March 7, 2020
A relatively simple post today.
But despite its simplicity, the instructions here (when acted upon) are incredibly powerful.
This is not a learning/thinking style post. This is an article about action and results!
As you’ll see, Optimisation Day is going to be your most profitable day of the year. It’ll be so good that you might as well call it your second Birthday!
And you don’t even have to let the fun expire after one day. You can keep this party going for a few days or maybe even a week!
Yes, I know I sound excited. But that’s for good reason! So let’s dive in and see what the hell I’m talking about.
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Well, it’s a name I just made up. But the name doesn’t matter. What matters is that you do it!
Optimisation Day is where you calmly, but decidedly, take a freshly sharpened blade to your regular ongoing expenses.
You’ll need your phone. Your list of expenses to give the Optimisation treatment. Pen and paper. A calculator (of course). And comfortable footwear…
Why? Because you can’t jump and dance around celebrating like a maniac in heels or thongs. Well, maybe thongs!
So get ready to do a little research, some dialling and even a bit of old-fashioned negotiating! But before we start, let’s discuss why your Annual Optimisation Day (and this habit in general), is crucial to your financial success.
If we’re honest, we all love the status quo. Leaving things as they are is nice and simple.
So why deal with the hassle of picking up the phone or chasing better deals for things like insurance, mortgages etc.?
In short, because the rewards are well worth the effort! Here’s why…
— You can generate huge savings from getting your ongoing spending lower. Shaving just $2,000 per year across a bunch of your expenses will compound to $25,000 over ten years. Over twenty years, it’s worth $66,000.
— Lower annual spending means you need less investments to retire. As above, an annual saving of $2,000 has a real and immediate benefit to you of $50,000. Why? Because that $2,000 cost required $50,000 of investments providing you 4% per year in passive income. For the purpose of Financial Independence, every $1 annual saving has equal value to $25 worth of shares. In this way, a dollar saved is twenty-five dollars earned.
— It brings your retirement date forward. Because of the heavenly combination of the two factors just mentioned – higher wealth created, plus less wealth needed – your Annual Optimisation Day will bring your FI date forward. Potentially by years!
— You avoid the loyalty tax. Also known as the lazy tax. That’s right – by staying with the same bank, insurer, phone network etc., you’ll be kindly rewarded with, well, nothing. In fact, you’ll look on in disbelief as new customers get all the best pricing and benefits. People are getting wise to this behaviour now. Thanks to your research and checks, you’ll make sure you have sharp deals and be doing your bit to keep the bastards honest!
— Pay off your home sooner. Negotiating a lower interest rate for your mortgage means you can win in a few ways. You’ll have more cashflow leftover for investing each month. Or you can pay off your home years sooner, often saving tens of thousands in unnecessary interest costs.
— Psychological benefits. You’ll receive a happiness boost as you feel more empowered and in control of your finances than you did before. Lower annual spending and lower stress levels go hand-in-hand. Not to mention, more freedom in your life sooner due to the above factors and the strong financial position you’ve created.
Okay, enough fluffing around. Here’s a list of places where we can find some great efficiencies…
The number one saving for most people is getting a cheaper interest rate on your mortgage. Banks are very competitive right now and are willing to come to the party.
And if they’re not willing to budge, look at refinancing to a different lender. A number of banks are offering a cash bonus of $2k-$4k for new customers. So if you can meet the banks lending criteria, there’s no reason you can’t have a better home loan rate than you’ve got now.
If you’re renting, check out the current market. Look at rentals in your area vs nearby suburbs. Have any price differences opened up that you could take advantage of? Can you offload some extra possessions and get a place with one less bedroom?
Or maybe for the same price you can live closer to work, shops or public transport. This lets you drive less and walk or ride more. You might be surprised to find that it’s worth moving once your lease is up.
If you’re in the Eastern states, then you have a ton of electricity providers to choose from. There are sites like this one, as well as other comparison sites to nail down the best price.
Here in WA, we’ve had huge competition come into the gas market in recent years. Prices have fallen by more than 30% as new entrants have come in. So most providers will reluctantly agree to this level of discount if you firmly remind them what others are offering!
From what I’ve seen, Kleenheat are quite competitive, and so are AGL. In fact, AGL now offers a discount of 48% on gas usage charges.
