HECS HELP Loan: Calculating final lump sum payment

You want to make a final lump sum payment on your loan right? I've got plenty of Googlers landing on this blog because they want to understand how much, when and where to make that final lump sum payment.

The latest budget is cutting lump sum payment discounts from 10% to 5% starting 1st January 2012. That's going to hurt for the current batch of University students and also for graduates like moi who make erratic extra lump sum repayments because there are heaps better returns on your money invested elsewhere rather than paying it off early.

A few important points about paying off your HELP loans (previously known as HECS debt):

* Lump sum payments of $500 and greater attracts the discount
* HELP loans are indexed to inflation(CPI) on 1st June every single year
* If you have spare money and wish to make lump sum payments, aim to make your lump sum payment in amounts of $500 or greater prior to 1st of June(saving yourself the indexation on that payment)
* If you plan to make a FINAL lump sum payment, ensure you pay the lump sum before you lodge your tax return so that you're applicable for the discount. If you did your tax return first, then you'll have to pay a compulsory amount which is not applicable for discounts. You can save yourself hundreds and possibly thousands depending on the final payment amount by paying that final lump sum before your lodge your tax return

If you're like me and plan to make a final payment to kiss that student loan goodbye, then I'll show you how you can calculate your final repayment:

A) My formula that you can use:

$Balance of your HECS&HELP debt /110 * 100 = $Final payout figure

B) If your final HELP loan amount is $8800 for example
$8800/110 * 100 = $8000 final payout figure (discount= $800)

C) If your final payout figure isn't a whole number, just round it up and pay the rounded up amount and any extra will be either be a refund or reduce your tax payable after you lodge your tax return.

Eg, if you HELP loan amount is $9000
$9000/110 * 100 = $8181.8181, just pay $8182 (discount =$818.20)

How you can make extra HELP repayments:

A) Call the ATO on 13 28 61 and ask them to send out your HELP debt statement with payment options
B) The statement will have a final payout figure- easy peasy
C) You can ask them for your balance and payout figure over the phone
D) You can ask the ATO for a repayment booklet which has information for payment options such as BPAY, direct credit, post office and mail payments

So before I lodge my 2010/2011 tax return, I'm going to make a final lump sum payment on my HELP loan and it will be FINIS! Time to celebrate the end of me babysitting my loan lol

Further reading on HECS/HELP debt:

1. Liabilities at tax time
2. Making a lump sum payment on my HECS/HELP loan

New Zealand, Wanaka, Treble Cone & Cardrona

What you see is Lake Wanaka in New Zealand. Just before we drove back to Queenstown after a hardcore day at Treble Cone in 2008.

Only a few more weeks before we leave on our NZ snow trip for 2011. I'm pretty excited. My last memory of snow was spending three hours in solid rain at Falls Creek in Victoria trying to snowboard in slush and then fresh powder falling from the sky when we were packed up and ready to drive home.

Rain, hail or shine, I'm out there. Especially when it took us a total of 18 hours to drive down to Falls Creek and back home. This year the snow destination is New Zealand. We are praying for snow in New Zealand.

Powder + my board and I = perfection

“Happiness is like a butterfly: the more you chase it, the more it will elude you, but if you turn your attention to other things, it will come and sit softly on your shoulder…”– Thoreau

When I first came across this quote, I was 16 and thought it was such a powerful and meaningful quote. Several years later and it's still a meaningful quote. There are a few things in our lives that we have little or no control over and there's no need to worry yourself over what you can't control.

Happiness isn't the only thing that is like a butterfly. Relationships are like butterflies. If you chase after anything or anyone too much, they may never come to you. Sometimes you just have to accept your life, enjoy what you can and then happiness will come your way. And no, I'm not smoking weed or turning hippy on you ~ A friend of mine who I no longer keep in touch with much, was always unhappy and swinging between depression and feeling suicidal. He thought that he could find happiness by moving overseas but not only do problems follow you, misery does too because happiness really is a state of mind.

Escaping overseas to avoid problems that you have at home could be effective if you have a maniacal ex or some creepy stalker that you're trying to get away from. Otherwise, those same old troubles just follow wherever you go until you confront them and resolve those issues.

