Archive for July, 2010

Vote 1

Sunday, July 25th, 2010

With election day getting closer, you will have to decide which person or party you will put a number 1 next to. I am not about to tell you which of the 2 major parties is better, and I don’t discuss how I vote. I would simply urge you to consider the bigger picture.

Both major parties have things going for and against them when it comes to matters of personal finance. The coalition started the Financial Literacy Foundation, whose aim was to raise the standards of money knowledge among all Aussies. The Labor party ripped the guts out of it. Labor has plans to increase super contributions so all Aussies have a better retirement. The coalition has said it will scrap these plans.

The next time you see a pollie (or candidate) in the local shopping centre, try not to focus on what is going to benefit, or hurt, you the most. Think about what will be best for society and the country. Then put a 1 next to the party, or independent, who you feel will do the job.

When I was young I asked my mum “Why do we have compulsory voting in Australia?” She replied quite simply “If you didn’t have the right to vote, you would want it more than anything else.” Please, don’t waste this important right.

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It’s your funeral

Sunday, July 18th, 2010

If you watch daytime commercial TV you can’t miss the large number of ads for funeral insurance. If you believe them, you can pay as little as $3.50 a week for $6,000 of cover that’s paid out to your family within a couple of days of you dying. With figures like these, the average customer would have to be paying premiums for 33 years before they’d paid for their funeral in yearly premiums. And that assumes the insurance company isn’t incurring any costs or making a profit, and getting craploads of advertising on the telly for free. Unlike life insurance products, cover is guaranteed and you don’t need a medical examination (the average life insurance company won’t go anywhere near you if you’ve been diagnosed with a life-threatening disease for fear they’ll lose too much money). And if this wasn’t sweet enough, their customers who are older than 90 get their cover without even paying more premiums.

In a lot of ways these ads are like the ones that were on years ago for high interest (and high risk) mortgage backed securities. Their offers sounded too good to be true, and the companies went bust.

So, do you want funeral insurance, or do you want to pay funeral insurance premiums for a few years, then get a letter one day telling you your policy is worthless as the company has gone belly up?

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The grand total

Saturday, July 10th, 2010

When you receive your payment summary from your employer this year, make a note of the total money you earned (if you are self employed you should have a bookkeeping system that will show what you have made). Subtract the tax you have paid and you are left with the amount that was put into your bank account over the year. Now go and dig out your old payment summaries from previous years (they used to be called group certificates) and do the same with these.

What’s your grand total? You might be surprised how much you have made over the years. You might be even more surprised when you compare this figure with how much you have in savings and investments, and the value of your net worth. Your net worth is a simple figure you can work out be subtracting the total of all your debts from the total value of all your assets. If the amount you have saved, or the amount of your net worth, is close to zero you might be feeling pretty ordinary. Particularly if the money you have made over the years is significant. Don’t panic. Don’t think it’s too late or too hard to change your situation.

Realising you need to make a few changes is the first step to making a positive change. The worst thing you can do, is nothing.

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Who want to be a taxi driver?

Wednesday, July 7th, 2010

On a recent work trip to Queensland I got talking with a cabbie – a bloke in his late 20’s or early 30’s who had come to Australia from the sub-continent. He arrived, aged 16, with nothing. It turns out that this guy had only recently moved to Queensland from Melbourne. For love, of course.

He told me that he owned 2 cabs in Melbourne as well as a house. Outright. Yes, all 3 of them. “What does it cost for a pair of taxi number plates?” I asked. “Five hundred thousand dollars,” he replied. I turn to my colleague in the back seat and said “There you go – the cabbie’s a millionaire!”

He had worked bloody hard and you wouldn’t pick his wealth to look at the guy. In fact, he would blend into a crowd as easily as many of the wealthy people I have met. The ones who stand out, displaying wealth with the clothes they wear and food they eat, are the ones who keep their credit card providers very, very happy.

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The rate we hate

Tuesday, July 6th, 2010

The Reserve Bank has met again and decided what is best for the economy (and inflation) by raising, lowering or keeping steady interest rates. The average homeowner doesn’t give two hoots about the economy, only how interest rate movements will affect them personally.

Some people are living so close to the edge that even a 0.25% increase in interest rates will force them to do something drastic. Like sell their home.

Don’t view interest rates in terms of what they will be doing in the short term. Look at where they could be in the medium and long term, then evaluate how this will impact on you. If you could not handle rates rising again, please get in touch with your lender now. Right now. Give yourself the best chance to hold onto your home by sorting it out early. And if the figures tell you that you need to sell, remember that your family and mental health are worth much more than 4 walls and a roof.

Hope for the best, prepare for the worst – it’s a great philosophy to live by.

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What’s important?

Sunday, July 4th, 2010

Things in life that are more important than money: life itself (wow, that’s heavy), love, family, happiness, good health, laughter, education, fulfillment, sex, helping people, wisdom and playing card games.

Things in life that are made easier by having your finances sorted: all of the above.

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No regrets

Friday, July 2nd, 2010

It’s natural to see past performance figures for a particular investment and think “I wish I’d invested money in that 7 years ago”. When it comes to investing, people will often look back and regret not making a decision.

It’s much better to look forward 7 years to when you say “I’m glad I did something wise with my money in 2010”. With investment, getting in early is important, but it’s never too late to start.

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