involves legal costs. You are charged for time spent in court and for costs such as telephone calls, preparation of documents, conferences to discuss the case, letters written on your behalf, and sundries.

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CAN I APPLY FOR LEGAL AID? You have to be near-destitute to be eligible for legal aid funding as resources are limited. Inquire at your nearest legal aid office. You need to supply details of income, expenses, assets, and so on. If granted legal aid, you may be required to contribute to, or to repay, costs incurred on your behalf if your finances become healthier at a later date.

WHAT ARE MY ENTITLEMENTS IF MY DE FACTO RELATIONSHIP BREAKS DOWN? De facto laws are governed by State law, and vary according to where you live. Though living together without a marriage certificate is more acceptable today, in most States separating de facto couples are at a disadvantage when compared with married couples in the same situation. For example, the recent Federal Government proposal to include superannuation in divorce property settlements does not yet apply to de facto couples. In some States, if you have lived together for more than two years or have a child together, you are entitled to a property settlement. Maintenance payments are the same as if you were married. Usually there is no provision for maintenance to be paid to a former partner in a de facto relationship, but de facto status is recognised by most superannuation funds in paying death benefits. If you are separating and your partner was named in your will or was a beneficiary under your superannuation policy, change these immediately. Go to the bank if you have a joint account or if either of you can sign withdrawals. Under de facto laws, you could lose your house if you allow someone to live with you. Even though he does not contribute, the fact that he has lived with you and shared the home may be enough to give him some entitlement to your property. To find out your

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full entitlements, seek legal advice if the relationship looks like breaking down, or immediately after separation.

WHAT ABOUT SAME-SEX RELATIONSHIPS? Same-sex relationships are viewed the same as de facto couples. If you have had a child together by artificial insemination or donor sperm, the one who has custody of the child may be entitled to child support.

WHAT CAN UNMARRIED COUPLES DO TO MAKE A BREAK-UP EASIER? Just as some people contemplating marriage sign prenuptial agreements, unmarried couples may choose to have a lawyer draw up a cohabitation agreement. This document should state when you began living together, list all assets owned by each of you, outline the financial aspects of your arrangement, that is, if one works and one looks after the home, and what settlement you each expect upon separation. These agreements may not be legally enforceable, but can be used as a basis for settlement should the relationship fail.

Chapter 24

Coping with life’s challenges Time may heal all wounds, but steady daily routine makes good bandages. W.G.P.

L

ife is a challenge, a roller-coaster ride of compromises and conflicts, uplifting joys and devastating tragedies. When a crisis occurs, we would like to shut ourselves off from the world until the pain goes. Despite our distress and grief, however, we have to cope with the financial implications of that crisis. In fact, it sometimes takes a crisis—job loss, illness or divorce—to force women into saving, or thinking about ways of ensuring financial security.

RETRENCHMENT/UNEMPLOYMENT Depending on how long you have been employed, retrenchment can be either exciting or frightening. The usual payout for retrenchment or voluntary redundancy is, in most instances, two weeks pay for every twelve months service. But if you have been with a company for 30 years, do not expect 60 weeks pay; the maximum is usually twelve months’ salary plus any money in lieu of notice, which could be an additional four weeks pay.

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Do not immediately book an overseas holiday, or buy a new car. Instead: • Register with Centrelink.You may not be eligible for benefits immediately, but it will help you to budget if you know when payments will begin and how much you will receive. • Seek professional advice from an accountant or financial planner, as tax rules apply to redundancy and retrenchment packages. • Obtain information on redundancy and investments from NICRI (see Chapter 25). • Do a complete budget as outlined in Chapter 1; how much will it cost to maintain your home and lifestyle? • List all outstanding debts. Any decision about paying off your mortgage and debts should be balanced against your prospects and the amount of the package you received.You will need money to live on until you receive benefits or get another job.

WILL I BE EMPLOYED AGAIN? Finding another job depends on your age, the area of your previous employment, the level of demand for your skills, and sometimes your ability to ‘network’. Long-term employment is rare in these days of ‘restructuring’, ‘downsizing’, and ‘centralising’. The average length of employment is approximately five years. Losing your job is stressful, and you may experience feelings of anger and denial. However, losing your employment may be the impetus you need to re-evaluate your life. You may opt to use your payout to open your own business (see Chapter 19), or decide to retire early if you are near retirement age. First ensure that you have enough superannuation and funds to retire on by seeking advice from a financial planner.

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To add to your chances of finding new employment, you could update your existing skills or add new ones by doing further courses, such as computer training. If you qualify for Austudy, you could choose further study, such as that degree you always wanted. Discuss your options with Centrelink; it provides assistance with job search training, including résumé writing and interview preparation. You may have to accept that you will never find another traditional job. If you are receiving a social security payment, find out how much you can earn before it affects your pension or benefit, then supplement it by: • cleaning out the house and having a garage sale; that way you get a tidy home and money in your pocket; • doing word-processing from home, using your computer and laser printer to prepare résumés, type letters for local businesses, or essays for students; • doing clothing alterations; put a sign in the local shop windows or on community noticeboards, offering to do small sewing jobs, such as taking up hems or inserting zips; • cleaning houses; make it more fun, and safer, by cleaning with a friend; elderly women often prefer their inside work to be done by another woman; • letter-dropping to houses with leaflets advertising yourself as a jill-of-all-trades, offering services such as collecting children from school for busy parents, babysitting, ironing, grocery-shopping, cleaning, dog-washing and/or dog-walking, window-cleaning, gardening, home maintenance for the housebound or the elderly.

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If you have a particular skill, such as cooking, photography, chocolate-making, leadlight, and other skills, teach a class at your local community centre or sell your creations from a stall at your local market. You may be able to take classes at home, but check first with your local council. Losing your job is not the end of the world, but if you have continuing difficulty coping with your changed circumstances, seek counselling.

ACCIDENT I had an accident at work. Can I get worker’s compensation? If you suffer a work-related injury, you are entitled to claim for lost wages and medical expenses. (Conditions may vary across Australia.) For any significant loss, for example, a limb, you might be entitled to a payment or may be eligible for a disability support pension. This pension has strict criteria (see Chapter 7). Report an accident immediately to your work supervisor who should have a logbook; delays can hold up payments. If you cannot return to work, you will be classed as totally and permanently disabled (TPD). Your superannuation fund may include a TPD cover which you can claim. If your injury was caused by negligence, you may be able to take your employer to court for compensation and make a common law claim; however, this option is no longer available in Victoria. Seek legal advice.

DEATH We are rarely prepared for death, whether it is sudden or prolonged. If your partner or another family member dies, you have to make arrangements despite your shock, disbelief, and grief. Though many of us shy away from making a will because we do not want to think about dying, it is much easier

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for family and friends to cope if our wishes are known. The following basic measures will assist families to cope. • Make a will (see Chapter 6), ask someone you trust to be your executor, and inform that person of where the will is kept. • Keep an up-to-date list of contact numbers and addresses of family and friends, your solicitor, doctor, and any religious minister for reference in the event of your death. • Make your wishes known to family members and to your executor if you wish to be an organ donor, or if you want your body donated to science. • Write out clear instructions about your funeral. Do you want flowers, or do you prefer donations to go to a charity? Do you want to be buried, or cremated? Do you want your ashes buried, scattered at sea, or spread over your favourite spot? • Ensure all important documents are stored in one place, known by your partner and executor. These should include birth and marriage certificates, will, title deeds to the house or mortgage papers, details of superannuation and investments, bank accounts and cheque book, as well as your numbers for Medicare and social security. What does a funeral cost? Funeral and cremation costs vary greatly, depending on whether you choose burial or cremation, the location and cost of the burial plot, the crematorium or cemetery fees, the type of casket or coffin, funeral director, clergy or celebrant fees, the number of cars required, the cost of organist, vocalist, and flowers, newspaper notices, and any refreshments following the service. A private viewing of the body incurs a further charge.

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The funeral director Most people choose the funeral parlour closest to their home, without considering that another place might be better suited. For example, you may prefer all female funeral directors, or one which caters for your religion. Most funeral homes now cater for all religious beliefs or cultures. If you are unsure, ask them. You have the right to change directors until the funeral. However, this could increase the cost as any services already carried out would need to be paid for. Choose a company which is a member of the Australian Funeral Directors’ Association (AFDA). Funeral directors will make house calls, even during the night. Do not feel pressured to enter into a contract for the funeral at the initial interview, as you will be very vulnerable. Such an important decision can wait until the following day. Cost should be discussed at the initial interview. Remember your budget. It is not essential to have the most expensive casket or to provide extra cars for mourners. Though most funeral homes request upfront payment for cemetery costs, newspaper notices, and clergy or celebrant fees, they will wait for the balance of money if it has to be accessed via superannuation or insurance. If your funds are limited, explain this at the beginning. Do not be left with a debt you will not be able to pay.

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PROFILE

Magda had experienced trouble with her local bank for many years. On discovering that she had only weeks to live, she decided to ‘get even’ before she died. After extending the limit on her credit card, she called all her friends together, gave away all her assets and threw an extravagant party, paying on her credit card. She also organised a lavish funeral for herself, prepaying on her credit card. Casket or coffin This is where the funeral home profits. Caskets and coffins can cost as much as $10 000, depending on style, case, handles, and lining. Cheaper coffins can be home-made out of particle board with a flat lid and ropes for handles. Unlined particle-board coffins can be bought with chrome handles for below $500, and consumers may have the option of cardboard coffins in the future. The more expensive caskets are cedar or copper, finished with semi-precious metals, with high domed lids and adjustable mattresses. There is a choice of linings at extra cost. Viewing the body A viewing can be held in your home or at the funeral home. It is possible for the body of your partner or child to remain in your home overnight before the funeral. Sometimes family members wish to hold and dress deceased young children or babies. The service You can have the service anywhere — in a church, your garden or a local park, near the sea, or in the bush under the gum trees. If the deceased left no instructions, think about them when choosing the style of the service. What were their favourite places, their preferred music, their personality? Make the service personal. Funerals are not for the deceased but for those left behind; they are part of the grieving process. Consider taking photographs or a video to view later.