Anyhoo, I've been in a happy state recently. Life has reached a few milestones and almost everything that I thought I wanted when I was 18 have come around. As Meatloaf once sang, "2 out of 3 ain't bad". The world is always promising with so many events left to unfold. I'm young and healthy with a great family, great friends and plenty of people that I love and care about very much.

We are looking forward to our ski trip to New Zealand that's coming up shortly in a few weeks. Our last trip to NZ was awesome. If you've never been, it should be on your list of countries to visit. The craggiest mountains and the most beautiful vista.

Do you think happiness is a state of mind? Can happiness be elusive no matter how hard you try?

Beautiful Winter Weekends

Spring is tender green buds and pretty flowers blooming, Summer is fish and chips by the beach, Autumn is blazing red and oranges while Winter is suppose to be dull and dreary.

For the first time in a long time, I fell in love with Winter again for reasons other than snow sports. We enjoyed a Sri Lankan lunch at Roselea Community Centre, where a friend of mine was involved with organising a Sri Lankan fundraiser.

It's the first time I've tried Sri Lankan cuisine. It's similar to Indian cuisine (Dosai anyone?) but not as oily. Chilli was litterally used and that had me huffing and puffing but other than that, it was delicious-particulary the potatoes and the spice combination used. Fish hopper, pronounced as 'Op-pah' in Sri Lankan. It was delicious. The flour net had the consistency of a French crepe. It was a batter mixed with rice flour, coconut milk, water and a bit of salt? Cooked on a tiny gas stove pot:

Went for a much needed walk around the neighbourhood afterwards to aid in digesting all the rich and spicy food that we had consumed. It was amazing to see that all the succulent plants were blooming madly. Other winter plants that I adore are the Camellia trees, African daisies, Dandelions and well, pretty much anything except for huge electricity power plant poles ^.^

 

Ducked into a house that was having a for-sale-open-house and saw the oddest looking tree with what looked like a white fluffy beard dangling down. Also saw a fat, fluffy cat idly lazing on a table. It was adorable, cute and friendly. Contentedly meowing as I petted it :)

Books and Chocolate Chip Cookies

Found myself making a trip to the library last night. I ended up borrowing so many heavy books that I could barely even carry them back to the car. I needed a luggage or shopping trolley to cart them back! With the library closing at 9pm, I really didn't have much time to slowly deliberate, so randomly grabbed piles of books from different sections. The top ones are romance novels by Jude Deveraux, one of my favourite authors along with James Patterson. James Herbert is probably a better writer but I didn't see any of Herbert's books. The Ten Trillion Dollar Gamble is a book about the downfall of Wall Street and hypothesising about America's future. The Barefoot Investor is rather popular in Australia so I thought I'd have a read to see what the fuss is all about. Find It, Buy It, Fix It is a real estate book about renovating because I'll probably be doing some renovations in the near future. Female Entrepreneurs sounded interesting. Grow Herbs...well I've always loved gardening and am always looking to learn more about everything. Sunday Roast, The Country Table and The Food and Cooking of Vietnam and Cambodia are cookbooks.

With a name like mine, there's no disguising my Asian background. Although I've never mentioned it before, I'm an Australian Cambodian. My family migrated to Australia as refugees. Maybe someday soon I'll write about that part and how we can to be Australian citizens instead of French citizens. That's why I was excited to finally see a Cambodian cookbook that has pictures of food that my beautiful mum cooks. It was only earlier in the week that I stumbled across an American Cambodian blogger, blogging about Khmer/Cambodian food recipes.

Much as I love finance/accounting/economics, I also love food, cooking, gardening, outdoorsy stuff, snowboarding and plenty of other stuff and can only blog regularly if I make blogging detours. Anyhoo, whilst on the subjects of books and cooking, this is the cookbook section of the cupboard:

Recipes from friends, newspaper or magazines are filed into the ring binder folders in plastic sleeves as Entrees, Mains, Desserts and Favourites. With the books and magazines, I tag the recipes I plan to try so that I don't have to keep flicking through all the time. It's more inspiring to pick one up and see which one was on your to-try-cooking-wish-list.

