Council Rates Through The Roof

I received a letter which nearly knocked me off my feet last month. My council rates were due and they had increased from $1040 per year to $1160 a year. You might think, what is so shocking about a $120 price rise. Sure $120 on the surface doesn’t seem like a huge price rise until you work out that this is an 11.5 percent increase.

Unfortunately, most people have zero understanding of percentage increases and what it means to them. For example, if there was a news headline which read, “Pollution Increasing 7 percent a year” most people would not give it a second look. But a headline which read, “Pollution has doubled in 10 years” people would be outraged. By increasing any number at 7 percent a year, means it will double in just 10 years.

Back to my council rates. Let’s say councils decided to continue this 11.5% increase each year from now until the end of time. This would be an extremely expensive neighbourhood to live in very quickly. Let’s use the example of Max, a fictitious character. Max is 18-years-old and he has a very good job for his age. He earns $55,000; he lives in my area and of course he pays the $1160 in council rates. This is a total of 1.89 percent of his after tax wage just to pay this bill in 2011.

Max works for the same company until he is 70 and earns a 3% pay rise each year. However, as in this example his council rates keep going up 11.5% a year.

By the time Max hits 70 years old, he is earning $241,113. However his council rates have hit $240,395. So just to pay one bill he must use 99.70 percent of his wage, and this is his pre-tax wage! Of course this is impossible.

But it illustrates a great point about percentage increases over time. If your bills are rising faster than your wage, over a long period of time you will lose your buying power. As you probably know, we at Mr Home Budget keep every receipt for every purchase we have made. This has been over a five-year period. Now let me assure you, in this time our expenses have been rising faster than our wage (or even the average income) increases.

These expenses include gas, electricity, grocery shopping, council rates and insurance. The scary thing is we have tried to keep them down by saving money and cutting back where we can. Over the last few months there have been a huge number of stories on retail stores suffering downturns in business and revenue. From our studies, this does not surprise us. Of course if you are putting a bigger percentage of your overall wage into other areas you have less discrepancy spending available to you.

Your job is to make companies (in this case the local council) understand you are watching them. Next time a yearly bill arrives don’t just pay it. Work out how much it has gone up since last year PERCENTAGE WISE. Now compare this to your wage increase. Have your wages gone up as much or more than the bills. Or is a bigger percentage of your money just going to covering your costs?

There are two things you can do to try and take some pressure off.

1.Ask for a pay rise. If your bills are increasing on average at 5 percent a year, while your pay is only increasing at 3 percent a year, you are losing purchasing power. Sure your money has increased year on year, but what you can purchase with it has gone down.
 
2.Call your billers and ask for a discount. Don’t just sign the yearly form. Call your companies and demand a discount. Shop around for a better price. Do everything you can to let the companies you deal with know you’re watching them. And you will be ready to move in a heartbeat if they don’t respond correctly by lowering prices.