Wednesday, 3 August 2011
USA narrowly avoids default by a couple of hours and the world sharemarkets plunge. Investors are concerned that the world's largest economy is faltering and heading towards another recession.
Wall Street fell over 2%, Asian markets over 2% and European markets between 2% - 3%!
Australia dollar drops approx. 3 cents USD from Tuesday morning to Wednesday afternoon.
$30 billion wiped off Australian share market, as it drops below 4,400 for first time in almost 12 months with this years gains all but gone. Markets are down 13% since April representing a loss of $170 billion.
Australian retail sales in Australia slipped by 0.1% with most economists predicting a 0.4% increase.
Economists and short term money markets now factoring a interest rate cuts over the next few months. It was only 3 - 4 months ago that economists were predicting 2 to 3 interest rate rises over the next 6 months.
Amazing couple of days...more to come??
Friday, 29 July 2011
The first part covers most of the secured money savings options with maximum tax benefit. The later part presents views of personalized money management program and debt relief strategies like debt consolidation programs.
1) The most favored pension plan 401k in America. It is a traditional pension plan for American private employees who contribute certain deductible salary into an account opened by their employer. The account is some time merged by the employer with the direct profit sharing account of the company.
2) The ultimate benefit one gets from 401k plan is in the form of deferred tax benefit upon his deposited money. As the money gets channeled to your special account before the IRS tax takes its toll, a large volume of money you can save there. This way your money gets compounded fast.
3) 403B plan is what some say just like a clone of 401k plan having almost all the benefits of 401k. This plan allows Government employees or people working in charitable, scientific and educational sectors to voluntarily contribute their money on a pre-tax or post-tax basis. You can hold mutual funds or bonds in your 403b account whereby get the dividends and interest intact. No taxes will be exercised on your investment profits.
4) Private Mortgage Investment- Mortgage investment is great way of amassing money. You offer your house to any buyer to live in without losing your house until full payment is made with all the accruing interest. In case your mortgage buyer defaults in any of his payment you can terminate the term of the contract and keep your house at your disposal. It is considered more profitable than rental income.
5) Roth IRA- It is unique money saving tax efficient plan. Up to certain limit of money you can save into this account as tax deductible. The specialty of this plan is that you get tax-break when you withdraw your money from your account. Though withdrawal prior to time limit may cause penalty. But in some cases like house purchase or paying student loan, you can avert penalty.
Your self- initiative to plan for your money management.-
6) Pay your Credit Card loan- Your personal finance will be incomplete if you let your credit card interest and late payment penalty overpower you. Therefore, before your credit issuers report the Transunion or Equifax; try to pay them on time.
7) Avoid Bankruptcy in any way- if you are knee deep in debt, look for debt consolidation or debt settlement programs. But never avail bankruptcy if you are told that filing bankruptcy can give a fresh start to your economy. Bankruptcy can destroy your future possibility of obtaining credit from potential borrowers.
8) Make a customized Budget- Whether you are in financial good health or in crisis, saving your money properly is always advisable. This way will help you manage your money better way - try EasyBudgeting.
9) You may find some of your spending over insignificant item is not worthy to be included into your list of spending. Like if you buy a can of soda when filling gas into the tank of your car, but you should still reckon every penny as your spending. Doing this you will realize how great amount of cash flows in and out of your account.
10) Make it a habit to put aside certain percentage of your income as your emergency savings. You can also utilize that money in secure mutual funds instead of putting it into static checking account.
Friday, 22 July 2011
I remember the days when there were two major sales; 1) Boxing Day sales and 2) half year stocktake sales. The state of the economy in Australia, especially the retail sector is under pressure from a lack of consumer confidence and therefore spending.
Retailers have worn thin the sales pitch because consumers know another one will be just around the corner. Harvey Norman have a new sale every week and an opportunity to buy of 30, 40 or even 50 months interest free, all in an attempt to lure consumers back through the doors and dollars back through the register. Don't think its working.
Just yesterday, Premier Investments (Just Jeans, Jay Jays, Portmans etc) announced that they will be closing up 50 loss making stores and looking for ways to cut costs in the supply chain, including sourcing from other Asian countries as opposed to China where labour costs have risen significantly in the last few years.
With retail sector experiencing it's worse winter for a couple of decades, it would appear that global uncertainty, high interest rates and the risk of further increases have meant that consumers are increasing their savings, instead of attending these so called "sales".
Kmart have decided enough with the sales, they'll just over a lower price all year round. Maybe this is a sign of things to come....
Monday, 18 July 2011
It's that time of the year we all probably wish we managed better. Pretty sure most people say they'll do it better next year, be more prepared, keep all receipts and supporting documentation nicely filed and ready to take to the accountant or to help with preparing your own tax return.
Whilst I'd love to provide you with a list of tips and tricks to be more prepared for this time of year, truth is, you'd probably read it and think that's great and probably not think about it again until next year and really, I'm not the best person to be able to do that.
Maybe it's just one of those things in life that we just have to accept. Don't get me wrong, I'm someone who tries to be more organised or learn from not doing things as best as possible but having documents ready for tax time is not something I'm good at.
