Actually, the way I see it, the 'Credit Cards' are not the villain.
Credit cards perform a very usefull function, and to blame the plastic for our financial woes is a simplistic approach to a more complex problem.
If you don't have a credit card, you have to go to the Bank or the ATM and withdraw money on a frequent basis.
The govt tax on withdrawal / transfer of money is $0.40 for each $100 or part thereof.
For example, if you withdraw $100 once a week (to pay for your lunches!), the tax is $0.40.
However, if you make a number of small withdrawals throughout the week eg use the ATM at the service station to pay for your petrol, that $37.50 withdrawal will also cost you $0.40 tax.
Buy some bread and milk using the ATM at the supermarket, another $0.40 tax.
By the end of the month, you might have made 50 small transactions (plus the lunch money withdrawal), so 50 x $0.40 = $20 tax per month simply on withdrawing the money.
Add to that, that most banks will allow, say, 20 withdrawals from your account 'free' each month, but charge $1.50 for excess transactions, and suddenly you're looking at 30 x $1.50 = $45, plus the $20 tax. Wow! To use the ATM and pay cash for everything just cost you $65 for the month.
However, if you take eg $300 cash out each week, the transactions are 'free' within your usual monthly account keeping fees, and the tax is only $1.20.
But ... there you are, walking around with $300 in your wallet or handbag. That's a security risk that you may not be comfortable with.
So, if you use the card (except for the lunch money 'eeerk') but set your internet banking to pay the balance of the card the day after you get paid, whether that be weekly, monthly or whatever, then you've used the card responsibly and it has certainly cost you a lot less than $65 in fees and taxes.
The problem with cards is where the balance is not paid out regularly, or large ticket items are bought without a payment plan in place.
If you buy a lounge suite for $1,000, set the internet banking to transfer $100 monthly for 12 months to clear that specific part of the card balance (plus interest).
Yes, set the internet banking to transfer a nominated amount each week to a Cash Management or Progress Saver account. My children have had $50 weekly deducted from their pays since they started work. That small savings pattern was what got them their loans at such a young age.
As far as budgets are concerned, we all know our achilles heel. Do you buy cask wine at $20 for 4 litres, or pay $20 for a 750ml bottle? If you like cafe lunches, switch to cask wine at home, or eat a better lunch so your dinner is not so important. Eat six oysters instead of a dozen, or buy them fresh from the supermarket at a third of the price.
The truth of the matter is, if every member of the family buys lunches, has a mobile phone, the house has internet connection, plus cable TV, there are two cars, central heating, and you eat out or entertain friends at least once a month, your discretionary income has just gone into the red. Add to that school fees, a couple of trips to the snow or the beach each season, and a new hot water service in one of your investment properties and factor in a two week vacancy and a reletting fee, and with no savings as a buffer zone, you're in deep water very quickly indeed.
Gordon, the way forward is very simple. No amount of plotting and planning will take the place of simply putting the money aside and then living within your means.
Good luck
Kristine
Credit cards perform a very usefull function, and to blame the plastic for our financial woes is a simplistic approach to a more complex problem.
If you don't have a credit card, you have to go to the Bank or the ATM and withdraw money on a frequent basis.
The govt tax on withdrawal / transfer of money is $0.40 for each $100 or part thereof.
For example, if you withdraw $100 once a week (to pay for your lunches!), the tax is $0.40.
However, if you make a number of small withdrawals throughout the week eg use the ATM at the service station to pay for your petrol, that $37.50 withdrawal will also cost you $0.40 tax.
Buy some bread and milk using the ATM at the supermarket, another $0.40 tax.
By the end of the month, you might have made 50 small transactions (plus the lunch money withdrawal), so 50 x $0.40 = $20 tax per month simply on withdrawing the money.
Add to that, that most banks will allow, say, 20 withdrawals from your account 'free' each month, but charge $1.50 for excess transactions, and suddenly you're looking at 30 x $1.50 = $45, plus the $20 tax. Wow! To use the ATM and pay cash for everything just cost you $65 for the month.
However, if you take eg $300 cash out each week, the transactions are 'free' within your usual monthly account keeping fees, and the tax is only $1.20.
But ... there you are, walking around with $300 in your wallet or handbag. That's a security risk that you may not be comfortable with.
So, if you use the card (except for the lunch money 'eeerk') but set your internet banking to pay the balance of the card the day after you get paid, whether that be weekly, monthly or whatever, then you've used the card responsibly and it has certainly cost you a lot less than $65 in fees and taxes.
The problem with cards is where the balance is not paid out regularly, or large ticket items are bought without a payment plan in place.
If you buy a lounge suite for $1,000, set the internet banking to transfer $100 monthly for 12 months to clear that specific part of the card balance (plus interest).
Yes, set the internet banking to transfer a nominated amount each week to a Cash Management or Progress Saver account. My children have had $50 weekly deducted from their pays since they started work. That small savings pattern was what got them their loans at such a young age.
As far as budgets are concerned, we all know our achilles heel. Do you buy cask wine at $20 for 4 litres, or pay $20 for a 750ml bottle? If you like cafe lunches, switch to cask wine at home, or eat a better lunch so your dinner is not so important. Eat six oysters instead of a dozen, or buy them fresh from the supermarket at a third of the price.
The truth of the matter is, if every member of the family buys lunches, has a mobile phone, the house has internet connection, plus cable TV, there are two cars, central heating, and you eat out or entertain friends at least once a month, your discretionary income has just gone into the red. Add to that school fees, a couple of trips to the snow or the beach each season, and a new hot water service in one of your investment properties and factor in a two week vacancy and a reletting fee, and with no savings as a buffer zone, you're in deep water very quickly indeed.
Gordon, the way forward is very simple. No amount of plotting and planning will take the place of simply putting the money aside and then living within your means.
Good luck
Kristine