Newsletter  No.  31                 January  2009   

We help people all over the world improve their money skills   

A Rainy Day  

A recent survey of more than 1500 adults by the Commonwealth Bank found that about half have no savings set aside for emergencies with most admitting to relying on credit cards to get them through difficult times. Of course what is an emergency or unexpected bill seems to vary. One third said these seem to include items like home and car repairs.  

If you find yourself in the group where bills like these really hurt, it is time to look at a budgeting system that works for you. 

Have a read of out budgeting section and in particular cash diary, latte factor and automatic budget articles.  

How to teach kids the value of money  

Open them a Savings Account 

Open this when they are about 7 or 8 years old. Pay in a small amount each week and if they receive money at birthdays or other occasions have them deposit this as well. Discuss with them that it is to be used to buy something really special. Suitable time frame to buy would be 3 months ahead and show them the statements and how regular deposits are growing the balance. Building a large balance is not the aim at this age, just the practice of saving for an item and developing good money habits. 

When they are older and have a part time job for instance, then the bank account should have an investment option allowing teenagers to save for a big ticket item like a car. 

Take them to the supermarket 

When you go shopping, give them a job of finding out the cheapest item out of those you propose to buy. This is a good teaching tool for them to understand about choices when buying. Taking into account different sizes, weights, types makes an even bigger impact. Have a reward if they do a really good job of helping you to save money. Not monetary either, perhaps their favourite food for dinner that night 

Put them to work 

Doing chores around the house is a great way for them to develop good money skills and also reduce your workload. You could pay them on an incentive basis ie. at the end of the week talk with them about what amount of chores they willingly did without being yelled out. You could then ask them how well they did and pay an amount to them based on their efforts. 

Show them the basics of investing 

A good way to explain about investing is to monitor share prices of companies whose products they like and understand. Some examples of Companies that have products they understand like Billabong and Coca Cola. You could show them the company websites and explain what they do ie Coca Cola sells other products apart from Coca Cola. The share price could then be tracked weekly by your child. This is a good way to gain some understanding about investments. 

Be prepared to Say No. 

When children are demanding that you buy them things, tell them no and give a reason that they are able to understand. As they get older and perhaps have a prepaid mobile phone pay the account monthly and explain that it won’t be topped up during the month under any circumstances. This is a good budgeting tool. 

Tell them about credit 

During their early teenagers years explain to them about credit. Show them your credit card and home loan statements and explain how they fit into your overall budget/financial plan. When should they obtain their first credit card/loan? The best answer is when they have good money skills and can handle the new responsibility rather than the new credit card/ personal loan being a burden which they can’t handle.  

More Scams 

A newspaper article, this time from the UK, which notes that in every year, 3 million UK residents lose £3.5 billion pounds to some sort of scam. However you look at it, it is a lot of money. 

One that we have mentioned in our scam section is a phishing scam which seems to be growing 

This usually involves a fraudster sending an email pretending to be from your bank asking you to follow a link and enter your account details and password. The growth is staggering with 7,200 in the 1^st six months of 2007 which increased to 20,600 for the same period in 2008. They can be difficult to detect as I have received them and they are very realistic.  

Remember your bank, credit union or building society will never ask for your password or PIN over the phone or by email     

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Formal education will make you a living; self education will make you a fortune   

Jim Rohn 

Newsletter  No.  32                 February  2009

We help people all over the world improve their money skills    

Texting while driving

The don’t drink and drive campaign has been around in Australia for many years. It focuses on making people aware of the need to make the correct decisions about whether to step in the driving seat after drinking. The goal of course is to reduce the number of car accidents and most importantly lives lost on the roads. Campaigns like these, safer cars and better roads, not to mention compulsory wearing of seat belts has seen the amount of road fatalities in Australia reduce by over 50% since 1970 when the number of cars on the road has more than doubled in that time. 

Road safety campaigns constantly change to keep the message fresh. 

A new one that can be expected in the future is don’t text and drive. 

A recent study in the U.S.A. by Nationwide Insurance showed a disturbing trend of our younger (more inexperienced) drivers to drive while texting (DWT):

·                         37%               18 – 27 

·                         14%               28 – 44 

·                         2%                45 – 60 

The number of accidents relating to texting is growing. 

Insurance companies are becoming more aware of this trend. They are checking your mobile phone transactions for texting at the time of the accident. You may find that your claim is rejected for repair of your car. Ouch! 

So next time you are in the car and thinking about responding to that urgent confirmation of what is for dinner or what time you will be home? Think again. Is it that important? 

You may save yourself an accident or maybe just a fine.     

More Scams     

Another scam doing the rounds. 

