Author Topic: Case Study: Pay off our car lease and make a start on a stash - Aussie  (Read 1637 times)

shelleyvdp

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2 adults (husband 45 working fulltime, myself 39, SAHM, studying part time), 2 children (aged 12 and 16, both in private girls catholic high school). Living in Brisbane, Australia.

I am posting here as we need to get our act together to pay off the balloon payment on our lease next year, and start getting a stash together so hubby can retire before 75…

What we already have planned to get started:

We have a caravan that we are going to sell as soon as we get back from Easter camping. We free camp so it’s a very cheap holiday. Just going to outback QLD so no tourist traps. We are going to spend the free time on the trip fixing up the fiddly things on the caravan ready to sell it on our return.

We have a great big car lease that we are stuck with. Two years ago we were not at all financially smart and thought how nice to have a new car. Now we have a car worth less than the lease so even though we are selling the caravan that we had to have the car to be able to tow it, we are stuck with the JEEP! Oh well. After posting in general discussion I have realised that we can put everything into the car lease once the Interest Free finance is paid off in April and the caravan is sold, and we SHOULD be able to pay off the balloon in June 2018 of $22,000. Then we will drive the car until it dies, hopefully a long time away although you never know with Jeeps.

Budget: My husband likes to budget for EVERYTHING so there is a lot of detail. This gave me the feeling that we had only $707 left per month to save towards the car

Gross Salary Package includes superannuation:
$170,000pa
Superannuation paid by employer: 9.5%

Deductions Before Tax:
Car Novated Lease: $1116.81pm (ex GST)

Deductions Partly Before, Partly After Tax:
Car Tyres and Maintenance: $1800 pa
Car Registration: $831.60pa
Car Insurance: $1250pa (includes loading for Learner driver)
Diesel: $2975pa
Lease Fees/Unemployment Insurance: $633pa
Automobile Club: $180pa
Total Car Cost Deductions (not including before tax lease payment): $7669.60pa

Tax Bracket:
$19,822 plus 37c for each $1 over $87,000

The following are all per month.

Income:

Net Salary: $7518

Expenses:
Bank Fees: $14
Chemist: $20
Council Rates: $129
Drivers Licenses: $6
Electricity: $250
Netflix: $12
Tolls: $5
Gas (stove and hot water): $80
Child 2 Dance: $50
Insurance Caravan: $30 (Selling caravan in April 2017, not replacing)
Insurance Health: $339 (Changed in Sept 2016 to lowest)
Insurance Home and Contents: $145 (Changed in Sept 2016 to lower)
Insurance Life and Income Protection $167
Interest Free Finance: $175pm
Internet: $87 (high speed needed for occasional work from home but company won’t pay for it)
Loan – Caravan: $423 (to be sold in April this year)
Passport Renewal: $10 (2019)
Pocket Money: $61 (each receive half their age per week, they do dishes, animal care, cleaning)
Mobile Phone #1: $76 (includes handset fee, plan expires April 2018)
Mobile Phone #2: $60 (plan expires April 2018)
Mobile Phone #3: $5 (prepaid for kids occasional use on Scout camps)
Mortgate: $1735
Registration Caravan: $17 (will be sold in April 2017)
Registration Dog: $4
School Fees Child #2: $500 (Includes fees, books and uniform allowance)
University Child #1: $87 (text books, she starts next year. High school is paid in full now)
Scouts Child #1: $40 (includes term fees and one weekend camp each term)
Grocery Shopping: $1300 (includes everything food, pet, toiletries, stationery etc. Still too high. Currently doing an empty the cupboard challenge and spent $79 for this weeks groceries. Plan to do a lot more meal planning and budget meals in the future. I’d like to do $120 a week if possible)
Spending Hubby: $44 (he has sushi once a week. I’m not going to ask him to lose this. He doesn’t golf, go to the pub etc)
Spending Me: $217 (this is for everything else not covered by grocery shop such as everyone’s clothes, shoes, doctor, dentist and so on. No haircuts, nails, massage etc. All done at home. I do plan to not buy any clothes, shoes etc so this will be less, just for emergencies)
Tax Return Fee: $13
Transport – Bus Fare: $150 (hubby’s transport to and from work)
Water and Sewerage: $130

