The surplus cash flow trap

20 Feb 2018

By Shadforth Financial Group

It’s great knowing that when a bill comes in, you’ve got the surplus cash flow to cover it. However a study by the Queensland University of Technology (QUT) found that each year Australians spend an additional $11.6 billion on day-to-day bills like their energy bill, general insurances and banking than they need to.

Does this sound familiar?

Trevor and Simone had fallen into a routine around paying incoming bills for their family. Trevor would pay the utilities as they fell due, and Simone would handle the insurances. Each paid their own mobile bills (with different providers), Trevor paid for their son’s phone and Simone covered their daughter’s phone. Additionally, Simone also gave her daughter some petrol money every now and then, as well as helping her out with the registration and insurance for her car.

With this kind of arrangement, neither Trevor nor Simone had a good understanding of how much money was heading out the door, only that they had enough surplus income to handle things as they came up.

By streamlining their expenses to come from a single bank account source Trevor and Simone could work out what their family’s actual outgoings were. They could then make changes to consolidate their bills and providers and make the most of the services their family need.

What’s stopping us saving around $500 per person each year?

The QUT study points out that at least 50 per cent of people involved in the study thought about switching providers in order to curb their expenses, however, only 25 per cent actually did.


The perceived effort, not even the actual effort to review their suppliers was seen as too high. Importantly, the study didn’t suggest people needed to ‘tighten their belts’ to make the savings, they merely had to take advantage of better arrangements offered by a range of providers to keep more of their money in their back pocket.

Dr Juliana Silva-Goncalves from Queensland University of Technology, says: “It’s interesting to see apathy as the key barrier to switching... This belief that it’s too hard to switch and too costly, is stopping households from saving thousands of dollars. We expect this trend to change and the amount of people switching to significantly rise over the next year with the expected economic downturn motivating people to shop around and become more savvy.”

The top things to review to ensure your dollar is going as far as it can include:
Your home loan

Owner occupiers are currently sought after by lenders - if you haven’t reviewed your home loan in the last one to two years, you may be able to find yourself a much more attractive interest rate than you currently have. In fact, 50 per cent of QUT’s respondents were over $1,000 better off if they made a new lending arrangement.

Also, make sure your loan product has an off-set account feature and take advantage of it or switch to one that does. You effectively reduce the balance of your mortgage for the period of time you can afford to have your income sitting in the off-set account. This could significantly reduce the interest calculated on the balance.

General insurance

While it’s easy to remain with the same provider year on year, having a broker compare what is available in the market could save you up to $200 per year on car and home and contents cover. For instance, there may be discounts depending on your age or lifestyle. Property improvements could also reduce insurance fees. For example, installing an alarm system, garage or new window locks.


Check your bill against your power meter – does it seem correct? Also, try the Government’s Energy Made Easy website to see how the prices of your energy supplier compare to others in your area.

Private health insurance

Shop around and make sure the policy you have suits your needs and you don’t pay for extras you never use. Check out the Private Health website to see how your private health insurance provider compares to the competition.

Personal insurance

Personal insurance such as life, total and permanent disablement, trauma and income protection should be reviewed every one or two years. Changes to your personal situation may affect the cost and benefit of your policy. Determine what insurance cover you have inside and outside of super and ensure you’re not paying for more cover than you need.


Log in to myGov and see if you have any lost super or ask your current super fund to do a search for any additional accounts you have. Additional accounts could mean additional fees which erode your super balance.

If the perceived time and effort of changing your providers is the main reason you are remaining with your supplier - contact your financial adviser to help you find better arrangements for your:

  • home and investment loans
  • general insurance
  • personal insurance
  • superannuation.

And don’t get stuck in the surplus cash flow trap!

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