Last weekend, I baked Salted Chocolate Chip Cookies from Stonesoup's recipe. I failed to salt them haha ..but they still tasted wickedly, deliciously good even without the salt. Good quality dark chocolate is KEY. I used 50% cocoa Lindt dark chocolate. The higher the cocoa content, the bitterer the chocolate. My baking efforts yielded GINORMOUS cookies about 9cm in diameter ;p~~

 

Two dresses for $500: Bargain or not

Bargain of course! If you read my previous post on the Chanel dress and Burberry coat, $500 for two dresses is a bargain compared to buying just a single Chanel dress for $15000 ;)

"Everyone has a price" is a quote that is often bandied around to illustrate how vulnerable humans are to briberies. It assumes that 'everyone' is only moral to a certain degree and if you throw enough temptations at them, they'll fold and buckle in to your negotiations.

It also has an economic application. Companies and marketers need to price their products correctly in order to get their prospective customers to spend. Price it too high = no sale, price it too low = it's too cheap and they wait for it to get cheaper. If you're interested in reading up on pricing strategies and how it affects our buying behaviour, you can read up on 'price elasticity of demand'.

While I was studying, I spent several years working part-time across several retail sectors such as merchandising, seafood and food retailing. When certain products were deeply discounted, instead of rejoicing and buying tons of the discounted item or food, shoppers would ask me suspiciously, "Why is it on such a large special? Is it off? Is there something wrong with it? Is it damaged?"

If instead, the discount was only a minor discount, it was insane to see how many people thought it was a bargain and thus bought piles of the discounted item/food. I never quite understood that mentality and the cynical, distrustful queries that accompanied any deep discounts yet minor discounts triggered hoarding behaviour.

Would you spend $500 to buy two dresses? Directed at my female readers of course. If you're a male reader thinking wtf are you reading this post, would you be fine with your significant other spending that much on her dresses?

Oddly enough, the "everyone has a price' quote just plonked itself into my mind when two friends were discussing dress prices and how they couldn't believe one of their colleagues spent approximately $500 to buy two dresses.

Their opinions were along the lines of 'It's outrageous...a waste...so expensive' and my opinion were along the lines of 'That's cheap...what a bargain...' 

So there we were, clashing in our opinion on how much was too much to spend on fashion and clothing. Having said that, there are other friends out there who buy luxury labels and wouldn't baulk at spending $3k on dresses.

I <3 dresses and yes, I know my weaknesses and dresses are one of them. If you did decide to read about price elasticity of demand, then you'll know why some fashion labels price their products outrageously knowing that the demand for their clothes are price inelastic.

 Check out the drool worthy Christian Dior cream booties that have three buckles and is retailing for $2050. Or the glamourous Salvatore Ferragamo woven gold clutch purse that is retailing for $3290? ...now that's expensive! @_@

So what are your weaknesses?

Greece: Are we in for another financial crisis?

When the GFC crisis started in 2007, I thought we were all doomed. Fortunately Australia scraped through relatively unharmed. Our equity market was hammered but employment wise, we weren't losing 500,000 jobs per month like the U.S during the peak of their crisis.

Lately, I've been thinking about the domestic and international economy and the more I think about the situation and read the statistics, the more concerned I get.

The blogger, 'My-Wealth-Builder' wrote a recent post encapsulating his worries and they are similar to my concerns, which is why you are now reading a post about it. In terms of equity, I'm not heavily invested into equity right now and won't be for the foreseeable future. If Greece defaults, the equity markets will be hammered. If anyone thought the GFC crisis was bad, this could be worse because Greece has borrowed off several European banks and defaulting on those bonds may trigger a European financial crises.

Problematic areas:

• Looming potential default by Greece
• Struggling nations with huge debts such as Portugal, Ireland, Iceland and Greece, will they require further bail outs too? Are we looking at dominos lined up for a collapse?
• The U.S deficit, trillion dollar debts and woeful economy that is not recovering anytime soon. When will the U.S deal with their debts instead of printing off more money to band aid this problem?
• Australia's own flat housing and construction market, call centre and manufacturing jobs lost to cheap labour in Asian nations
• Japan, the second largest economy in the world is struggling with no end in sight to the struggle
• China, one of the largest economy in the world, heavily reliant on U.S citizens and their appetite for consumption will be affected if the U.S falters. There are also rumours about their property bubble but we'll never know for sure how accurate those rumours are. If the U.S falters, China's demands for Australia's commodities will drop

Right now, like 'My-Wealth-Builder' I also prefer to ere on the side of caution and am not increasing my equity holdings. I am also not buying any property this year and the goal is to buy one next year but again, need to review the economic situation around the world again next year not to mention our own domestic property market.

