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Monday, 30 December 2013

Should there be a medicare co-payment required for gp visits?

It appears that the Liberal government in Australia is leaking details of a plan to introduce a 'co-payment' for visits to a doctor that are bulk-billed, in order to find out exactly how much this would upset the electorate, and possibly to also soften voters up before anything concrete is announced in the May budget. The suggested amount is fairly small (about $5) compared to the minimum 'short consultation' fee bulk-billed for a GP visit, but would hopefully curb 'over-servicing' - whereby some elderly or unemployed patients sometimes visit their GP with great frequency in order to have a chat, rather than for any specific medical need.

While the AMA (the doctors 'union') always meets any suggestion of a co-payment with predictions of adverse patient outcomes ('the poorer patients won't see their GP when they need to') such dire predictions have to be taken with a grain of salt, given the conflict of interest between seeing patients as often as needed with the need to see patients as much as possible in order to boost bulk-billing income (one doctor was recently investigated for claiming to have seen hundreds of patients an hour, thereby billing medicare for thousands of dollars. When questioned about how he could treat a patient in less than a minute, he claimed he 'eyeballed' all these patients in his waiting room!). While the vast majority of doctors are presumably highly ethical and wouldn't think of trying to 'rip off' the public health system, it would be easy to tolerate over-servicing as actually providing a medical service - after all, the little old lady on high blood pressure medication that comes in for a chat every week might indeed benefit from such close medical supervision, and, like chicken soup for the 'flu, while it might not be doing any significant good, it can't hurt (except the federal budget).

The Labor party, having been trounced in the recent election, but bouncing back in the opinion polls (now that the new Liberal government has to actually work out which services to cut or taxes to raise in order to have any chance of reducing the multi-billion dollar deficits entrenched while Labor was in government) is obviously keen to portray this a terrible new tax, a hence a 'broken promise' (although if you promise not to raise taxes, not to cut services, AND to reduce the deficit, as both parties seemed to do during the campaign, how can ANY promises be considered 'core'?). The also like to portray a co-payment as the first step in dismantling medicare, claiming that that is part of the Liberals 'hidden agenda'... although since a similar co-payment was suggested by Bob Hawke it seems that both parties occasionally realise that the current rate of rise in health expenditure is unsustainable in the long term.

However, a co-payment probably would discourage some poor people from seeing a GP when they need to. But then again, some pensioners already choose to spend part of their government unemployment or aged pension on booze, cigarettes, and sometimes illicit drugs, rather than on medical care, or even the educational needs of their children (hence the well-intentioned but controversial 'intervention' and 'managed payments' schemes).

Overall, it seems a small co-payment for GP visits would be a good thing, so that the finite health budget can be spent where it is off greatest actual benefit to public health, but would probably also have to be matched by a similar amount of 'out-patient fee' at the public hospitals funded mostly by the states, otherwise there would be a large movement of bulk-billing patients from GPs to public hospitals in order to avoid the fee.

It will be interesting to see how much 'outrage' over this measure actually attracts - in some ways it seems very similar to the mock outrage that was whipped up when a small 'user pays' fee was introduced for all ambulance services - prior to which there were cases reported of elderly patients calling an ambulance to take them to public hospital for free, in order to fill the medical prescriptions, simply to save travelling to the nearest pharmacy by bus or taxi to fill their prescription! Any public service that appears to be entirely 'free' to the consumer will end up suffering from considerable over-servicing, often at huge expense to taxpayers for very little benefit.

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Tuesday, 3 December 2013

Net Worth: November 2013

A rather weak month for the Australian stock market reduced the value of my leveraged share portfolios, but the value of my SMSF account still managed a slight increase due to the unhedged exposure to international share markets. The fall of the Aussie dollar boosted the value of the Vanguard HighGrowth Fund units, which form a large part of our SMSF investment portfolio. The recent rise in the Sydney real estate market boosted the estimated market value of our house, which also added to my net worth total this month.

Assets$ Amount$ Diff% Diff
Stocks *$219,413-$5,109n/a
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,383$100.01%
Net Worth$1,145,446$5,7020.50%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans

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Friday, 1 November 2013

Net Worth: October 2013

An even better month for the stock market boosted both my leveraged share portfolios and the value of our SMSF investments. This month also saw two months of employer contributions deposited, which also helped.

Assets$ Amount$ Diff% Diff
Stocks *$224,522$55,331n/a
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,373$70.01%
Net Worth$1,139,744$78,0237.35%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans

With a large exposure to the stock markets, a return of investor confidence and bullish stock market would provide a major boost to my NW progress. Hopefully 2014 sees a return to stronger global growth and reduced uncertainty and volatility. The trick will be to know when to start reducing my leverage in preparation for the next inevitable correction or bear market. Having seen out the GFC and EFC, I hope I don't have to go through a third 'once in a lifetime' market crisis. But there are still major storm clouds in the horizon in terms of the massive government debt levels present in many developed economies, an aging population increasing welfare costs and reducing productivity growth, and the costs of 'peak oil' and many other finite commodities and tackling global warming (or mitigating the effects thereof).

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Saving Pennies - closing an inactive credit card account

One of those annoying little avoidable expenses that has been bugging me for ages is the annual fee on an ANZ credit card account I never even use. I can't remember how I ended up having this account in the first place (I think there must have originally been a $100 bonus for opening a new account and using it a few times), but for the past couple of years the only activity on the account has been the annual fee of $30. I would totally forget about the account (as they only send out a monthly statement if there have been any transactions or if there is a balance carried on the card), and then remember it again when the statement arrived showing the annual fee that had been charged. Every year I've been promising myself to close the account down just before the next annual fee falls due, and then forgetting all about it again. The problem was that, having just paid the annual fee, I thought I may as well keep the account open 'just in case' for the remainder of the year, and that having a extra $15,000 credit line available in case of emergency might come in handy at some time...

This year was even worse, as I didn't even notice when the annual fee statement arrived, as we now have a savings account with ANZ for our self-managed superannuation fund. The envelop for the ANZ savings account statements looks identical to that used for the credit card statement, so I didn't even open up the credit card statement when it arrived, and only noticed the following month when another statement arrived showing a late payment fee of $20 and interest charged on the unpaid $30 balance! That was enough to convince me to finally phone up ANZ and close the account. Fortunately when I explained my reason for closing the account I ended up getting the annual fee, late payment fee and interest charged all waived (having $30,000 or so sitting in our SMSF savings account probably makes me a 'valued customer'). Well worth making the phone call!

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Saturday, 26 October 2013

Estimated cost for a second storey house extension

The consultant dropped by last night to have a look at our existing single-story, brick veneer home and discuss our ideas for adding a second floor on top. Our thoughts about adding a master bedroom with en suite bathroom, study, and WIR, plus a large lounge room and library appear 'do-able' at about the cost I had in mind - around $230,000 to $250,000. The price includes an interior staircase, bathroom fittings and so forth, and some minor changes to the downstairs, and a large tiled balcony along the front of the house. But it doesn't include floor coverings (we'd probably have hardwood flooring put down), so I'm sure the total cost would end up near $300,000. The extension would be done in single brick 'skin' and a timber frame, with the bricks chosen to match the old red bricks as closely as possible. A slight mismatch shouldn't matter, as the new balcony with separate the old and new brick sections visually. The alternate would have been to use rendered cement sheeting on the extension, and render the existing house - but doing that probably would have cost around $30,000.

We'll get a sketch plan of the concept in the mail, and think about it for the next year or so before making a decision. Meanwhile, I'll consider the alternative of spending the money on a block of land up at Port Stephens, and building a new 4-bedroom holiday/retirement home there. The cost would be about the same as adding an extension on top of our Sydney home. I can't afford to do both. And I'm not entirely sure if I'll decide to do either.

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Monday, 21 October 2013

Credit burns a hole in my pocket

Only a few months have passed since we finalised the sale of our Sydney investment property and we used the proceeds to pay off most of our home loan. Yet DW and I have each already 'invested' about $100,000 in the stock market using some of the 'portfolio loan' credit that became available once the investment property and home loan accounts had been paid out. And we are now talking about using some of the remaining credit to maybe add a second-storey extension on top of our existing 3-bedroom home. Seems that having hundreds of thousands of dollars available to borrow (at home loan interest rates) is too tempting to resist for long.

