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Newsletter No. 25 July 2008
Assisting people to develop conscious and successful money habits
Peer to Peer Lending (P2P)
People borrowing and lending with each other has been going on for centuries but the advent of mainstream banking in the 20th century reduced reliance on this. The advantages of the internet and growing dissatisfaction with our banks have seen this type of lending emerge in the past few years in the USA and UK and now in Australia on various internet sites.
How it works is someone looking to borrow money will list their requirements ie how much money they want to borrow and what interest rate they are prepared to pay. Potential lenders will then assess the proposal taking into account interest rate offered, details of the borrower, purpose of the loan together with the credit rating of the borrower.
The credit rating is worked out by the site provider based on credit history and income.
To spread the risk most lenders will only inject part of the amount required so there is often a number of lenders for each loan.
The P2P site handles all loan documentation and assists with loans that are in arrears. It is early days however default rates in the USA and UK are reported to be very low.
This type of lending is quite popular for families. For the lender which is usually the parents it puts the loan in a more formal type of arrangement, putting more responsibility on the borrower than would normally happen. This also can assist the borrower by having a successfully repaid loan showing on their credit history.
For being the intermediary the internet sites charges both the borrower and lender a fee which is easy to understand and cost effective. Insurance is sometimes also offered.
To know more have a look at these sites:
U.S.A. www.prosper.com U.K. www.zopa.com Zopa operates in the U.K., U.S.A., Japan & Italy Australia www.igrin.com.au New Zealand www.nexx.co.nz
20 Ways to Save Money
Use a Cash Diary to record everything you spend. Then use this information to look for ways to spend less.
Cold Callers
Are you regularly receiving phone calls at inopportune times from cold callers? Not only can they be annoying, on some occasions it could be costly. I am not talking about the cost of a product or service you may agree to buy, but being the victim of a deliberate scam. An investment scam.
The scam is well presented with promises of high return for minimal or no risk. The investments often are in overseas companies which make it harder for you to find out any information on and also demand a quick decision again making it harder to do any meaningful research.
To make it harder to spot it, is the fact the callers speak very well, have scripted answers to any questions you may have and will include financial jargon to back up their spiel.
Remember a golden rule with investments is if it sounds too good to be true it probably is not legitimate. Have a read of our scam section for more information on scams.
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We make a living by what we earn-we make a life by what we give
Winston Churchill
Newsletter No. 26 August 2008
Money100 - Assisting people to develop conscious and successful money habits
New Articles
Positive responses to our July 07 newsletter article “Mobile Phones & Credit Cards” and the November 07 article “Have a No Spending Day” has caused us to add these articles to our budgeting sections during the month.
Identity Theft
Identity theft is where your own personal information is stolen and then used by another party for financial gain. It is becoming more and more popular with the growing use of technology. Unlike other scams, identity theft can cause problems for a number of years. Identity theft can come in many forms such as:
· Obtaining of your ATM personal identification number (PIN) either by observing the number as you key it in or by a device attached to an ATM. · Sending you an email from an organisation, that appears to be your Bank or similar requesting your password. · Requesting your tax file number · Requesting bank account or credit card details · Someone obtaining information like your name, address, date of birth, drivers licence, credit card etc and using that information to commit fraud by assuming your identity and purchasing goods and services under your name.
Stay alert to prevent identity theft happening to you.
Credit Cards
At the start of 2008 there will be approximately 14 million credit cards in Australia. This is out of a population of 21 million. Of course if you discount those under 18 who make up approximately 25% of the population who can’t have a credit card then the statistics are more frightening.
14 million credit cards out of 16 million people who are eligible for one.
Cost to fill up your car
Reading newspapers from around the world there is a constant theme of how the rising fuel prices have really affected our ability to cover our day to day living costs.
We have provided the following details comparing the costs to fill up your car in various countries. This information was valid as at July 08 and takes into account different currencies.
It is a bit like the Big Mac cost of living comparison that comes out every year.
Average Price per litre Converted to US Dollars Australia $1.65 $1.57 Canada $1.43 $1.40 France €1.52 $2.37 Saudi Arabia SAR 0.45 $0.12 United Kingdom £1.20 $2.40 United States $1.10 $1.10
Money100 Store
The money100 store has been developed to make it easy for you to purchase Books/CD’s/DVD’s which we believe would be worthwhile for our readers. We have spent a great amount of time in looking for items that people have found worthwhile.