My most recent move was transferring some online savings to a term deposit that is earning 6.15% compounded monthly and 100% risk free. I do have equity holdings which I'm not going to liquidate. They're set on DRP (dividend reinvesting plans) and are held with a long term intention since I've got several decades to go before I reach my sixties so there's no harm in riding out the market with what I've currently got in equity.

Chanel and Burberry: How thee tempst I

 
Achieve this stylish look for only $56,110:
Chanel silk dress $15000
Headband $1870, cuff on the right hand $3070
Victorian garnet beetle brooch $5900 on garnet chain $10800
Victorian garnet and gold bangle on left hand $8500
Martin & Stein 18ct yellow gold c.1890 bracelet $10200
Salvatore Ferragamo silk pump $770


OR you can achieve this uber stylish look with $44,973:
Burberry Prorsum cashmere officer's coat $5595
Dami Doma belt from Assin $615
Christian Louboutin Daffodile shoes $1295
Chantal Thomass stay-up stockings $68
Cartier Panther ring with peridot and black lacquer $26000
Lakarda ring with garnet and red onyx $11400

I saw these two gorgeous outfits in the AFR(Australian Financial Review) magazine and thought, omg I <3 the outfits. So I went to look at who, where and which shops stocked the goods. On closer inspection at the price tags, I'll just have to continue looking-at-the-page shopping lol

After adding up what it would cost to possess the outfits, it was an O.M.G moment haha @_@ ... IF and I mean a big IF...If I had wanted to buy the whole outfit, I could but would I do that? Not anytime soon ;p

The elitist publications in oz are usually the business newspapers and financial magazines such as Fortune/The Economist/AFR/BRW/SMH/The Sydney Magazine and their ilk. Their pages are splashed with luxury products vying for their readers' attention. I should stick to just reading the content and be wary of looking at anything advertised inbetween their pages ;p

I know that a friend of mine from back in my Uni days occasionally visits this blog and these luxury items would presumably be up her alley. Last time I caught up with her a few months ago was when she was parading her Birkin handbag around. Afterall, Lady Gaga has a Birkin handbag. It was a heavy, soft leathered handbag that can be bought for $13k. Admittedly, it was soft and luxurious and probably an easier decision to buy if you're a housewife(which she is) and not having to earn your own bread and butter like moi.

It's still hard to look away from that Chanel dress and the Burberry coat because they're gorgeous and I just *know* that they would look good on me ^.^ One day...

The 135K Project: The Tunnel Movie

Update- The Tunnel movie is a mockumentary. Visitors to this blog from all over the world are using queries such as, "Is the tunnel movie real?". Rest your fearful soul, it is NOT real and it is a fake documentary, hence the genre label 'mockumentary'. It's just creepy because our underground tunnels ARE creepy! 

Where the Radiohead Band Ventured, The Tunnel Movie 
Follows

The Tunnel Movie has been released worldwide for FREE so download it now and watch a horror movie showcasing part of Australia's creepy, underground tunnel history. The producers couldn't resist sneaking in some shots of the Harbour Bridge but finally we have a movie that has left out the Opera House. For once we have a local movie that's not trying to appeal to international audiences on purpose...it's nothing like the infamous movie(Australia) that bored me to tears within the first half hour.

Creepy Tunnels and Creepy Cityrail Train Stations

It's ironic that this movie came out this year because I've been thinking about how creepy some of our underground stations and passageways are at night. Especially when you're the only one walking in the underground tunnel late at night. Alone with the fluorescent lighting, fading lime green shades of tiles and the noise of  your every footsteps echoing through the tunnel. If you have watched the Korean horror movie re-make, 'The Red Shoes' then you would know what I'm talking about. Sometimes I have to get off at stations that aren't very populated at night and it's really freaky. I took a few photos with the idea that I may blog about them one day when this movie was coincidentally released:



Whimsical and Innovative Ideas on the Internet

Does anyone remember that guy that made millions from selling the pixels of his page? Corporate companies and individuals leaped to own a piece of pixel. It's getting harder and harder to attract online attention for crazy marketing stunts because there are so many wacky stuff out there already such as a kid selling a kidney for an Apple product and innocent girls auctioning off their virginity to pay for college, ebaying sections of their bodies to be tattoed by the winning bidder...

