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7 steps to fix your bank problem

Apparently, according to a poll by The Australia Institute, some 68% of people want a Royal Commission into our banks. Earlier this week I made the observation that it seems to me that our banks are like Kim Kardashian — everyone seems to hate her but an unbelievable number of ‘fans’ do business with her!

There’s something about Kim

The SMH’s Jenna Clarke drew together some KK facts, which are worth understanding if you hate the poor woman:

  • She has 161.8 million fans.

  • Forbes says her gross earnings were $67 million last financial year.

  • Her TV show Keeping Up With The Kardashians is into its 12th season. Seinfeld only did nine.

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I have to say I wouldn’t want my daughters or granddaughters to be a KK fan but I admire her business nous and many small businesses can learn about marketing cut through from her.

Also read: Why poor Aussie financial literacy is to blame for banks overselling their financial products

Balancing act

In comparison, banks need to be more self-regulatory and more insistent on better ethical standards but we do habitually hang out with them.

We love banks when they give us a home loan to buy that dream property we always wanted. And we often don’t compare rates but simply sign up for a loan because we want that house so badly!

Super contributor

We should love them when their ‘too big profits’ deliver great super returns. Also, banks and their dividends are an important contributor to our super funds.

Have a look at what super watcher Warren Chant said about super earlier this year: “Super funds were down in April, with the median growth fund (61 to 80% growth assets) losing 0.4% for the month. However, they remain well on track to deliver a sixth consecutive positive financial year, with the return over the 10 months of the year to date standing at a very healthy 10.9%.”

And over 10 years, our top 10 super funds have returned 6% plus on average, despite the big slug of the GFC when stocks fell 50%. Bank shares are important to super fund returns.

Also read: Big four banks grilled by Parliament

A desirable risk

Banks are a bit like cars – they can be dangerous but we get a lot out of them so we take the risk. I’d rather my money be in a bank than with a more dodgy financial institution that promises to pay higher returns and then goes broke. And banks are better than leaving my dough under the pillow.

Some might say banks and Kim are both necessary evils but that’s not true – there are alternatives. 

How to beat the banks

On Kim, anything intelligent would be my suggestion but here are my 7 steps to beat the banks.

If the country has a bank problem then let the people of the country solve it themselves by wising up, reading smart stuff and hanging out with the right crowd.

I’m going to list a few really sensible things that all Australians should know to pretty well bullet-proof their money life. And you don't need another big brother Government inquiry to deliver you results that will protect you from the hip-pocket threats out there.

Also read: How much did the banks make by delaying interest rates?

A 7-step plan

So here goes:

  1. Create a list of all of the financial products you have from your super fund to bank accounts to insurance policies to loans.

  2. Go through each policy, noting all costs and/or returns from them.

  3. Go to comparison websites such as www.finder.com.au, www.ratecity.com.au, www.iSelect.com.au, www.superratings.com.au, and so on to make sure you have great deals on loans, term deposits, credit cards, insurance policies, energy prices, leases, etc.

  4. If you are 50 years of age plus, join the FiftyUp Club from my mates at 2GB at www.fiftyupclub.com for a range of money-saving deals.

  5. Go to a mortgage broker to see if you have the best home loan deal or simply see if you can do better than www.switzerhomeloans.com.au where our variable home loan rate is 3.89% with no fees, etc. so our advertised rate and comparison rate are exactly the same, unlike a lot of lenders. (Sorry about the plug but I’m plugging everyone else and we do have a great, damn honest deal!)

Importantly, find out what your super fund costs and returns and compare it to this list:

Top 10 Performing Growth Funds* for 10 years to 30 June 2016 (%)

Ranking

Super fund and investment option

10 years (% each year)

1

REST Core

6.6%

2

QSuper Balanced

6.5%

3

BUSSQ Balanced Growth

6.4%

3

CareSuper Balanced

6.4%

4

Catholic Super Balanced (MySuper)

6.3%

4

UniSuper Balanced

6.3%

4

Commonwealth Bank Group Super Balanced

6.3%

5

Cbus Growth (Cbus Super)

6.2%

6

HOSTPLUS Balanced

6.1%

6

AustralianSuper Balanced

6.1%

Source: Chant West, 19 July 2016 media release (www.chantwest.com.au)

(*Performance is net of investment fees and taxes. The returns in the table are before any administration fees or adviser commissions are deducted. The performance data is based on Chant West figures, and the table ranking is based on individual investment options offered by a superannuation fund, and the investment options involved in the ranking process look after assets worth $1 billion or more.)

         6. Switch your 17-20% credit card to the ME Frank Credit Card at 11.99% or the Coles Low Rate MasterCard at 9.99%.

         7. Once you have all your info together and you know what you are paying and what you could be paying, go to your bank and twist some arms for a matching or better deal.

Professionalise your money management

This is just a seven-step plan to get you money smart and to protect your hip pocket from the scary world of banking, which we make scarier than it has to be by being so unprofessional about how we operate with money.

One day you might find trustworthy accountants and financial planners who will help you grow your wealth. And out of that, you can teach your children about what an adult should know and be doing about money.

Also read: Why governments and central banks should stop trying to stimulate the economy

It takes commitment!

I hope this little education piece spurs on many to lift their game but my greatest fear is that not enough people will read it. So pleas for a long, expensive and ultimately a political Royal Commission will be called for and might even happen.

Every morning on my website and here once a week I try to make the world of money, finance and getting richer easier to understand, so reading me or someone else, who also does this too, might be a great first step to bulletproofing your money life from all of the threats out there. That said, the greatest problem is our lack of commitment to building our wealth and only you can change that.

 

Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds.

www.switzersuperreport.com.au