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.

Mobile Phone Companies, Don’t Expect That Loyalty Counts For Anything

Mobile phone companies must think we are stupid. We never hear from them until our contract runs out. However in the last month of the 24-month contract, a letter or phone call comes our way. All of a sudden they are our best friend. They want us to stay with them.

My wife’s contract ran out in January. We were very happy with our company as their rates are extremely good and their customer service is not bad either. So like Sherlock Holmes, we jumped onto their website to check out their best 24-month contract deals.

After finding the perfect deal we called them up. Only to be told that this deal was only for new customers not existing customers. In fact all the deals we had looked at were for new customers only, not existing customers! There was a special website for existing customers to check out their deals. Let me assure you, this so-called special website was only special for the phone company, as these deals for existing customers were terrible. The phones were cheaper and the monthly amounts more expensive.

From what we can gather, would you believe all phone companies are like this? They are much more interested in finding new customers than keeping their existing ones.

Didn’t my loyalty count for anything?

·         Paying my bills on time

·         Having two phones on the one bill

·         My 5 years plus of being a customer with them

Well apparently not! And we found this out once we tried to argue our case with the call centre. We even talked to a call centre team leader to be told there was nothing he could do. This answer did not please us.

We wrote a letter to the company putting our pleas in writing outlining our argument why we should be allowed to take up this deal. Plus we even wrote in very black and white terms, that if they did not accept this deal we would be forced to change providers.

While we really did want to stay with our current company, shopping around for a new deal was easy due to the internet. And as all these companies were like ours, and gave such great deals to new customers, it was like being a kid in a candy store. They were all trying to get new customers.

OK the pen is 100% mightier than the sword. Would you believe all of a sudden we were offered the same deal as a person who has not shown any loyalty? So we had to go the long way round. However, the savings are there to be had if you are prepared to put in the extra effort.

However, don’t just think this is happening with telephone companies but also insurance, gas, electricity, internet, and pay-TV. For some unknown reason, these companies have a better price for new customers than existing customers. But is this unknown reason that hard to work out? Somewhere along the line, these companies have worked out that customers just don’t care. They send out the renewal form and we sign it.

To save money, you can’t just sign the form. Ring the company as a fake new customer. Tell them you are unhappy with your current deal and what could they do for you. Then ring back as yourself. See if you can get the same deal. If you can’t, write an email, write a letter or ask to talk to a team leader. This small amount of time researching can save you money in the future. And just to show you what I mean, we expect to save around $12 a month from our letter to the mobile company. Average this out over 24 months and for a little bit of effort, we have saved $288. Not bad!