To access the store just click on “Money100 Store” this is noted just above and below the 5 books shown on the home page. We currently have over 40 books and 20 CD’s/DVD’s available and will be reviewing these on a regular basis. It is our intention to limit the number available and focus on quality products.
For our Australian buyers the items should arrive in about 2 weeks.
You can also purchase other items from Amazon just click on the “powered by amazon link”.
Enjoy.
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A bank is a place that will lend you money if you can prove that you don’t need it
Bob Hope
Newsletter No. 27 September 2008
Money100 - Assisting people to develop conscious and successful money habits
Reducing the cost of running your car
It doesn’t seem to matter where in the world you live. The common theme seems to be fuel costs are affecting people everywhere. Not only are they directly affecting people when filling up their own cars, they are being affected in other ways as well. Businesses are paying more for fuel so in most cases this is being passed on to the consumer. Food costs have also risen due to the cost of fuel and in some cases weather conditions have affected food production, reducing farm output and as a result increasing the costs as well.
When researching for money100 it is apparent people throughout the world are being affected both directly and indirectly by the rise in fuel costs. This is now starting to affect people’s decisions when buying a home or looking at a place to rent or even where they will consider working. The cost of fuel is now more of a factor in decisions we make than it was say 3-4 years ago. If the costs continue to rise, we will be affected more and more.
As individuals there is not much we can do about the actual cost of the fuel we buy apart from looking out for service stations that sell cheaper than others. But there is something we can do that will reduce our costs and also help the environment by using less fuel.
We sometimes read about ways to do this such as use public transport more or car pool however for many of us this isn’t a practical option. The way we drive and maintain our cars can save us some money. Some practical ideas are as follows:
· Avoid speeding. Not only does this cost more it is also dangerous. · Check tyre pressure regularly · Ensure wheels are balanced · Use other options for short trips ie walk or ride a bike. · Avoid braking hard · Avoid unnecessary acceleration · In manual vehicles, avoid revving while changing gears · Don’t carry too heavy a load · Have your car serviced regularly by a qualified mechanic
Don’t forget about the car you drive or about to purchase? Does it suit your needs? Can you manage with one that uses less fuel?
Are you a millionaire?
Latest report provided by French Consultants Capgemini and US Broker Merrill Lynch provides details on the number of millionaires in the world today. Currently there are approximately 10.1 millionaires in the world today. This wealth doesn’t include their own homes so basically is their other assets over $1 million US Dollars. Of course a million dollars isn’t what it used to be. A million dollars back in 1996 compares to $0.9 million dollars in 2008. The number of millionaires is rising by over ½ a million per year.
The majority of the new comers reside in emerging economies like Brazil, China, India and Russia.
These millionaires only make up a fifth of one percent of the world’s population of 6.7 billion. Ie .020
This is how some countries compare:
Country Population No. of Millionaires % Australia 21,000000 172,000 0.819 % U.K. 60,000,000 495,000 0.825 % U.S.A. 300,000,000 3,028,000 1.01 % Canada 33,000,000 274,000 0.83 %
Interesting how apart from the U.S.A. the other 3 countries percentage is relatively similar.
To make the percentages more clear work out how many millionaires based on these figures are in your town, suburb etc. ie Australia
Town 10,000 0.819% = 81.9 potential millionaires
This compares with world average
Town 10,000 0.20% =20 potential millionaires
What does this all mean?
I suppose how lucky we are to live in the countries we do. Also these 4 countries also have a spread of wealth as compared to some of the poorer countries which have a huge proportion of people in poverty with another large group of very rich.
Perhaps our lives are not as hard as we thought and we are much wealthier than we believe. Is there a way to help others more in need in our community? This can be voluntary work or perhaps donating money to a worthwhile cause.
Is there a simpler and cheaper way?
I remember a lunch a few years back where the conversation turned to the best machine to squeeze oranges. After considering all types of wiz bang machines, I was surprised to hear the answer was your simple manual type where you cut the orange in half and then using a bit of elbow grease, twisted the orange and out comes the juice. To ensure you get all of the juice out you can even put the orange in the microwave first to soften it.
