Friday, September 27, 2019

Compound interest calculator shows the impact of tax and the Medicare Levy on savings.

We're always told with investments, you can't beat the effect of compound interest. With compound interest you earn interest on your interest. The calculators you find online can all show the benefit of compound interest, but what they don't show, is just how much impact taxes can have on the end result. Even the government's ASIC Moneysmart site doesn't include the option to enter a tax rate.
The Compound Interest Calculator shows quite clearly the impact of taxes on your savings and depending in the interest rate, can make quite a significant difference to the end savings.
For example:

Initial amount: $10,000
Interest rate: 5%
Number of years: 10

End result: $16,470
Interest: $6,470

Now let's enter 32.5% and Medicare Levy of 2%.

End result: $13,904
Interest: $3,904

The impact on your savings due to taxes is very significant giving just 60% of the interest that could otherwise be made if the government didn't take taxes each year. If taxes were taken out at the end of the period, the interest earned would be $4,237, or about 8.5% more.

For those interested extend the time out to 30 years and you can really see the difference taxes make.
Generally compound interest calculators aren't particularly useful in the real world because they don't take into account the government needs to collect taxes. The Compound Interest Calculator provides a better estimate of the return on your investment that ends up in your pocket.

Kelvin Eldridge
Compound Interest Calculator

Tuesday, September 17, 2019

Petrol Price Alert - Petrol prices have unexpectedly gone even higher at 171.9 cents per litre for unleaded.

Recently I wrote a post to let people know petrol prices were on the increase. However, I have to say I've never seen this before, even as prices at those first stations to lift prices started to drop, we've seen prices go even higher. The petrol price hike looked like it was going to go to 167.9 but now a number of petrol stations have put prices up to 171.9.

The average gate price(think wholesale) today was 130.7 so this price has also increased 1.2 cents. That doesn't explain the additional 4 cent jump. As a consumer you can only think this is taking advantage of the hype recently in the media with the Saudi Arabia oil plant being bombed.

What will happen in the future is hard to say but the media is conditioning people to expect higher prices and since we're expecting it, it will probably happen.

There's still time to shop around so it's hard to tell if prices from now will go up fairly quickly or whether some will hold back. Certainly paying 171.9 when you can currently pay 126.5-129.9 elsewhere doesn't make much sense.

Now I'm not an economist but what I find interesting is higher petrol prices have an impact on inflation. I read a 10 cent increase in petrol gives a 0.6% increase in inflation. Since we're seeing that an more recently with the petrol price hikes, higher than expected inflation appears to reduce the chances of an interest rate drop. It is amazing how all these things seem connected. For the consumer all we see is higher prices in one area.

Keep a close eye on petrol prices over the coming days. Don't forget to lock in using the 7 Eleven Fuel App to keep prices low for another week.

Kelvin Eldridge
Petrol Prices Melbourne

Sunday, September 15, 2019

Petrol Price Alert - Prices around Melbourne have started to increase to 167.9 but dropped to 166.9.

A couple of days ago I noticed a couple of petrol stations around Melbourne had increased their prices to 167.9. Today some of those petrol stations have dropped their price to 166.9.

The current average gate price (think wholesale) of unleaded petrol is 129.5 so we're seeing a price increase of 35-40 cents. This price hike range has now occurred for the last few price hikes which is higher than the 25-30 cent price hike seen over the past few years.

The media has also reported the drone bombing of Saudi Arabia's biggest oil plant and it's been suggested prices may go up as a result. Prices were already on their way up before the bombing occurred so this may add additional pressure to oil prices.

How quickly petrol prices will rise is hard to tell as we approach the next school holiday period, since it's still around two weeks away.

Time to keep on eye on petrol prices over the coming week to two weeks.

Kelvin Eldridge
Petrol Prices Melbourne

Friday, September 13, 2019

Is your variable rate home loan with mortgage offset account costing you more than a fixed rate home loan?

I suspect more of us when we get a home loan look at the fixed rate and variable rate and make a pretty quick decision for one or the other. Variable even though it currently has a higher rate but have an offset account to save money, or fixed because it saves money now.

Of course the big one is which way are interest rates going to go in the near future (1-2 years) and if they're going to go up, fixing the rate is a good idea, but if they're going to go down, variable is a good idea or is it?

When I wrote the Fixed vs Variable loans calculator I recently released, the first version of the calculator only went as far as showing how much money was needed in the offset account to recover the difference of the lower fixed interest rate. That in itself required understanding the financial calculations and formulas, even going back to basics to work out the formula.

However the problem is this solution was incomplete. It assumes the money in the mortgage offset account isn't otherwise generating any interest. That's not realistic. If you have a reasonable sum of money it should be in an account earning interest. In addition each year you need to pay tax on that interest.