Total Expenses:
$6381

Liability:
Interest Free Finance: $478.25, will be paid off in April 2017 and will not add anything else
Loan – Caravan: $11,986.21 (will be sold in April 2017)
Mortgage: $359,000 (5 years into 30 year mortgage, refinanced in June 2016 to lowest rate)
Lease – Car: $41,830.11 (Cannot sell as it is only worth $35,000. Lease pays off interest first)
Liability Total: $413,294.57

Assets:
Caravan: $20,500
Car – Jeep Grand Cherokee: $35,000
House: $450,000 (So around $90,000 in equity. Not sure of actual value. Most sales in the area are old houses being demolished and subdivided or brand new on our size block selling for $850,000… We paid land value for ours!)
Cash: $4500 (placed into home loan but we have unlimited free redraws)
Superannuation: $120,000
Assets Total: $630,000

I hope I’ve arranged everything correctly, hubby is the money man.



« Last Edit: February 25, 2017, 02:50:38 PM by shelleyvdp »

toucansurfer

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #1 on: February 25, 2017, 04:59:01 AM »
Hi I read this and essentially it was my families situation (3 years ago) minus the kids.  I had a novated lease as well previously.  What a financial bonfire those things are.  Nothing you can do now in that regard as the terms essentially force you to live out the lease.  Sell the car as soon as its up and downgrade to a more economic car if you can.  Kids are older and you don't live in woop woop so should be easy to switch to a used Camry or Corolla.

You're already all over the caravan sale so not much to say there.  Catholic school I guess is a personal choice but does appear to be another financial kick in the side.

Once you sort out the car though that will free up about $1800 per month depending on what you downgrade to. 

Get solar hot water if you can.  I spend nothing on it now and it now and the water is boiling hot most days.  This will reduce your gas bill.

Your electricity is high would be worth looking into where it's all going?  Do you have central ac?  I find this is a big killer in power bills.

Switch to Aldi prepaid or Optus $40 post paid bring your phone plan.  Both are half decent and should save a bit.  You'll have to wait till your plan runs out though.

Drop the life insurance and offset this by building wealth.  You have relatives I'm sure they won't let your family starve if something happens.

Change the house insurance to house only and reduce your assets if you're particularly worried.  For the car when you downgrade switch to third party insurance to cover liability.  Carry enough liquid assets to buy the car again if you totalit..  Only need $5k to buy a crappy but useable car if things go bad.

Your husband makes good money.  Unfortunately the choices your family have made around children and car have locked him in and make it a little difficult to whittle down the big budget killers I see.  You could quite easily save $3-4K a month by getting a cheaper car and sending kids to public school.  Even if you don't cut the school as I know that ends up being a hard one once they're in it cut the insurance and phones bills these are no brainers.

Good to see another person in Brisbane on the forum.  Good luck you're not doing terrible I'd say it's almost a situation I see over here with every Aussie family but a lot can be done with little inconvenience.

EDIT:  Actually just realised you don't have a novated lease.  Get out now if you can (assuming it's not as harsh as a novated lease).  If you have savings use it to pay off the lease otherwise get a temp loan, sell the car as soon as you can, pay off the loan with the sale proceeds and a little bit of a loss in savings, dip into the home equity and buy an old Corolla for $6-$8k.  This will free up heaps of cashflow.  Agin don't know the terms of your lease but better to sell the car now while it's worth more then down the track as they depreciate very fast.


« Last Edit: February 25, 2017, 05:36:55 AM by toucansurfer »

ltt

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #2 on: February 25, 2017, 05:03:10 AM »
Wow, from just doing a brief look at what you've listed, the vast majority of your assets are tied up into your home and vehicles---over 1/2 million $$$$$$.  I don't think you have an income problem; I believe there is a spending problem.  Is there any way you can't get out from under the Jeep lease?  Can't you sell and take a loss? Yes, you can take the Caravan money and start putting toward that Jeep lease.