The advantages of using this simple gadget over a big electric machine are many:
· Cheaper to buy · Cheaper to operate · Our energy is used in squeezing the orange · Easier to store thereby saving time as compared to that big machine that is kept in the back of the cupboard · The alternate machine uses valuable energy in its manufacture, delivery and use
Makes you wander what other machines that people have that have an alternative that is simpler, provides some health benefit and use less power. Here are some that come to mind with the simpler option.
Milkshake machine Plastic Container and shake Garden Blower Broom Food Blender Knife Powered Lawn Mower Reel (Manual) Lawn Mower Electric Can Opener Manual Can Opener Treadmill Legs Electric Knife Knife Ride on Mower Powered Lawn Mower Computer Pen & Paper Mobile Phone Face to Face meeting
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Expect the best. Prepare for the worst. Capitalise on what comes.
Newsletter No. 28 October 2008
Money100 - Assisting people to develop conscious and successful money habits
Motivation to Save for your Retirement
If you are struggling to find the motivation to plan for your retirement, you are not alone. Most people are just like you. For those of us who don’t take a great deal of interest in their financial situation then the best way to have some hope of a comfortable retirement is to have a plan that is simple, easy to implement and automatic.
This won’t necessarily make you rich but it will improve your chances of having an enjoyable retirement. By having a satisfactory nest egg at retirement provides choices. Those choices can give you the opportunity to pursue your passions. We are not talking about endless cruises or the lifestyles of the rich and famous, just sufficient money to pursue your passions without having to worry how you will pay for them.
The people who seem to enjoy their retirement the most are those who still have a purpose in life. This can take the form of voluntary work, returning to study, getting passionate about that hobby that you haven’t had the time to dedicate to. No matter what your interest is, it will be easier to enjoy this if you don’t have to worry about your finances.
Have a read of our “7 ways to grow your wealth” article for some inspiration and then read “Automatic Investment Plan” which are both in our Saving/Grow your Wealth section.
Need to know more?
Reading these books should assist you with your motivation levels: · Automatic Millionaire · Richest Man in Babylon · The Wealthy Barber
It doesn’t matter whether your main retirement vehicle is superannuation (Australia), 401 K (U.S.A.) or Private Pension Plans (UK). The basics are the same, the more you put in the more you will benefit later in life.
Global Rich List
Ever wonder how you compare in your earnings compared to everyone else?
Have a look at www.globalrichlist.com
Things are better than what you thought.
Basically anyone with a computer is almost certainly in the top 10%
Three billion people live on less than $2 per day while 1.3 billion get by on less than $1 per day.
Do you have any old valuables?
A recent newspaper article from the Boston Herald Newspaper in the U.S.A. outlines an upcoming sale of a painting that had been owned by a family for a number of generations. They were rather surprised when at an appraisal event it was estimated to be worth up to $500,000!
It makes you wonder are there any old items that you have or family members have that may be worth something. It is possible they are at risk of being lost or damaged unless you do something to ensure they are in a safe place.
I have this old coin that has a date of 1768 on it. I always wondered whether it was of value so one day I did some research on the internet. I found an expert in the UK in old coins and sent an email describing in detail the coin. He replied with a picture of my rare coin that was in fact not rare at all and in fact not a real coin just a token of some sort. It’s value? About 5 cents!
I can remember as a boy seeing some old football cards that my father owned. They weren’t in a set just a bunch of cards. Where are they now? Not sure and neither does he. My parents have moved a number of times so probably gone for good. Would they be worth anything? Again just like “my coin” probably not given there was only about 10 however who knows?
Have a look to see if there is something owned in your family that may have some value. You may be surprised.
Newsletter No. 29 November 2008
Assisting people to develop conscious and successful money habits
Sub Prime Fiasco
Are you reading the headlines in your newspaper and watching the nightly news program about the sub prime mortgage fiasco and current credit crisis and don’t really know what they are talking about, how it started and who is to blame?
Most people are like you.
It all started with people in the U.S.A. putting pressure on those in power to assist the not so well off in buying their own home. Sounds like a great idea, so the government-chartered but autonomous agencies, Freddie Mac and Fannie May were used to increase home ownership. And this they did on a huge scale. Many other Banks got in the act as well lending money to those whose ability to repay was questionable.