This one involves staff usually at a retail outlet fitting a skimming device to the hand-held terminal that is used to withdraw funds from savings accounts and credit cards. The magnetic strip on the back of the cards is copied and the pin number is either observed or recorded via camera. 

It is most likely this occurs at a smaller retail outlet rather than a supermarket or large store/restaurant.  

The actual use of this information can occur a few months after the information was obtained making it difficult for people to remember when this could have happened. 

Often the retail outlet is popular with overseas tourists, making it even harder to pin point exactly where the fraud was initiated. 

Retailers are being asked to be observant. 

For consumers all we can do is be careful and look out for any suspicious behaviour and be careful when inputting pin numbers. Try and be as close to the machine when keying in the numbers which reduces the chance of the details you are entering being caught on camera. Also ensure other people are not beside you. Having them behind you prevents them from observing. 

You may have noticed cards are now coming with a computer chip on the front of the card. This records the information more safely, however for now we are still reliant on the black strip on the back of the cards until the new technology is more widely accepted. 

Be alert.  

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A small leak will sink a great ship    

Benjamin Franklin”  

Newsletter  No.  33                 March  2009

We help people all over the world improve their money skills

Rules for parents  

Teach your children to be frugal 

Teach them to run their own lives. 

The more dollars adult children receive from their parents, the fewer dollars they accumulate, while those who are given fewer dollars accumulate more. 

No matter how wealthy you are, teach your children discipline and to be frugal.  

1. Ensure your children don’t realise how affluent you are until after they have established a mature, disciplined, and adult lifestyle. Also have their own income which they live off.
2. Minimise discussions of the items that each child and grandchild will inherit or receive as gifts.
3. Never give cash or other significant gifts to your adult children as part of a negotiation strategy.
4. Stay out of your adult children’s family matters.
5. Don’t try to compete with your children.
6. Always remember that your children are individuals.
7. Emphasise your children’s achievements, no matter how small.
8. Tell your children that there are a lot of things more valuable than money.

Some Ways to Earn Money from your Home

Struggling with your finances at the moment? 

Most people look at cutting expenses. Another option is to increase income from your home. See if these are an option. 

1. Take in a boarder. This is quite popular for singles who buy a house/unit for the 1^st time. Have others live with you and let them assist in paying off your home loan. This is what I did and it certainly made a difference. The boarder could be a friend or even a university student from overseas or someone from a country area who lives to far away to travel every day. 
2.  Have a garage sale. A great way to sell off unwanted items and reduce the clutter. 
3. Home Office / Business. Have you a skill that could be used to make money and operate from home? It doesn’t have to be just office / internet based either. It may not necessarily have to be full time or time consuming for that matter. Some people are involved in selling products like Amway or making something in their shed. Have a think of something you are good at and look at a way of making money from it. After all an extra $100 per week may make a difference. 
4. Rent your garage or parking space.  It is possible a neighbour may be willing to pay you to store their car in your garage or parking space.  
5. Is there something you own that hardly gets used? Maybe you can use it to generate income or barter for something you need. An example might be to allow use of a lawn mower in return for child minding which you usually pay for. 
6. Storage facilities are growing in popularity. People use them for a variety of reasons. Do you have a secure shed, garage or even a spare room that isn’t being used? Perhaps you can use this wasted space to generate income.

Smoking in decline

Some great news recently provided in the Tobacco in Australia report.  

Just one in 5 Australians now smokes with the downward trend continuing. An example of this is in the 18-24 year olds group which has seen a change from 1980 when 47% smoked to the present day where 19% of this age group is now smoking.

This is clearly a sign that the push by the anti smoking groups is succeeding. 

The benefits in the hip pocket can be huge to those who give up. 

The benefits to their health can be remarkable as well. 

Go on give up now! 

Both you and your family will be better off.  

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When you are in charge of your finances, you are in charge of your life 

Paul Hanna 

Newsletter  No.  34                 April  2009  

We help people all over the world improve their money skills  

Lonely Hearts (Another Scam)  

The typical Nigerian scam of receiving a letter or email asking for assistance in moving money out of the country may have reached its peak. The media and police authorities have both been doing their part to assist. This recent example in the U.K. demonstrates the ability of these scammers to continue to adapt and find new ways of committing fraud.

Shane Symington is a UK mailman whose loneliness leads him to MySpace. He met Angela Gates who after a few weeks revealed she was having serious money difficulties as a result of her mother’s medical and funeral expenses. The details would have been gradually provided and Angela probably would have advised at some time of her inability to communicate on a regular basis due to her having to obtain a 2^nd job. Of course the job would have been something she detested and an offer to assist from Shane made. Angela would have resisted at first while at the same time mentioning a large inheritance that she was due to receive after the estate has been finalised.

How much did he hand over?

₤100,000

Once Angela had obtained as much as she thought she was going to receive from Shane she shut down the scam there and then. Or did she?