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Forms The death certificate can take up to eight weeks but this will not delay the funeral. Other necessary forms, such as the application for burial, order for cremation, notice of death, will be completed by the funeral director. Prepaid funerals Planning and prepaying for your funeral spares your family the emotional and financial burden of deciding what you would want and whether it is affordable, and they have the comfort of knowing that everything was done exactly as you wished. Funerals can be prepaid by: • Entering into a contract with a funeral director Obtain quotes from a few funeral homes. Ensure all your wishes are listed correctly and that no further money is payable after your death.The money must be lodged with an approved fund and is only payable to the funeral company after your funeral. Obtain legal advice before signing the contract. • Buying funeral bonds As long as the money is for a funeral, any earnings from the bonds are tax-free, and up to $5000 ($10 000 for couples) is exempt from the pension asset test. Leaflets are available from NICRI (see Chapter 25). • Opening a separate bank account specifically for your funeral This will not have the same benefits as funeral bonds. Ensure that you leave specific instructions in your will about the use of this bank account and give the account details. For further information contact the Australian Funeral Directors’ Association in your State. Funerals are for those left behind, and so is any financial mess you may leave. To minimise your family’s loss and stress, ensure that someone is

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aware of your wishes, or make an arrangement with a close friend or relative. Whichever of you dies first, the other organises the funeral; unfortunately the one left behind then has to find someone to organise theirs. Money matters To withdraw money held in a joint account requiring both signatures, obtain a copy of the death certificate for the bank. If your partner had any life insurance policies, notify the companies of the death as soon as possible, as you may need the money to pay off debts or to cover funeral expenses. As soon as you can, work out a budget, allowing for your changed circumstances. If you are worried about managing financially after the death of a spouse or child, make an appointment with a Centrelink social worker. Centrelink have a variety of benefits—bereavement payments, bereavement and widow allowances—to assist a surviving partner, parent, or carer. They also assist you to apply for the sole parent pension, if you are eligible, or help you to return to work. A funeral benefit is also payable to the estate of certain deceased veterans. Check with the Department of Veterans Affairs. Obtain legal advice and assistance during this time. The solicitor’s fee will depend on whether there was a will, if probate needs to be lodged, or if letters of administration are required (see Chapter 6). If there is a will, probate (declaring the will valid) may not be required if the estate (money and assets) is small, or your home is in joint names. Letters of administration are required if your partner died without a will (intestate). Any assets are distributed according to the rules of intestacy (see Chapter 6). The executor needs to ascertain any outstanding debts to be paid out of the estate, any life insurance

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or superannuation benefits that need to be claimed, and ensure distribution to the beneficiaries, that is, those named to receive any assets from the estate. Going on alone After the death of a person close to you, be it your partner, parent, child, or friend, it will take time to go through the different stages of the grieving process. You experience guilt, anger, and denial before you reach the final stage of acceptance. After a tragic death, do not make any major decisions, such as selling your home, for at least six months. If decisions need to be made, talk them over with someone close. If you are not coping, seek grief counselling. Talking through issues is of great benefit generally and may stop you from making wrong decisions.

PROFILE

Maria and her three children went shopping, leaving Derek fixing his car. On their return, they found that the car had fallen on Derek, killing him instantly. After the funeral, Maria put the house on the market as she could not face the driveway every day. The house sold for a low price and, after the mortgage and other debts were paid, there was not even enough money left to pay the bond and rent for a rental property. Maria had to apply for emergency public housing.

CARING FOR A CHILD WITH A DISABILITY Only a parent or main carer of a child with a disability knows the rewards, stress, and cost involved. Whether the disability is intellectual, physical, sensory or neurological, or is a brain injury resulting from an accident, there are services which offer support.

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• Centrelink offers disability and carer pensions. • Local councils may provide, or know of groups which provide, services such as assistance with bathing, feeding, house cleaning, and respite care. • There are support groups for almost every type of disability; join one. Other members will completely understand your problems and feelings, and can offer invaluable help and comfort. If you are not getting enough assistance, financial or otherwise, fight for your full entitlements or find an advocate who will act on your behalf. People with disabilities are as entitled as anyone else to a full and rewarding life. Do not forget to care for the carer.

CARING FOR ELDERLY PARENTS There may come a time in your life when you become one of the ‘sandwich generation’, trying to cater to the needs of both children and ageing parents. Thanks to improved medical care, people who once would have died in their sixties from cancer, heart attacks, or strokes are living decades longer; however, they often suffer from chronic illness, dementia, and/or incontinence. When your parent(s) can no longer manage by themselves, you will have to decide whether to: • encourage them to continue living in their own home with community care Their local council will arrange for meals on wheels and nursing assistance, and may assist with modifying the house, for example, putting in ramps or safety rails. A letter of recommendation may be necessary from your parent’s doctor. Most elderly people are happiest being cared for in familiar surroundings. However, the reality is that funding has not kept abreast with our

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ageing population and there may not be enough available care to meet your parent’s needs. • pay a professional personal care service to provide assistance, in their own home, with daily tasks such as showering, dressing, toileting, laundry, shopping, and house cleaning.This service is very expensive. • care for them in your home, an exhausting and difficult task which, while rewarding, could erode the quality of your relationship. If this is your choice, explore all avenues for help such as community care, home help, and other services. Contact Centrelink to see if you are eligible for a carer’s pension which is means-tested and only available if your parent is a social security or service pensioner. If you are employed, you may be able to negotiate more flexible working hours.You should also find out about respite care, so that you can have an occasional break. • move them into residential care, that is, hostel, special accommodation, or nursing home, depending on their needs. People entering residential care pay an income-tested daily fee and an additional income-tested daily care fee. Hostels also charge an entry bond and nursing homes charge an asset-tested daily accommodation fee. Hostel residents usually have their own room, furnished with their own belongings, with an ensuite bathroom, and share a communal lounge, dining room and garden area.The fees cover all meals, laundry, cleaning, and so on. If your parent’s mental or physical health is deteriorating, arrange with a solicitor to obtain an enduring power of attorney and an enduring power of attorney (medical treatment), so that you can make both financial and medical decisions on your parent’s behalf.

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The Commonwealth Department of Health and Family Services provides information and advice about aged care, nursing home and hostel standards, and so on (see Part 3 for contact numbers). Do not feel guilty if you cannot care for your parent personally. This is no longer an option for most women because they are working full-time; also, as many women have children later in life, their children may be quite young and still needing a high level of care. If you are considering moving a parent to residential care, be aware that this can cause friction, with siblings not wanting their family home sold or their potential inheritance eaten away by bonds and fees, and the parent feeling guilty that the children will not get as much as they were expecting.

ADDICTIONS If you are addicted to drugs, alcohol, gambling, smoking, or shopping, you know how much it is costing you to feed your addiction. An addiction to drugs or gambling, in particular, can ruin the finances, not only of the addict, but of friends and family members as well. How would I know if my partner or child is addicted? Is he or she hiding the bills? Have you given your partner money to pay a bill, only to find out later that it was not paid? You may be given excuses, such as: ‘My wallet was stolen/lost’, ‘I owed the boss some money and he was pestering me for it back’, ‘The car broke down when I was on my way to pay it, and I had to get it repaired.’ Have items started disappearing from home, like the cassette player you have not used for a while? If you believe drugs are involved, look for telltale signs such as pieces of balloon or foil under the bed or in pockets, needles and syringes buried in the rubbish.

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What can I do to minimise my losses? Do not leave large amounts of money around the house. Always ensure credit cards are in a safe place, and check the statements when they come in for any large or regular withdrawals. If you have a joint bank account, ensure two signatures are required for withdrawals, or open another account of your own. If you have a joint mortgage, ensure it cannot be extended or any withdrawals made. Do not divulge your PIN even to your partner, and hide your cheque book.

PROFILE

Esther, a drug addict, had no money, but she did have a cheque book. She bought a CD player, microwave, stereo, and an iron from a variety of electrical stores, then sold them at the nearest pawnbrokers. The money went to her dealer. The cheques bounced. She was charged with obtaining goods by deception, went to court, was fined, put on a good behaviour bond, and ordered to make restitution for the ‘bounced’ cheques. If you have, or someone close to you has, gambling, alcohol or drug-related problems, help and support such as counselling, supported accommodation, specialist methadone programs, and other services are available. See Part 3 for contact numbers.

Chapter 25

Ensuring a comfortable future Get even with your kids—spend their inheritance. Car bumper sticker

B

ecause our population is ageing and our birthrate is dropping, we have fewer future taxpayers to support the ‘baby boomers’ when they reach retirement in the next decade or so. By that time there is likely to be little pension support and most retirees will be expected to fund their own retirement. People living comfortably in retirement will be the ones who planned early or were in a position to receive significant superannuation. Most older women will be significantly disadvantaged as, due to low rates of pay, less time in the workforce, interrupted careers, more part-time and casual jobs, few have anywhere near the level of financial resources needed for an adequate retirement lifestyle, and so are more likely to live in poverty. Younger women, who have access to higher education, better pay, and are more likely to return to work soon after having children, have a greater chance of achieving sufficient financial resources to fund a comfortable retirement. Realising that some people close to retirement do not have enough funds, the Federal Government is encouraging people to work longer.

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HOW MUCH WILL I NEED TO CONTINUE TO LIVE MY LIFESTYLE? If you want to retire at 60, for example, you could need enough money to support you for another 25 years. It is unlikely that you will be paying off a mortgage or supporting children, but you will want a reasonable standard of living which, with inflation, might cost $40 000 per annum. To cover 25 years, therefore, you will need $1 million.

WHAT IS THE DIFFERENCE BETWEEN SAVING AND INVESTING? Saving is accumulating money, investing is putting your savings to work by buying something which earns an income or makes a profit. Investing involves more risk but potentially higher returns than leaving your money in a bank account or term deposit, where it is whittled away by fees and earning minimum returns.

WHEN SHOULD I START SAVING? Most people start thinking about retirement in their early 50s, when they own their homes and no longer have dependant children. However, the sooner you start saving, the higher your standard of living will be in later years. • Look at your spending first. Cut unnecessary expenses and concentrate on saving. • Work out what you need for basic living expenses and regular bills. • Pay off any mortgages as soon as possible; paying lump sums to reduce the principal will save you thousands of dollars. • Increase your personal contributions to superannuation, once the mortgage is paid off. • Put aside an emergency fund for unexpected expenses.

