Indexation & HECS/HELP Debt

the Order Kerni Whoalbury and a waddery woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on a wondery country, acknowledging the elders, the ancestors and the next generation coming through as this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow.

And I guess today is the day that we are going to be talking about that, because it is wild and when I just need to make sure that everyone is aware that I do mean the first of June, not the thirtieth of June, because a few people have messaged me because I was on Instagram Stories just like talking about it the other day and they're like, oh, don't you mean the thirtieth of June when you know

end of financial year happens. No, this happens on the first of June, ahead of the end of financial year, so that in a month, basically, in the next thirty days, they can calculate what your repayments were be with the new level of indexation and can hit the ground running from the first of July basically. So I'm not wrong. I just feel the need to, like, you know, back myself a little bit and be like, this is why I'm correct. But also people were right to slide into

my dams because I'm consistently wrong. So if you would like to correct me, you are more than welcome to so don't. Yeah, I feel like a diep when I correct myself, right, Sure, I just feel a little bit rude when I'm like, I was right. I know it is.

return for your birthday? No, I always end up owing money. It is actually a joke, is okay? Thank you for tho as well wishes though. Let's talk about debt.

is a lot of money. And when you're paying back your HEX debt, especially if you're on a lower income and you're not maybe you know, in one of those high marginal tax brackets, but you're in the bracket where you're starting to pay back your debt, it just feels like it stacks on a little bit, like it genuinely feels like you're getting nowhere. And I mean you are, I promise, but it just feels like you're going backwards.

And I think that there's just this I don't know, it's just a unspoken concept of hex versus help that it's there to help you, and it feels like you're kind of being kicked while you're down. Like you already have hex debt, You already see it on your pay slip coming out. You already know that that's money that's not going into your back pocket. We know how we feel about debt in general. Yes, we've spoken about the difference between good, bad, and okay debt here on the podcast.

But I just feel like we're all just a little bit salty with indexation because for so long we've just talked about how hex slash help debt doesn't have an interest rate associated with it, Right, So when you hear that Beck, you smile and nod, go yeah great, but it is indexed, So it kind of feels like we're being kicked while we're down. Does that make sense? Kind of?

do you remember back in the day. I don't know if you ever had this luxury, but my mum would give me a fifty cent coin silver, it was silver. I don't know if anyone sin silver coins these days because they can't buy you anything anymore. But I get a fifty cent cone from macis.

swimming lessons, like Victoria Devine. Anyway, you're right. I feel like it used to be twenty cents at some point, but this is beyond the point. It is now what like a dollar fifty? A dollar fifty, I think it's like more than a dollar. Oh, blow me down. I feel like in different locations around Australia, somewhere you're going to say, oh, they're a dollar, somewhere else they're like a dollar fifty. Right, Okay, so that has increased in

price over time. But are you getting the same product, beck, I would say, identical product, identity. It's just nowadays it costs more to produce. It's going to be more expensive. So the dollar that you used to have back in nineteen ninety eight, when I was seven years old and going to swimming lessons and paying twenty cents for a cone, I could have bought five of those ice cream cones for a dollar. But today, if I gave you a dollar, you could only buy one, and in some locations you

wouldn't even be able to buy one. You need another fifty cents to get there. Right, So a dollar today is not worth what a dollar tomorrow is worth. And that's what that saying means. So indexation is that increase in price. So it's the difference of going from twenty cents to a dollar and you kind of don't get any more value out of that product. You're still getting the Maca's cone. There's actually no more value. It's not any better today than it was back then because it's

probably the same recipe. So like nothing has changed about it except the price. And that's what inflation is. It just means that a dollar back then was actually quote worth more because you could buy more with that dollar than it is today.

world does increase over time. And when we look at it, the RBA, which is the Reserve Bank of Australia, they're kind of in charge of making sure that's consistent for us and the reason we want it to be consistent is so we can consistently afford to grow as an economy. Inflation on average increases about two or three percent each and every single year, which is good.

that is by increasing the cash rate. So the cash rate is how much they're lending the let's call it the government's money, how much they're lending the government's money out to the big banks. So by increasing the ca hash rate, it costs the banks more to borrow the money from the RBA to give people mortgages and.

don't know if that's going to work for me. So you as the consumer, the person that gets the mortgage or gets the personal loan or gets the business loan, you're less likely to take it out. And if you're less likely to take it out, what that means is the economy starts to slow down because there's less people like you making big purchases and throwing money around, so that the economy starts to go down a little bit. And that's what they're trying to do, so that we

can curb that growth or the inflation over time. So if you're doing less in the economy, like you're not buying as much, things are a bit more expensive. You're kind of like holding your purse a little bit closer to your chest, going like, I don't know if I

want to, you know, pay for that this month. It means that there's less business going on in the community and less business going on in the country, which means ultimately the economy isn't doing as well, and that's what they're trying to create.