While our 40+ year old home isn't very large (3 small bedrooms and one bathroom), we don't really need the extra space - especially as DS1 might be moving out of home when he starts university about four years from now. The cost of adding a simple upstairs extension is also fairly expensive in Sydney - one master bedroom with en suite bathroom and a small study/office, a lounge room and a library room will cost somewhere in the vicinity of $200,000-$300,000 (I'll have a better idea once a 'consultant' from one building firm visits on Friday to give an 'obligation free' inspection and price guidance). And living in our house while construction work is going on above us also wouldn't be particularly pleasant.

As an alternative, I'm thinking about buying a vacant house block in a sea-side village in the Port Stephen's area (about two hours drive north of Sydney). A vacant block there costs around $100,000 and a quick internet search has turned up at least one project home company that will build a basic, single-storey four-bedroom/one bathroom house for around $160,000. So it should be possible to end up with a nice new holiday home on the central coast for under $300,000.  New four-bedroom houses in the area are selling for around $400,000 so it should be possible to get our money back if we decide to sell the finished house (provided the real estate market in general doesn't decline). And if we choose to rent it out, similar houses in the area rent for $300-$400+ per week, which we provide an ROI of between 5% and 8% (depending on the final cost of the finished house and land). If we like the area we might even move their when we retire (it's close enough to visit Sydney for a day trip), which would let us sell or rent out our Sydney home to help fund our retirement (if we needed the cash/cash flow). We may drive up there next weekend and check out the area and local facilities.

Then again, I may decide to do nothing, and just keep waiting for my parents to renovate the holiday house they have sitting on a lake-side 25-acre hobby farm (about three hours drive north of Sydney). However, that house is in unliveable condition at the moment, and my parent's have been 'planning' to renovate it for most of the last ten years since I last visited there (without making any noticeable progress). So I think both of our kids may have moved out of home before we can realistically expect to stay there on vacation!

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Sunday, 20 October 2013

Feeling like a Ph(rau)D

My first year as a part-time, post-grad 'research' student is drawing to a close, and I've just had my first 'Annual Progress Report' signed off by my research supervisor. He seemed quite happy with my progress and gave me a 'motivated and very capable' rating, which should go down well with the review committee (I will have a brief 'interview' session with them in early November to finalise the annual review). My supervisor also signed off that I had completed the 12-month's probation period, so I should have my candidature officially 'confirmed' once I get past the review committee interview. And after that is out of the way I'll start working on the application required to officially  'upgrade' my enrolment from the MSc(Research) degree to  PhD. Knowing that I'm working towards a PhD thesis due in 6-8 years time, rather than having a MSc thesis due 1-2 years from now, will make it easier to plan my literature and thesis writing schedule. Being a part-time research student is a s-l-o-w process ;)

Despite my supervisor saying that my research topics have turned out to be more difficult than he had anticipated, I still feel I haven't achieved very much this year (definitely not as much as I had intended). Although I've managed to learn how to 'drive' the Mt Wilson interferometry telescope array remotely from the lab at Sydney University, and have some tantalising preliminary results from my micro-quasar observations (which my supervisor says should be enough to publish a paper already), there is still a lot to learn about the nuances of optical stellar interferometry and the 'nuts and bolts' of the various data reduction and modelling software tools. I also feel that my maths and statistics (which were never my strongest subjects) are about 30 years out of date, and I haven't spent as much time 'brushing up' my calculus and basic physics knowledge this year as I had hoped. Oh well, I will have a couple of weeks over the Christmas/New Year period at home (while my office shuts down for the holidays), so I *might* be able to do some remedial background reading while lounging around the swimming pool. I also have to get my literature search more organised (so far I'm just browsing random papers that seem relevant), and allocate a fixed amount of time each week to read and critically summarise each paper, rather than just skimming through them and jotting down a few interesting factoids.

Next year I'll also have to enrol in one of the 'honours' level courses that have to be completed as part of a MSc/PhD at Sydney University. It's probably not a good idea to attempt my supervisor's Bayesian Statistics course until I've brushed up my maths and statistics a bit more ;) so I'm thinking of doing the History and Philosophy of Science honours course as my first elective. At least that was one of the subjects I got a high distinction for in my undergraduate degree thirty years ago, and although there is a lot of reading required, the assessment only involves four 1,500 word essays.

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Tuesday, 1 October 2013

Net Worth: September 2013

A good month for the stock market, despite a sudden drop on the last day due to the US budget imbroglio. There was a slight downward adjustment in my estimate of our home valuation due to the source of the monthly average sales data, but overall Sydney house prices seem to be starting another uptrend despite already being unaffordable for many young local families. The latest explanations include foreign (ie Chinese) investors, and self-managed super funds, driving up prices. But the old explanations of geographic restrictions on available house sites, high local building costs, council red-tape and zoning restrictions all help restrict supply, despite some people expecting a glut of properties as the 'baby boomer' generation starts to sell off the family home to downsize, move to aged care accommodation, or make escape to the country/seaside. I think it is the effect of home loan interest rates being around 5% that is the main driver, and the trigger for a drop of Sydney house prices (at least in real terms) will be when the RBA starts to raise interest rates again when the Australian economy recovers.

Assets$ Amount$ Diff% Diff
Stocks *$169,191$20,688n/a
Debts ^$ Amount $ Diff% Diff
Home Mortgage(s)$102,380$90.01%
Net Worth$1,061,721$18,3011.75%
* the Stocks figure is portfolio value - margin loans. The LVR is around 80% overall.
^ doesn't include the ~$675,000 of investment loans

Despite some trepidation at increasing my level of gearing to invest in the stock market, in the end I decided to borrow $96,000 of the $250,000 available from my portfolio loan account last month, and invested in a dozen Australian stocks selected from the ASX200. Only time will tell if this was bold move to invest close to the bottom of the market, or absolute folly at my stage of life given the volatility of the market so far this century, and the ongoing challenges faced by the developed economies.

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Friday, 27 September 2013

Getting back into gear(ing)

Selling our investment property provided enough net proceeds to pay off most of our home mortgage, and I was initially planning to use the cash flow freed up by the elimination of home mortgage repayments to start paying down some of my existing margin loans. But a side-effect of paying off the investment property loan and the larger of our two home mortgage loans was that our two 'portfolio loan' accounts (secured against our house title) of $250,000 each were cleared and available for investment purposes.

DW decided to draw down $50,000 from her portfolio loan sub-account and use it to fund a $150,000 stock portfolio (borrowing the other $100,000 on her Comsec margin lending account). She'll be able to 'pre-pay' 12 months of margin loan interest next June (just before the end of the Australian financial year), but will help reduce the capital gains tax payable on the sale of our investment property.

Helping her 'pick' stocks to invest in re-kindled my appetite for geared stock market investing, so I borrowed $96,000 from my portfolio loan sub-account and invested it in a dozen Australian stocks (about $8,000 worth of each stock). As I have a mediocre track record of 'picking' individual stocks (I'm a sucker for a 'good story' and have tended to believe the optimistic forecasts touted in company annual reports), I decided to apply a fairly rigid stock-picking formula and see how it works out over the next 5-10 years. The goal is (obviously) to out-perform the ASX200 stock index (otherwise I'd just invest in an index fund), and the 'hope' is that the worst of GFC/EFC period is pretty much over and that we'll get back to the long-run rate of return that the stock market has historically provided.

While many people feel that 'this time its different' and that post-GFC the global economy will remain subdued for many decades and stock market returns will remain well below the trend average, I think there's a good chance that stock market returns will 'revert to the mean' with the potential for some good years in the stock market in the coming decade, once the developed economies get back to more 'normal' growth rates.

My stock picking methodology for this particular portfolio of stocks was:
1. Take the current ASX200 list of Australian stock (ie. the biggest 200 by market capitalisation)
2. Wash these against the list of 100 or so stocks listed in the book 'Top Stock 2013' by Martin Roth (an annual guide that casts a critical eye over key financial indicators to, hopefully, eliminate 'dogs'). This reduced the list of 'possibles' to around 50 stocks.
3. Plot the 1-year chart of each of these 50 stocks against the ASX200 index, and eliminate stocks that hadn't outperformed the index. This left a final selection of twelve stocks to invest in:

Code Description Quantity

After one year I'll sell these stocks (so any capital gains are 'long term' and taxed at half my marginal tax rate) and reinvest the account balance in a new selection of 10-15 stocks (the number will depend on the value of the portfolio at that time and the number of stocks 'short listed' using the same methodology). Barring major disasters (eg. GFC Mk II) I plan on sticking with this for 10-15 years until I get towards retirement age.