I take it that the superannuation is similar to a 401k?--money socked away for retirement that is pre-tax?

You must live somewhere where there is (good??) public transportation as your husband uses public transportation to and from work?  Is it absolutely necessary for you to have any vehicles?

What are council rates?  This must be a mandatory expense of some type?

Is it absolutely necessary for your younger child to go to private school next year?

shelleyvdp

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #3 on: February 25, 2017, 01:58:20 PM »
Hi I read this and essentially it was my families situation (3 years ago) minus the kids.  I had a novated lease as well previously.  What a financial bonfire those things are.  Nothing you can do now in that regard as the terms essentially force you to live out the lease.  Sell the car as soon as its up and downgrade to a more economic car if you can.  Kids are older and you don't live in woop woop so should be easy to switch to a used Camry or Corolla.

All our family lives in Adelaide, and we drive down at Christmas as it's cheaper than flying, hence the big, safe car for those 5000 km of driving. But it is definitely something to consider, now that we don't need to tow the caravan, whether the lower costs for insurance etc will cover the flights.

You're already all over the caravan sale so not much to say there.  Catholic school I guess is a personal choice but does appear to be another financial kick in the side.

Yes, we are stuck with the school, always said we would never do private school but I went to a country school and wanted my kids to be in a small school. It is the lowest private school costs I've ever seen though thank goodness.

Once you sort out the car though that will free up about $1800 per month depending on what you downgrade to. 

Get solar hot water if you can.  I spend nothing on it now and it now and the water is boiling hot most days.  This will reduce your gas bill.

Your electricity is high would be worth looking into where it's all going?  Do you have central ac?  I find this is a big killer in power bills.

No central air, just a reverse cycle in the bedroom and one in the lounge. one of them is running pretty much all the time for the three months of summer. That's what happens when an Adelaidian moves to QLD! We are getting better and better with it though with regard to raising temp and lowering fan speed.

Switch to Aldi prepaid or Optus $40 post paid bring your phone plan.  Both are half decent and should save a bit.  You'll have to wait till your plan runs out though.

Absolutely will do this. Thanks.

Drop the life insurance and offset this by building wealth.  You have relatives I'm sure they won't let your family starve if something happens.

This is a tough one for us, because the rest of our family lives at the other end of the country, we have no close support and would hate to have to move the kids if something happened to hubby. The other reason is that I have a neck and back injury so it is very difficult to find work I can do without pain or further aggravation. Even desk work at a computer or looking down aggravates it...

Change the house insurance to house only and reduce your assets if you're particularly worried.  For the car when you downgrade switch to third party insurance to cover liability.  Carry enough liquid assets to buy the car again if you totalit..  Only need $5k to buy a crappy but useable car if things go bad.

Your husband makes good money.  Unfortunately the choices your family have made around children and car have locked him in and make it a little difficult to whittle down the big budget killers I see.  You could quite easily save $3-4K a month by getting a cheaper car and sending kids to public school.  Even if you don't cut the school as I know that ends up being a hard one once they're in it cut the insurance and phones bills these are no brainers.

Good to see another person in Brisbane on the forum.  Good luck you're not doing terrible I'd say it's almost a situation I see over here with every Aussie family but a lot can be done with little inconvenience.

EDIT:  Actually just realised you don't have a novated lease.  Get out now if you can (assuming it's not as harsh as a novated lease).  If you have savings use it to pay off the lease otherwise get a temp loan, sell the car as soon as you can, pay off the loan with the sale proceeds and a little bit of a loss in savings, dip into the home equity and buy an old Corolla for $6-$8k.  This will free up heaps of cashflow.  Agin don't know the terms of your lease but better to sell the car now while it's worth more then down the track as they depreciate very fast.