Dot au. And the reason I like this is because it's up to date with what's going on on the ATO website. But in all honesty, it's better than the ATO website. It's a privately owned website. I mean, this guy whoever owns paycalculator dot com dot u is a wizard, because everybody in the industry or in my industry uses this website as kind of like a really good base level calculator to just like go, oh, I'll whip it out, see what's going on. You know, pop in your income,

see what that looks like. Anyway, everybody uses it, but it's covered in ads, and you just know he's breaking it in because every single time someone in our industry goes there or you go there, he's making money. So I just feel like that was a genius thing from him.

That is genius exactly. So if you go to this website, you can basically put in your salary and then click options, So you could click your salary includes superannuation or it doesn't, or you could click student loan, which is what we're talking about here. Yes, so many people, just like you, they don't know what they're paying. All they see is these headlines and get really stressed out about like, oh my gosh, I'm going to be paying seven percent indexation,

Like I already can't afford a house. I already, you know, struggle to buy a good coffee every friggin day, Like what's going on. So, when it comes to calculating your repayments, it's actually based on income thresholds, and those are different

from your marginal tax bracket. So your marginal tax bracket is kind of the most normal one, which sits in that thirty two point five cents per dollar, which most people are in in our community, because it sits between forty five than one twenty, Like, that's a really wide bracket. People often think that that bracket then applies to your HEX, but it doesn't. It's different from that. So if you earn under forty eight thousand, three hundred and sixty one dollars,

you don't pay any of your HEX back. After that point, it starts to increase, and the first amount that you pay back is one percent, then two percent, then two point five percent, and that is the repayment of your income. It's a percentage of your income, not a percentage of the debt that you owe. Right, So if you earn forty eight thousand to fifty five thousand, eight hundred and

thirty six dollars, you pay back one percent. If you're between fifty five and I'm just going to round these down, but fifty five and fifty nine it's two percent, fifty nine and sixty two it's two point five, sixty two to sixty six it's three, and so on and so forth. Let's pretend for a hot second that you earn an income between seventy four hundred and ninety three dollars and seventy four thousand, seven hundred and twenty two dollars. That

means that your repayment rate is four percent. So if we calculated that out, and I've just popped in a random number, and I can do this for you offline, so it's your specific income back. But I've pretended that you're on seventy three thousand dollars, right, which I feel like is a pretty normal income for our community. That means that every single week from your paycheck, you would have a student loan amount of fifty six dollars coming out.

That's fifty six dollars that you're paying towards your help or hex debt. That's not going into your back pocket. The second that your hex or help debt doesn't exist, that fifty six dollars goes back into your personal account. You start being paid it right right, So that to me is a fair whack of money, because like fifty six bucks that you know, it's half my grocery bill, Like, that's a lot of money. I think it's a lot. Fortunately,

that's one hundred and twelve dollars. Every single month, that's two hundred and forty three dollars, and then every single year, beck that adds up to twenty nine hundred and twenty dollars. Like, that's a lot of money. I see, nine hundred and twenty bucks. I could go on a holiday to Bali. I reckon, in this economy, the flight's probably going to cost two nine hundred dollars, But we don't want to stretch that out right, I reckon, we jet Star. We

could get there. But moving on from that, I think it's important to understand what that means because if you actually increased your salary back and you were between a different tax bracket, like let's say you earn eighty four thousand dollars, that student loaner payment goes up. So now on a salary of eighty four thousand dollars, you're actually paying back five point five percent, which to me is a fair whack. So five point five percent each and