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Saturday, 14 September 2013

Becoming a de facto piano teacher

After taking DS1 for his first 'lesson' with his new piano teacher yesterday (where she just had a look through his recent grade 5 piano exam report [he got a B+/credit], heard him play one of his exam pieces, and then spent some time evaluating how much/little theory he knew) I thought we had things sorted. Aside from not teaching 'piano for leisure' (she only teaches the more rigorous 'piano' course - whereas DS1 had been sitting both exams each year previously), and also only teaching 'musicianship' rather than the easier 'music craft' course, she seemed like a competent teacher, although a bit pricey (at $57 for a 45-minute lesson). Although she didn't have a timeslot free for DS2 to also have a lesson, I wasn't too fussed about that, as I feel capable to teach him for the next couple of years (at least through grades 1 and 2) since I studied piano myself up to grade 8 (although I never got around to doing the required grade 5 theory exam, so I never got the official 'certificate' from the AMEB), and did some Bachelor of Education course a few years ago while thinking of getting qualified as a high school science teacher as a redundancy/early retirement (lots of holidays) option, so I know a little bit about teaching in general. Also, having had to register with the AMEB as my sons' replacement 'teacher' in order for them to be able to sit their recent practical exams, this seemed a sensible option for DS1, as spending $38 for a half-hour lesson at grade 1 level seems like a waste of money at that level.

However, this morning the teacher phoned to advise that one of her existing pupils (that had dropped out due to a scheduling problem) had decided to continue with their lessons after all, and the only available (?!) spot was the one DS1 was supposed to have. So, once again, DS1 doesn't have a piano teacher...

Having already found out that one of the other two possible teachers in our area is a rank amateur, and the other wasn't taking on any new students, we're back to square one in the search for a new piano teacher for DS1. I'll have a look if any teachers are available close to DS1's selective school, in which case he may be able to go straight to his piano lesson after school, and then catch the bus home, or wait for me to collect him on the way home from work. However, if there aren't any suitable teachers available, I've discussed the possibility of him just picking the required 4 pieces from the AMEB grade 6 book and then learning them by himself, with me provided some critique and guidance along the way. He can learn the required grade 1-3 musicianship (theory) from the books I bought this morning (before learning that his new teacher was pulling the plug on him), and I've bought the grade 1 online exam for him so he can read through the online tutorials and do the practice exams during the school holidays before taking the actual grade 1 online exam under my supervision in a month or so.

While it wouldn't be ideal for DS1 to try working through grades 6-8 with only my assistance, it would be possible, as his results at this level will be mostly due to his application and amount of regular practice. And, overall, that would mean a saving of around 40 wks/pa x $57 /lesson x 3 years(grades) = ~$6,840! As DS1 is only learning the piano 'for fun' and doesn't intend having a career as a pianist/piano teacher, or even taking music as an HSC elective, he/we may be better off putting that $7K towards buying him a second-hand grand piano (I saw a decent 10-year old grand piano on sale for $10K today), or even just investing it or using it to help fund some post-graduate studies for him abroad...

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Friday, 13 September 2013

Free University Courses

I came across the Coursera site after reading that a couple of Australian universities had signed up to offer free courses via their platform. So far DS1 has enrolled in a couple of excellent computer program classes ('Introduction to Systematic Program Design 1', and 'Learn to Program: The Fundamentals') which are excellent, and I enrolled in 'Algorithms, Part 1' which was also very good - but I but dropped out after the first week as I didn't have enough time to do the exercises and assignments for another course while also doing my PhD studies and working full-time ;(

I've enrolled in 'High Performance Scientific Computing' which may be of use for my PhD work (and doesn't start until next year), and DS1 has enrolled in another couple of courses that start soon ('Internet History, Technology and Security' and 'Learn to Program: Crafting Quality Code' and 'Computer Science 101'). The courses are all free (unless you choose to pay a nominal fee for the 'Signature Track' option, which involves extra identity confirmation steps during the assignments and exams [such a using your webcam and typing characteristics to confirm the identity of the person submitting the course work] which gets you an official verified certificate upon completion of the course) and are offered via online video tutorials (about 1-2 hours worth each week), reading materials and exercises. The courses are generally run over 4-12 weeks, although some are also offered in 'self study' mode where you can access the videos etc. at your own pace and submit work for automatic grading, but you don't get an official 'Statement of Accomplishment' that is available upon completion of most of these online courses. Each course requires around 4-12 hours of 'homework' each week, although the amount of time required can easily blow out if you are totally unfamiliar with the subject area and need to carefully work through all the exercises and do additional background reading.

There are literally hundreds of quality courses available in a wide range of subject areas, and the courses have been produced by some top-notch universities around the world. From what I've seen so far, the content and assignments are just as good as you'd get through attending some university courses, although some fields of study are better suited to the on-line delivery method (eg. you can learn computer programming perfectly well through an online course, but studying analytical chemistry would be less satisfactory, due to the lack of practical experience using expensive lab equipment). While such online courses can't provide direct interaction with fellow students and university lecturers (although the online forums provide a good substitute), there are an excellent alternative given the cost (free) and easy accessibility.

Some of the courses are aimed at first year university level, and I've found that these are suitable for a gifted high school student. The introductory computer programming classes are an example, especially those that are entry-level and developed for arts of 'soft' science students (and therefore don't expect much more than an interest in the topic and a background of high school algebra).

These courses are a great example of the educational opportunities provided by the internet, and the quality of content is almost indistinguishable from some of the 'distance education' I did for my Master of Astronomy or Graduate Diplomas in Industrial Mathematics and Computing. Unfortunately, while they are great learning tools, employers (and universities when you apply for admission) are unlikely to regard them as comparable to 'real' university courses - even if you pay the $100 or so for the 'Signature Track' option. Which is a pity considering the quality of these courses and the high cost of university enrolment, even as a distance education student. However, they are still worth doing for personal/professional development purposes, and *may* be helpful to list on your CV in some circumstances (eg. a high school student applying for work experience of college entry).
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Monday, 9 September 2013

Unexpected and costly change of piano teacher

My sons recently sat their AMEB piano exams - DS1 got a B+ on his grade 5 'Piano' exam, while DS2 got an A on his preliminary grade 'Piano for Leisure' exam. I also sat an exam (getting a B for grade 5 'Piano for Leisure' - better than I thought given I hadn't played much since I sat my grade 8 AMEB Piano exam more than 30 years before, and didn't have much time to practice due to my PhD studies) as I wanted to ensure their piano teacher had enough students being examined to have the exams held at his studio. As it happened, I needn't have bothered enrolling for the exam, as their piano teacher unexpectedly went out of business the week before the examination date, due to him being arrested and charged for allegedly grooming a child for sexual purposes! I won't form an opinion as to his guilt or innocence, as I always stayed at the studio while DS1 and DS2 were having their lessons and (therefore?) nothing inappropriate happened to my sons. On the one hand the "where's there's smoke there must be fire" line of reasoning (always a favourite of lynch mobs) would suggest that since he has been arrested, questioned and charged on the same day the police must be some substantial evidence that the alleged offence occurred. But, on the other hand, everyone charged with a crime is entitled to a presumption of innocence, so I'll leave it up to the jury to decide. Whether or not he is actually guilty his days as a piano teacher are over - he's 70+ years old and was considering retiring soon anyhow, his business has been closed down with his computers and paperwork taken by the police, and word-of-mouth about the arrest passed around the local piano-teaching community like wildfire (one of the prospective new piano teachers I contacted mentioned that she'd seen the news in the local paper, and her husband had commented that she'd be getting a rush of new students as a result). So, even if he is found not-guilty at his trial, he would be unlikely to want to resume teaching, and probably couldn't get any students regardless of a non-guilty verdict.

