The middle class—what a way to live! While we live in relative comfort, but we still need to compete to keep our heads above water. The world is a dog-eat-dog place. And every day, just sticking to your budget gets more and more complicated.

 

93% of Australians see themselves as middle class. And nearly two thirds of Australians say they don not have enough money to buy what they really need. Not what they really want but really need. Rising food, petrol, and energy prices have all taken a huge chunk out of our pay packets. Every week, very smart middle class families contact me with stories of how they are falling out of the middle class. It's heart breaking.

 

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The Reserve bank of Australia used to control interest rates in this country. However, it seems this is no longer the case, as banks now have been doing their own thing. Last week's interest rate rise by the big four banks was a real slap in the face to Australian home loan holders.

Did you know that mortgage means death contract in Latin? And the way the banks treat us, it can feel this way. You can fight back and save some money in the mean time (Now when I say money, I mean a truckload of money). There are always better deals than the rates the big four offer. Plus, with new switching laws in place, there has never been an easier time to swap.

Let's make an ironclad case for switching banks. Pretend you have a $300,000 home loan at a 7.50% interest rate. If you could find a home loan at just one percent off (6.50%), you will save $57,406 over the course of 25 years! But if you continue to make the same monthly payments that you made at the original 7.50% rate, you will save a further $68,043. Add these total numbers up and you have saved $125,449. This is real money in your pocket and not in the bank's.

Imagine a scenario where your boss calls you into their office to inform you of a 2% pay cut. This pay cut is not because you have done anything wrong, or due to the company struggling financially. The decrease in this case, is just because your boss feels like it. It comes completely out of the blue! You might be very upset; you might even threaten to quit. Now imagine the same scenario, but with a 10% pay cut; the stress levels would be even more intense.

 

But many people give themselves a self-imposed pay cut every day without even realising it. Bank fees have the power to reduce your spending levels very quickly. With banks cleverly adding them anywhere they can, you might need a refresher course on how to avoid them.

 

For example, if you use an ATM which is not one of your banks, a $2.00 fee is customary nowadays. But if you take out $100, you have just lost 2% of your money. Take out only $20 and you have given up 10%. This fits perfectly with your boss giving you a pay decrease in the example above.

Credit Cards Rarely Make Me Smile

There has never been a better time to talk about credit cards than right now. The big banks are under fire for unfair late payment fees. The federal government is bringing in new laws to help consumers tackle their credit card debt. And Australia's current credit card debt stands at $49 billion. Yes, you read correctly, that's with a "b".

 

Would you believe this is $2,248 for every man woman and child? And since children do not have credit cards this is an extremely high amount. To put this total amount into perspective, in 1985 Australians only owed $168 per person on credit cards. So we have increased this total amount by $2,080 in just 26 years. Something is not right here!

 

Now, as someone who advises people on what they should be doing with their home budget, my first golden rule is Get Rid of the Credit Card. This plastic (not so) fantastic is probably costing you more money than you know. The following 3 reasons should have you running to cancel yours quick smart or, better yet, take a chainsaw to it.