Australian Personal Finance and Bush Fires

GoodDayAustraliaThis week we had special guests at our home. Our cousin Jim* and his wife Anne* arrived from Australia for a fortnight tour of US. They live in Melbourne which is one of Australia's thriving metropolitan cities.

We were excited to see them after a long time and wanted to catch up with our lives' varied events and experiences. But they were tired from their long international flight and were fighting jet lag. So we politely requested them to rest as much as they wanted. After all their bodies needed to catch up with lost sleep and get recharged for their forthcoming US tour.

brunchToday they joined us for brunch. Rejuvenated they were brimming with enthusiasm and energy. Immediately we started exchanging notes about various events of our lives and the U.S. economy in general. Since personal finance is an integral and important aspect of success in life, we asked Jim about how he managed his personal finances in Australia.

Jim and Anne is a young DINK (Double Income No Kids) couple. Jim is a software engineer, and Anne a registered nurse. Jim shared that the core of their personal finance revolved around spending less than what they earned and building a solid savings buffer. After graduating from university, they saved like crazy for the first couple of years to pay off their education loans. Next, they saved for a year to build a small emergency fund and clear their car loans. Their sacrifices and discipline have borne fruit since now they are debt free.

At this point Anne added that as a consequence of their intense focus on savings, they have a sparsely furnished apartment with few possessions and second hand cars. In contrast, some of their friends after graduating from school and getting their first jobs, went in for sleek furnished apartments and top of the line cars. Looking at their friends' lifestyles, at times they felt left out. But now they are thankful that they paid off their debt first since their friends are buried neck deep in debt with no savings whatsoever.

CarsBoth of them have jobs that need a solid one hour (each way) high traffic commute every morning and evening. They own two cars to facilitate independent commute, odd hours of work and attending emergency calls (for Anne). Jim said that he uses an Australian comparison site to shop for their car insurance. And he saves money through special discounts by combining car and home insurances and purchasing them from the same vendor. He uses the same tactics when he shops around for $0 annual fee credit cards. On further discussion, we found that the insurance games are pretty akin to the ones we have in US. Since Australia is a developed nation, they have shopping tools akin to those in America.

At present, Jim and Anne plan to take it easy for a year and beef up their fledgling emergency fund. Also, since their debts are paid off, they plan to travel around the world during their vacations. We were impressed with the ideas of taking a break to see the world and bolstering their emergency fund at the same time :). Once their emergency fund is done, Jim and Anne plan to build a fund that will contribute towards their first home's down payment. We felt really proud at the way Jim and Anne have handled their finances. Perhaps they will become role models for their friends who are struggling with debt and personal finance in general.

Real EstateCurrently Jim is keeping an eye on the interest rates on home loans, and spending his free time in learning the ropes of the Australian real estate market. He said that so far his studies have revealed that in some parts of Australia, housing has become severely unaffordable. Researchers have compared similar properties in other countries, like UK, New Zealand, U.S.A, and Canada. Results indicated that Australia had the highest number of cities in which properties would come under the "severely unaffordable" category!

The Sunshine Coast in Queensland is currently touted as the least affordable area. The Gold Coast and Sydney were among the top five "severely unaffordable" areas. A recent report from an international group has concluded that the housing bubble in Australia is on the brink of bursting! Jim added that if the employment held up, falling interest rates and grants for first time buyers could help improve the situation. Well let's hope that things do improve. Real estate in America is not in good shape and no one has a clue as to how long it will take for things to turn around. Till then we can hope for the best and keep our fingers crossed.

Australian Bush FireFrom real estate, the conversation turned to Victorian bush fires which have claimed 181 lives so far. In addition to losing loved ones, many people have lost everything that they owned including their homes which have been burned to the ground. Some reports claim that the major banks have not yet decided on whether they will dissolve the home loans of the affected people. This means that these innocent people may still have to make mortgage repayments on a home that they no longer have!

However Jim added that official from banks have promised to do whatever is possible to help the victims of the bush fires. According to recent reports, banks have contributed towards helping bushfire victims through donations, with each of the major banks, like ANZ, Commonwealth, NAB and Westpac, giving one million dollars each to the relief fund that has been set up to help the victims of the bush fires. Anne pointed out that the Australian insurance industry is poised to assist people who have lost their property and homes in the tragedy by speeding up claims through the assistance of a specialist task force.

Jim voiced that aside from the tragic loss of human life and property, thousands of animals (wildlife and livestock) were abandoned and injured in the fires. RSPCA Australia (Royal Society for the Prevention of Cruelty to Animals) is working overtime to help them. They have set up several triages in fire zones like Kinglake, Whittlesea, Burwood and Beechworth for people to bring animals in need of care. Anne added that there will be major effort from teams of animal welfare agencies to ensure that animals can be relocated to areas suitable for them to live in.

News of the relief effort pleased our hearts. We'll look into how we can contribute. All of us silently prayed for the peace and well being of those who have been affected by the bush fires along with those who are serving in the relief teams.

Jim and Anne sends in their good wishes to all our readers at FIRE Finance. We wish them all the best on their first tour of this great country :).

* Names have been changed to protect the privacy of individuals.

Image Source(s): iStockPhoto, ABC News