It was a bit of a shock to suddenly have to arrange for the exams to be shifted to the AMEB head office in town at such short notice, and I also had to contact several local piano teachers to try and find a replacement teacher for the boys. There were only three local teachers listed in an online directory of piano teachers, and of them one was fully booked and not accepting new students at this time, the second one sounded like a very young man when we talked on the phone, and the third charged substantially more than average for lessons (~$95/hour compared with the typical rate of about ~$70/hour). We arranged to meet the young (cheaper) piano teacher at his home, but found that he was very young (early 20s) and didn't seem very professional (he had his injured arm in a cast due to a recent motor bike accident, was living at home with his mother, and was teaching on a small upright piano located in a messy bedroom!). That left only the more expensive teacher as an option, so I've arranged for DS1 to start weekly 45-minute lessons with her from next week. She doesn't have a time available for DS2 to have lessons at the moment, so I've started teaching DS2 some new grade 1 exam pieces for next year myself. Given the higher hourly rate charged by the new teacher, I'll try to arrange for a one-hour lesson to be scheduled next year, which can be shared between DS1 (40-min) and DS2 (20-min) in order to save a bit of money. And if she can't find a suitable time-slot for a year to so, I'll probably be able to teach DS2 adequately myself until he completes grade 2 in a couple of year's time. One good side-effect of having their old piano teacher go out of business just before their AMEB exams were scheduled, and not having started lessons with any new teacher yet, was that I had to fill in an AMEB 'change of teacher form' and nominate myself as their 'teacher'. This means I an now registed as an official AMEB 'piano teacher' and can easily enter DS2 for his grade 1 exams next year.

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Thursday, 5 September 2013

Congratulations, Prime Minister Abbott

While, as they like to say, "the only poll that counts is on election day", it looks like we won't have to stay up very late on Saturday night to know the election result - so I'll get in early and 'call' the election as a resounding win to the coalition. My guess is about 87 seats will go to Libs-Nats, 60 to Labor, and 3 'other'. As a sweetener the $5 online bet I made about six months ago should add a few more dollars to the small win I made better against the Aussies winning the Ashes series in the UK ;) It will be interesting to see how things pan out over the next term of parliament - if the global economy recovers and Australia gets back to trend growth rates, unemployment could be trending down and the federal budget deficit diminishing, which should put the coalition in a good position to win a second term. From the coalition's points of view, the large deficit, slow growth rate and increasing unemployment rate left behind by Labor should make it easy to maintain the mantle of 'sound economic managers' during their first term(s) in office. The big question will be whether or not the result on Saturday is such a convincing win for the coalition that they are tempted to call a double dissolution early next year in an attempt to gain control of both Houses of Parliament. The trigger could be either the Carbon Tax or Paid Parental Leave legislation being blocked twice in the Senate by the Greens and Labor. While it is unlikely that the coalition can win a clear majority in the Senate in a double dissolution election (given that the Greens appear to have a fairly solid ~10% of the vote), if they win a large enough majority in the Reps next Saturday they may think it is worth taking a punt. ps. I decided I am pretty much a Liberal supporter these days, so I became a 'card-carrying' Liberal Party member last week. As I'm enrolled as a post-grad student I took the opportunity to pay the 'student' membership rate ;) Subscribe to Enough Wealth. Copyright 2006-2013

Monday, 2 September 2013

Net Worth: August 2013

Not much change to our SMSF balance this month as the stock market (Australian and International) was fairly flat overall, despite a couple of rises and dips during the month. And there were no employer contributions deposited into our SMSF this month (due once a quarter). The net value of my stock and real estate portfolios was also fairly constant, but there was a sizeable transfer of funds out of the 'property' column and into the 'stocks' column caused by the sale of our investment property last week. The sale proceeds were used to pay off the loan secured against the investment property, and the surplus funds were used to pay down one of our home mortgage accounts (the variable rate one - the other home mortgage account is on a fixed rate for another year and a half, and the early repayment penalty would be similar to the amount of interest over the remainder of the fixed rate period!), and the remainder used to pay off some of my margin loans. Hence the decrease in the net value of my real estate investments corresponds with the 'increase' in my geared stock portfolio.

The remaining amount shown for 'properties' and 'home mortgage(s)' is my half of these figures. As usual, I don't include assets or liabilities belonging to DW, DS1 or DS2 in my net worth figures.

Assets$ Amount$ Diff% Diff
Stocks *$148,503$132,809n/a
Debts$ Amount $ Diff% Diff
Home Mortgage(s)$102,371-$260,643n/a
Net Worth$1,043,421$2,8350.27%
* the Stocks figure is portfolio value - margin loans

Paying off the investment property mortgage has freed up about 1/4-million dollars of available credit in my 'portfolio loan' account (which is secured against our house title), so I could, in theory, deposit $250K into my leveraged equities margin loan account by drawing down on this loan account, and then purchase another half a million dollars worth of stocks (or managed funds, or index funds) on margin, at a 'modest' LVR of 50% (from the point of view of the margin lender). A bull market over the next decade could see the ASX200 double, as the world fully recovers from the GFC, which would result in a windfall gain of half a million dollars. But on the other hand, a stagnant market over the coming decade (as happened in the 70s) would see me throwing all my available cash flow away simply servicing the debt. And a decline in the stock market would erode my net worth considerably.

I suspect I have reached the limit of my personal risk-tolerance, as I will feel more comfortable using my cash flow to pay down some of my existing margin loan balances, and/or contributing additional amounts into my SMSF. While I won't get rich with that approach, there is more certainty of achieving a comfortable lifestyle for my retirement.  I already have several hundred thousand dollars of 'other peoples money' invested via my geared share portfolio, plus we have a small amount of gearing in our self-managed superannuation fund via our IQ CFD investment. Borrowing even more to invest in the stock market seems too high-risk at this of my working life, and would not leave much room for misadventure (such a ill health or losing my job). I'll leave it to DS1 and DS2 to create a 'family fortune'. ;)

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Sunday, 25 August 2013

House Sale Settlement Tomorrow

The sale of our investment property should 'settle' tomorrow, and all going well the balance of net funds should appear in our bank account. The sitting tenants had found a new place recently, and were scheduled to move out yesterday, and today DW will be dropping by the do a final inspection (in case there is any substantial damage to the property which would need to be claimed against the tenants' bond deposit) and collect the keys. Our agent should be handing over all the sets of house keys to the new owners tomorrow.

The net proceeds (after paying off the investment property mortgage and the various selling costs) should be just enough to clear the mortgage on our home and pay the capital gains tax on the investment property sale - although one of our home mortgage accounts is a 'fixed rate' loan that runs for another 18 months or so, and the capital gains tax won't be due until about March 2015.

Being mortgage-free will provide additional cash flow that I shall use to whittle away at some of my existing margin loan balances, and DW will use her extra cash flow and the available equity in our home to borrow and invest in a diversified share portfolio. I tend to favour investing in the stock market via low-cost 'index fund' investments, having had little luck 'picking' individual stocks (or high-cost 'managed' investment funds), but DW wants to be more hands-on, and will 'pick' her own portfolio of 5-10 stocks to invest in.

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Sunday, 11 August 2013

Apparently I'm more conservative than I thought...

Being a pro-choice, atheist I had thought I wasn't that much of a conservative, but according to the results of a survey I completed on the ABC's votecompass website my overall viewpoint is more conservative than the NLP!

I suppose that why I've ended up voting for the Liberal Party candidate in most elections despite considering myself a 'swinging' voter ;)

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Sunday, 4 August 2013

Early start to Christmas shopping

I tend to buy several small Christmas presents for the boys throughout the year, as I come across 'bargains', plus one 'expensive' item. This year I decided to order an Elenco 750R snap circuits student training kit as a combined gift for both of the boys. The present won't come as huge surprise (unless they forget about between now and Christmas Eve) as I checked if they thought they'd like spending time using it before I placed the order. The kit has received some good reviews, and seems suitable for a wide age range - DS1 (13yo) can use it to learn about electrical circuit theory and test out circuits of his own design, while DS2 (7yo) can construct simple working devices by following the step-by-step instruction manual, in a manner similar to building a Lego model. As is usually the case, buying the product online from was a lot cheaper than getting it from a local distributor - the kit cost A$136.32, plus a hefty A$52.00 shipping and handling fee for delivery within a couple of weeks, making a total of A$188.82 delivered to my doorstep. Getting the same product from the Australian distributor would cost A$249.95, which includes the 10% local GST plus free delivery.