Some ideas are intelligent and some are stupid and involve irreversible decisions that are likely to be regretted shortly after. The Tunnel Movie has a great innovative concept of selling parts of the movie to people.

135,000 Frames That They Hope to Sell

This marketing move is to try and recoup some of their production costs and a random frame buyer will win the opportunity to own 1% of the profit should the movie ever turn a profit.

135,000 Frames > 1 frame is $1 USD > 1 second of the movie is 25 frames > 1 minute is 1500 frames

Well yours truly put her money where her mouth is and bought 25 frames. $25USD didn't cost $25AUD cause our Aussie dollar is so strong right now and is crushing the USD in its fist. Sometimes I feel so sad that our movie industry is so flailingly weak and unsuccessful. The success of our own actors and actresses was never at the forefront of my mind until two people I am associated with (directly and indirectly) struggled to find work and mentioned how difficult it is due to lack of funding in the Australian industry.

Part of the problem is because Hollywood movies can afford the publicity yet Aussie movies barely struggle to raise funds to produce films let alone fund a publicity blitz.

Top Australian Movies (IMO)

I want to give a shout out to some Aussie movies that were rather impressive given their smaller budgets:

• Beautiful Kate: Sophie Lowe is beautiful and highly intriguing as the beautiful 'Kate' but this movie is really confronting because it revolves around incest, dawning sexuality, country life in outback Australia and jealousy. Well acted, well filmed and it does portray the loneliness experienced by people living in outback societies.
• The Tunnel Movie: Finally an Aussie horror that is creepy and is bringing part of our history to life in a movie. Underground Sydney contains thousands of tunnels that are unused, unlit, dank and dilapidated. They were built for various purposes in our history, including war but are now obsolete. Perfect for a horror movie setting. 
• Wolf Creek: This is one of the creepiest, hair raising movie that you can possibly watch. I've watched my fair share of ghosts, horrors, thrillers and I can state that the perpetrator in Wolf Creek was so creative that he could have been telepathically reading Quentin Tarantino's mind. If you think Hostel, Saw or Sweeney Todd: The Demon Barber of Fleet Street was terrifying, Wolf Creek is on par with those movies and the Aussie desert outback was the backdrop.It's supposed to be based on a true story as well so you've gotta watch it if those type of movies are your thing.
• Gallipoli: A Peter Weir film based on World War 1 starring a young, sexy looking Mel Gibson prior to his anti-semitic tirade that hastened his downfall into a Hollywood nonentity. WW1 is why we celebrate and commemorate Anzac Day as a public holiday every year. They sacrificed their lives so that we can live in freedom (well at least until Stephen Conroy implements his lame internet filter and chokes the internet).
• Mad Max: Classic Mel Gibson movies that precedes modern apocalyptic type movies such as Armageddon, 2012, Book of Eli, I Am Legend and Resident Evil. Maybe it's a classic because Tina Turner was such a powerhouse vocal on the theme song. The scene where Mad Max was eating from a dog food tin was seared into my mind. Everytime I fed our pets, the insinuous thoughts ran through my mind - 'If an apocalyptic event happened, could I and would I eat cat food like how Mad Max did?!'  Sadly no and I would probably perish T__T
• Strictly Ballroom: Romance, ballroom dancing and a decent storyline. If you enjoyed Dirty Dancing, Save the Last Dance, Black Swan, Step Up, Flashdance and all those dance movies like I do then you will LOVE Strictly Ballroom because it's a classic.
• Romper Stomper: Russell Crowe when he was a teenage gave such an amazing performance in Romper Stomper. I have to compare it to Gran Turismo because for some reason, they're both similar in exploring the violence in neighbourhoods in their respective country. If Hollywood thought Crowe's performance in Gladiator was amazing, that performance was nothing compared to his performance in Romper Stomper and A Beautiful Mind. 
• Muriel's Wedding: The very beginnings of Toni Collette. She's such an awesome actress. Just as under-rated as Jennifer Connelly. I prefer her movies such as Muriel's Wedding and The Sixth Sense than the TV series, United States of Tara. Julia Roberts has nothing on Toni Collette.