This area is notorious for loyal customers getting shafted. Whether it’s house, car, health or other types of insurance, you’ll want to check comparable levels of cover with other providers.
Pricing for new customers tends to be pretty sharp, while existing customers receive (often unwarranted) hefty increases. This combination helps keep their insurance book growing, while keeping margins similar, as they know people are reluctant to change.
If you can afford to, consider increasing your excess and even question the level of insurance you currently have. For things like income protection and/or life insurance, maybe think about getting these inside super. Especially for younger people, doing it this way you free up more cash for investing, meaning your investments will grow faster and you can retire stupidly early!
There are some fantastic deals around these days. The price of pre-paid phone plans and the data that comes with it are incredibly generous compared to just a few years ago!
Currently, we both use Catch Connect 365-day pre-paid mobile options (which runs on Optus network). Was around $120 from memory.
For internet, I’ve been using Aussie Broadband after hearing and reading fantastic reviews. By the way, if you’d like a $50 referral credit to join, use my code: 3103355. (I’ll receive $50 credit too, so thanks!)
But don’t be afraid to try a new provider in this space. The networks are effectively the same, but the prices are much more attractive with many younger and hungrier competitors. Related post: When Frugality Meets Smartphones.
This seems like a weird one to add, but hear me out. Instead of another international trip, consider seeing a bit more of Australia. Rent a nice house on AirBnb and go exploring! This is what we do, taking our dog with us on road-trips, and it’s fantastic 🙂
There’s no shortage of beautiful places to see in this fine country. We’re very lucky in this regard, so we really should make the most of it. People travel from all over to marvel at the beauty of our beaches, animals, national parks, and friendly laid-back culture.
With the Aussie dollar continuing to fall, travelling within Oz also becomes relatively better value. Sure, some touristy things are expensive. But spending more time in nature and visiting new places doesn’t have to kill your savings. Like me, you might even find that as you come to appreciate Australia more, your desire for exotic travel begins to fade away.
So consider the holidays you currently go on, or are planning. Is there a way to get just as much enjoyment for less cost? Almost always, there is!
If you’re interested, you can get $55 off your first AirBnB booking using my refer-a-friend link (full disclosure: I’ll also receive $25 credit, so thanks in advance if you do use it!).
Okay, maybe I was a little optimistic in saying you’ll get it done in a day. But a couple of days, no worries!
And you know what? There’s actually a way to make this feel even better, and even less like hard work.
Take a day or two off work to do it! For employees, you’re now getting paid to sit around and find ways to save a mountain of cash!
So, not only do you end up with a higher savings rate, higher wealth and earlier retirement than before, but you’re getting paid – the icing on the cake!
Of course, there’s something to be said for always being on the lookout for better deals. And I probably do that myself without realising.
But many of us aren’t wired that way. We all know we should check to see if we’re being ripped off or other options are better value than what we currently have. But we usually get slack and complacency wins, because the motivation isn’t there and it feels like a small victory.
So by making it a special event with a much bigger payoff, we’re more likely to take action. Because those seemingly small wins add up to a large, meaty benefit.
And because it’s a special event, you’re allowed to treat yourself to any favourite food you like. After all, your Optimisation Party needs fuel! Plus, you may even choose to add a couple of tasty alcoholic beverages as you bask in the glorious accomplishment of a job well done!
Of course, another approach is to tackle one of these things each month. And honestly, that’s just as good if you prefer doing it that way. The only thing is, it’s easy to forget, and a bit less exciting… so you might not end up doing it!
Even though it’s called Optimisation Day, this isn’t a one-time deal. The best results are had by playing this game at least once per year.
So make it a ritual. Any time of the year that suits you. Maybe the start of the year. Or maybe next week! It doesn’t matter when you do it – just that you do.
You’ll likely be on a bit of a high afterwards. It’ll feel like you’ve just created money out of thin air! And effectively, you have.
As I said, you can even treat this like your second Birthday! After all, what could be a better gift to your future-self than freedom and a stronger set of finances?
Mortgages: If you want help finding a good deal for your situation, feel free to check out my mortgage broker More Than Mortgages. I’ve used them for 10 years now and they’ve been great. If you haven’t had your home loan reviewed for a while, there’s a good chance you’re getting screwed!
If you happen to get a new loan through More Than Mortgages, this blog may receive a small commission at no cost to you. I only recommend things I use myself and genuinely approve of.