Saturday 28 November 2009

Avoiding 'bank' fees

Although I have many (too many?) different bank accounts, and our biggest 'relationship' with St George bank (our home mortgages, a margin loan account and a portfolio loan account), I've always considered my 'main' bank account to the credit union savings account I opened thirty years ago while at uni. It's always been economical to have my wages paid directly into the credit union account as there is no monthly account keeping fee, and, until recently, there were no fees for writing cheques or making on-line bill payments or transfers. There was a limit to the number of "free" transactions each month, but I had never exceeded the limit.

A few months ago the credit union announced a new, variable monthly transaction fee 'allowance' that is based on the total size of the 'relationship' you have with the credit union each month. As my savings account balance tends to fluctuate between $0 and several thousands of dollars during the month, some months I only have the minimum $25 fee "allowance" and other months I'm allocated a $50 "allowance". As my usual monthly activity (bill payments, transfers, cheques and ATM cash withdrawals) usually adds up to around $25 dollars in notional "fees" some months I've ended up having to pay out $2 or $5 in fees. It was especially annoying when I thought I was just under the monthly limit, only to have a couple of cheques presented on the last business day of the month!

To avoid having to pay any fees I now transfer some money from my personal credit union account to the "joint" account DW and I opened after getting married and pay some of my bills out of that account. A transfer between accounts within the credit union has no fee, and while the joint account generally has almost no cash in it, it is still allocated the minimum $25 "fee allowance" each month. By paying some of my bills using the joint account I can effectively double my monthly fee "allowance" to $50, which means I can make around 25 transactions each month without being charged a fee.

Subscribe to Enough Wealth. Copyright 2006-2009

Thursday 26 November 2009

Building a Castle, one stone at a time

I've always been an aficionado of castles, and even made a bid (unsuccessfully) to buy a small Scottish 'castle' (actually a manor house) a few years ago that was an ex-boy's remand school in need of substantial renovation. However, the combination of the UK property price boom and then the GFC makes it unlikely I could ever afford to buy a 'castle' fixer-upper, and DW was never all that keen on the idea of migrating to Scotland! So, I've now decided to build my own 'castle' as a holiday home on my parent's lake-side farm on the mid-north coast, with a view to eventually retiring there.

Not being totally insane, my 'castle' will actually be a modern DIY 'kit home' with some stylistic features reminiscent of medieval European architecture. Although I haven't even settled on a final house plan yet, the key feature will be to clad the exterior walls of the house with real stone panels, such as the 'rock face' granite cladding imported by Cinajus. The RRP for the granite cladding normally ranges from $106.33 per sq. m (white granite) to $136.67 per sq. m (for 'black' granite), and was recently on special for around $80 per sq. m. A few days ago I was checking that the product was still available, and found that Cinajus was having a clearance sale on some small 'remainder' stock for only $25 per sq. m! After much consideration (and two trips to the display yard by my parents to collect samples of the available granite colours) I've bought the stock of about 82 m^2 of white and 87 m^2 of 'black' granite wall panels. This should be just about the right quantity to clad a modest two-storey kit home. The cost of delivery of the 30 tonnes of stone to my parent's farm will add around $20 per sqm to the final cost, but the total cost will still only be around 30% of the normal RRP plus delivery.

Once I've found a few kit-home plans that I like, the next step will be to get an architect to draw up a plan with the features I like, and allows for the exterior to be clad using this stone. I'm not sure that a standard steel house frame will be strong enough to support this cladding, so I may end up building the exterior walls in hebel aerated concrete blocks, or plain old concrete 'besser' blocks. One major advantage of building the house will concrete walls and clad in granite will be a high degree of fire resistance -- very useful given the rear of the farm property adjoins the Wallingat National Park and is therefore at risk from bush fires.