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• Develop an investment plan. As pension, tax, and superannuation rules are increasingly complicated and change frequently, you may need professional help to assess the suitability, risk, and tax effect of the various options. • Be prepared to take risks.Women generally are more comfortable with low risk investments and consequently miss out on higher returns. The younger you are, the more you can afford to invest in higher risk and long-term schemes.

HOW DO I FIND OUT ABOUT SUITABLE INVESTMENTS? A financial planner will help you to understand the risks of various investments. Keep in mind the golden rules: • The higher the return, the higher the risk. • Spread your investments. Never invest all your money with one company. If that company has difficulties, you could lose everything. • Mix up your investments; do not invest in shares or property only. • Do not put everything into long-term investments; you may need money urgently and cannot withdraw it, or not without paying a substantial fee. • Plan properly—think about what you want your money to do; if you want to buy a new car or take an overseas holiday within two years, invest accordingly. • Do not give taxation benefits your highest priority when other investment might achieve much higher returns than you could save on tax. • Do not store your money in low interest accounts in order to qualify for the pension; if invested for high returns, it could earn far more than the pension.

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HOW DO I CHOOSE A FINANCIAL PLANNER I CAN TRUST? Before choosing a financial planner, know what you want your investment to achieve. Are you seeking high returns, regular cash flow or long-term stability? Do you want a financial planner with expertise in a particular area? Obtain recommendations from friends, colleagues, and relatives, and make appointments to see at least three financial planners before making your decision. If you are not comfortable with any of them, keep searching, as it is essential to find a financial planner you can trust. Be wary if: • the financial planner does not take time to get to know you, your needs and expectations, before recommending investments. • the financial planner promises high returns; ask for evidence that the suggested investments have performed well in the past, and ask to see the company’s projections. • the financial planner suggests long-term investments such as shares and property when you asked for advice about short-term projects. A good financial planner should focus on investments which meet your particular needs. • the financial planner recommends only one company’s products.You should be told, before any discussion, if the financial planner is affiliated with any institution. • the financial planner does not offer you a prospectus or report for any recommended investments. Financial planners should explain the level of risk attached to recommended investments, and disclose any fees, charges, and commissions.

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WHAT IS A PROSPECTUS? A prospectus is a document which sets out the fund’s history and current status about investment objectives and strategies. A prospectus must be made available to potential investors.

HOW DO I KEEP TRACK OF MY RETURNS? Your financial planner should send you regular reports about the progress of your investments. Always read them carefully and ask for clarification.

WHERE CAN I GET SOME FREE BASIC INFORMATION ABOUT INVESTING? The National Information Centre on Retirement Investments Inc. (NICRI), a free, independent, confidential service funded by the Federal Government, provides easy-to-understand, up-to-date investment information to people with minimal savings who are facing redundancy or who are wanting to invest for their retirement. The centre keeps abreast of all changes to legislation, social security, taxation, and Veterans’ Affairs, and can supply a wide range of leaflets on a variety of subjects to help you understand, for example, what unit trusts, fixed interest investments, shares, rollover, cash management trusts, and so on, are. It does not give investment advice, or recommend financial products or financial planners. Topics covered in the NICRI brochures include: general information on deeming accounts; how to invest with safety; complaint resolution schemes; how to select a financial planner; fee structure of financial planners; your first interview with a financial planner; the advantages and disadvantages of a wide variety of investment products, and consequences to social security, Veterans Affairs’, and taxation. NICRI operates a free call telephone information

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service, giving you information on investment products. Its advisers will also discuss your financial position and supply details on where to find more assistance (see Part 3).

APART FROM BANKS, WHAT ARE MY INVESTMENT OPTIONS? • Shares and/or property tend to provide better returns than ‘safer’ investments over longer terms (10 or more years). Seek good professional advice, and do not sell your shares as soon the price drops; be prepared for ups and downs. For further information, contact the Australian Stock Exchange, which offers courses and hold lunchtime lectures on investment topics. • Cash management trusts are suitable for investments of less than twelve months.Your money is guaranteed, the interest rates are higher than bank accounts, and they are flexible at 24-hour call. • Managed funds, which pool your money with that of other people, are managed by professionals who charge a fee of about 1 per cent to 2 per cent.This gives you access to a wide range of investments with a small amount of money; some funds accept as little as $500.

WOULD IT BE BETTER IF I WERE TO INVEST IN PROPERTY? Buying an investment property as another way of planning for your retirement is a good idea if your superannuation contributions were limited, for example if you run your own small business, as all expenses associated with the property are tax-deductible. Remember, though, that the rent will be classed as income and it will be assessed if you are on the pension. Also, ongoing maintenance of property can be expensive, and you may be subject to capital gains tax if you sell your investment property.

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WHAT IS ‘DEEMING’? ‘Deeming’ is the assumption, whether true or not, by social security that your income is attracting a certain level of interest. This level is set by the financial market and is advertised in the media. Income, in this instance, includes bank accounts, cash, shares and gold. Financial investments not ‘deemed’ include your home and contents, cars, caravans, boats, antiques, stamps, coin collections, holiday homes, farms, or other real estate. For a more detailed list and assistance, Centrelink has a financial information service (FIS), or contact NICRI.

IF I FUND MY OWN RETIREMENT, AM I STILL ENTITLED TO CONCESSION CARDS OR OTHER ASSISTANCE? Only people of pension age are eligible for the Seniors Card, which entitles the cardholder to a wide variety of discounts including professional services, education, entertainment, and transport. Eligibility may differ nationally. If you do not qualify for the age pension, but are on a low income, you may qualify for the Commonwealth Seniors Health Card which entitles you to a limited range of concessions. The taxable income limit is $40 000 for a single person and $67 000 for couples; assets are not tested. Check with Centrelink for eligibility. All Australians aged 65 years and over are entitled to receive an annual influenza vaccine at no cost. For eligible pensioners suffering from hearing loss, the Australian Hearing Services (AHS) conduct assessments and rehabilitation services at no cost. There is a small charge if a hearing aid is fitted, which includes a year’s maintenance and batteries. Centrelink also posts out the Age Pension News to all pensioners.

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I HAVE HEARD STORIES OF PEOPLE LOSING THEIR LIFE SAVINGS IN FAILED INVESTMENT SCHEMES. HOW CAN THIS HAPPEN? Anyone can fall victim to an investment scam. People will take risks for high returns or to avoid tax, and there are always smooth operators prepared to rip them off. Retirees who are looking for ways to improve their lifestyle are particularly vulnerable. You can avoid being conned by: • being wary of chain letters and other ‘fabulous opportunities’; • always asking questions, no matter how solid the investment seems; • seeking advice in writing; • having a solicitor check any documents before you sign. Scams come and go, sometimes in cycles of 10 years. People are very inventive and can devise lots of enticing schemes, such as: • Consumers received letters from an overseas company, asking for assistance to bring money into the country; for the use of their bank accounts, the recipients were promised $1 million.Their bank accounts were cleaned out. • A telephone caller, supposedly from the ATO, advised consumers that they had outstanding tax bills and asked for their credit card details to clear the debts.

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• After loans were advertised in newspapers, applicants were interviewed in a seemingly professional office and charged a $200 application fee.When they arrived days later to collect their money, their $200 fees had disappeared with the con artists. • Many lonely people are conned out of their life savings by dubious introduction agencies.

PROFILE

Anna was persuaded to put money into a ‘get-richquick’ scheme, where 50 people pay a set amount, for example $1000, for seats in a mythical aeroplane. When the plane is ‘full’, it ‘takes off’ and the ‘pilot’ gets the $50 000. The next person on the list then goes into the pilot’s seat, the vacant seat is sold, and so it continues. Usually the plane only ‘takes off’ a few times as not enough ‘passengers’ are found. Anna never made it to the pilot’s seat, and lost her money. This is really just another version of the chain letter.

TIPS

If a financial planner, a prospectus, or an advertisement offers an investment which appears too good to be true, it usually is.

I HAVE HEARD ABOUT INVESTMENT CLUBS. WHAT ARE THEY? Entering the share market can be daunting for amateurs. There are a growing number of investment clubs in Australia which involve between 10 and 20 people, usually women, often friends, meeting every month. After giving an initial set-up amount, each member contributes between $10 and $50 a month; the pooled money is then invested in shares.

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SHOULD I SET ASIDE MONEY FOR MY CHILDREN? Provided that your health is good and that you have enough money to support yourself, retirement should be one of the best times of your life. Enjoy it. By all means set aside money for your children if you can still live comfortably, but do not deprive yourself in order to do it. Do not continue to bail your children out of financial difficulties if it means your assets are at risk, and do not sign as guarantor for their loans.