Hubby says it is a novated lease. 😞


Thank you for your great advice!
« Last Edit: February 25, 2017, 02:51:48 PM by shelleyvdp »

shelleyvdp

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #4 on: February 25, 2017, 02:11:36 PM »
Wow, from just doing a brief look at what you've listed, the vast majority of your assets are tied up into your home and vehicles---over 1/2 million $$$$$$.  I don't think you have an income problem; I believe there is a spending problem.  Is there any way you can't get out from under the Jeep lease?  Can't you sell and take a loss? Yes, you can take the Caravan money and start putting toward that Jeep lease.

To get rid of the lease now we would have to sell the car for $35,000, then give almost all the equity we have in the caravan once we sell it to the lease company as well, leaving nothing to buy a car with. Our thoughts are to continue paying off the lease and save the balloon payment up, then in June next year either sell it and buy a smaller car with the proceeds or run the car into the ground.

I take it that the superannuation is similar to a 401k?--money socked away for retirement that is pre-tax?

Superannuation is the retirement fund, yes.

You must live somewhere where there is (good??) public transportation as your husband uses public transportation to and from work?  Is it absolutely necessary for you to have any vehicles?

The train station is just 100m away. We do still need a car though as its painful to get anywhere other than the city. The bus routes around here are not going where we need them and with kids to get home from Scouts late at night from 7km away we need it. And my eldest is learning to drive, I think she would disown me! 😂

What are council rates?  This must be a mandatory expense of some type?

I'm not sure of the US equivalent, maybe land tax? Paid to the municipal body to pay for road works, park maintenance etc I guess.

Is it absolutely necessary for your younger child to go to private school next year?
She started there 5 weeks ago, our year starts in February. It is the one thing, other than having some sort of car..., that we feel we need to stick with. I went to 12 schools and always promised my kids they'd never have to move and make new friends. I think there is space in our budget for it, if we cut back on everything else.

Thank you for replying, I appreciate all the different ideas and viewpoints.

shelleyvdp

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #5 on: February 25, 2017, 02:26:06 PM »
Just had another look at the numbers and we are paying $19,000 in payments over the next 16 months, and the payout figure goes down $19,000. So we are paying back 100% principal from this point on. So it's worth sticking it our rather than putting our cash into the lease company pockets by selling it.

marty998

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #6 on: February 25, 2017, 02:42:41 PM »
Mentioned it before in another thread but I still think the net income line is a little off. Net salary can't be as low as $90k on income of $170k... it just doesn't add up - tax is not that high.

Could you post a payslip (minus all identifying details?)

Wow, from just doing a brief look at what you've listed, the vast majority of your assets are tied up into your home and vehicles---over 1/2 million $$$$$$.  I don't think you have an income problem; I believe there is a spending problem.  Is there any way you can't get out from under the Jeep lease?  Can't you sell and take a loss? Yes, you can take the Caravan money and start putting toward that Jeep lease.

I take it that the superannuation is similar to a 401k?--money socked away for retirement that is pre-tax?

You must live somewhere where there is (good??) public transportation as your husband uses public transportation to and from work?  Is it absolutely necessary for you to have any vehicles?

What are council rates?  This must be a mandatory expense of some type?

Is it absolutely necessary for your younger child to go to private school next year?

This is Australia. There are no cheap houses. It sucks. In Sydney you'd be up for a million for a basic starter home within 90 minutes of employment hubs. Brisbane is better, but it's still a huge chunk of change.

Council rates level on property owners in a local government area. They pay for local roads, lighting said roads at night, waste/rubbish removal, sporting fields and maintenance, footpaths, subsidised swimming pools etc...