She sent an email to him saying she appreciated what he had done and also that she was in fact a man and from Nigeria!

All over you might say? Not quite.

An email a few weeks later from a woman saying she too had been caught out in the same scam. She informed him of her desire to have the scammers apprehended with a plan to hire some ex FBI agents to track down Angela. This saw Shane hand over more money, this time approximately ₤30,000!

Strike 2, another scam!

No matter how the scam is played out, they all have one similar trait. A request for money at some time.

Don’t fall for it or let someone you care for fall for it.

Ten good money tips

1. Have a system that enables you to know where you spend your money. Our Cash Diary is a good tool to use. With this information set up a budgeting system that works for you. 
2. If you are struggling with your finances, talk to someone who can assess it from an outsiders view. Better still have a number of different people do this giving you a more balanced opinion. People to talk to could be a Banker, Accountant, Financial Counsellor or Financial Planner. Perhaps there is a relation, a friend, a neighbour who you trust and have confidence in their money skills. 
3. Do you need your credit card? Why not leave it at home? If you are going shopping use your money instead of someone else’s money (credit card) which you have to pay back later. Go on start to change your spending behaviour now. 
4. Do you have a plan in how you are paying off your debts? Many people don’t and are paying for it by not reducing their credit card debts or personal loans fast enough. Have a look at our article on our Debtonator™ and have a plan that truly works. 
5. Do you constantly use other bank ATM’s, without considering the extra cost involved? What is your reason for doing so and what can you do to avoid this charge from now on. Maybe you need to consider changing banks or perhaps it is as simple as walking that bit further down the street.  
6. Do you know the value of what you own and more importantly how much you owe? Many people don’t know what their superannuation (retirement plan) is worth as they don’t look at their annual statements. If they took an interest they may decide to take some action such as combining all the different superannuation accounts they have which will save them money. It also may mean their money is invested better. By fully understanding their level of debt may spur them on to better manage it. Fill out our personal balance sheet spreadsheet now and take more of an interest in your finances. 
7. Once you have your personal loans/credit cards under control attack your home loan debt. The only really affective way is to pay more than the minimum. Go onto a site like www.infochoice.com.au that has loan repayment calculators. By seeing how much you save if you increase your loan repayments can save you thousands of dollars. What are you waiting for? 
8. Do you have any savings that you aren’t using which is sitting there for a rainy day? Perhaps you could make a lump sum off your home loan that can be redrawn if necessary. Another option is to pay it into an offset account. A key to good money management is having your money work for you as efficiently as you can. 
9. If your finances are really a concern, it may be worth consolidating all of your debts into one. Remember this may see a short term debt like a credit card being added onto a debt with a much longer time frame like a home loan. The aim here is to reduce your monthly financial commitments to put more money in your wallet now. Remember to cancel those credit cards and don’t put yourself in this situation again.  
10. Talking to your lenders may seem daunting however it may be the best option. They can look at your full situation and may be able to provide some worthwhile options. Don’t be embarrassed about your financial position. They are professionals. Be upfront and tell them everything and talk through it. You will probably be very relieved.

Happiness is not something you find, but rather something you create.

Newsletter  No.  35                 May  2009  

We help people all over the world improve their money skills  

A Good New Story 

These days with the gloom and doom of the economic crisis it is pleasing to read a good news story. 

The story dates back to 1965 when Gary Fenton, an Australian tourist in Belgium didn’t have the money to pay for a ferry trip back to the U.K. He met Jim Webb from the UK who was also on holiday at a ferry port where the Australian asked to borrow the money required. Jim promptly handed over the ₤5 needed and Gary promised to send the money back which was arranged with Jim providing his address. 

Jim didn’t hear from Gary until last year when a note with ₤200 (₤5 for every year that had gone by) was delivered personally by Gary. Unfortunately Jim wasn’t in; however the note explained why he had been tardy in sending the promised money. Gary intended to forward the money with the proceeds of his 1^st pay when back in Australia however the piece of paper with Jim’s address was lost. Jim’s address was recently uncovered while going through some old papers that his mother had kept. Gary decided to call in on Jim while he was in London on a business trip and come good with his original promise. 

What a delightful feel good story and one that helps to provide some positive thoughts in a time of uncertainty.  

Credit Rating 

There is a common misconception that a previous borrowing history is required to be accepted for a larger loan such as a home loan. People often talk about not having a credit rating as being a great hurdle. 

In fact lenders are usually very pleased when someone has demonstrated a good savings pattern in the past to pay for their car or overseas holiday.  When they are looking at a home loan application for someone with no borrowings and a sufficient deposit usually means they approve the loan.  