every single week's eighty nine dollars. Every single fort nine, it's one hundred and seventy eight dollars. Every month that's three hundred and eighty six dollars, and every year that's forty six hundred and twenty dollars. So this isn't something that we should be blinking at. Like from little things, big things grow. And I know you said, oh, it's just like thirty bucks a week or whatever, and that could be true for your circumstance, but thirty bucks a

week back ends up being fifteen hundred and sixty dollars. Okay, I see, And we know that a lot of people are still struggling to get you know, one thousand dollars in their emergency fund. Yes, So it ultimately, to me, is a lot of money that we should be caring about, and I think that it's something that we do need to discuss. And whether you're paying back more or less isn't really about the conversation right now, The conversation I'm having is I really want you to understand what your

paycelip means. I really want you to be in the position where you just know what those repayments are. And I mean it's not a decision you're making like you have to pay that back. It's coming out before you even get your money back. But what we want to understand is is that something that's hindering your ability to create wealth in the future and right now for your personal situation. I don't think it is. I think it's fine.

You're bopping along, you're having a good time. Like I know the financial position you're in, you shared it on the podcast before, like you're not about to buy house in the next six months. So it's not something that we need to be worried about because it's not impacting your borrowing capacity. So personally, I don't think you do care. So do we worry about the seven percent? I mean, yes we do. And the reason we do is because

we want to understand what that means for you. Pragmatically and pragmatically, all we need to understand is what does

that mean for you? Beck? Right, So seven percent of thirty thousand dollars is actually twenty one hundred bucks, So that seven percent is going to mean that you go up to thirty two thousand, one hundred dollars instead of the thirty thousand dollars and beck we just said before that if you're on an income of seventy four seventy three thousand dollars, your student loan repayments every year about twenty nine hundred and twenty dollars. So you just paid

twenty nine hundred and twenty dollars off. And what that's going to feel like to you is that you only paid eight hundred and twenty dollars off that year, even though every single week fifty six bucks was coming out of your account. It just increased. So no, there's no interest on that, Like you're not paying an interest amount on the repayments that you have, but that amount that you owed increased by seven percent because of indexation, right, I see?

I feel like that's a good thing. But also on the other sides that I'm thinking, if this is a common thing that your hex staate kind of goes up on a yearly basis depending on how the economy is going and things like that, it almost feels like, is there any point in trying to like pay it off faster or anything, because it's it just feels like you're running on a treadmill.

So the Greens were actually proposing a law that would freeze indexation for seventy four billion dollars in help loans, which has been rejected by the Senate Committee, which I think is a little bit rude. That's why I think it's so much of a hot topic in the media. A pitch it out because obviously would it help the economy to freeze help debts, Probably because people are already stressed,

We're already not getting pay rises. It's why as she's on the money, we're going to be going into even more career content because I'm getting so frustrated with people just not being paid what they're worth, people not being able to afford the groceries that they were last year, people not knowing their worth because they don't have the confidence to ask, Like I just think that the government

could be doing more for us. But I guess let's have a quick look back at what indexation has looked like historically, because indexation is calculated each and every single year, and basically it's not always the same. So in twenty eighteen, indexation on our help debt was one point nine percent. In twenty nineteen, it was one point eight. In twenty twenty, it was one point eight. In twenty twenty one, it was zero point six percent. In twenty twenty two it

was three point nine. So it increased, and the reason it increased is because inflation in general was increasing, And what they do is they take the average inflation rate for the past two years and then apply that. So they've done that again this year, and that's why we are predicting it's going to be seven percent. That number hasn't come from nowhere. That's come from us going Okay, well, if the inflation rate last year and the inflation rate this year is this, This is what that seven percent

looks like and where it's coming from. So that doesn't mean that seven percent is going to happen again. It might go back down. And in a perfect world, if the RBA is doing exactly what they should be doing by you know, helping to slow down economic growth and helping to bring down the rate of inflation, next year it won't be so much. So it won't be the same thing each and every year, but there's always going to be a level of indexation that is applied to

help or hex steps, because that's what we signed up for. Sure.

