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The Bottom Line
The real truth of the final reckoning

This final question is particularly important when large amounts of money are borrowed (eg mortgages and business loans) because, at some time in the future it may prove advantageous to re-finance with another company, and you want to avoid the added expense of payout and transfer fees. Having put your advisers on the spot, be guided by their reactions. If they won't give you a straight answer, ask the same questions again, and again if necessary. Three strikes, and you're out of there! And if they claim not to know the answers, don't even give them a second chance - they are either being deceitful, or are mathematical incompetents. Just remember - the deal has to be fair for both parties, not just weighted in their favour.

Perhaps an even greater mystery than loans is the way retirement funds work. Because this investment is one which can extend over decades, we tend not to think about it too much in our younger years; but we should. Handing over regular sums of money and neglecting to check on its progress once in a while isn't all that smart. It only takes a bit of mismanagement, or an event like the global financial crisis to come along, and that retirement nest-egg can diminish significantly. The GFC did happen, of course, and there's nothing we as individuals could do about moneys already lost; but there are ways to ensure current and future investments don't get whittled away. The fund managers will tell you: "Leave it with us. Be patient and the good times will come again." That's what we were told, but we refused to believe in flying pigs!

Our solution was quite simple - get personally involved. As soon as we realised our superannuation was taking a dive, we looked at the available options. All of our retirement money was invested in a balanced fund which, we were originally advised, was reasonably safe and gave a good return. It did, until the GFC. Then it went into negative mode. By that, I mean that instead of interest being added to the principle, it was actually being deducted from it. Had we left it in the hands of the experts, we wouldn't have been able to retire at all. So, initially we transferred what remained to a cash fund which was supposedly the safest of the lot. The interest rate was much lower, but it was very unlikely to go negative. Murphy's Law struck again and our money continued to decrease. That was it - we'd had enough! As quickly as possible, we withdrew everything and used it to set up our own retirement saver account with the bank. Once again, it didn't pay a high rate, but the interest would never go lower than zero. The worst that could happen was that our cash wouldn't grow - but we wouldn't lose any of it either. Had we wanted to, we could have put the investment back into a managed fund once the crisis was over; but that hasn't happened yet. We are comfortably retired now and are grateful we took personal control of our finances. Anyone can do what we did, or not as the case may be. Isn't it nice to have a choice, though?

Whether close to retirement or years from it, there will always be something needed that costs. Quite often, an item is too expensive to pay for with cash, and in some cases even the credit-card won't stretch to it. No worries - the big super-stores are on hand to make life easier. Nothing to pay for 3 years! No deposit and 24 months interest free! Sounds good, eh? Now you can get a new lounge suite and that massive wide-screen TV in time for the finals. But there's nothing for nothing. Back up a bit, ask the questions, read the fine-print and do your sums. I guarantee that when you eventually work out the final and true cost of the products - in other words, what you will eventually have to pay - you won't be so keen to rush in. Whatever you buy, consider the end result very carefully.

There are many areas where considering the bottom line will save you money. Most people get trapped by the complexity of the details, none more so than with the plan scam. This is where companies offer package deals - individual services and components bundled together for a seemingly bargain price. One that springs to mind is the convenient phone/Internet combo. By shopping around, you can actually save money, but if not careful, the reverse can be the case. Don't get sucked in by the free phone and $200 of free texts. It's fine if you need both, but have a good look at the rest of your commitment. There could be one or more items in the package that you'll never use. Where's the sense paying for what you don't need? And remember that these plans are usually for a fixed period, sometimes two years or more. Once you sign on the dotted line, you are locked in; and if you come across a better deal next week - tough luck!

Never feel guilty about being tight with your money. It took a while to earn it, and you want whatever you spend it on to be of value. If the bottom line doesn't reflect that, don't buy it!

Next issue:   Starting Out – independence is more than just “playing house”

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