What do you find hard within Personal Finance?

illumination on 26/01/2016 - 12:36

Hey guys,

Just thought I'd start a discussion here.

I've found that I've developed a pretty sound understanding of saving money with most things in relation to daily expenses and "Personal Finance". Btw, Personal Finance refers to anything that affects you on a more "consumer" level" – for example, Credit Cards, Private Health Insurance, Public Transport, Eating Out, Phone Bills, Accommodation/Housing, Banking.

I personally have found Superannuation, Private Health Insurance and "Novated Leasing" (Salary Sacrificing for vehicle) particularly difficult to understand. Generally, I always try to understand these things myself and read into it in as much detail as I can to try and get a good grasp of it so that if anything goes wrong, I understand my rights, entitlements and know exactly what I've paid for.

What about you guys? What do you find difficult, and what have you done to address it?

Financial

Comments

  • [Deactivated] on 26/01/2016 - 14:03

    I think it could be something where a lot of planners for budgeting mention stuff like entertainment, school costs, rent etc.
    But what they fail to mention is that certain stuff isnt cut and dry.

    Say dog food.
    You might get:
    Dry Food
    2kg of Kangaroo
    Fish Oil
    then budgeting $150 every 3 months for vet visits etc.

    Or say you might have a $13 a year membership or $110 membership that comes out weekly.

    So the weekly fortnightly monthly or even servings all come into affect that makes it harder to budget.

    • illumination on 26/01/2016 - 21:57
      +2

      I'm a bit confused by what you're saying..

      Are you saying that finance planners often neglect those "odd" things that people have, such as in your example dog food? So someone else might have to worry about mountain biking maintenance costs because he mountains bikes, and someone else will have to worry about cat food?

  • toristo on 26/01/2016 - 14:04

    I'm in banking so I understand personal finance. I don't understand psychology though so the hardest thing for me is sticking to my budget. I can balance my personal finances to the cent, but it serves only to remind me how easily I can be tempted sometimes (particularly with eating out). My budget category has continue to creep up as I accept my willpower is particularly weak in this space and it's easier to just budget for it rather than kid myself that I will say no to dinner with friends.

    I would agree that more passive products (insurance for example) tend not be as well understood. I know I have private health insurance, I know it covers "stuff" but couldn't tell you off the cuff what my benefits are despite it being one of my more expensive policies. I use dental, optical and massage but occasionally think about all the other "features" that I get that I never use but always intend to.

    • illumination on 26/01/2016 - 22:13

      What do you do as "Personal Finance" for a bank? Is that selling the bank's products to customers? e.g. Insurance, Credit Cards, Transaction accounts.. anything basically?

      I think that's only normal though. Basically, you've got a desire to save $X per month. However, you get invited to random events where you are not willing to say no because you want to go. The example you gave is dinner with friends.

      There are certain things in life that you just can't say no to because you like it too much, such that you're not willing to give it up. If you tell a skiier they could save $3000/year by not skiing, they wouldn't care about the $3000/year. If you a tell a smoker they could save $2000/year, they also wouldn't care. It's something similar to that I suppose.

      Yea PHI confuses the hell out of me. I find it's so different to other insurances. With insurance in general, you're basically paying a small sum upfront so that if something that normally costs a lot in the future, you are covered. In other words, even if you do not have the insurance, you can still pay for it - you just have to pay much more.

      In basic terms, it goes something like this (say for example, car insurance):

      • Pay $X for premium per month or year ($X is affected by stuff like your age, gender, # of claims made recently, traffic infringements notices)
      • If you get into an accident and you are responsible, you have to pay excess of $Y
      • If you get into an accident and responsibility has not yet been determined, you have to pay excess of $Y which may be refunded to you once responsibility has been determined
      • If you get into an accident and are not responsible, the other party covers all the costs.
      • Events A, B, C are covered
      • Event D may be covered for an additional $Y per month
      • Events E and F are not covered
      • What are waiting periods?

      With some other insurances, such as maybe Travel Insurance…:

      • Pay $X for the policy (or Y% of closing balance of statement for Credit Card Travel Insurance)
      • Pay $Y for excess if events A, B or C occur
      • Pay $0 if events D, E or F occur
      • Events A, B, C are covered
      • Event D may be covered for an additional $Y per month
      • Events E and F are not covered
      • What are waiting periods?

      However, when it comes to PHI (or rather, not having it), having the money doesn't help. There are potential implications on tax with having hospital cover (if you earn $80k+?), you can pick a specific hospital, and a specific doctor. There are waiting periods. In other words, without PHI, you don't even have these options of picking hospital/doctor. Money can't buy it. You have to have PHI to be able to do that stuff.