As a former loans officer, it was not uncommon to be assessing an application and determining the applicants had a sufficient deposit and income to meet the repayments on a home loan. When the extent of their financial commitments is revealed it soon becomes clear their other borrowings have ensured they do not meet the servicing requirements the financial institution requires. The key here is an inability to save for smaller ticket items has affected their ability to buy a bigger ticket item like a home. 

Of course an applicant who has never borrowed and has minimal assets will have trouble borrowing. A lender will look at them and ask how are you able to afford a loan when it appears you need all of your income to live off?  

Remember there are more important issues when borrowing money than a supposedly non existent credit rating. They are: 

·       Your normal income (overtime etc may not be included in their calculations)

·       Repayment history on all current borrowings including credit cards

·       Conduct of transaction accounts

·       Level of existing debts

·       Previous loan history

·       Amount of assets compared to borrowings

·       Stability of income    

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Some men see things as they are and say why? I dream of things that never were, and say why not?  

George Bernard Shaw  

Newsletter  No.  36                 June  2009

We help people all over the world improve their money skills   

Credit Card Offers   

Information provided by Mail Monitor which is a credit card direct tracking service outlined that credit card offers mailed to US households reduced by 27% to 3.8 billion in 2008. That means the figure in 2007 was 5.2 billion or to make it look bigger 5,200,000,000 or 17 offers for every of the 308 million residents. Of course if you remove those under 21 and perhaps those over 60 then the real figure for their target market in 2007 was probably closer to 25 offers! 

Now I don’t know what the figure is here in Australia or other western countries. What I do know is the amount is too much. 

That is a lot of paper that has to be printed, delivered and taken to landfill or recycled. What a waste of resources  

If you add up all the other junk mail/advertising that is received that includes supermarkets, clothing outlets etc it is clear we are not doing enough to help our environment. 

I receive offers from my credit card provider probably every quarter and also an offer from American Express as a result of my Accounting membership about every 2 months. This last example is quiet common with businesses paying money to trade organisations to offer their product direct to their members. 

There is an opportunity to do our own bit in reducing unnecessary use of natural resources and its effect on our environment. 

There are 2 easy things we can do.  

·       For those offers made direct to us, we can request (via email of course) that we no longer receive separate offers by mail.  

·       Put a “no junk mail” sign or similar on our letterbox 

I have emailed my Accounting organisation and requested they not send me out any offers by outside organisations via the traditional mail service. 

Go on do it now.      

Declined Application for Finance   

People borrow money for a variety of reasons, and they use different financing options such as home loans, personal loans and credit cards. Basically there are only 2 possible answers that you can be given and that is approved or declined. 

There has been a great deal of press in the last couple of years about loans approved in the U.S.A. to people who should not have been successful in their application. Enough has been said about this so we will write about the other situation where people have had their application declined. 

There are variances between different banks and indeed banks in different countries in what they look for in determining whether to approve a request for finance or not. The basics however are pretty much the same. 

The most important criteria they are looking for is, are you able to afford the repayments on all of your financial commitments relatively comfortably. To determine this the financial institutions will take into account: 

·       Your normal income (overtime etc may not be included in their calculations)

·       Repayment history on all current borrowings including credit cards

·       Conduct of transaction accounts

·       Previous loan history

·       Amount of assets compared to borrowings

·       Stability of income  

If you are declined for finance, don’t just look for another financial institution with lending criteria that may be more relaxed. Try and talk to a loans officer to find out why. Often it isn’t just one particular reason but a combination. Be positive in your discussions and then review what they said and the application itself. Remember the financial institutions have a long history of loan records which they use to help them decide which borrowers are more likely to default or miss loan repayments. 

The declined application may assist you to put off that application for further finance, and work on improving your financial position before applying again. 

Sometimes there are reasons for the decision to be reviewed again. Examples I have seen include: 

·       The borrower has convinced the financial institution their total financial commitments may be higher than would normally be accepted however their expenses may be lower than other people. Examples could be lower vehicle running costs ie walk to work, live a frugal lifestyle (credit cards would have to demonstrate this) 

·       Borrowers not including all their assets in their personal balance sheet. Young people in particular are prone to this. Ensure you try and work out what you have spent for everything you own. Walk around where you live and write down everything. You may be surprised that what was recorded as assets in the original application is far less than what you have now discovered. 

·       Unused credit cards. Financial institutions usually use the credit card limit not the outstanding balance when assessing your ability to repay. This may be hurting you. Ask the institution whether having the limit reduced would alter their decision. 

One final point to consider when looking to borrow, is what if interest rates were to rise by a couple of percent? Financial institutions often take this into account particularly the first few years. Input your details into a loan repayment calculator to take into account different interest rate scenarios. 

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Winning is not everything, but making the effort to win is. 

Vince Lombardi