So the question really is, how much do you need in the mortgage offset account to not only cover the fixed and variable interest rate difference, but also how much to cover any interest the money would otherwise earn in an interest bearing account, whilst also taking into account tax and the Medicare Levy?

The Fixed vs Variable loans calculator has now been updated to handle the complete picture. By entering the savings interest rate, tax and Medicare Levy, the calculator provides how much is required in the mortgage offset account taking in all those factors.

I have to admit even I wasn't expecting the amount to be as large as it is. If people don't take this into account many people will be paying more for their loan than even they think they are. In a way this is deceptive on the part of the banks. Banks aren't informing people how much they really need in their mortgage offset accounts.

This reminds me of the days when people were buying items just to get rewards points, where the cost of the items often meant they were wasting money since the points had such low value.

I certainly had no idea of how much money really is needed in the mortgage offset account to break even. Now at least people can be better informed by using the calculator.

The only remaining issue is whether interest rates will go up or down. A small change in the rates can have a huge impact on the break-even point.

I hope others find the Fixed vs Variable loans calculator to be useful. If you have a home loan you really should plug in your figures and see if there's a better option for you.

Kelvin Eldridge
Fixed vs Variable loans calculator

Monday, September 09, 2019

Fixed vs Variable Home Loan - How much is needed in a mortgage offset account to break even?

Currently the fixed interest rate on home loans is lower than the variable interest rate. It makes sense then to take out the fixed interest rate doesn't it?

Well the answer isn't quite that simple.

When you first take out the loan it may make sense. People won't have much in the way of savings. However it really depends on how much people have left in savings. Variable rate loans often include a nice feature called a mortgage offset account. When you put money into the mortgage offset account the interest on your mortgage is calculated on the balance of the mortgage less the amount of money in the offset account. The best part is it's tax free. If you put the same money in an interest bearing account you'd get taxed on any interest earned every year plus you have to pay the Medicare Levy. Not so with a mortgage offset account.

So the answer to this question really is how much money do you need in your mortgage offset account to break even. This isn't a simple calculation so I decided to write the Fixed vs Variable Loans calculator to provide the answer.

It may sound strange, but if you have some savings, the variable interest rate loan may be the better option even thought the rate is higher. Give the calculator a go and see what is best for you.

Kelvin Eldridge 

Thursday, September 05, 2019

Centrelink PDF upload error - Unexpected error happend. Please try again later. Error code - undefined

If you're trying to upload a PDF document to Centrelink and receive the error message: "Unexpected error happend. Please try again later. Error code - undefined", the following may help.

This type of error has been occurring for years. Not sure why, but it can be frustrating when you're trying to upload a document. If the document is a single page document that can be viewed on a computer screen the following tip may help.

To get around the "Unexpected error..." you can try to convert your PDF file to an image file. The image file can then be uploaded and this has worked.

Convert the PDF document into a PNG graphic file as follows.

Open the PDF document either using your browser or Acrobat PDF Reader. Other PDF readers may also work.

Enlarge the document to full-screen mode. That is you can only see the document and it takes up the entire screen. You may also wish to rotate the document so the document takes up more of the screen and the information is larger. For example if you have an A4 document rotating the document may give a better result.

Press PrtSc to perform a print screen (this captures an image of the screen into the clipboard)

Open Microsoft Paint

Paste the captured image into Paint (use the Paste option or Control+V)

Save the image as a PNG file

Now you can upload the file to Centrelink.

Kelvin Eldridge
IT support

Wednesday, September 04, 2019

Tuesday, September 03, 2019

Pia's Survivor challenge. What really happened.

I read the following article about Pia on the Survivor challenge and how she may have grab the bar with both hands before the end of the challenge meaning she would have been disqualified.

Luckily for Pia it appears no one at the time realised what she had done. The production company indicated there was a micro second when Pia grabbed the bar with two hands and Luke let go. However this really isn't what happened at all.

The good thing about the video in the following article on is you can grab the slider and drag the video backwards and forwards.

What actually happened is Simon lets go and starts sliding. He is out of the challenge. Pia then grabs the bar with both hands whilst Luke continues to hold on. We watch Simon slide off the equipment and into the water, then the camera returns to Luke and Pia. We can clearly see Pia holding with both hands and Luke holding on with one hand. Luke then lets go and Pia is declared the winner.

Pia was not struggling and I suspect that was because of her light weight. She most likely could have easily continued and won. In this case however she breached the rules and should have been disqualified. Luck was on her side and her breach wasn't noticed.

13s - Simon lets go of bar
14s - Pia holds on to bar
15s - Luke lets go of bar

For those into Survivor and wanting to know what happened, hopefully this answers the question as to what happened.

Kelvin Eldridge