  • [Deactivated] on 26/01/2016 - 14:31

    I'm similar to you OP.

    Superannuation? It's just something, but I don't quite get it.

    My biggest problem - I just save into a savings account, don't know what to do with it. Invest? How? etc.

    I get money. I save. Full stop… I know there's more, but don't know what to do.

    • illumination on 26/01/2016 - 22:18

      What I realised when I first started saving money was that I was so happy with saving $2. This is going back to my teens, but I would be ecstatic and I would put in so much effort just to do that.

      As I've gotten older, I've realised that there are many more opportunities in life and that it's sometimes really not worth going to such lengths to save $2. I've also realised (as you have) that investing probably offers you a better return on your money than your average bank savings account, but you should probably have saved enough to have sustain your life in case of emergencies. That means if you have $5k, don't invest $4.9k into Telstra stocks because you think they're going to make a major announcement (e.g. Telstra becoming a bank or something of similar magnitude) soon. Because if that doesn't eventuate and that "major announcement" was actually simply Telstra announcing they are expanding NBN to 2 new suburbs, and your $4.9k becomes $4k, you could potentially be screwed.

      May I ask how old you are? (Range if not precise age?)

  • [Deactivated] on 26/01/2016 - 16:22
    +3

    What do you find hard within Personal Finance?

    Well, there's not enough of it…

    • illumination on 26/01/2016 - 22:18

      What do you mean? Not enough money?

      • [Deactivated] on 26/01/2016 - 22:52

        Nobody has enough money, it's one of those things that you really can't get enough of.

  • altomic on 26/01/2016 - 17:44
    +1

    my sound understanding is: spend less than I earn.

    any extra cash on the evening before next pay day goes into the home loan as bonus homeloan payoff (you understand). this works as a savings account (somewhat).

    only buy what is essential.

    if a super special comes up and you don't need it (but will in the future) then grab it.

    occasionally treat myself and family. treat smartly e.g. went out for sushi last night when it was $2.80 plate night. or going to Hawaii in 2 weeks with $421 return tickets.

    • illumination on 26/01/2016 - 22:20

      Are you referring to an offset account?

      Agree with you, especially on "only buy what is essential" - I just hope you're still enjoying yourself. I don't see the point in sacrificing happiness for money. What I find is sometimes people tend to think tightasses don't enjoy themselves (I feel colleagues often find me weird, and think I must live an "unhappy life" saving money and not spending on much). I can't speak for everyone, but that couldn't be further from the truth for me.

      • altomic on 26/01/2016 - 23:57

        Not offset account. I have an everyday account and home loan account. Left over everyday account money goes into home loan account. It has a draw back facility.

        I enjoy life as much as possible .

        I still occasionally buy stuff I don't need (picked up 10 laptops before Christmas as fixer-uppers/ hobby).

        I buy what I want but generally don't get the best/most expensive. E.g. needed/wanted a decent road bike last year. Just watched eBay for a couple of months and was fortunate to score a $1200(when new) bike for $130. In near new condition. I was stoked. I don't need top of the line. Just decent quality. Maybe I'll upgrade in the future.

        I'll go to the library for books rather than buy. Or swap with friends.

        Heading to Japan in July.

        Careful with money. That's how I'd sum it up.

  • DeafMutePretender on 27/01/2016 - 00:34

    What do you find hard within Personal Finance?

    My appendage every time I look at my bank account/investment portfolio.

    • illumination on 27/01/2016 - 16:48

      I take it you're doing "well"…

      • DeafMutePretender on 28/01/2016 - 00:08
        +1

        Can't stop my third leg from swelling to be honest.

  • Brainwhacker on 30/01/2016 - 13:05

    I guess it's hard to judge the market and decide on the investment which will give you the best returns

  • backno67 on 30/01/2016 - 20:36

    The one thing I find hard is realising what is a true deal, and what isn't. Only if you know yourself really well, then you are able to make the best decisions, but I would say I fall short and so would the great majority of the population.

    Best examples I can come up with are:
    Entertainment book
    Pizza vouchers

    Both those 'deals' are great to have if, and only if, you don't indulge more than you would have without those vouchers. Because if you indulge more then obviously you are spending more than if you didnt have those vouchers. And of course, you can only judge yourself if you know yourself really well.

    Other than that, I would say the value of your spare time is also very difficult to establish. It has so many variables depending on how easy it is for you to pick up extra work and how that extra work affects your performance in your main job, and quality of life, etc, it is pretty much impossible to make good 'finance' decisions when so many variables are obscure.

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