think that they should wipe it and be kind. But whatever, they're doing it so that their dollar that they len to you for your education isn't worthless when they get it back. Oh those dirty dogs, I know, right, But like it makes sense if I explain it like that, Like if I said, hey, Beck, I'll pay for your your degree. It's thirty thousand dollars, I'd like thirty thousand dollars back. But as we explained before, a macis cone in ninety seven is not worth what a macas cone

is today, But the same value is there. They're basically saying we just want the value of our dollar back so that we can you know, put that money into

something else and not have it be worthless. And you kind of go, oh, that makes sense, Like that's a pretty pretty sexy explain if I borrowed money from a friend and they're like, oh, yeah, okay, can you just like, if you want to borrow the money from me, can you just make sure like there's no additional fees or charges or anything that get charged to me, because individually, I shouldn't be missing out if I'm lending the money

to you. And I mean, we're not friends with the government, But that's okay.

there are people to protect us. Right. How good is that? But there are a lot of things that a lot of people don't agree with. I mean, we could start a conversation about the doll we could start a conversation about how government money is being channeled into the wrong education places, where could be starting a conversation about how there are a million schemes that need funding and don't

have it. But essentially, I just think that the government is maintaining this so that they still have money to go around because they just don't want their dollar to be worth less tomorrow than it is today to them. And they essentially, from my perspective, they're seeing helping you out as a privilege. They're seeing it as like, Okay, well I helped beck out, she didn't have to cough up thirty grand to go to university. I'm gonna just ask for that money back, and that's a fair way

of doing things. Obviously, the same is not true in other countries, like in America, like they have to get very expensive student loans that are worth a whole heap of money and have a whole heap of interest associated with them. And then on the flip sides, there are countries that have a completely free education system. In fact, Australia used to have a free education system where university

was free, and this wish that happened again. So essentially, what I think that they're trying to do is get back the money because they just don't have enough of it to go round at the moment. And I think that from their perspective they're doing the right things, but from a community perspective, I think they could be doing more.

hard time. What would we do about there? It's not really yeah, a political conversation for me, it's not going, oh my god, the Greens a label or liberal like. The Greens had this idea to freeze indexation for seventy four billion dollars, and I nodded and smiled and said, you know what, that's a pretty good idea. I think people would like that.

ten dollars. For every ten thousand dollars in debt you have, it will consistently increase by seven hundred and ten thousand dollars. So if you have a twenty five thousand dollar loan balance, it would increase by seventeen hundred and seventy five dollars. Beck And if you had a fifty thousand dollar loan, it would increase by three thousand, five hundred and fifty dollars. And Beck, do you want to know how much my

hex STEP's going to be increasing by? Because you know, we've been a little pervy, we're being a little personal go on. So I still have eighty thousand dollars worth of hex step, So I'm going to be slammed with five thousand, six hundred and eighty dollars worth of indexation. No, that's a trip for two to Bali.

you know, I'm in a bit more debt. But honestly, I see my HEX debt as something that has helped me in the past few years. It has got me to where I need to go. There was a period of time where it made me feel physically sick when I logged into my portal because it was more don't log in. Yeah it was more than one hundred grand, and I'd be like, whoah, who let that happen? Whose

idea was that, And it's kind of like you. Right when I started my degree, I just didn't think about how much debt I was racking up, Like I was not interested in finance. We've talked about this publicly before that by the time I was twenty two, I was in like I think it was forty four thousand dollars worth of personal debt. Like I was really good at that, and that didn't worry me at the time until I started learning more and more about finance and I kind of was like, oh, I might need to pull my

socks up. This is a lot of money. And like I got out of that. It took a lot of work and a lot of time. But it's one of those things where now things like this mean a bit more to me because I'm grateful for them. But when I took them on, I had no concept of what that would look like for me in the future. And I think a lot of people are in that circumstance.

to think about. So first things first, we know that every single persons situation is different, and if you're stressing over it but you can't afford it, please stop stressing. It is what it is. Let's not stress about the things we can't change, Like, what's the point. Absolutely, if it's something that is stressing you, then maybe we can look at it in a bit more depth. But I think making sure that you're comfortable with that and you know what it means and how it works is basically

what everyone can do. Whether we contribute more or not is a different conversation. But given what we've discussed for the first time in a long, long, long time, it actually might be worth for some people to be making extra contributions to their HEX debt. It's something that personally, I will not be doing, and the reason I'm not doing it is because I don't need to do that

to achieve the goals that I currently have. So if my goal was to buy a house, and I knew that by paying down some of my HEX debt would mean that my ability to lend more money would increase them, maybe it would be worth it for me. Maybe I could do that. But if you're in that circumstance shameless plug for Zella Money, please go. We'll put the link in the show notes to talk to one of our brokers.