TIPS

PART 3 WHERE TO GET HELP

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ADDICTIONS Break Even G-Line 1800 622 112 (freecall, Victoria, Tasmania and Western Australia) 1800 633 635 (freecall, New South Wales) 1800 060 757 (freecall, South Australia) Australian Capital Territory and New South Wales Alcohol and Drug Program (02) 6205 4545 (24 hrs), (02) 6205 1323 (office hours) Queensland Alcohol and Drug Information Service (07) 3236 2414 or 1800 177 833 (country freecall) Northern Territory Northern Territory Community Services (08) 8981 8030 or 1800 629 683 (country freecall) South Australia Alcohol and Drug Information Service 131 340 Tasmania Alcohol and Drug Information Service 1800 811 994 Victoria Australian Drug Foundation (03) 9278 8100 Drug and Alcohol Helpline (03) 131 570 Gamblers Anonymous (03) 9696 6108 Western Australia Alcohol and Drug Information Service (08) 9442 5000 or 1800 198 024 (country freecall) AGED CARE All States Aged Care Internet Website: http://www.health.gov.au/acc/ The Commonwealth Dept of Health & Family Services provides information about aged-care issues 1800 020 103 (central office)

Council on the Ageing Australia (03) 9820 2655 National Aged Care Information Line 1800 500 853 Australian Capital Territory Council on the Ageing (06) 2823 7777 Seniors Card Information (02) 6282 3777 Veteran Affairs (02) 6289 1111 or 1800 026 185 (country freecall) Queensland Council on the Ageing (07) 3256 6766 Seniors Card Information (07) 3224 2788 New South Wales Council on the Ageing (02) 9299 4100 or 1800 466 102 (country freecall) Seniors Card Information 1300 364 758 Northern Territory Council on the Ageing (08) 8948 1511 Veteran Affairs (08) 8927 0384 South Australia Veteran Affairs (08) 8290 0555 or 1800 113 304 (national freecall to connect to nearest office) Council on the Ageing (08) 8232 0422 Seniors Card Information (08) 8226 7200 Tasmania Veteran Affairs (03) 6221 6666 or 1800 113 304 Council on the Ageing (03) 6228 1897 Seniors Card Information (03) 6233 4532 Victoria Council on the Ageing (03) 9654 4443 or 1800 136 381 Veteran Affairs

WHERE

(03) 9284 6000 or 1800 113 304 Seniors Card Information (03) 9616 8241 Western Australia Council on the Ageing (08) 9321 2133 Veteran Affairs (08) 9366 8222 or 1800 113 304 Seniors Card Information (08) 9220 0111 BANKING All States Australian Banking Industry Ombudsman (03) 9613 7333 (Victoria), 1800 337 444 (all other States) BANKRUPTCY Also see Financial Counselling and Budgeting section below Australian Capital Territory CARE Credit & Debt Counselling Service (02) 6257 1788 The Insolvency and Trustee Service of Australia (ITSA) (02) 6250 6994 Queensland Financial Counsellors Association (Qld) (07) 3029 3622 The Insolvency and Trustee Service of Australia (ITSA) (07) 3360 5444

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South Australia Anglicare Financial Counselling Association (08) 8362 1199 The Insolvency and Trustee Service of Australia (ITSA) (08) 8205 4296 Tasmania Anglicare Financial Counselling Service (Hobart) (03) 6224 3510 Anglicare Financial Counselling Service (Launceston) (03) 6223 4595 The Insolvency and Trustee Service of Australia (ITSA) (Hobart) (03) 6221 7777 Victoria The Financial and Consumer Rights Council (Inc) (FCRC) (03) 9614 5433 or 1800 134 139 (country freecall) The Insolvency and Trustee Service of Australia (ITSA) (03) 9272 4800 Western Australia Financial Counsellors Association of Western Australia (08) 9398 1466 The Insolvency and Trustee Service of Australia (ITSA) (08) 9268 1222 CARS

New South Wales Financial Counselling Association (NSW) (02) 9858 1377 The Insolvency and Trustee Service of Australia (ITSA) (02) 9581 7822 ITSA Parramatta (02) 9806 6800 Northern Territory The Insolvency and Trustee Service of Australia (ITSA) (Darwin) (08) 8943 1450 Somerville Community Services Inc (08) 8945 1533

Australian Capital Territory and New South Wales NRMA 132 132 Register of Encumbered Vehicles Service (REVS) (02) 9600 0022 Queensland RACQ (07) 3361 2444 Motor Vehicles Securities Register (07) 3246 1559

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Northern Territory AANT (08) 8981 3837 South Australia RAA (08) 8202 4600 Vehicles Securities Register 131 084 Tasmania RACT (03) 6232 6300 Vehicle Security Register (03) 6233 5201 Victoria RACV (03) 9790 2211 Vehicle Securities Register 131 171 Western Australia RAC of WA (08) 9421 4444 Register of Encumbered Vehicles Service (REVS) (08) 9222 0711 CENTRELINK (SEE SOCIAL SECURITY) CONTRACTS AND CONSUMER ISSUES Also see Financial Counselling and Budgeting section below. All States Telecommunications Industry Ombudsman 1800 062 058 Australian Capital Territory CARE Credit & Debt Counselling Service (02) 6257 1788 Consumer Affairs Bureau (02) 6207 0400

New South Wales Consumer Credit Legal Centre (02) 9212 4111 or 1800 247 890 (country freecall) Dept of Fair Trading (02) 99895 0111 Northern Territory Anglicare (08) 8948 2700 Office of Consumer Affairs and Fair Trading (Alice Springs) (08) 8952 5883 Office of Consumer Affairs and Fair Trading (Darwin) (08) 8999 5184 or 1800 019 319 South Australia Office of Consumer and Business Affairs (08) 8204 9777 Outside the Adelaide area, the telephone number 131 882 will connect you directly to the nearest regional office. Tasmania Office of Consumer Affairs (03) 6233 4567 Victoria Consumer Credit Legal Service (03) 9670 5088 Consumer Law Centre (03) 9629 6300 Credit Help Line (03) 9602 3800 Energy Industry Ombudsman 1800 500 509 Financial and Consumer Rights Council (Inc.) (03) 9614 5433 Office of Fair Trading and Business Affairs (03) 9627 6000 Western Australia Ministry of Fair Trading (08) 9222 0666 or 1800 199 117 (country freecall) CREDIT

Queensland Office of Fair Trading (07) 3246 1500 Small Claims Tribunal (07) 3247 4578

All States Credit Reference Association of Australia (CRAA) (02) 9464 6000

WHERE

Also see Financial Counselling and Budgeting section below. Australian Capital Territory CARE Credit & Debt Counselling Service (02) 6257 1788 Consumer Affairs Bureau (02) 6207 0400 Queensland Credit Line (Brisbane) (07) 3252 7086 Lifeline (for all types of counselling, including financial) (07) 3252 1213 New South Wales Creditline (02) 9951 5544 or 1800 808 488 Dept of Fair Trading Service Centre (02) 9286 0006 Northern Territory Office of Consumer Affairs and Fair Trading (08) 8999 5184 or 1800 019 319 South Australia Office of Consumer and Business Affairs (08) 8204 9777 Tasmania Anglicare Financial Counselling Service (03) 6223 4595 Office of Consumer Affairs (03) 6233 4567 Victoria Credit Helpline 9602 3800 or 1800 803 800 (country freecall) Financial & Consumer Rights Council (Inc.) (03) 9614 5433 Office of Fair Trading and Business Affairs (03) 9627 6000 Western Australia Ministry of Fair Trading (08) 9222 0666 or 1800 199 117

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EMPLOYMENT CONCERNS All States Centrelink: For all enquiries about pensions and benefits, call 132 468. To find the location of your local Centrelink office, telephone 131 021. Dept of Workplace Relations and Small Business 1300 363 264 The Australian Job Search Internet site is: http://jobsearch.deetya.gov.au Victoria Job Watch (03) 9662 1933 or 1800 331 617 (country freecall) FINANCIAL COUNSELLING AND BUDGETING Australian Capital Territory CARE Credit & Debt Counselling Service (02) 6257 1788 Queensland Financial Counsellors Association (Qld) (07) 3029 3622 Financial Counselling Services (Qld) (07) 3257 1957 New South Wales Credit Line (02) 9951 5544 or 1800 808 488 (country freecall) Financial Counselling Association (NSW) (02) 9858 1377 Salvation Army Money Care (02) 9299 6744 Northern Territory Anglicare - (08) 8948 2700 South Australia South Australian Financial Counselling Association (08) 8362 1199 Tasmania Anglicare Financial Counselling Service (Hobart) (03) 6224 3510 Anglicare Financial Counselling Service (Launceston) (03) 6223 4595

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Victoria Credit Helpline (Vic) Ltd (03) 9602 3800 or 1800 803 800 The Financial and Consumer Rights Council (Inc) (FCRC) (03) 9614 5433 or country freecall 1800 134 139 Western Australia Financial Counsellors Resource Project of Western Australia (08) 9221 2411

Tasmania Tenants’ Union of Tasmania (03) 6223 2641 Victoria Archicentre Architects’ Advisory Service (03) 9819 4577 Residential Tenancies Office, Office of Fair Trading and Business Affairs (03) 9627 6222 or 1800 136 716 The Tenants Union of Victoria (03) 9416 2577

GAMBLING (SEE ADDICTIONS)

Western Australia Tenants’ Union (08) 9211 9499

HOUSING

INSURANCE

Australian Capital Territory Consumer Affairs Office (02) 6207 0400 Real Estate Institute of Australia (02) 6282 4277 Tenants Advice Service (02) 6247 2011 Tenants Union (02) 6247 1026

All States The Private Health Insurance Ombudsman handles inquiries and complaints about health insurance. The Ombudsman’s office is based in Sydney — Tel (02) 9261 5855 — but can be accessed Australiawide on 1800 640 695 (free call) during normal business hours. The Life Insurance Complaints Service 1800 335 405

Queensland Consumer Affairs (07) 3246 1500 Tenants Union of Queensland (07) 3257 1108 or 1800 177 761 (country freecall) New South Wales Renting Services of the Dept of Fair Trading (02) 9377 9100 or 1800 451 301 Tenants Union (02) 9251 6590 Northern Territory Anglicare (08) 8948 2700 South Australia Shelter (08) 8223 2555 Tenants Landlords Rights Office, Consumer Affairs (08) 8204 9544

INVESTMENT All States Australian Pensioners’ and Superannuants’ Federation (AP&SF) (02) 9281 4566 Australian Securities and Investment Commission Infoline 1300 300 630 Australian Stock Exchange Customer Service Line 1300 300 279 Centrelink Pension Enquiry Line 13 23 00 Consumers Federation of Australia (02) 6257 6311 NICRI (02) 6281 5744 or 1800 020 110 (freecall) Australian Capital Territory The Financial Planning Association of Australia (02) 6260 4567

WHERE

Queensland The Financial Planning Association of Australia (07) 3839 2427 New South Wales The Financial Planning Association of Australia (02) 9299 8300 South Australia The Financial Planning Association of Australia (08) 8373 3936 Tasmania The Financial Planning Association of Australia (03) 9224 8855 Victoria The Financial Planning Association of Australia (03) 9614 2289 Western Australia The Financial Planning Association of Australia (08) 9226 0168 LEGAL MATTERS All States National Association of Community Legal Centres (02) 9264 9595 Australian Capital Territory Consumer Credit Legal Service (CARE) (02) 6257 1788 Women’s Legal Centre (ACT and Region) (02) 6257 4499 or 1800 634 669 (country freecall) Queensland Central Queensland Community Legal Service (07) 4922 1200 or 1800 628 908 (country freecall) Gold Coast Community Legal Advice Centre (07) 5536 9777 North Queensland Women’s Legal Service (07) 4041 0066 Queensland Association of Independent