Hopefully the boys have lots of fun playing with this kit for years to come.

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Thursday, 1 August 2013

New Worth Update: July 2013

The past month saw strength in the international and local stock markets give a substantial boost to the value of my retirement savings (SMSF) and geared stock portfolio.

However, the overall gain in net worth was substantially affected by writing down half the difference between my previous monthly estimated value for our investment property, and the agreed sale price. Settlement of the sale is due at the end of August, so next month the remaining impact to my net worth will be felt. However, it won't be apparent in the property figure as the sale proceeds will be split between paying off one of our mortgage accounts, paying off some of the 'portfolio loan' currently secured against both our property titles, and the balance sitting in a cash account. There will be a capital gains tax liability of around $60K created by the sale of our investment property, but as I use cash accounting for my finances this won't affect my net worth figure until the tax is due around March 2015.

Despite this partial write-down in the value of our investment property, my NW this month reached its highest level since May 2008. On the one hand it is nice to see the worst impact of the GFC on my NW has finally dissipated, but the down-side is that it has taken five years to do so. And considering I save about $50k pa the situation is still dire compared to where I would have been if I'd been invested 100% in cash and fixed interest investments since late 2007...

Assets$ Amount $ Diff% Diff
Stocks *$15,694$5,246n/a
Debts$ Amount $ Diff% Diff
Home Mortgage(s)$363,014-$89-0.02%
Net Worth$1,040,585$16,3791.60%
* the Stocks figure is portfolio value - margin loans

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Thursday, 25 July 2013

Free money redux

It's been a long while between drinks, but I suddenly received a cold call from Citibank offering me a cheque for a loan of up to 80% of my Redicredit limit ($60,000) for four months at 0% interest rate, with no fees of charges for this 'balance transfer'. Several years ago such 'balance transfer' offers at 0% interest for 6 months or even 12 months were common, and it was great fun taking the offered funds and investing them in a high interest bearing online savings account for the period of the loan. Such 'credit card arbitrage' was a good way of earning hundreds of dollars income from OPM (Other People's Money). However, the credit card companies eventually woke up to the fact that some people were taking advantage of them (which must have been a surprise turn-around for them!), and they introduced either a flat 'transfer fee' or a minimal interest rate (compared to their normal exorbitant rate of ~18%), which made the proceeds hardly worth the time and effort involved.

But this latest off from Citibank is apparently fee-free, and, provided I pay back the borrowed funds on time, there will be no interest to pay. So I've accepted a loan of $40,000 and when the cheque arrives I'll use the funds to reduce the balance of my St George 'portfolio loan' for about four months (which will save me 5.59% pa interest). Allowing 7-10 days for the funds to arrive, and repaying the loan a week before the 'due date', the interest saved over about 3 months should amount to about $560.

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Wednesday, 24 July 2013

Consolidating my superannuation

Now that we are about to sell our investment property and pay off most of the mortgage on our home, it seems superflous to keep paying $160 a month for a $400,000 life insurance (Death and TPD) policy from my old BT Employer Superannuation Fund account. I'll retain my loss of income insurance policy, but if I die the balance of my SMSF account should be sufficient to look after my wife and kids. In any event at the current rate of life insurance premiums my BT Fund would have been tapped out in a couple of years anyhow, so I decided to rollover the balance (~$4,800) into my SMSF while there's still some money sitting there.

The process of closing my BT account and rolling over the funds into our SMSF was very straighforward. I simply downloaded the ATO 'Request to Transfer whole balance of superannuation benefits between funds' form from the eSuperfund website, filled in my personal details (name, address, DOB and TFN), the details (fund name, account number, ABN, and SPIN) of my BT account (the 'from' fund), and filled in the details for the 'to' account (fund name, member number, ABN of my SMSF). Recent legislative changes now require proof of identity to be included with rollover requests, so I simply had to drop in to my nearest Westpac Bank branch to have my licence copied and certified, and sent with the form to BT (they are a subsidiary of Westpac).

My finances are slowly being simplified over time, and having only one superannuation account is another step along that path.

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Wednesday, 17 July 2013

Pay 'rise' 2013-14

My boss went around handing out the annual pay review letters today. Unless you get a promotion, the company's policy for the past decade or so has been to only give out a 'rise' equivalent to the CPI ('consumer price index' aka inflation rate), which this time around was 2.25%. A plot of my salary vs. the actual CPI figures published by the Australian Bureau of Statistics shows that the company has 'rounded down' the adjustment on several occasions, resulting in my pay actually dropping about 3% in real terms over the past decade or so. But this time the CPI adjustment was slightly higher than the official inflation rate for the past year.

If I was feeling adventurous I'd show my boss the plot of my salary vs. the Average Weekly Ordinary Time Earnings (AWOTE), which shows my salary package has dropped about 10% compared to average wages since my last promotion. However, since I don't want to have to try looking for a new job now that I'm in my 50s if I can possible avoid it, I'm relatively happy for my pay to only keep up with the cost of living. I was even pleasantly surprised that the company didn't try to offset the 0.25% legislated increase in the Superannuation Guarantee Levy (to 9.25%) with a reduction in the quanta of CPI increment.

Since I haven't had an 'annual' performance review for several years, my boss also took the opportunity to spend a couple of minutes saying what a great job I was doing - so at least it doesn't look like I'm about to get sacked.

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Sunday, 14 July 2013

Data reduction or digging a fish pond? (When in doubt, procrastinate)

I should be spending today doing data reduction on the first set observation data for my PhD research. But as I can't even get the 'right' answer for the example data set that came with the software, there's no point trying to process my data until I can work out what is going wrong! So instead I've started digging the hole for a fish pond we want to install in our back yard. When in doubt, procrastinate!

There's a paved area in our back yard that ends up sitting under a couple of cm of water for about a week after every period of heavy rainfall, and some of the cement pavers are badly cracked and need replacing. So rather than spend money on installing grated drains and re-paving a large area, I decided to just rearrange the existing pavers and use the space left by the broken pavers to install a Koi pond (about 3m x 1m x 35cm deep). The bedrock is fairly flat and about 35cm below ground level, so I'm simply digging out the soil and will cement in some 20x20 cm pavers ($1.60 each) (standing upright) to form the edges of the pond. A black plastic 6m x 4m pond liner ($169) should stop any groundwater seeping into the pond, and I'll install some ag pipe and gravel along the back of the pond to direct the run-off into a nearby existing drain ( although the lack of any significant slope will make this 'interesting' to get right).

Conveniently there's a wholesale Koi 'fish farm' only a few km from our house, so we visited there yesterday to see what's available. DW and the kids were very impressed by the large, colourful Koi (some costing $350 or $475 each!). Fortunately the fish farm also sell small, young Koi for only $6 each (or 10 for $50), which is what I'll buy when our pond in finished. Apparently it will only take 5-6 years for these to grow to the size of the $300+ Koi (assuming they don't die or getting eaten by birds or cats!), although I doubt they'll be as colourful or valuable as the 'show' Koi on display. I don't want to spend too much money on this 'project', so instead of spending around $1,000 on an external pump and separate filter with UV treatment, I'll just buy a cheap ($120) submersible pump/fountain with a replaceable sponge filter bloke ($6). From past experience saving money on the pump will mean having to be very careful not to overfeed the fish, and having the siphon some waste off the bottom of the pond every few months.

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Thursday, 4 July 2013

Better too little and too late than not at all

My parents (aged 78 and 81) finally got around to filling in a Centrelink application for a (partial) aged pension. I think they were pleasantly surprised to find that they are entitled to a combined Australia pension of about $10K a year, and therefore also some other pensioner benefits such as subsidised medications. Which just makes me wonder how many years ago their assets and income first got below the relevant thresholds to qualify for a part pension. I'm sure they have missed out on several thousand dollars worth of pension payments by simply assuming they were too 'wealthy' to get any pension payment, but at least they finally made the effort to apply! Although they may not have qualified for a part-pension five or ten years ago, by going through the application process they would have found out exactly how much above the threshold they were, and they would have obtained the pension as soon as they became eligible. Ah well, better late than never.