Normal credit criteria was thrown out the window and they loaned money, often 100% to people with no assets and incredibly on many occasions no jobs. Now this type of lending is a disaster waiting to happen. And it did and it was expected. Interest rates were extremely low and with house prices on the rise the situation looked ok. In fact, in some cases this made the situation worse, with some borrowers able to go back and borrow more on the basis of their house going up in value. Predictably this was often to cover small loans and credit cards which had been used to pay for items which they didn’t have the money to pay for. The reason? They couldn’t afford them and pay their home loan!
Adding to the problem is most of these loans were on a non recourse basis, meaning that if borrowers no longer wanted to make the repayments on their home loans, they could simply walk away with no further obligations. One question often used in the banking industry when I was in it was “how much hurt money is the prospective borrower putting in”? The rationale is people will fight hard to keep their house if they have put hard earned money into it ie a deposit. With nothing to lose some of the borrowers would have spent savings on cars, holidays and shopping expeditions instead of extra repayments on their home loans.
The amount of foreclosures in the U.S.A. has been estimated to be up to 6.5 million households. Time will tell whether this forecast is accurate.
Recent data coming out of the U.S.A. notes illegal immigrants default rate is way below the average. The reason is this group usually had to put in a reasonable deposit and they moved to the U.S.A. for a new life which in most cases meant home ownership. Their desire to own their own home and with “hurt” money involved means they are working harder than most to repay their loans.
With the increase in interest rates saw defaults go through the roof and also housing values plateau and in some cases fall. The tide was turning and on a vast scale.
The other issue is the practice of banks these days to sell off a parcel of loans to investors with a mixture of good loans and these poor ones and rating them as Triple A investments. It is a way for banks to lend more and more money if they can sell off these loans for a profit. It also means what was a primarily U.S.A. problem is now a worldwide fiasco. The sub prime drama 1st seemed to raise its ugly head about a year ago and it has been growing in strength ever since. The on selling of these loans, initially saw many financial institutions saying we are ok we aren’t involved. This has now changed particularly so in the past couple of months. Now the situation is just like a game of domino’s as the number of financial institutions are finding themselves in trouble.
In Australia, the situation is not as bad. For a start the lending criteria of our banks is generally sound. I can agree with this having worked in the industry for over 20 years with one of the majors. Ability to repay is the main criteria which is worked out by comparing income against financial commitments and also taking into account savings held and equity in their home. This sound criteria has assisted our 4 majors all having a Triple AAA rating and sharing this with only 20 other banks in the world.
In fact the Global Competiveness Report for 2008-09 which only recently was released showed Australia out of 134 countries was ranked 4th. The leader was Canada.
Where did the U.S.A. come in at?
40th with countries like Botswana, Senegal and Mauritius in front of them. Another country making big headlines with the current credit crisis is the U.K. They come in at 44!
Alan Greenspan the former chairman of the Federal Reserve admitted last month that his belief in a free market system where the financial industry in the U.S .A. was less regulated than other industrialised nations has obviously not worked.
As a result we shouldn’t see the issues being seen right now in the U.S.A. coming to Australia. What may happen however is if the U.S.A. does go into a recession which may even be the case right now, this will have an impact on most countries economies particularly China and therefore Australia as well.
Any suggestions?
All we can do is look at our own situation. The best way is to reduce spending to ensure our own personal situation is ok.
Have a read of our budgeting and handling debt sections.
Good Luck
A buy nothing month!
With the cost of fuel, hitting us directly at the pump and also indirectly via increased costs of goods like food it may be necessary to get really serious about your financial situation. If you have had a look at our debt program it mentions the saying:
“Just for today, one day, do not incur any new debt”
To try and change your spending habits and give yourself some breathing space in the hip pocket it may be necessary for more drastic measures.
The aim here is to limit spending for a full month to essential items only. This consists of food (to be eaten and prepared at home), utility bills, school expenses and fuel. Even so there may be a way to even reduce these. Can you negotiate a better deal on your power, drive less, and use the phone less?
Items that are included in the no buying month are:
· Eating out includes lunches for work · Entertainment · Clothes
At the end of the month, review your bank account balances.