If you are in the position to be purchasing a house, or you think you're in the position to purchase house and you're thinking about your HEX debt repayments, go and talk to a mortgage broker so that they can look at your whole circumstance, and they can sit you down and be like, yep, back in your situation, it would do this for you, and you go, great, I will do that. Can I tell you that on a podcast?

Unfortunately not. But what I can tell you is that it might change it for some people, it might not because it's going to depend how much text debt do you have, how much can you afford to repay? What is your current deposit for the home that you're looking to buy? Do you have a Garran tool loan? What do all these things actually mean for you? There's no one size fits or response to that, and I am very sorry. I wish there was. Did it make content creations so much easier?

you can get out of a pickle real quick. Someone the other day called it a squirrel fund, and I thought that was real cute, because like squirrels, they're like hide away all their nuts for the winter, and then they live off their nuts in the winter when things aren't as good. That's what how emergence. That's very cute. Anyway, we want a squirrel fund. We want to make sure that we're not in any personal debt, and at that point we can consider whether making additional contributions to our

hex or help debt is a good idea. Perfect Again, it's going to depend on whether you're going for a home loan or not as to whether that is worth it or you know, what could just be stressing the but Jesus out of you, Beck. You could be so stressed over your heck's debt, and no matter how many times you listen to me or how many times you listen to other podcasts, it's just something that keeps you up at night. Maybe making additional contributions to something that

fits within your goals makes you feel good. You do you, sis, you do you, You do you. But what I want you to be able to do is tell me what your payments are, what they look like, how it impacts you as an individual, what it actually looks like if you paid off more debt. Because a lot of people might go, I really need to get rid of my hex step before I get a home. That's actually not true. I bought a house with a one hundred thousand dollars worth

of hex step. We work with people every single day that have very large hex stets and still get homes. That's company. So it's really important to understand that doesn't need to be completely diminished before you do that. That's why I want you to talk to a broker, because the amount of people that I have spoken to that are like, oh my god, vee, like I've paid off

eighty thousand dollars worth of my hex stet. I go far out, that's so sick, like, that's so good, And then they say, so I'm going to now start saving for a house, and I kind of go, oh good, smile a nod like, because there's nothing I can do

about that circumstance. But in reality, if they had the capacity to pay off an eighty thousand dollars home loan, they had the capacity to save eighty thousand dollars, and they could have probably already been in a house and just started paying off their hextet a bit more now that they have the property. And obviously, when it comes to investing, the sooner you're in the market, the more time you have for compound interest to play into it.

And sometimes that's the best outcome. Am I saying that that's right for every single person? No, But that's why you need to be educated, because if you're stressing about your hextet, I can almost guarantee that the reason you're stressing about it is because you don't know enough about it. You don't know the semantics of that hexel help debt, but you also don't know how it impacts you financially,

and that makes people stressed. So talk to someone, listen to some more podcasts, go and talk to a mortgage broker about how that actually impacts you, because Beck, you know, we calculated what your hex step looks like and how much you're paying back. You're like, yeah, okay. I feel like you said yep, okay, because that was about what you expected anyway, Yes, you were fine with that, and

you're also not looking into any other big goals. But would you be stressed about it if you were on the home buying process and you're like, oh, I don't know what that looks like.

But I just I want you to be in the best possible position to make the best decision for you, and that is honestly all I can do.

kind of like your personal hub. The simplest way to make your repayment on Hex is actually just through bepay it's so easy. I'm not saying go do it right now, but what I am saying is, like, I think a lot of people assume it's this really complex process. It's not. It's just a be pay for repayment, like you just transfer it like you would be transferring your mate when

they bought the pizza. Easy, really easy. So if you are considering making a repayment and you're like, oh, I'm really stressed about this, or I only have a little to go rah rah, make sure you're making that repayment well before the end of May to make sure it's processed in time to avoid any additional indexation that might be applied to that. So just be in really early because when it happens, it's going to happen on the first of June, so you want to make sure that

you are getting that payment in asap. If that is your plan.