Attaching the stone cladding to the new house will be a major endeavour - even though each 600x300mm piece isn't too hard to handle (weighing around 30kg), the entire consignment consists of around 940 pieces (28 tonnes in total!). Hopefully the finished product will end up looking something like this:

Subscribe to Enough Wealth. Copyright 2006-2009

Tuesday 17 November 2009

Astronomical Expenses

I phoned the JCU Centre for Astronomy again today to check that I'd mailed my MAstron application form to the correct address and had included all the required documentation. I didn't want to wait until next January to find out that my application was incomplete or had not arrived at all! I wasn't sure that everything was OK because the instructions printed on the 'one size fits all' post-grad application form had been different to the information provided on the Centre for Astronomy website. After putting me on hold for a while they were able to confirm that everything was in order and my application had, apparently, just been 'signed off' by the Dean. A letter of offer should be mailed out to me in the next week or two. When it arrives I'll then have two weeks to accept the offer, send in certified copies of my uni transcripts and pay the 2010 fees.

I haven't been able to find the originals of my uni transcripts (I think I mis-filed last time I took them our to make copies), so I had to phone UTS, UWS and CSU unis to order certified transcripts from each institution (total cost $65).

* * * * * *

Since applying for the MAstron course I've been browsing through online journals to find out what the 'hot' research topics currently are and checked out the publication lists of the JCU staff. I also browsed through the online catalogues of various US-based telescope retailers, and ended up ordering a Meade Pro II CCD digital camera ($499) to use with my Meade 10" SC telescope. I also ordered a Coronado PST Solar Telescope ($999) for viewing prominences, active regions, filaments, and other surface details of the sun (it has a 'Double Stack' H-Alpha system that provides a bandpass of <0.5 Angstrom) - unfortunately there is a six month wait due to a production back-log.

Subscribe to Enough Wealth. Copyright 2006-2009

Swimming pool maintenance

I finally finished installing our new pool fencing and safety gates last weekend, so it was time to get the pool cleaned up and start swimming again. The old candle filter was on it's last legs, so we decided to replace it with a new sand filter. The pump had also been performing poorly, but that turned out to be easy to fix -- there was a small tree nut stuck in the impeller! Tomorrow my dad will find out if the old salt chlorinator can be repaired with a new electrode, or if we need to replace the whole unit. If it needs replacing I may defer the capital expense and continue using chlorine granules until next year. The new pool filter cost around $1,000, which isn't too bad as it has a ten year guarantee (and should last longer). Unlike the candle filter, which required new diatomaceous earth every couple of months, the sand filter only requires regular back-washing. Apparently the sand will need replacing in about ten years time.

Next weekend I'll work on building the new sandstone steps leading down from the pool area to the newly enclosed play area. Once that is done I can finish levelling the play area, lay new turf and assemble the kids play set/gym. Oh, and put up the Christmas lights ;)

Subscribe to Enough Wealth. Copyright 2006-2008

Wednesday 11 November 2009

Are homes unaffordable, or are people just too greedy?

With interest rates starting to rise again in Australia, and house prices failing to drop much during the GFC, many commentators(eg. Ross Gittins) are joining the chorus of young (and not-so-young) renters bemoaning the cost of houses now being "out of reach". I suspect this is a perennial complaint, as I know that my parents were shocked when they migrated to Australia in the early 60s and found that the equity from the sale of their UK house was barely enough for a deposit on a Sydney home. And I could barely qualify for a mortgage to buy a cheap house (in Blackett) a few years after I started working full-time as a uni graduate (and I was still living at home rent free...).

Anyhow, lets look at the current situation:

Average weekly full-time ordinary time weekly pay for a person in NSW (as at May '08) is $1,142.50. According the the St George bank online mortgage estimator, a single person on that weekly income (using the default settings of having average living expenses of $14,568 pa plus a 350/month car loan) would qualify to borrow up to $367,000 on a standard 30-year variable rate home loan. In my experience St George uses fairly typical repayment:income limits (typical of 'old school' banking). So a person on AVERAGE income in NSW could easily 'afford' to buy a house in one of the cheaper suburbs. For example, median (ie. half the houses sold for LESS than this amount) house prices for the 6 months to Sep '09 for some example suburbs are:
Blackett $226,000
Mt Druitt $277,000
St Marys $284,000
Colyton $300,000

I wouldn't choose to live in one of these suburbs, but they're OK (my sister lived in St Marys for a while and I owned a rental property in Blackett for about ten years).