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Tuesday, 2 July 2013

Net Worth Update: June 2013

The past month was fairly flat overall, with a substantial dip in the stock market mid-month only partially reversed by the month's end. My retirement account was adversely affected, with the market decline offsetting the benefit of three month's worth of employer contributions (SGL and salary sacrifice) being deposited during June. Our property investments showed a slight gain during the month, but in the next couple of months our investment property should be sold, which will result in my net worth taking a hit of around $140,000 due to selling fee ($14K), the sale price being about 7% below my 'estimate' of its value ($60K), and the capital gains tax liability resulting from the sale ($68K). So my NW figure will be dropping back below the $1m mark in a couple of month's time, and unless the stock market performs brilliantly, I don't expect to be a 'millionaire' again until 2015 or thereabouts.

Assets$ Amount $ Diff% Diff
Stocks *$10,448$1,451n/a
Debts$ Amount $ Diff% Diff
Home Mortgage(s)$363,103-$134-0.04%
Net Worth$1,024,206$6,5750.65%
* the Stocks figure is portfolio value - margin loans

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Sunday, 30 June 2013

Sold our investment property - maybe

A new buyer for our rental property was found, so we've finally "sold" our investment rental property for $806,000. Of course nothing is 100% final our bank clears the buyers payment on the settlement date (likely to be 8 weeks from today, unless our sitting tenants agree to move out before that date) - the last "buyer" who had negotiated a final price of $805,000 then pulled out. At least this time the buyer has already paid the 10% deposit to our agent, and has signed the purchase agreement, so the odds are good that the sale will go through. We signed the contract today, and I've made a rough calculation of the net proceeds after the agents fee (~$14,500), capital gains tax (~$68,000), and investment property mortgage ($249,140) are all paid. It should be just about enough to completely pay off the mortgage on our home when the period for the fixed rate part of our mortgage expires two years from now, and in the meantime we can clear roughly 60% of our home mortgage which is on a variable rate loan.

Once our mortgage is paid off I'll probably use the extra cash flow to 'top up' my superannuation contributions until I reach retirement age, while I think DW is planning on (maybe) buying a 1-bedroom apartment as an investment.

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Laptop first impressions

My new Dell 17R SE laptop arrived at my workplace on Thursday via Toll courier, after phoning Dell to redirect the delivery (although the Dell website says that for security reasons orders can't be redirected, Toll said I simply had to contact Dell to arrange a change of delivery address, and it turned out to not be any problem). The laptop looks very stylish with its subtle honeycomb-patterned matt-black cover and keyboard surround, with silver edging. But it is just as big, chunky, and hefty as expected. The setup for Windows 8 was quick and easy, but I must admit that my first impression of Windows 8 is not completely favourable. Aside from looking very tablet-like and colourful, getting to the familiar desktop, seeing the list of 'all apps' and even just getting to 'shut down' all seem buried under a layer (or two) of extra swipes, drags and generally un-intuitive user actions.

I've also noticed that it doesn't seem to have the back-lit keyboard listed when I ordered the product and on the packing sheet, so I've emailed Dell support to ask about this.

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Wednesday, 26 June 2013

Will the new Labor leader become PM? WIll he help Labor avoid annihilation at the next election? Do we care any more?

Despite being removed from the office of Prime Minister by the 'faceless men' of the Labor party three years ago, and the best efforts of some of his disgruntled colleagues to render him unelectable, Kevin Rudd did a John Howard act tonight, and got himself restored to the leadership of the Labor party. It will be interesting to see how Labor goes about marketing him as the 'best choice' for our next PM, when it is obvious that the only reason he's back is that he's more popular than Gillard, and will help Labor retain as many seats as possible at the next election.

It's not clear yet if he will actually be going to the next election as Prime Minister - that will depend on whether he convinces the Governor General that he can form/retain a functioning government with the aid of the 'independents' (two of whom resigned earlier today), and I'm sure the opposition will try to get a 'no confidence' motion up in the last day of parliament tomorrow.

Some pundits have predicted that Kevin's return will turn around Labor's fortunes, and that the 'bounce' in Labor's primary vote might even be sufficient for them to win the election. I think his impact will be a lot less than that, as there are far too many 'candid' comments by fellow Labor members about his failings as PM, for the election campaign to be very positive. And the reality of his removing Gillard from office may even disaffect some of the female voters who had viewed Julia as a role model (not that they're likely to vote for Tony Abbott instead). But Mr Rudd will probably save a lot of marginal Labor seats, and it will be interesting to see if he stays on (for long) if Labor loses the election, but not too badly.

One big positive that might come out of this turmoil is that Rudd may decide to call a 'snap' election in early August, as he isn't 'locked in' to the Sep data the Gillard had announced. I think the Australian public has already had more than enough of this 'election year' and would be relieved to get the election out of the way. An early election date would be brave call though, as it's hard to guess how long a 'honeymoon' period Rudd will enjoy once the election campaign officially begins.

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Tuesday, 25 June 2013

Bought another laptop

Although my old (2008 vintage) Dell Inspiron 1525 is still going strong (with a bit of help from a recent RAM upgrade), I was getting some funny looks from my supervisor and postgrads every time I unpacked it at the astrophysics department ;) I can't really justify buying a new laptop as most of my 'number crunching' is being run on a uni workstation (via a remote connection), but there is a data reduction package I recently installed on the laptop which probably needs a more powerful system to run on, and there is some observatory remote-control software that probably wouldn't even work on my old laptop.

So after a bit of indecision I eventually decided to take advantage of Dell's End-of-financial-year clearance sale to buy a reasonably 'high end' laptop - an Inspiron 17R SE ('special edition') for $899 (about 35% off the RRP, and $500 dollars off the usual price). The 17R SE comes with a fairly stylish anodised and textured aluminium cover plate and interior, back-lit keys, and an 17.3" 1920x1080 FHD display. The CPU is an Intel i7 quad-core running at up to 3.4 GHz, and the system has a 1TB SATA HDD and 2GB of separate video memory. On the downside, this desktop-replacement 'laptop' weighs more than 3kg and looks fairly 'chunky' compared to an ultrabook (it's about 1.5" thick at the back). This form factor probably wouldn't suit a petite lady, but it suits me and will just squeeze into my current aluminium laptop case (a sub-$100 Dicota knock-off of a $300 Halliburton case). Although I've seen the 17R SE configured with a 32 GB SSD, a SSD doesn't appear to have been included in my particular variant (hopefully I can add one as an upgrade in a year to two when SSD prices drop). The 6-cell 48 Whr battery only lasts around 2-3 hours (unlikely to be an issue for me, as I nearly always use my laptop plugged in to a power point). And the model I bought comes with a DVD drive rather than the BlueRay that's available on the more pricey versions, but I don't think I'll miss that as I don't even own any BlueRay discs. The 17R SE comes WiDi built-in, which might someday become useful for making presentations if WiDi ever becomes widely adopted, but the specs say that it requires 'Intel graphics' so the WiDi may be disabled in this model.

When I ordered online on Monday afternoon my order was confirmed by email as soon as my payment had cleared, and it was already with the courier service later that afternoon. Although it was initially scheduled for home delivery between 9-5 on Thursday, there was already a 'missed delivery' card waiting on my porch when DS1 got home from school today. So I'll phone the delivery company in the morning and get the package redirected to my office address.

The 17R SE I bought was initially listed as being on sale until 27/6, but when I checked today it had already sold out. A similar 17R SE model that is now on 'clearance sale' costs $500 more ($1299) and only has an i5 CPU, so I'm quite happy with my decision to make my purchase on Monday.

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Sunday, 23 June 2013

The world's worst time-share investment, or the world's best property 'flip'?

LOL. A guy bought an old US military storage facility in the middle-of-nowhere for $510,000 in April, on-sold 75% to another guy who is now trying to lease space at $1,000 per square foot as a 'resort' facility cum post-apocalypse bunker...