TO

GET

HELP

• 269

Legal Services (QAILS) (07) 3229 8749 Women’s Legal Centre (07) 3392 0670 or 1800 677 278 (country freecall) New South Wales Aboriginal Women’s Legal Resource Centre (02) 9569 3847 or 1800 686 587 (country freecall) Legal Service Commissioner (02) 9377 1800 Women’s Legal Resources Centre (02) 9637 4597 or 1800 801 501 (country freecall) Northern Territory Central Australian Women’s Legal Service (08) 8952 4055 Darwin Community Legal Service (08) 8941 3394 Top End Women’s Legal Service (08) 8941 9989 South Australia South Australian Council of Community Legal Centres (08) 8362 1199 Women’s Legal Service (08) 8221 5553 or 1800 816 349 (country freecall) Tasmania Hobart Community Legal Service/Women’s Legal Service (03) 6223 2500 or 1800 682 468 (country freecall) Launceston Community Legal Centre (03) 6334 1577 or 1800 066 019 (country freecall) Victoria Federation of Community Legal Services (03) 9602 4949 Law Institute of Victoria (03) 9607 9311 Legal Ombudsman (03)9642 0655 or 1800 357 772 (country freecall) The Legal Aid Commission of Victoria (provides an hour of FREE consultation on legal issues) (03) 9269 0234

270 • MONEY

MANAGEMENT

FOR WOMEN

Western Australia Gosnells Community Legal Service (08) 9398 1466 Office of the Public Advocate (08) 9278 7300 or 1800 191 009 (country freecall) SMALL BUSINESS Australian Capital Territory Dept of Fair Trading (02) 6299 3433 Queensland Queensland Small Business Corporation (07) 3405 6789 New South Wales Office of Small Business (02) 9242 6700 Northern Territory Small Business Advisory Service (08) 8999 7916 or 1800 193 111 South Australia The Business Centre (08) 8233 4600 or 1800 188 018 Tasmania Small Business Service (03) 6233 5712 Victoria Small Business Development Corporation (03) 9651 9888 or 1800 136 034 Western Australia Small Business Development Corporation (08) 9220 0222 or 1800 093 340 SOCIAL SECURITY/CENTRELINK All States To find the location of your local Centrelink office, telephone 131 021 or access the Centrelink website: http://www.centrelink.gov.au Centrelink: Family Hotline — 131 305 Newstart and other Allowances — 132 850 Pension and benefit enquiries — 132 300 Youth Allowance — 132 490 For information in languages other than English — 131 202

Commonwealth Ombudsman 1800 133 057 (freecall) Social Security Appeals Tribunal (SSAT) 1800 011 140 (freecall) For appeals against SSAT, write to: The Registrar, Administrative Appeals Tribunal, GPO Box 9955 in the capital city of your State. Australian Capital Territory Social Security Appeals Tribunal 1800 041 514 (freecall) Welfare Rights and Legal Centre (02) 6247 2177 Queensland Social Security Appeals Tribunal (07) 3229 5005 Welfare Rights Centre (07) 3847 5532 Welfare Rights, Townsville Community Legal Service (074) 721 5511 New South Wales Welfare Rights Centre (02) 9211 5300 or 1800 226 028 (country freecall) Northern Territory Welfare Rights, Darwin Community Legal Centre (08) 8941 3394 South Australia Welfare Rights Centre (08) 8226 4123 Tasmania Hobart Welfare Rights Advocacy Service (03) 6223 2500 or 1800 232 500 (country freecall) Welfare Rights, Launceston Community Legal Centre (03) 6334 1577 or 1800 066 019 (country freecall) Victoria Welfare Rights Unit (03) 9416 1111 For emergency support, contact the Emergency Relief Worker at the Victorian Council of Social Service (03) 9654 5649

WHERE

TO

GET

HELP

• 271

Western Australia Welfare Rights and Advocacy Service (08) 9328 1751

Tasmania Taxpayers Association of Tasmania (03) 6243 0829

SUPERANNUATION

Victoria Australian Taxpayers’ Association (03) 9819 7944

All States The Australian Tax Office Superannuation Helpline 131 020 Commonwealth Superannuation Administration (02) 6252 7911 The Insurance and Superannuation Commission 131 060 The Lost Members Register’s Help Line (helps people find ‘lost’ superannuation money) 131 020 National Information Centre on Retirement Investments Inc. (NICRI) (02) 6281 5744 or 1800 020 110 (freecall) Superannuation Complaints Tribunal 131 434 Superannuation Hotline 131 020 TAXATION All States The Australian Tax Office (ATO) operates the following enquiry lines: Deeming — 132 300 Fringe Benefits tax — 133 328 Income Tax — 132 861 PAYE — 132 866 Superannuation — 131 020 Tax Help — 132 861 Queensland Taxpayers Association of Queensland (07) 3257 5000 New South Wales Taxpayers Association of New South Wales (02) 9241 3299 South Australia Taxpayers Association of South Australia (08) 8218 4912

Western Australia Taxpayers Association of Western Australia (08) 9261 9442 TRAFFIC OFFENCES Also see Financial Counselling and Budgeting section above. All States National Association of Community Legal Centres (02) 9264 9595 Australian Capital Territory Legal Aid Commission (02) 6243 3411 Queensland Legal Aid Commission (07) 3238 3444 New South Wales Court Support Scheme (02) 9564 2722 Inner City Legal Centre (02) 9332 1966 Legal Aid Commission (02) 9219 5000 Northern Territory Legal Aid Commission (08) 8999 3000 or 1800 809 616 South Australia Legal Services Commission (08) 8205 0111 Tasmania Legal Aid Commission (Burnie) (03) 6434 6444 Legal Aid Commission (Devonport) (03) 6421 7870 Legal Aid Commission (Hobart) (03) 6230 0900

272 • MONEY

MANAGEMENT

FOR WOMEN

Legal Aid Commission (Launceston) (03) 6331 7099 Victoria Victoria Legal Aid (03) 9269 0234 or 1800 677 402 Western Australia Fines Enforcement Registry (08) 9235 0235 Legal Aid (08) 9261 6200 or 1800 809 616 RELATIONSHIPS/FAMILY MATTERS All States To find the location of your local Centrelink office, telephone 131 021. Centrelink: Pension and benefit enquiries — 132 300 Family Hotline — 131 305 Newstart and other Allowances — 132 850 For Youth Allowance — 132 490 For information in languages other than English — 131 202 Child Support Agency Complaints Service 131 272 or 131 107 Child Support Review Office 131 141 Dept of Health & Family Services 1800 020 103 Australian Capital Territory The Home and Community Care Program (02) 6207 1122 Parent Support Line (02) 6278 3995 Relationships Australia (02) 6281 3600 Queensland Lifeline (07) 3252 1213 Parentline 1300 301 300 Relationships Australia (07) 3839 9144

New South Wales Parentline 132 055 Relationships Australia (02) 9418 8800 Northern Territory Relationships Australia (08) 8981 6676 South Australia Parent Helpline 1300 364 100 Relationships Australia (08) 8223 4566 Tasmania Parents’ Information Telephone Assistance Service 1800 808 178 Relationships Australia (03) 6231 3141 Victoria Lifeline (24 hrs) 131 114 or (03) 9662 1000 Parentline 132 289 Relationships Australia (03) 9853 5354 Women’s Housing Outreach and Support Services (03) 9355 8850 Western Australia Family Helpline 1800 643 000 Parenting Line (08) 9272 1466 Relationships Australia (08) 9470 5109 WILLS (SEE LEGAL MATTERS)

Bibliography

Brown, Sarah. Queen of Hearts: The Needs of Women with Gambling Problems. Financial and Consumer Rights Council (Inc.). 1997. Faine, Jon. Know Your Rights: Explains Common Legal Terms. (6th edn). Victoria Legal Aid. 1994. McPhee, Cosima (ed.). The Law Handbook 1998: Your Practical Guide to the Law in Victoria. Fitzroy Legal Service Inc. 1998. Sheldon, Deborah. Where to Now? The Practical Adviser for Australian Widows. Mandarin, Reed Books. 1996. Sripathy, Vani and Ogle, Lorraine (eds). The Law Handbook: Your Practical Guide to the Law in New South Wales. Redfern Legal Centre Publishing. 1997. Sweetapple, Pamela (ed.). Queensland Law Handbook (5th edn). Caxton Legal Centre Inc. 1997.

Index

accident, at work 241 accounts 28, 113–14 balance 26 cheque 29, 31–32 emergency fund 14–15 fee-free 29 higher interest bearing 26 information 28 investment 25 joint 236, 246, 251 minimum balance 29 over-drawn account 30 regular 17 savings 25–26, 30, 32 statement 26 term deposit 32 accountant 82, 173, 183, 239 account-keeping charges/fees 26, 28–29 act of bankruptcy 143 addictions xi, 126–27. 131, 142 Administration and Probate Act 88 Administrative Appeals Tribunal (AAT) 95 adoption, inter-country 216 AEO 135–36 age pension 90, 171–72, 258 aged care 248–50 air-conditioners buying at sales 39 car 124 saving on power costs 55 alcohol 8, 11, 21, 127, 250–51 see also addictions allowances bereavement 90, 246 child disability 90 family 90 maternity 90

maternity immunisation 90 mature age 91 mature age partner 91 mobility 91 Newstart 91, 94, 195 pharmaceutical 92 remote area 91 sickness 91 widow 91, 246 youth 91, 92, 94, 196 youth training 195 ambulance 156 American Express 108 see also credit cards appliance breakdown 14 assets 79–83, 103, 105, 123, 133, 135–36, 139, 143, 234, 235–37, 247 and divorce 233 in joint names 86 sale of 139, 141 assets test 91 Assistance for Isolated Children Scheme 90 ATMs see automatic teller machines ATO 163, 259 Fax from Tax service 165 Lost Member Register 176 Tax Help service 165 attachment of earnings order (AEO) 135 Attorney-General’s Department, Federal 141 auctions 46, 73–74, 118, 138 auction houses 46, 120 Australian Consul 203 Australian Consumers Association 24 Australian Embassy 203 Australian Funeral Directors Association (AFDA) 243