Anyway, if you decide to download and watch the movie, consider buying a frame for $1 or buy more frames if you can. Support the Arts industry and support the musicians, if you're not buying CDs, DVDs or going to the cinema then you can always attend live band concerts, buy merchandise, buy theatre tickets, attend musicals, the opera, the ballet or something. 

Relief that house prices are stabilising

Lack of Housing Affordability

Family and friends all around me have been panicking over the recent years about the lack of housing affordability.

Got a spare $900k anyone? Fancy a mortgage loan of $720k? Got a lazy $180,000 in your back pocket to use as a deposit(down payment)?

House prices were ratcheting up at such a fast rate that we could see housing affordability dwindle before our very eyes. Sure, several of us have bought apartments but less than ten of us have bought a house. We had to start somewhere.

What Do I Mean By 'House' ?

A proper house. At least three bedrooms, bathroom and a carpark on a block that is at least 500sqm and larger. A freestanding house. Not a town house and not an apartment. Not any property that has strata levies to pay.

The property market has settled somewhat due to the increase in the cost of living such as fuel, electricity and mortgage interest rates. It would be a shock if we browsed the real estate websites next year and house prices have yet increased again by $200k or $300k. If it increased $200k in one year, which it has in recent years, that means we would have to save $60k in one single year just to maintain the aim for a 20% deposit.

My latest discussion with family and friends over the topic of buying a home closer to the CBD leads me to conclude that we are all frantically saving in order to buy a house before prices escalate further.

Housing Price Crash Predictions for Sydney

International 'experts' believe that our housing market is overvalued but I challenge them to try and find a rental property. The rental property is tight due to the insufficient number of new housing(apartment+houses) being built and as long as rental yields are decent, investors will keep buying properties and this will support housing prices. It's easy to be an armchair expert sitting at your desk on the other side of the world making predictions about the Australian  property market and it's another matter to be pounding the pavement around Sydney, submitting rental applications and being rejected.

Everyone is entitled to their opinions, armchair experts inclusive.

Will our property market collapse like the U.S or the U.K? I think not after looking at these factors. To buy a block of subdivided land cost around $300k. To build a new home on that block is a further $300k. If the price of a house and land package is around $600k then it would be absurd for the D&G(Doomers and Gloomers not Dolce and Gabbana) crowd to think that housing will crash 40% and not find support before that. There would have be high unemployment before investors and owners will start liquidating their properties and the labour/job market in oz right now is tight.

Cheapest House Listed for Sale

In my image above, I've circled suburbs about 30 minutes travel to the CBD. Properties with greater proximity to the CBD will usually be more expensive. I'll be doing a search on www.realestate.com.au and ordering the search results by price, low to high and will post up the CHEAPEST house that is in the search results.

Note that the cheapest house in each suburb are usually on main roads, nowhere near public transport facilities or public transport routes for trains and buses, usually nowhere near amenities such as shops, cafes, schools, on smaller than average size blocks as well, unrenovated, are cottages or fibro, pitiful landscaping and have something glaringly unattractive about them which is why they are the cheapest one in the suburb:

$910,000 at Freshwater
69 Lawrence Street, Freshwater NSW 2096: 3 bedroom, 1 bathroom, 1 car, 423sqm block



$898,000 at Roseville
38 Malvern Avenue, Roseville, NSW 2069: 4 bedrooms, 2 bathrooms, 2 car, 862sqm block

 

$720,000 at Epping
55 Carlingford Road, Epping, NSW 2121: 3 bedroom, 2 bathroom, 2 carpark

 

$569,000 at Parramatta

2 Symonds Avenue, Parramatta, NSW 2150: 3 bedrooms, 1 bathroom, 1 car

 

$600,000 at Kingsgrove
221 Stoney Creek Road, Kingsgrove, NSW 2208: 3 bedrooms, 1 bathroom, 2 cars, 510sqm land

$870,000 at Matraville
81 Jennings Street, Matraville, NSW 2036: 4 bedrooms, 2 bathrooms, 2 car, 632sqm

 

How was that for a taste of the CHEAPEST house in the suburbs that are at least 30 minutes drive and longer to the city? Dingy, old and unrenovated houses that are poorly positioned and yet still be paying over half a million for them? At least house prices are having a bit of a breather right now and we all need that period of price stability to even have the opportunity to aim for a decent house.
 



