The ‘Lazy’ Tax
No-one wants to be considered ‘lazy’. It conjures up all sorts of images from ‘Norm’ the beer-swizzling 70s couch potato who loved to ‘warm the set and cool the tinnies’ to someone using their wine bottle as an arm weight and saying they went to the ‘gym’.
But many of us are actually paying ‘lazy’ debt.
According to a 2016 study by Queensland University of Technology and Heritage Bank, Australians are paying a whopping $11.6 billion in ‘lazy tax’ every year by not shopping around for the best deal on their banking, insurance, grocery and utilities providers!
Here’s our top tips on how to avoid racking up lazy debts.
What exactly is a lazy tax?
“The lazy tax is the money many Australians are losing simply because they can’t be bothered shopping around,” says Laura Crowden, iSelect’s Corporate Affairs Manager.
It’s not an official tax but it can cost you thousands of dollars if you’re not willing to spend time researching the best products and deals on all of your financial products (banking, insurance, health providers, to name a few).
Loyalty doesn’t pay
Gone are the days where we stay in the same job forever or stay with one provider forever. In a rapidly changing marketplace, you need to be prepared to switch providers if the sums aren’t stacking up.
Smart companies are now competing for your attention and working hard to attract new customers so capitalise on this atmosphere of competition and use it to your advantage.
The industry isn’t geared towards loyalty anymore, a fact which many people, including older Australians, find hard to accept.
“Unfortunately, for a lot of those categories, there aren’t loyalty incentives for long-term customers and it pays to see what else is on offer on a regular basis,” says Laura. “Your loyalty might not be reciprocated by your provider.”
If you can track it, you can change it
When was the last time you unsubscribed from over-zealous email marketers? Or decluttered your office or your overflowing Inbox? What about checking your bank statements to see if you can cancel any monthly fees or costs?
We can’t change what we can’t measure.
Many of us simply get overwhelmed by the thought of going through our statements or accounts and seeing if we have the best deal. And yet, the study shows that we are also paying for insurance extras we don’t need and not updating our policies and products when our life circumstances change.
Make sure you check in with where your life and business is at and re-evaluate your insurance and banking requirements as time goes by.
For example, maybe the kids have grown up and flown the coop and you don’t need the same kind of internet coverage. Or you’ve moved house or bought an investment property and you’re not sure if your home contents or landlord insurance provider is the most affordable or suitable for your needs.
Just think of it this way: your personal inertia could cost you thousands of dollars and just imagine how many trips to the Fiji or the Amalfi Coast you could buy if you stopped paying the lazy tax? How many rounds of golf or new clothes or other investments you could make if you saved your pennies?
Review your home loan (and major life purchases)
Given this is probably the largest debt many of us will acquire in our lifetime, it pays to review at least every 2 years.
The QUT/Heritage Bank study also found that while 55% Australians have begun to shop around for good deals and save money on minor and ‘instant gratification’ spends like groceries and fashion and shopping, many still lose lots of money on the major life purchases like property (7.4 billion in Australia alone is wasted).
The extra premium banks make on the difference between the rate they charge existing borrowers and they rate they use to attract new borrowers is a form of ‘lazy’ tax.
The way to stay on top of this is to check in with your bank and review your interest rates regularly so that you can jump ship if you need to and seek the right financial and mortgage broking advice when you do.
Review, track, measure, research and save! If you do a financial detox every now and then, you’ll not only feel better, your bottom line will look good too.