INDEX • 275

Australian Hearing Services (AHS) 258 Australian Prudential Regulation Authority (APRA) 177 Australian Stock Exchange 257 Australian Tax Office see ATO Australian Taxpayers Association 178 Austudy 90, 196–97, 240 authorised review officer 94 automatic teller machine/s (ATMs) 26–27, 29 malfunction 34 maximum withdrawal 27–28, 32–33 automobile clubs 118–19 babysitting 36, 37, 50 backyard dealers 119 bad debts 107 bail 135 bailiff 137, 138 bank/banking 24–34, 103, 108, 127, 142 balance 26, 29, 112, 113, 189 books 28 cards 108 charges 27, 112 cheques 31 electronic 24 fees 24, 28, 30, 39, 45, 99 interest rates 28 loans 6 performance 27 shareholders 24 statements 5, 30, 127, 135, 162 taxes 26 banking telephone banking 27, 28 term deposits 34 bank accounts 29, 253, 259 cheque account 29 emergencies 15, 34 fee-free accounts 29 fees 25, 28 Bankcard 27 see also credit cards bankruptcy xi, 97, 103, 139, 141, 150 act of 143 contributions to 144, 145, 149 early discharge 144, 145, 149 extension of 145 notice 139 personal 106, 107 restrictions on 145 term of 144 trustees 140, 143, 144 voluntary 140, 143, 148 bargains 35, 99, 113 factory outlets 47

opportunity shops 39 seconds outlets 45 ‘specials’ 40, 41 bartering 50, 225 bazaars 40 beneficiaries 79, 81, 84, 86, 88 benefits 90, 93, 195, 239, 240 elegibility for 91, 92 bereavement 241–47 allowance 90, 246 bills 15, 28, 28, 131 best way to pay 31 essential bills 4 outstanding bills 14, 17, 127 regular bills 52-57 birth 16, 216–17 certificate 93, 242 blended families 225–27 board 198–99, 223 bond money 61 books 5, 16, 21, 36, 39 store 182 swapping club 50 borrowers co-borrowers 103 joint 102 BPAY™ 32, 33 broker 110 budgeting 3–5, 15–17, 38, 43, 106, 132, 135, 195, 223, 225, 239, 246 budget sheet 5, 20–21 emergency fund 14, 15 household 40 money plan 3 not on fixed income 15 plan 206 record-keeping 15 staying motivated 12 steps in 5–7 supermarket 41 tips 5, 7, 13, 15, 16, 18 unexpected expenses 14 wish list 12–13 yearly planner 5, 22–23 building a home 77–78 building societies 25, 27, 34 accounts 93 interest rates 28 personal loans 108 business 88, 99, 104, 107, 233 buying an existing business 185 franchised 184–85 limited company 186 plan 183

276 • MONEY

MANAGEMENT

FOR WOMEN

partnerships 187 party plan 188 sole trader 186 starting your own 180ff ‘Buy Australian’ 42 Camp America 200 Camp Counsellors USA 200 camping 223 cancellation fee 109 capital gains tax 83, 257 car/s 34, 38, 96, 98, 107–109, 115, 120, 234 accident 152 automobile clubs 118–19 breakdown 10 buying 115-25 company car 118, 164 dealerships 109 depreciation 38, 117 government fees 38 hire companies 111 inspection 119 insurance 6, 10, 21, 22, 38, 152, 235 loan 7, 10, 11, 117, 122 maintenance 8, 117, 118 manufacturers 117 new or used 115–17, 118 pooling 38, 50 price limit 116 registration 6, 10, 21, 22, 38, 117, 123, 235 repairs 117 repayments 38, 94, 127, 147 repossession 127 roadside assistance 153 roadworthiness 121 traders 100, 119 running costs 38, 117, 123 second-hand 39, 118–22 vehicle security register 121 warranties 117, 118, 119 washing 53 cards bank 108 credit see credit cards debit 27 Diners Card 108 greeting 5 plastic 26, 27 smart 27 store 108 telephone 27 carer payments 90, 248

cash 27, 31, 37, 106, 108, 201 spending 5 cash management trusts 257 casual work 195 Centrelink 90–95, 133, 162, 177, 182, 194–97, 228–29, 239–40, 248–49, 258 impairment tables 91 pension 176 social worker 228, 246 certificate of registration 121 certificate of roadworthiness 121 charity shops 45 check-outs 26, 43 cheque/s 25, 28, 30, 31, 108 account 29, 31 bank 29 blank 111 bouncing 189 butts 5 cash 31 cheque book 242, 251 facility 26 free 26 lost or stolen 31 open 31 travellers cheques 25, 201 child-care centres 219 costs 21 options 219–20 child disability allowance 90 child support 21, 229, 230 debts 145 payments 229 Child Support Agency see CSA children 21, 29, 39, 43, 206 clothing 36, 45 cost of 215–22 custody of 235 divorce 231 fee-free bank accounts 29 investments 165 pocket money 222 with disability 90, 247–48 church commitment 21 cigarettes 10, 11, 21, 127 cutting down on 36 cleaning products 39, 48 clothes dryers 39 clothing 6, 10, 16, 20, 37 bargains in 39 bills 6, 10, 16 children 36, 45

INDEX • 277

costs 8 recycled 45 co-borrower 99, 103, 105, 207 code of conduct (for franchisees) 184–85 codicil 84 cohabitation agreement 237 collections 232 collectors 17 commissions 15, 255 common-law claim 241 Commonwealth Department of Health and Family Services 250 Commonwealth Ombudsman 95 Commonwealth Seniors Health Card 258 communications networks 110 Community Aid Abroad 18 community-based order 169 community care 248 community centres 50, 225 community legal centres 94, 98, 99, 104, 168 community resources 36 company 97 directors 104, 145 company car 164 compensation 241 computers 36, 47, 53 accounting 233 banking 28 concessions 92, 133 on ambulance cover 195 on prescription drugs 195 on transport 195 condition report 61–62 connection fees 77 consent 98 consolidation of debt 134 Consumer Affairs, Office of 99, 111 Consumer Claims Tribunal 100 Consumer Credit Code 1996 99, 107, 109, 110, 132 consumers 96, 100, 101, 114 contracts 96–100, 104, 105, 109, 110, 113, 120, 133 cancelling 120 elements of 96–98 legally binding 97 role in 99 small print 98, 113 conveyancing 74 cooking, saving on power costs 54 cooling-off period 74, 75, 120, 143, 144, 185 with credit contracts 112

cooperatives 39, 50, 225 councils 168, 248 child care 220 rates 6, 17, 20, 22 counselling 128, 228, 241, 251 courts 81, 100, 135, 139 fines 145 order 139 magistrate’s court 134, 136, 170 petty sessions 134 summary jurisdiction 134 Supreme Court 80, 86, 138 work 128 courtesy letter 170 courts 81, 100, 135, 139 fines 145 order 139 petty sessions 134 summary jurisdiction 134 work 128 CRAA 107, 108 craft market 37 credit 104, 106–14, 131, 142 agencies 107 code 99 contracts 99, 107, 132 credit-reporting agencies 107 easy credit 17 facilities 113 free credit 106 history 107 interest-free 114 interest-free period 108, 109, 113 issues 114 providers 114 rating 106, 107 record 107 risk 106 statements 132 transactions 107 tribunal 99, 114, 132 credit cards 5, 7–10, 21–22, 29, 37, 106, 108, 111–14, 131, 133, 244, 251 balances 32 charges 7 company 27 debts 6, 9 details 259 due date 108, 113, 114 interest 7 issuer 111 loss or theft of 33 marriage breakup 229 MasterCard 27

278 • MONEY

MANAGEMENT

FOR WOMEN

minimum payment 114 number 111 travel 200–201 Visa Card 108 Credit Helpline 114 Credit Line 114 credit unions 25, 34 shares 25 personal loans 108 Credit Reference Association of Australia see CRAA creditors 32, 132–41, 147, 189 crime 98, 128 CSA 229, 230, 231 currency conversion 25 curriculum vitae 194 custody, child 235 customs 203 dealers 120 backyard 119 motor vehicle 117, 118, 119, 122 network 125 unlicensed 120 death xi, 142, 177, 241–47 benefits 236 certificate 245, 246 cover 157 debit cards 27 debits direct 31 tax 29 unauthorised 30 debtors 189 petition 143 debt-collection agent 134 debts 9, 103, 105, 114, 131, 133, 136, 138, 141, 143 collectors 19 crisis 142 outstanding 128, 135, 233, 239, 246 partner’s debts 103 repayments 5, 142 sexually transmitted debts 99, 102, 104 unliquidated debts 145 unpaid debts 128 unsecured debts 144 waiving of 140 declaration of intent 143 deeming 258 de facto relationships 228–37 break down of relationship 228, 236–37 buying property 207 laws 236

wills 80, 85–85, 88 deficit 21 dental costs and bills 6, 8, 17, 20, 42 Department of Social Security see DSS Department of Veterans Affairs 91, 177, 246, 256 pension 176 deposits 25, 28, 109, 113, 120 house 34 term 32, 34, 253 depreciation 113 car 38, 117 designated beneficiary form 178 Diners Card 108 direct debit 31 director of partner’s company 104 disability 177 caring for child with 247–48 insurance 157–58 support pension 90, 241, 248 discounts 100 shops 46, 49 discrimination against tenants 62 display homes 77 dispute resolution authority 78 divorce 84, 88, 103, 231, 233, 234, 238 kits 232 doctors 17, 242, 248 certificate or report 91 domestic violence 127, 228, 229 door-to-door sales 98, 109, 112 double orphan pension 90 driver’s licence 38 loss of 167 number 107 driving offences 38 drugs 127, 203, 250, 251 see also addictions DSS 90 duress 104, 161 EFTPOS 26, 28, 29, 33, 100 EGMs 130 see electronic gambling machines elderly parents, caring for 248–50 electrical goods 109 110 second-hand 47 electricity 6, 10, 225 bills 17, 57, 206 concessions 93 payment options 17 electronic banking 24, 28 electronic funds transfer at point of sale see EFTPOS