How did you go?
Is there surplus money that can be used to reduce debt?
Go on try it this month
New Article
We have added another article this month.
“First Full Time Job” has been added to the Budgeting Section.
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You only live once, but if you do it right, once is enough
Joe E Lewis.
Newsletter No. 30 December 2008
Assisting people to develop conscious and successful money habits
Try cash instead
As outlined in our “Money is Easier to Access” article (see miscellaneous section) the world of money has definitely changed. Before the early 80’s if you didn’t have the cash in your wallet you generally couldn’t spend anything. That impulse spending was much harder back then. What it did do was provide people with the opportunity of having reasonable money skills. They generally put money away to cover the rent/mortgage and lived off the rest. The ability to spend more than you earned was so much harder. Especially with shopping hours being much shorter as well. There was none of this shopping centres being open 7 days a week.
The opportunity to spend just wasn’t there. The early 80’s saw ATM’s be introduced however they tended to be in the larger shopping districts and weren’t as prevalent as they are now. Our spending habits hadn’t really changed the only difference was some people didn’t have to rush to the bank on a Friday afternoon to withdraw some money. The amount they withdrew didn’t change just how they withdrew it.
People were brought up in an environment where spending habits were conservative and the means to access their money matched that.
Things changed. During the late 80’s early 90’s we started to see more ATM’s at our bank branches. This trend continued through the 90’s to include placement of ATM’s at service stations, gambling institutions and smaller shopping centres not serviced by a bank branch. At this time also came the ability of buying groceries at supermarkets and using plastic to pay for them with either our money (out of our own bank account) or not our money (credit card).
This was the start to the growing level of consumer debt we see today.
By the late 90’s the revolution in how we access and spend money was just about complete. Since then the internet has arrived and with it another opportunity to spend more money (usually credit card – not our money).
For the young adults today, they would see the way we used to access and spend money pre 1980 as being ancient history and archaic.
This however has seen a larger proportion of our population than ever before in financial difficulties. Mainly as a result of their poor money skills and easier access to money.
If you are having trouble managing your money, perhaps it is worth considering operating the way people did before 1980. That is pay for all goods/services with cash. This is particularly worthwhile shopping for groceries and when you are at a large shopping centre. When you have spent what is in your wallet/purse that is all you can spend.
This is an opportunity to improve your budgeting skills.
Love Scams
A recent newspaper article outlined a scam originating from Nigeria in which an Australian man lost approximately $20,000. A 23 year old Nigerian man has been arrested by the Nigerian Economic Financial Crimes Commission and allegedly posed as a woman on an online relationship website and convinced him to send money.
In joint operations between Australian and Nigerian authorities has so far seen 10 arrests to date, however this is believed to be a drop in the ocean given the amount of money believed to be leaving Australia.
Romance sites are becoming more and more popular for fraudsters who have moved on from spamming millions of email inboxes worldwide.
The key point is to be vigilant.
You wouldn’t give your bank details or hand over money to anyone who asked, so don’t start now. After all you can’t be sure who you are dealing with. In this particular case the woman was in fact a man.
Every country in the world has key industries. Nigeria it seems has the scam industry and is particular good at it. They are continually changing the way they do it; however the key point doesn’t change. And that is, at some point you will be asked for money or bank account details. This will only be when they believe you have fallen for their story. Once this occurs they start to reel you in just like a fish caught on a line
Don’t fall for it.
Have a read of our scams section for more information.
Are the Banks setting the home loan bar too high?
This was a question that was put to visitors of the ninemsn web site during November. Over 70,000 people responded with over 2/3rds responding yes.
On reflection, I wondered what did the question really mean and also what did most people think the question meant.
After the sub prime fiasco and resulting credit crisis, to me it was obvious that no was the correct answer. After all poor lending to those that hadn’t the means in the USA helped start the economic downturn we are now in. In that case the home loan bar was to low and therefore I expected most people to realise that and vote no. Is it possible going on the survey that there is a lack of understanding about why we are facing an economic downturn?
To me the question seems to be asking people to have a dig at the banks in Australia. Why? Probably because it is easy.
Just be thankful our banks have sound credit standards, or the situation in Australia would be much worse.
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When prosperity comes do not use all of it all.
Confucius
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