Catholic schools are generally on the cheap end of the private school spectrum. Public schools are usually viewed unfavourably unless it is an academically selective school. Public would not be an option I would take either for future kids.


shelleyvdp

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #7 on: February 25, 2017, 02:47:47 PM »
Ok, so the $170,000 includes the super as part of the package. That's where I went wrong. I will revise my post. Thanks for pointing it out!

toucansurfer

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #8 on: February 25, 2017, 05:08:40 PM »
Hi so I have some modified advice after reading your replies.  In regards to life insurance.  Check but you should have this already through super.  I would still cancel your life insurance and put as much insurance through super as possible.  Then you can sleep at night but open up your cash flow.  Bummer on the novated lease.  Still think about downgrading.  Is it really worth your husband working an extra 5-10 years to have a slightly flashier car.  Simply fly to Adelaide when you have to go and problem solved no need for the long road trip.  This is your choice though but the biggest financial drain you have on your budget.  Let's put it this way you spend more on your car than your house. In Australia that takes a bit of effort.  I've made a similar mistake on the lease  but and still need to downgrade a bit but any future cars pay cash for.  If you can't pay cash for it do you really need it?

You're all over the phones.  I said my bit in insurance.  If not changing house, increase the deductible same goes for the car.

You do seem set on the school so not much to say there but do recognise the effects they have on your future stash.  I view it as id rather send my kid to a worse school if it means I can financial afford to spend more time with them as i find that more valuable.

Good luck don't get down on any of these points just remember these are all choices.  Things you probably never had as a young adult.  How long do you want to keep your husband in golden handcuffs?  The answer should drive your spending.

Cheers


urbanista

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #9 on: February 25, 2017, 06:47:13 PM »
$250 in electricity???

Get the solar panels.

shelleyvdp

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #10 on: February 25, 2017, 07:19:41 PM »
We just had a discussion on solar after your posts, and both agree that as I'm home all day it would be a good idea. We'd like to wait till the car is paid off though and save the cash up. Don't want to get stuck on a payment plan.

We also discussed the car this morning and thinks the best idea would be to follow through paying it out in cash in June 2018, then sell it and replace with a car about $10,000 less so we have the cash to go towards the solar. Going from the jeep to a carolla or similar size / economy car we should be able to get a 2014 for about ten thousand less.

We are going to get the life insurance mob over to check our options. It's split into income protection $89pm, TPD is $9 (that's just to tide us over till the income protection pays out as it takes a while apparently) and Life trauma is $69pm. We are going to double check that it our best option, what is available through super isn't enough as I really won't be able to completely support the family.

Insurance deductible he is set on for now because of not having much cash to throw at it, but once the car is paid and downsized we can increase those.

The car situation is a learnt behaviour for me, from hubby. My parents never had a new car but he did when I met him and when we moved in together I sold my car to pay off his student loan and the rest of his car loan. Then we had two ex government cars bough with cash at auction. Then the lease. I was working when we signed up for it, and my wages just covered the loan. But then my injury got aggravated and I had to quit. We never realized till now that they make you pay off the whole lease term worth of interest first, then the principal. I guess we didn't read the fine print?

Our house is the worst in the street. A single block where most were doubles. A 60 year old post war weatherboard, asbestos inside, original bathroom, 350m2 block. The double blocks have mostly been split, built on and now we have our little tardis four bed two bath cottage in amongst $850,000 McMansions. And we have no intention of building up, building on etc. This place costs us less than renting, and we couldn't get a three bed apartment for what we paid for it. So we will just slowly do budget renos to make it comfortable, paying cash to do it.

I think that in addition to the lease we were spenders too. If I went to officeworks to get school supplies for the kids there was always something hubby needed, or if I went to get shoes from Big W (cheap department store) of the kids I'd buy a couple of shirts for me. Even though we only bought from Kmart or Big W it all added up. We are out of that now, and committed to lowering groceries, paying off and downsizing the car and now perhaps doing the solar after the car.

All the advice is so helpful, things we never considered but should have. Thank you!
« Last Edit: February 25, 2017, 07:27:46 PM by shelleyvdp »

toucansurfer

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #11 on: February 25, 2017, 08:03:15 PM »
It's the right decision on the car.  It's good you've agreed on that one.  Truthfully the rest of the changes are peanuts by comparison.  Everything adds up though and I think you'll see the benefits slowly trickle into your bank account.  It won't happen over night as you can only really make some of the changes now.  It's learned behaviour you didn't get these habits overnight so you won't lose them overnight either.  It's like quitting smoking you'll find you bum a smoke every once in a while.  Good luck.  You'll really see a financial breath of fresh air when you do the car swap at the end of the lease.

deborah

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #12 on: February 26, 2017, 10:10:28 PM »
Instead of getting the life insurance mob to check your options, check with your superannuation mob first. TPD is standard in super, as are some of the other parts of the insurance. See what you actually are doubling up on.