INDEX • 279

electronic gambling machines see EGMs emergency accommodation 228 assistance 133 fund 14, 15, 34, 253 relief 95 repairs 63 support 95 employment agencies 196 pages 196 prospects 148 short-term 15 entertainment 6, 8, 11, 16, 21, 234 equity in own home 114 eviction 17, 127 examination summons 135 executors 81–83, 242, 246 duties of 81–82 expenses 20, 21, 135, 136, 140, 236 essential 6, 15, 16 household 6, 15 living 6 non-essential 16 factory outlets 47 Fair Trading, Office of 99, 111 families 126 blended 84 break down of xi, 128 day care 219 holidays 223–24 trusts 86, 164 Family Allowance 90 Family Law Act 230, 231 Family Law Court 232 Family Tax Payment 90 fast food outlets 193 Federal Attorney-General’s Department 141 fee-free accounts 29 fees, bank 24, 99 account-keeping 28 newly introduced 30 transaction 25, 28 fetes 39, 45 finance companies 10, 105, 107, 120, 147, 148 loans 109 finances 18, 224 advisers 173 assistance 228 difficulties 114, 142, 152, 205 hardship 95, 136

planner 175, 239, 255, 260 records 5 treadmill 131 financial counsellors 18, 94, 95 bankruptcy 141, 143, 150 contracts 104 credit issues and creditors 114, 132, 134, 136, 139, 140 debt 131 disputes 99, 101 financial institutions 25, 31, 33, 103, 104, 106, 107, 117, 162 financial year 161 fines 167–70 parking 167 traffic 167 revoking of 170 fixed-interest securities 164 food 6, 7, 16, 20, 22, 37, 51 cost of 40 grocery clearance houses 40 meals on wheels 248 meat 40, 41, 42 menu plan 41 preparation at home 43 restaurant meals 5 takeaways 5, 20, 43, 184, 193 franchises 184–85 fraud 128 free transactions 26, 29 freelance work 15 freezers, saving on power costs 54–55 fuel 38, 123 consumption 117, 118 see also petrol fund choice legislation 173 funds at call 26 corporate 174 industry award 174 public offer 174 funerals 81, 177, 242–46 furniture 20 bargains in 39, 47 renovating 35 second-hand 39 gambling xi, 126–30, 250 addiction 127–28, 142, 251 symptoms 127 venues 142 garage sales 39, 45, 240 garnishee order 135, 136 gas 6, 10, 225

280 • MONEY

MANAGEMENT

FOR WOMEN

bills 17, 57, 206 concessions 93 payment options 17 generic brand products 41, 42 gifts 5, 8, 21 saving on costs 37, 48–49 G-line 128 goods and services 100, 106. 109 goodwill 185 government bank taxes 26 concession schemes 57 departments 142 fees 66 payments 6 policy 229 grocery clearance houses 40 group certificate 162 guarantor 99, 102, 103, 105, 109 hackers 111 harassment by creditors 140, 142 health bills 44 concessions 93 insurance 45, 155, 224 Health and Community Services, Department of 216 Health and Family Services, Department of 250 health care card 92, 156, 195 heaters 39 heating 55–56 HECS 197, 198, 221 hidden costs 77 buying a car 117 Higher Education Contribution Scheme see HECS Hire A Hubby 184 hire car companies 111 holidays 4, 8, 16, 21, 34, 108 family holidays 223–24 leave 216 working holidays 199–200 home equity in own home 114 loan 69 home loans 66–70 honeymoon 212 house 103, 104, 108, 115, 146 brand 41, 42 equity in own home 114 maintenance 6, 14, 20 payments 20

repairs 20 housing 20, 22 building 77–78 buying xi, 16, 64–76, 206 auctions 73–74 cooling-off period 74, 75, 112, 120, 143, 144, 185 deposit 34 display homes house and land 147 inspection of property 71–73 loans 99 private sale public 64 renting see renting swapping 223 infringement notice 167, 169, 170 Infringement Notices Bureau (NSW) 169 illness xi, 14, income 4, 6, 10, 18, 20, 51, 114, 118, 135, 143, 236 after tax 136 fluctuating 15 inadequate 131 insurance 157 splitting 164 support payment 93 tax rebate 161 taxable 93 test 91 inheritance 81, 86, 250 insolvency 130 Insolvency and Trustee Service, Australia see ITSA instalment order 138, 139, 140 insurance x, 20, 22, 63, 96, 99, 100, 113, 151–60 ‘bomb’ 123 broker 160 car 117, 123, 152 comprehensive 123, 152 compulsory third party 152 extended third party 152 third party 123, 152 choosing a policy 159–60 discounts for non drinkers 153 disability 158–58 excess 151 health/medical 6, 20, 22, 45, 155 house and contents 6, 20, 22, 153, 235 income 157 jewellery 155 life 20, 22, 83, 86, 146, 156–57

INDEX • 281

mortgage 65, 147 personal legal 158–59 tips 13, 159, 160 trauma 157 travel 159, 201, 202 unemployment 132 intent, declaration of 143 interest 29, 106, 109, 113 how to maximise 28 on credit cards on personal loans on unpaid council rates 17 rates 26, 28, 30, 34, 99, 100 Internet 10, 111, 118, 159, 196 cafés 202 costs 206 crime 111 shopping 33 intestacy legislation 80 intestate 80, 246 investments 6, 34, 79, 88, 99. 143, 164, 178, 242, 254, 255 accounts 24 fixed rate 34 folio 175 management 174 plan 254 property 257 retirement 254 schemes 259 investment clubs 260 ITSA 141, 143 IVF 230 jewellery 110, 202 insurance 155 job hunting 196 loss/es 16, 142, 238 part-time xi search training 240 sharing 218 joint accounts 236, 246, 251 joint borrower 102 joint budget 206 joint loans 105, 229 joint mortgage 251 judgment 107, 135, 143, 147 interest 134, 147 order 134, 139 junk food 42 Junk mail 17 key money 61

kindergarten 39 landlord 61–64 laundry products 48, 54–55 lawyers 95, 135, 232–33 lay-by 109 lease 104, 185, 206 leasehold 185 leave holiday 216 long-service 216 maternity 216 left-overs 43 legal aid 232, 236 legal centres 94, 98, 99, 104, 134, 168 legal matters action 139 advice 104–105, 134, 137, 168, 214, 231, 237, 241, 246 adviser 86 capacity 97 costs 131, 134, 138, 139, 232, 235 fees 147 objectives 98 personal legal insurance 158–59 procedures 134, 140 relations 96 rights 103 leisure activities 37 lenders 103, 108 letters of administration 80, 246 letters of demand 109, 133 LETS 50–51 liabilities 83, 234 arrangements 104 life assurance 100 life insurance 20, 22, 83, 86, 146, 156–57 lights 54 loans 83, 102, 106, 107, 113, 130 agreement 30 bank 6 business 104 home equity 69 housing 99 joint 105, 229 outstanding 103 personal 21, 106, 108, 113–14, 142, 148 repayments 105 service fees on 66 Local Exchange Trading System see LETS lodgement fee 100 long-service leave 216

282 • MONEY

MANAGEMENT

FOR WOMEN

lottery/Lotto 21 ticket 96, 126, 130 wins 146 low income 113, 114, 133, 144 magazines 5, 10, 21, 36, 206 motoring 118 magistrates 101, 135, 168, 169 magistrate’s court 134, 136, 170 maintenance 81, 113, 234 house 6, 14, 20 payments 146, 236 major purchases 17 managed funds 257 markets 20, 39, 40, 45 marketing ploys 40 marriage 16, 206 break down xi, 131, 233 certificate 236, 242 divorce 232, 233, 234 prenuptial agreement 214, 237 remarriage 84 MasterCard 27 Maternity Allowance 90 Maternity Immunisation Allowance 90 maternity leave 216 Mature Age Allowance 91 Mature Age Partner Allowance 91 maximum withdrawal, from ATMs 27 meals on wheels 248 meat 40, 41, 42 medical/medicine 20, 40 benefits costs 6, 8, 241 insurance 155–56 treatment 91, 177 Medicare 155, 177, 195, 224, 242 levy 156, 224 menu plan 41 minimum bank balance 29 mobile telephone 10, 20, 22, 56–57 Mobility Allowance 91 money belt 202 management 4 market 134 matters 105, 127 plan 3 transfer 32 moratorium 140, 147, 149 mortgage 108, 113, 138, 225, 239, 253 budgeting 6, 16 credit rating 107 direct debit 31

in arrears 127 insurance 10, 65, 147, 148 joint 251 marriage breakup 233 papers 242 relief schemes 70 repayments 28, 70, 147, 177 trusts 164 mortgagee’s auction 147 motor vehicles Motor Car Traders Act 122 motoring magazine 118 motorists association/s 21 registration 123 roadside assistance 153 traders 100 vehicle security register 121 multi-level marketing 188 nannies 220 nappies 218 National Information Centre on Retirement Investments see NICRI negative gearing 164–65 net income 144 New Apprenticeships Scheme 196 new-for-old insurance 154 newsagents 39 Newstart Allowance 91, 94, 195 newspaper/s 5, 10, 21, 36, 39, 47, 118 next-of-kin 82, 88 NICRI 174–75, 239, 245, 256, 258 notice of acquisition form 121 notice of disposal 121 notice of enforcement order 169 notice to vacate 64 nursing assistance 248 nursing homes 250 Office of Consumer Affairs 99, 111 Office of Fair Trading 99, 111 Office of Small Business (NSW) 182 Ombudsman, Commonwealth 95 online shopping 33 opportunity shops 39 oral examination 135 organ donation 242 outstanding bills 14, 17 outstanding debts 128, 135, 233, 239, 246 outstanding loans 103 overdraft 104, 148 over-drawn account 30 over-the-counter transactions 27, 29