Some commentators are even going so far as to state that houses are 'out of reach' for a couple where BOTH people work full-time! In that case, AVERAGE male full-time OTE weekly income is $1,213.00 and for a female full-time worker OTE weekly income is $1,026.90, giving a combine income of $2,239.90. According to St George, that couple could borrow up to $853,000 putting a whole swag of the most expensive Sydney suburbs within reach (if they had saved up a 20% deposit):
Epping $740,000
Birchgrove $910,000

It appears that only houses in the MOST expensive suburbs would actually be 'out of reach' for a couple with both earning AVERAGE income:
Bondi $1,200,000
Hunters Hill $1,495,000

I think a lot of the people that are complaining about housing affordability (and hoping that house prices will drop 30%-40% before they buy) are simply unwilling to make the life-style spending sacrifices (eg. no eating out, taking staycations for a couple of years) required to be able switch from being renters to being home owners. In five years time I expect both house prices and rents will be higher than now -- and the same people will still be waiting for house prices to drop to more 'affordable' levels.

What do you think?

ps. Don't forget that home loan interest rates are now lower than at any time since the early 60s. Would you prefer current prices and home loan interest rates around 8%, or home prices 50% lower and interest rates of 17%?

Subscribe to Enough Wealth. Copyright 2006-2009

Wednesday 4 November 2009

How much will going back to uni cost me?

While I'm waiting to find out if I'll even be offered a place in the JCU Master of Astronomy course for next year, I tried to work out how much I should budget for the course costs. The MoA consists of 6 subjects each worth 0.25 "EFTSL" (equivalent full-time study load). You can either do the course in 1.5 years full-time, or 3 years part-time (either way the course is delivered via the Internet as "Distant Education"). The course has "some" commonwealth-funded places available, but I couldn't find out how many funded places are available, or how many students were enrolled in the MoA in 2009. If I have to enrol as a fee-paying student it will cost $2,500 per subject, but I think there is a chance that I'll end up only having to pay the government-subsidised HECS-HELP rate of fees. The subjects for this course are offered by the JCU school of Engineering and Science, and for HECS purposes the subjects appear to be classified in the "engineering" band (2), which determines how much the government pays JCU (and the maximum fee the uni can charge the students). This is based on the course cost being quoted as $11,350 by JCU, which corresponds to the Band 2 maximum fee rate. I guess the MoA subjects have been classified by JCU as engineering rather than as science so JCU can get a higher payment per subject from the federal government. From my point of view it would be better if the subjects were deemed to be "science", as that is one of the current "national priority" categories where the commonwealth subsidy is higher (and hence the student fee is lower).

I'll be choosing to pay any HECS-HELP fees "up front" as my "repayment income" would be so high that the full amount would fall due with each tax return anyhow. By paying "up front" I'll get a 20% discount on the HECS-HELP fee amount, so the total cost for the MoA course (based on 2010 HECS-HELP fee rates) will be $9,080 (plus textbooks etc.), rather than the $15,000 as a fee-paying student. If I get a HECS placement the commonwealth government will pay $22,734 in subsidy to JCU (I'm not sure if the 20% "up front" HECS-HELP discount is also paid by the government to JCU). Overall, it looks like I'd end up paying around 26.6% of the "full cost" ($34,084) of the MoA course if I get offered a HECS-HELP place.