Since the 75% share apparently provides two million square feet of floor space, that means your $1,000 square foot originally cost under 20c a few months ago! But don't worry that you might be ripped-off, rest assured that the guy has 'plans' to put in blast doors real soon now... ;)

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Cheap computer programming course for kids

DS1 has been interested in computing since he was quite young, and has enjoyed extracurricular activities such as the Lego MindStorms robotics course I provided at his primary school (his team competed in the RoboCupJunior event a few years ago), and the Year 9/10 IST (Information Science and Technology) course he began this year (while in year 8) via distance education from NBSC (Northern Beaches Secondary College) through their HSC.LearnOnline. Despite starting the IST course a year earlier (I presume) than the other eight kids that are enrolled in the course, he's consistently ranked first in nearly all the marked assignments, as is having a great time. The benefits of doing the IST course via distance education rather than enrolling in that subject at his selective high school next year are that a) he gets to do the subject as a slightly 'accelerated' student, b) that in turn means that he can also do the Year 11/12 Software Design & Development course while he is in Year 10/11 (and count the mark towards his uni entrance ATAR score, if he does well enough), and c) doing the IST and PDD subjects externally allows him to do choose another subject to study in Years 9-12. My general philosophy for G&T education is to 'broaden' the range of studies taken, rather than focus on accelerating one subject.

Since he's interested in programming, DS1 started a 'computing club' at his school this year, and is hoping to line up enough other students to form a team to enter the AIO (Australian Informatics Olympiad) competition next term (and possible also enter the UNSW ProgComp). He's previously self-taught (with a bit of help from me) in simple computer programming using Python and VisualBasic, but without doing any formal courses in programming there are still some 'gaps' in his basic programming knowledge. So, I've paid for him to enrol in the NCSS (National Computer Science School) 'Challenge' computing course/competition run annually by the University of Sydney through their spin-off venture 'Grok Learning'. At $20 each for the 'Beginner' and 'Intermediate' 5-week course/competition it seems quite good value. Although there are good, free resources available for children to learn Python programming (such as the excellent eBook 'Snake Wrangling for Kids'), doing an online course with deadlines and marked assignments provides greater motivation, especially when there is a certificate from the University of Sydney at the end of the competition showing the level of participation and achievement.

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Saturday, 22 June 2013

Rolled over and reallocated DS1s superannuation

It's a bit hard keeping track of the never-ending changes to superannuation in Australia, especially less 'mainstream' aspects such as the rules around the government superannuation co-contribution as it relates to children's superannuation. But it appears that nowadays it is extremely difficult to meet the requirements for the co-contribution if you are under 18. Aside from the normal rules (a 1:2 government co-contribution of up $500 is available to those individuals that make an undeducted contribution into an eligible superannuation account or RSA, and earn less than $31,920 - those earning up to $46,920 total income are entitled to a reduced co-contribution amount) the 10% 'eligible income' test apparently makes it very difficult for students under 18 to qualify.

While DS1 was doing a paper round he could easily meet this 'eligible income' rule, but these days a large fraction of his income comes from his investments, and only a relatively small amount (~$1000 pa) from occasionally 'working' as a self-employed busker. I'm not sure exactly how the rules get applied to his busking income (although he has an ABN and declared the busking income in his tax return, it may be treated as 'hobby income' and not count (?), and while the investment income from his paper-round money comes from a separate investment account, so gets treated as 'earned income' and avoids the sky-high 'unearned income' child tax rates, it may also not count towards the 10% eligible income test...). I had expected that the $1000 busking income would have satisfied the 'eligible income' test, but that apparently wasn't so - despite making a $500 undeducted contribution into his RSA the previous financial year,  the amount of government co-contribution eventually deposited into his RSA (a few weeks after his tax return was lodged) was only $1!

Since it appears that he can't qualify for the co-contribution, there's no point keeping his fixed interest RSA account open any longer - so I lodged a 'rollover' form with the manager of his 'child' superannuation account, Macquarie Group, to transfer the balance of his AMP RSA into his superannuation account at Macquarie. I 'post-dated' the rollover form a couple of weeks, just in case the interest due at the end of June is calculated on the minimum balance (I didn't want to risk him getting no interest on his RSA for the past six months!), and at the same time I also sent in an 'investment reallocation form' to switch around the investment mix of his Macquarie superannuation account.

His asset allocation at Macquarie had included about 1/3 in property securities, bonds and fixed interest. The new allocation reduces the allocation to these sectors and is weighted more heavily in Australian stocks, small companies, and international equities. With an extremely long investment time-frame of 50+ years until he reaches retirement age, a high-risk, high-return asset allocation seems most appropriate. The recent sell-off in the world equities markets might prove an apportune time to be rolling over his fixed-interest superannuation balance into a more high-risk environment to take advantage of a return to 'normal' rates of investment return in the coming decades. Once he reaches 18 years of age, I'll rollover his superannuation into our SMSF.

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Sunday, 16 June 2013

Still waiting to sell our investment property

Our 'investment' rental property is still on the market, almost a year after we first decided to sell it off. We had originally bought this property in 2000 with a view to rent it out initially, and then later on demolish it to build our 'dream home'. Our plans changed when we bought our current home (we couldn't really afford to build the sort of luxury home we had in mind when we first got married, especially after DW permanently (?) stopped full-time work after DS2 was born, and the GFC had wiped out most of the net value of my stock portfolio), so we decided to sell it and use the net proceeds to reduce our home mortgage as much as possible. That would free up a lot of cash flow to direct towards other investments - I'm no longer a fan of direct investment in rental properties in Sydney, given the constant headaches of delinquent tenants, repairs and maintenance, and the illiquid nature of real estate investments. It's also hard to see any great potential for capital gains in the medium term, given how expensive the Sydney real estate market appears to be.

We have had a series of 'low-ball' offers in the mid-700s (based on house prices in that suburb my estimated valuation is around $830K-$860K) since the property was put on the market, despite our asking price being 'offers over $830,000'. We had one tentative offer of $810,000 last year just before we changed realtors, but unfortunately that 'buyer' saw our property being advertised on the new agents website with a price guide of 'over $795,000' and reduced their offer to $780,000 before we could even negotiate. That sale might have fallen through anyway, but the new agent's strategy of listing our property below $800,000 (in order for it to be seen by buyers looking for houses under the $800,000 mark) appears to have been counter-productive, or at least very bad timing!

The latest offer we received was for $785,000, and they had rejected our reduced asking price of $825,000 before 'accepting' our 'final price' of $805,000. Unfortunately, as I had told DW, nothing is really definite until settlement day arrives - so I wasn't particularly surprised to learn that the 'buyer' pulled out a few days later. Either they got an unfavourable builders report (I think they may have wanted to renovate while living there, rather than demolishing it and building a new house), or perhaps couldn't arrange (or afford) the finance at that price.

Meanwhile our tenants had to be 'read the riot act' by DW (ie. sent a notice of eviction) when their rent payments fell more than 14 days in arrears. That woke them up, and they finally paid a couple of weeks back-rent last Friday, with a promise to 'catch up' the balance of rent owing this weekend (apparently one of their parents has paid the balance of the outstanding rent via electronic transfer, so it should appear in our bank account on Monday). Provided the tenants continue to pay their rent, the property has a rental yield of around 3.4%, which isn't too bad. Things will get more difficult again if we haven't sold the property by the time their lease expires and we have trouble finding new tenants. Last time the property was vacant it took almost six months to find new tenants!

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Monday, 10 June 2013

Getting Fit(ter) on the cheap

I've been singularly unsuccessful losing weight over the past couple of years, despite tracking what I eat (apparently just recording the fact that I ate some unplanned junk food or ate confectionary isn't a substitute for actually sticking to a diet!) and doing some moderate exercise (having a brisk 30-minute walk nearly every lunchtime at work). So I decided to join the 'Crunch' gym that recently opened in a nearby suburb. While I loath and detest going to the gym (my eczema makes getting hot and sweaty a really unpleasant experience), paying in advance is a good motivator to get me to actually do some aerobic exercise on a regular basis. I joined two weeks ago and have so far stuck to my planned twice weekly sessions. At a cost for a 'basic' membership of $6.95 per week (plus a $1 direct debit fee each fortnight, plus an $8 quarterly 'admin fee') its quite affordable (around $4.50 per session) - although I still would much prefer to spend the $474 each year on a new laptop ;)

The gym is conveniently located on one of the routes I can take home from work, so I can stop there on Thursday nights for a gym session on the way home. And on Saturday mornings I can go to the gym while DS1 is attending his Chinese lessons nearby.