Anatidae V

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #13 on: February 27, 2017, 12:03:45 AM »
Mentioned it before in another thread but I still think the net income line is a little off. Net salary can't be as low as $90k on income of $170k... it just doesn't add up - tax is not that high.

Could you post a payslip (minus all identifying details?)

Wow, from just doing a brief look at what you've listed, the vast majority of your assets are tied up into your home and vehicles---over 1/2 million $$$$$$.  I don't think you have an income problem; I believe there is a spending problem.  Is there any way you can't get out from under the Jeep lease?  Can't you sell and take a loss? Yes, you can take the Caravan money and start putting toward that Jeep lease.

I take it that the superannuation is similar to a 401k?--money socked away for retirement that is pre-tax?

You must live somewhere where there is (good??) public transportation as your husband uses public transportation to and from work?  Is it absolutely necessary for you to have any vehicles?

What are council rates?  This must be a mandatory expense of some type?

Is it absolutely necessary for your younger child to go to private school next year?

This is Australia. There are no cheap houses. It sucks. In Sydney you'd be up for a million for a basic starter home within 90 minutes of employment hubs. Brisbane is better, but it's still a huge chunk of change.

Council rates level on property owners in a local government area. They pay for local roads, lighting said roads at night, waste/rubbish removal, sporting fields and maintenance, footpaths, subsidised swimming pools etc...

Catholic schools are generally on the cheap end of the private school spectrum. Public schools are usually viewed unfavourably unless it is an academically selective school. Public would not be an option I would take either for future kids.
:) we plan on our kids going to public school like we did! But it's different once your kids are already there, especially to change what you did for one kid vs the next, unless they are keen on the change or otherwise suited for it.

I agree with Marty that your take-home seems low, but I think this is due to some things being paid with pre-tax dollars? Also, are you out of the brackets for all Centrelink support? Since your kids are teens, seems like it might be worthwhile you giving it another go to see if you can bring in an income as well, as your income will be a much lower tax rate than your husband's.

deborah

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #14 on: February 27, 2017, 02:19:51 AM »
Given the disclosures happening each day from the current Royal Commission, I can think of some very good reasons to send children to a public school rather than a Catholic one, besides the reduction in cost.



GT

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #15 on: February 28, 2017, 04:56:41 AM »
Instead of getting the life insurance mob to check your options, check with your superannuation mob first. TPD is standard in super, as are some of the other parts of the insurance. See what you actually are doubling up on.

Got a dollar that says double up is happening.

Bee21

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #16 on: March 14, 2017, 05:47:35 AM »
Definitely check your super statements for life insurance. Most of them have life and tpd, some have an income protection component as well. We dropped my husband's separate life ins when we realised that the one in super should be enough. If you have several super funds, you might be paying for multiple policies. I even got a separate quote to see whether it would be cheaper to drop the ins via super, but their fees were ok.

And also, do you have any super from a previous life? Your husband might be able to salary sacrifice into yours.

As for home ins, last year there was a thread here about aussie household spending, which made me realise that we were overspending on insurance. Bundling home and contents with car ins saved us around 800 a year. It is worth looking around.

I found the books of Cath Armstrong and Sophie Gray useful (Delicious, The destitute gourmet and the 10 dollar dinners)for reducing food spending, they are great for the Aussie audience (And available from the library). We are a fam of 4 and last year I spent around 180 a week on food. I tried to reduce it  a bit more this year but has been unsuccesful so far😈 

shelleyvdp

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Re: Case Study: Pay off our car lease and make a start on a stash - Aussie
« Reply #17 on: March 17, 2017, 03:09:48 PM »
I've started a journal so am posting more details and updates over there, link in the signature.