Based on the $2,500 "full fee" rate per subject, it would appear that JCU makes a "profit" of at least $19,000 for every HECS-HELP place (ie. the $22,734 amount of government HECS contribution to JCU plus the student's HECS fee payments, minus the $15,000 of notional "full fee" payments). I assume that the $2,500 per subject charged to domestic fee-paying students is more than the actual cost of delivery for each subject. With the course being delivery via the Internet, the incremental cost to JCU for each student must be fairly low (just the cost of some admin overheads, plus marking of the exam and assignment work).

Doing the MoA will consume 1.5 of my remaining HECS-HELP SLE (Student Learning Entitlement). Fortunately the uni study I had done prior to 2005 didn't affect my initial standard entitlement to 7 years worth of full-time study assistance. To date my SLE balance has only been reduced by 0.625 for the subjects I attempted for the GradDipEd course I dropped last year, so I currently have 6.375 SLE remaining. In additional, it appears that if you're over 27 years old there will be an extra 0.25 SLE added each years from 2012 onwards, aimed at encouraging "lifelong study".

Aside from HECS fees, the MoA will probably cost me another $1,000 or so for textbooks, and a small amount for miscellaneous items. There may also be unexpected costs for software (eg. Hearne's "Origin" app for data analysis and graphing would be nice, but it's not worth the $1,000 cost) and there will probably also be some additional expenses associated with the literature review and research subjects.

Subscribe to Enough Wealth. Copyright 2006-2009

Net Worth Update: October 2009

October saw little overall change in my net worth, with the strength in the Sydney property market being offset by a sharp correction in the stock market in the last week, which produced negative results for my geared stock portfolio and retirement savings (SMSF). By 31 October my net worth had increased slightly to $790,140 (up $1,452).

My retirement account (SMSF) lost -$12,215 (-3.80%) to $309,237, erasing all of last month's gains. The drop in the stock market was exacerbated by our small geared stock investment (8 ASX200 index CFDs, code: IQ). There was around $2,000 of employer superannuation contributions banked during October, so the result is worse than it appears. I expect the rest of the September quarter's employer contribution will be deposited sometime during November (around $4,000). During October I transferred $5,000 of our cash balance into our Vanguard "High Growth" index fund investment and also bought 1 additional IQ CFD. If the market consolidates around current levels I may buy the final 2 IQ CFDs to top up our holding to the planned holding of 10 IQ CFDs.

The estimated valuations for my half of our real estate assets (house and investment property) were up substantially this month, by $21,459 (+0.2.74%) to $805,393. The Sydney real estate market still appears to be in an up-trend at the moment, but the winding up of Federal boost to First Home Owners grant and continued monthly rises in official interest rates will probably limit price increases.

My stock portfolio lost -$7,122 to $40,014 net equity during October (due to the high gearing levels - stock portfolio value is currently around $500,000 with $460,000 of margin and portfolio loans outstanding). Hopefully this is just a normal "correction" of 10%-15%, rather than the confirmation of a double-dip bear market. The relative strength of the Australian economy and Asian trading partners suggests the Australian stock market should have lower correlation with the US stock market in the medium term.

I haven't had any spare cash flow to pay off some mortgage or margin loan debt this month, as I continued spending on "home improvement" projects ($580 for a 81cm HD digital TV and stand from Aldi, $280 for sandstone slabs and besser blocks for constructing a path and steps as part of our swimming pool area upgrade, and about $500 on a new bunk bed and mattress for DS1's bedroom). This month I plan on spending another $250 or so to enclose two existing pine bookcases with sliding doors, and about $400 to lay new turf in the play area I've enclosed next to our swimming pool. It may also be quite expensive (I guess around $500-$1,000) to get our pool ready for swimming - the filter valve assembly needs a new seal, there is a significant leak somewhere in the underground pool piping when the filter is running, and the salt chlorinator needs a major service to get it working again!

Once I find out if I'll be enrolling in the MoA course next year I'll revise our budget for 2010. Perhaps I'll even have time during the Christmas holiday period to get my financial data for this FY up to date in Quicken.

Subscribe to Enough Wealth. Copyright 2006-2009