Savings Accounts: Pitfalls of having too many

Savings accounts are great. Having savings in them is even better. But having too many savings account is not only a nightmare but can possibly be doing yourself a disservice.

Disadvantages of having multiple savings accounts with small amounts:

• Fees may be payable on each of those accounts
• Harder to manage and efficiently rotate into higher interest accounts
• Tax time can be a nightmare when trying to calculate how much you earnt in the financial year across the multiple accounts
• You may not qualify for higher interest returns if you don't meet minimum establishment/investment amounts

How can anyone possibly be tempted to open separate savings accounts for categories such as holiday, house deposit/down payment, car, taxes, education and lump sum bills to name a few? Just trying to keep on top of multiple accounts can be accompanied by a headache.

The biggest problem that you encounter due to separating your savings into separate accounts is that you may not qualify for higher interest accounts that require a minimum $X amount of money to establish such as $5000 or $10,000. Some term deposits also have different rates depending on how much funds you have. Usually you can qualify and request higher interest with the more funds that you have.

You don't have to open up separate accounts for all these categories. You could simply work out how much you need to save across each of those categories and then ensure that those amounts are direct debited/transferred out of your salary and deposited into a single, high interest savings account. Simple, easy and fuss free. After that is sorted, you can start negotiating with the bank for the highest advertised interest rate or you can move them to different financial institutions if the rates are more competitive elsewhere.

The Envelope Budgeting Method Should Be Called 'The Flawed Method'

And the envelope budgeting method? Where you put certain amounts into envelopes labelled electricity, water, gas etc? I remember when I turned 18, I told my parents that I was moving out to relocate myself closer to Uni and would survive just fine on my own. In the panic that ensued realising that I knew nothing about moving out, I read piles and piles of books on personal finance, managing my finances, how to budget, my rights as a tenant/renter, what my expected housing, living and entertainment costs were going to be and all the other expenses involved with the student Uni life.

I even bought enough non-perishable food to fill up a 70 litre box. Oodles of cans, tins, drinks, biscuits, chips, snacks and anything I could think of. The box was so large that it wouldn't fit in the kitchen so it had to be stored in my bedroom. That's how silly I was back then ;p

Once I moved out, the first method I tried was the envelope method. I look back fondly on my introduction into the big, not-so-bad world of supporting myself. Every time I got paid, I diligently withdrew money from my account and stashed them into the appropriate envelopes. When the bills came, I used those funds from the envelope. It was a bit stupid really. Since I'm not a crazy spendthrift I didn't need to use the envelopes at all. Instead, I had dudded myself out of earning interest. Fortunately I realised that rather quickly, tore up the envelopes and instead rotated my funds into higher interest savings accounts and term deposits whenever I had excess.

The Envelope Budgeting Method is really flawed if you have no problems with managing your finance. If you do, maybe it'll help but essentially you're not earning any interest on those funds that are stashed in those envelopes.

Chasing the high interest and opening multiple bank accounts

A few years ago, I was on the war path for higher interest. High rates were advertised in all the business newspapers so I started opening up one account after the other. Whichever account had the highest advertised interest, I would rotate those funds into the appropriate bank. At the end of the financial year, tax time would arrive and I'd find myself buried neck deep in bank statements and interest from piles of term deposits, savings accounts and online savings accounts. It was an absolute nightmare >.<

Now that I'm older and wiser (so I like to think), instead a simple call to the financial institution requesting a more competitive rate to match other banks will suffice. They will usually match or give me a more competitive rate if I ask for it. It's so much simpler than opening up new accounts frequently, transferring funds around and completing tons of paperwork.

Who should have multiple savings accounts?

If you're really bad with your personal finance and can't resist maxing out your credit cards, maybe having multiple accounts could work for you. Some people just like to compartmentalise everything in their life to feel a sense of control and that's fine if you're like that. It's important to know your own psychological behaviour in relation to money so that you can find something that works for you.

Afterall, some people out there are still stashing their life savings under their mattresses and I'm not even going to explore the pitfalls with that particular option because there's far too many.