INDEX • 283

packaging, damaged 40 parenting Payment 91 skills 225 parents, caring for elderly 248–50 parking costs 21 fees 7, 38 fines 38, 167 meters 37 part-time work 193–95, 218 partner’s debts 103 partnerships 187, 188 party plan 188 passport 93 password for email 202 for telephone banking 32 pawnbrokers 99, 110, 111 pay slips 15, 127 payee 31 payments 94, 95, 225 periodic 31 progressive 133, 140 PBS 44, 45 penalties 120, 143 fees 145 Penalty Enforcement by Registration of Infringement Notices Court (Vic) see PERIN Pensioner Education Supplement 91 pensioners 28, 29, 100, 114, 156 married 161 pensions 30, 91–93, 240 age pension 90, 171–72, 258 Department of Veterans Affairs 176 disability support 90, 241, 248 double orphan pension 90 sole parent 246 war widows 91 wife pension 91 PERIN (Penalty Enforcement by Registration of Infringement Notices) Court (Vic) 169 periodic payments 31 personal effects 146 personal finances, taking control of 4 personal identification number see PIN personal legal insurance 158–59 personal loans 21, 106, 108, 113–14, 142, 148 personal superannuation fund 175 petrol 6, 7, 10, 21, 40, 117, 206 stations 26

see also fuel pets 21 Pharmaceutical Benefits Scheme (PBS) 44, 45 pharmaceuticals 44, 202 costs 8, 91, 92 concessions 196 photographs 101 wedding 211 piggy bank 37 PIN 26, 33, 251 playgroups 36 pocket money 21, 222 poker machines 10, 11, 126, 130 see also EGMs postage 31, 32, 83 poverty 127 power, saving on regular bills 53, 54, 55–56 power of attorney enduring 87, 201, 249 general 87 legislation 87 medical treatment 87, 249 prenuptial agreement 214, 237 prescriptions 44, 202 concessions 196 prisoners 97 private health insurance 45, 155 private trustee company 82 probate 81, 246 progressive payments 133, 140 property 79, 88, 138, 178 buying 64–76 investment 257 settlement 232–35, 236 prospectus 255, 256, 260 public transport 38, 124 concessions 92, 93 offences 167 Public Trustee 82, 83 purchases 18, 110 major 17 price 109, 118 quolls 50 quotations 98 builders 77 solicitors 82 raffle tickets 96, 164 rates council 6, 17, 20, 22 outstanding 138

284 • MONEY

MANAGEMENT

FOR WOMEN

water 20 real estate 138 agents 71 cooling-off period 74, 75, 112, 120, 143, 144, 185 rebates 133 on health insurance 156 tax 163 receipts 5, 15, 98, 164 records 18 recycling shops 45 Red Cross, The 18, 95, 133 red waiver notice 119 redundancy 238, 239 referee 101 refrigerators 46 power costs 54–55 registration car 117 number 121 relationships 126, 127 break down of 102, 105, 206, 228–37 long-term 206 problems 205 sexual 99, 102 with employer 136 Relationships Australia 228 remarriage 84 Remote Area Allowance 91 rental property 6, 174 entry by landlord or agent 64 renting 6, 10, 16, 22, 127, 225 advantages and disadvantages of 59–60 assistance with rent 92, 93, 94 bond 61 couples 205, 206 eviction 17, 127 high rents 113 key money 61 landlord 61–64 payment of rent 20, 38, 62–63 rent in advance 61 Residential Tenancies Act 61 shared accommodation 199 repairs, emergency 63–64 repayments 99, 110, 114 repossession, car 127 reserve price 138 residential care 249 Residential Tenancies Act 61 restaurant meals 5 résumés 193–94, 240 retail outlets 26 retirement xi, 164

financial planning for 252–61 Returned Services League see RSL road tolls 38 roadside assistance 153 roadworthy certificate 97, 120 RSL 11, 126 salary 6, 136 packaging 164 ‘sacrifice’ 175 sales 109 closing-down 39 contract 100, 118 end-of-season 39 price 109 stocktaking 39 salespeople/person 110 car 97, 117 door-to-door 17, 110 telephone 17 Salvation Army, The 95, 133 same-sex relationships 228 breakdown of 236–37 buying property 207 children 230, 237 wills 85 savings x, 103, 113, 253 accounts 24, 164 capacity 11 objectives 12 plan 206 regular bills 52–57 tips 53, 55 scams 259 school 39 after-school activities 36 excursions 14 fetes 45 fees 21 insurance 224 holiday activities 36 lunch 36 report 93 year 114 second-hand car 118–22 clothes 39, 45 shops 40 toys 39 seconds outlets 45 security/ies 3, 104, 109, 149 fixed-interest 164 risk 16 when travelling 202–203

INDEX • 285

Seniors Card 258 separation 142, 229–30, 231, 232, 236, 237 settlement in divorce 232, 233, 234 order 101 sexually transmitted debt (STD) 99, 102–105 shared property in divorce 231–32 shareholders, bank 24 shares 164, 173, 178, 257 blue chip 174 in credit unions 25 sharing accommodation 199, 225 jobs 218 living costs 50 rental property 64 sheriff 137, 138, 139, 170 office 169 powers 137 shoes 8, 20 shopping 250 centres 41 list 41 psychology of 40 saving money on 39–49 ‘specials’ 40, 41 shops 31, 40 charity 45 shortfall 147, 148 Sickness Allowance 91 sickness benefit 91 single parents 224 small business 15, 164, 180–89, 257 failure 142 Office of Small Business (NSW) 182 Small Claims Tribunal 100 Smith Family, The 95, 133 smoking 250 see also cigarettes social security 242, 256 and wills 86 benefits 139 debts 146 Department of 90 payments 92, 113, 240 social worker 95 see also Centrelink Social Security Appeals Tribunal see SSAT socialising 49 sole beneficiary 88 sole borrower 99 sole income 139

sole parent pension 246 solicitors 82, 87, 91, 98, 99, 168, 183, 242, 259 fees 246 Special Benefit 91, 95 ‘specials’ 40, 41 SSAT 94–95 St Vincent de Paul 95, 133 stamp duty 65 state automobile clubs 119 State revenue office 65 State trustees 82 statements bank 30 of affairs 136, 143, 145, 149 loan 30 statutory declaration 101 STD calls 56 stocktaking sales 39 store cards 108 credit facility 109 students 100 fee-free bank accounts 28, 29 financial resources 196–98 sub-contractors, licensed 77 superannuation 83, 86, 130, 146, 171–79, 239, 241, 242, 247 and death cover 157 and divorce 233–34, 236 and retirement 172–73 and self-employment 174–75 contributions 164, 165, 171–73, 253 personal fund 175 self-managed 178 spouse contributions 168 Superannuation Complaints Tribunal 179 supermarkets 20, 26, 29, 40, 41, 193 supported accommodation 251 Supreme Court 80, 86, 138 surety 135 surplus 6, 7, 8, 9, 11, 14, 21 TAB 126 takeaway food 5, 20, 43 tax agents 161, 162, 163, 165 audit 162 capital gains 83 deductions inheritance 86 liability 163 returns 162, 165, 233 rules 239

286 • MONEY

MANAGEMENT

FOR WOMEN

shortfall 163 taxable income 93 tax-free threshold 161 TaxPack 162, 163 taxation 161–66, 256 benefits 254 debts 146 deductions 163 keeping records 162 minimising 163–65 superannuation 175 taxis 38 telephone 6, 10, 22, 31, 110, 225 account 57 assistance 92 bills 206 calls 109, 110 contracts 110 disconnection 17 mobile 10, 20, 22, 56–57 payment options 17 salespeople 110 STD calls 56 telephone banking 27, 28, 32, 33 telephone cards 27 prepaid 56 television 9, 17, 111 temporary variation 99, 132 Tenancy Acts 60 tenants association 64 rights and responsibilities of 61–64 tenants in common 86, 207 Tenants Union 61 term deposits 32, 34, 253 termination notice 112 testamentary trust 86 textbooks 21 title deeds to house 242 Totalisation Agency Board see TAB totally and permanently disabled (TPD) 241 cover 157–58 toys libraries 36 second-hand 39 trade-ins 120 Trade Practices Act 185 trade union movement 174 traders 109, 110 Trading Post, The 39 traffic fines 145, 167 offences 167–70

transactions accounts charges 28 fees 25 over-the-counter 27, 29 transfer fee 121 transfer of money 25 transport 6, 21, 146 concessions 195 fares 6 options 38 trauma insurance 157–58 travel 11 insurance 159, 201, 202 tips 201–203 traveller’s cheques 25, 201 tribunals 95, 99, 100, 101 trustee 144 trusts family 86 testamentary 86 unemployment xi, 14, 106, 131, 142, 238–41 insurance 132 payment 93 uniforms 21 union 137 unliquidated debts 145 unsecured debts 144 use-by date/s 40 used cars 118–22 utilities 20, 22, 51, 62 disconnection of 57 electricity 20, 22 gas 20, 22 telephone 20, 22 water utility relief grant 57 valuables, insurance 155 valuation of house and land 138 vehicles 37, 118, 120, 123 ex-government 118 inspection service 119 motor 100 unroadworthy 119 vendor 119 Veterans Affairs, Department of see Department of Veterans Affairs videos 5, 9, 53 videotaped evidence 101 Visa Card 108 voluntary bankruptcy 143, 148

INDEX • 287

voluntary redundancy 238 wages 139, 231 earners 163 lost 241 slip 135 warrant for arrest 168 to seize goods 169 warranties of seizure and sale 138 on new home 77 on second-hand goods 47 to seize property 137, 138 War Widow’s pension 91 water 6, 16, 35, 225 bottled 44 rates 20 saving on usage 52–53 weddings 208–13 dress 210–11 insurance 213 photographs 211 reception 209–10 welfare rights centre 91, 94 white goods Widow Allowance 91, 246 Wife Pension 91 wills 70, 79–85, 201, 227, 242, 246 challenges to 80–81 common problems 84

divorce 231 executors 81–82 form 83 kit 83 making one 79 remarriage 81 separation 236 Wills Act 80 wish lists 12 withdrawals 25, 28 from ATMs 27 witnesses 101 to wills 83–84 Women in Business Mentor Program (NSW) 182 Work for the Dole 91 work 127 casual 94, 195 from home 218 part-time 193–95, 218 place 38 related expenses 163–64 visas 199–200 workers compensation 241 yearly planner 15, 22–23 Yellow Pages 95, 196 Youth Allowance 91, 92, 94, 196 youth hostels 223–24 Youth Hostels Association 224 Youth Training Allowance 195

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