Although the amount of calories 'burned off' during a vigorous 30-min aerobic session (bike and rowing machine with an average pulse rate of 140-150, which is 80%-90% of MHR for my age) and 20 minutes of weight training is fairly negligible, I have noticed that a serious bout of exercise supresses my appetite for hours afterwards. So I often consume less calories than normal on the days I go to the gym.

The joining fee for Crunch gym is normally $100, but was on 'special' last month ($30), and I even managed to have that waived after I had enquired why their Google advert said 'no joining fee' (it turned out that was only if you opted for the more expensive 'premium' weekly rate, which includes attending any of the scheduled 'classes' that cost $5 each for 'basic' members). They charged an up-front 'pro rata' amount for the days from when I joined until the normal billing day (the 15th of each month), plus the 'last' month's fees ($27.80). This basically means I will have to give four weeks notice before I want to stop attending the gym. On the plus side, having effectively pre-paid for at least the coming month, there's more incentive to attend the gym regularly and not 'drop out' without making a definite decision to do so.

We'll see how long I stick with the 'new me', and if I finally can get down to a more healthy weight. Ideally this exercise and healthy eating lifestyle should be for the rest of my life...

ps. The most cost-ineffective spending on exercise would have to be our swimming pool. It costs more to maintain each year than the Crunch gym will, and we only use for about half the year.

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Sunday, 9 June 2013

Is Labor's NBN really FTTH? Or just another version of FTTN?

While I think the current NBN plan is a waste of money, with the number of people that will really need 1000 mbps/100 GB/month broadband internet connections in the next 20 years vastly over-estimated, it was nice to learn a couple of months ago that the NBN roll-out plan had finally been expanded to include our region within the next three years (at least, there's a plan to start rolling out here in 3-4 years time, so we would get access in 4-5 years time, if all went 'according to plan' - not very likely given the NBN roll-out track record so far...). Previously roll-out to most of the northern suburbs of Sydney wasn't even part of the 'plan'. (A suspicious correlation between the announced roll-out regions and Labor electorates existed, despite NBN reassurances that their plan had been formulated purely on the basis of roll-out efficiency).

But then, looking at the current coverage maps on their website I noticed a strange dark 'band' cutting across most of the roll-out areas. A closer reading of the 'fine print' accompanying the map below shows that the dark band is the area where homes can connect directly to fibre (ie. FTTH), while the bulk of the areas due to get NBN 'coverage' are only going to get a 'fixed' wireless broadband connection pointed at the nearest tower connected to the fibre.

Surely a wireless link from homes to these towers is FTTN like the coalitions, cheaper landline to the node, based plan? I might be missing something here, but from all the advertising of the NBN I had got the impression the billions spent on the NBN were going to provide a 'box' mounted on each home with a direct optical fibre connection, not just a gloried wireless broadband service?

If were are to get a 'fixed' wireless connection to the NBN, I wonder how good our broadband service will be when a large truck or cement mixer is sitting in the 'line-of-sight' between our fixed wireless antenna and the NBN tower?

If the NBN service is going to be a fixed wireless service, I can see even less benefit switching to NBN compared to a mobile 4G broadband device that can be used outside the home, coupled with antenna at home to improve the signal strength. After all, where I really need fast broadband (at uni and at work) it is already available. Most internet use at home doesn't need a fast broadband link, and if I want to watch downloaded multimedia content (eg. movies) while at home for a few hours every day, I can simply download them overnight or while I'm at work.

Perhaps this 'fixed wireless' situation is just going to be the initial case in five year's time - and that eventually optical fibre will actually spread down each street to connect to 'the home'. But in that case, the much-publicised 'roll-out' plans are at best misleading, and the NBN should be more open about how many years after the NBN 'coverage' reaches a suburb you'd actually be able to get a FTTH connection...

If the FTTH internet connection is going to take ten or twenty years to be fully rolled-out, I'm not sure how 'future proof' it will turn out to be. Technology has a way of making leaps forward in totally expected directions. For all I know, I might be using a quantum-entanglement broadband connection to use the internet in twenty years time, and not the old technology of glass fibre 'land-lines'...

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Tuesday, 4 June 2013

Net Worth Update: May 2013

After a good run up during the month, the stock market reversal in the final week of May left my net worth at a slightly lower point than it started. Still no serious interest in our investment property, and the tenants have fallen behind in their rent payments. DW remains keen on property as an investment class, but, despite the poor performance of the Australian stock market since the GFC, I'd still rather have our house as my only direct property investment.

Assets$ Amount $ Diff% Diff
Stocks *$8,997-$15,846n/a
Debts$ Amount $ Diff% Diff
Home Mortgage(s)$363,237-$104-0.03%
Net Worth$1,017,631-$20,598-1.98%
* the Stocks figure is portfolio value - margin loans

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Saturday, 1 June 2013

How much value does a financial planner add?

Not much, in some cases, as this saga of financial planning gone bad show:

While financial planning has its place - as some planners are highly ethical, well-trained and look out for their clients interests for a reasonable fee, and some of their clients have large amounts to invest and lack the required  knowledge to make optimal investment decisions on their own - there are more than a handful of 'financial planners' that have mediocre skills, or whose focus is on maximising their fee income by advising clients to invest in products that provide large upfront and/or trailing commissions.

This article also highlights that using planners who work for a major financial institution is no guarantee that you'll be taken care of a particular planner does the 'wrong thing'. Although corporations all pay lip-service to lofty goals around customer service and satisfaction, their bottom line is usually, well, the bottom line. So fully compensating customers for losses is not consistent with the corporate aims of minimising costs and maximising profits.

As the saying goes, no one has your best interest at heart more than yourself. So while DIY financial planning has its own inherent risks, it may not be more risky than going to the 'experts', given that it is very hard to know which financial planners are really 'value-for-money'.

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Friday, 24 May 2013

Ripping off the consumer - the cost of internet access in Australia

My uni research has started chewing through a few extra GB of data each month, now that I'm remotely monitoring the data reduction routines running on my uni workstation. So I'm in danger of exceeding the data allowance of the 10GB/mo Optus 'data plan' we're currently on for our 3G wireless broadband. Any excess data use is charged at an exorbitant $20/GB ($0.02 per MB), which provided a nasty shock once earlier this year when I went over the limit on the final day of the month by mistake. At least the optus rate is slightly 'better' than Telstra charge of $100/GB for excess data that applies on some of their mobile broadband plans!.

So I was looking at the options for upgrading to a higher standard monthly data allowance, although I'm wary of paying an extra fee every month for extra data when most months the 10GB cap is more than adequate. I had expected that the cost per GB/mo would decrease as you contract for a higher monthly 'plan', as most commodities enjoy economies of scale, or encourage their customers to 'upsize'. And, given the fairly high monthly cost for paying off the wireless device is constant regardless of data plan size, the effect should be quite noticeable if normal economic rules applied.

Therefore I was somewhat shocked (but not particularly surprised, given the track record of telcos ripping off consumers at every opportunity in Australia) to see that both Telstra and Optus actually charge MORE per GB/mo for plans with higher data allowances. For example, Optus costs about $35 for data on their 10GB/mo plan (ie. $3.50/GB/mo), whereas the 20GB/mo plan costs $75 for data (ie. $3.75/GB)! This is highlighted in the 'cloud' region of the chart below.

It is interesting to note that the 200GB/mo and 500GB/mo NBN plans from Telstra lie close to the expected log-log line of cost per GB vs. GB/mo plan size. Unfortunately a) NBN isn't 'coming soon' to our suburb for at least 3 years, b) I only need ~15-20 GB in high use months, with normal use around 5-10 GB, so even 100GB/mo seems excessive, unless I start downloading lots of movies, or spend hours a day Skyping overseas colleagues, and c) while the Telstra and Optus plans both support 4G and fall-back to 3G where needed, our house is in a valley and only has (rather poor) 3G coverage available.

What I'd like to see is wireless broadband plan that charges, say, $60/mo for a 20-GB/mo data plan, and charges something reasonable for excess data usage, say $3.50/GB, up to a reasonable limit (eg. twice the plan's standard data allowance). That would be enough to 'tide me over' until the NBN (or the coalition's NBN-lite) is rolled out to our suburb around 2016... I won't be holding my breath though.

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