Instead of worrying about it during the year, I just put everything in the same place (when I remember) so that at least it's altogether. That at least reduces the amount of time I need to spend to find receipts or get things organised and that's enough for me......I do the best I can and hopefully mange as best as possible when it comes to completing the process.
When you're cursing and thinking about how you hate getting doing all that is required to complete your tax return, instead think about the tax refund you're going to collect and what you can do with that....that'll make it all worthwhile!
Tuesday, 12 July 2011
During the most recent economic recession, consumers defaulted on their credit cards in record numbers, resulting in card issuers taking a less aggressive approach to finding new customers. Now that the economy is on the rebound, banks that issue Visa, MasterCard, American Express and the like are back with new ways to try to win a loyal customer base. They have resumed mass mailings and other marketing efforts in an effort to woo people back to using credit cards, especially consumers who have good credit ratings.
New Tempting Offers
Credit card issuers have a more challenging task ahead of them than ever before, since the recession forced people to cut back on their spending and re-evaluate habits that got them into debt. As a result, issuers are coming out with tempting offers such as earning cash back on every purchase, free airline miles and other perks. Creditors have also had to adjust to new laws aimed at protecting consumers, which limited the amount they could charge for late fees and interest rates.
To make up for lost time, the competition between credit card issuers has become intense, with the result being more consumers who get a good deal. However, financial advisers urge consumers to exercise caution and evaluate several factors before jumping head first into credit card debt. The following are some of the most important issues for consumers to consider when deciding which credit card is best for them.
Consumers Urged to Pay off Balances Each Month
In an ideal world, a credit card would only be used as a convenience and the consumer would have the funds available to pay the balance in full each month. People who are able to do this should consider getting a rewards card rather than a charge card. A rewards card is more likely to offer store discounts, cash back and other benefits than a charge card does. Since the balance is paid in full each month, consumers don't need to worry about the annual percentage rate. For those consumers who do carry a balance month to month, a low-interest card would be best.
Always Read the Entire Agreement
It sounds obvious to advise consumers to read the fine print before agreeing to accept a credit card, but a large percentage of people do not take the time to do this and then are surprised with unexpected fees later. For example, a card that advertises a very low interest rate may double that rate if a consumer is even one day late with a payment.
Some credit card companies present information in such a way that it can easily be misunderstood. In an effort to entice people to transfer balances to their own credit card, banks can overplay the low interest rate and downplay that there is a limit enforced on the amount transferred or a fee charged to make the transfer. Before accepting any new card, consumers should sit down and figure out exactly how much it will cost them over the course of the next year.
Jessica Bosari writes about personal finance topics for several websites including TermLifeInsuranceNews.com. The site seeks to inform consumers so they can make smart decisions when asking, “What is Life Insurance?” and “How Can I Get the Best Rate?”
Wednesday, 19 January 2011
The Christmas Club savings account can take many forms but the most common are the one offered by credit unions or banks. Whilst the bank or credit union accounts may not offer a high interest rate (around 2%), they are usually pretty good on the fees.
Set yourself a target amount that you want by Christmas or a month before Christmas to allow you time to by some presents, and then break the amount down to weekly or monthly balances and then deposit this amount into your Christmas bank account.
Having a set amount at the end of the saving period may also help you avoid overspending during the festive season. You've saved a certain amount and then that's your budget.
When reserching Christmas Club accounts be careful to read the fine print, some of these accounts have a lock out period. For instance, you may be able to only access the funds between 1 November until 31 January and if you don't use the funds by 31 January, the funds go back into the account and are locked away until next November.
If you don't want to open a separate bank account and regularly deposit funds, what about the old fashion piggy bank option. Put your spare change in every day and what the money grow. If you start now, you've got pretty much a whole year to save quite a lot for next Christmas. Think about, let's start today and add $2 per day....that could be close to a $700 fund by the time Christmas rolls around again.
When you have loose change, put in your drawer at work or a piggy bank at home. You'll be surprised how much you have by the time Christmas rolls around again.
Tuesday, 11 January 2011
While you're at it, if you buy a coffee each day, think about how much you could save by cutting back or eliminating it altogether. $5 a coffee, $25 a week, 46 weeks a year (considering annual leave, public holidays etc) and you're paying $1,150 per year on coffee!
There's heaps of little things you can do each day / week / month that might not seem like much in isolation but when you add it all up, it can save you heaps.
Think about all the little amounts you spend and think about where you could cut back, add it all up on annual basis and you'll be surprised what you can do.
Thursday, 6 January 2011
Local Australian retailer, led by the retail kings Gerry Harvey and Solomon Lew, are pushing the Australia to have start charging GST on internet purchases as they believe it is an unfair playing field. Some commnetars are suggesting they are implying that shopping online from overseas sites is “unAustralian”!
Their argument centers around the fact that is it significantly cheaper to purchase items online compared to purchasing in the local department stores. Individuals purchasing from a website based overseas are not required to pay GST (10%) or duty (typically 10% for clothing and 5% for electronics) for purchases under a $1,000, which is probably about 99% of the time. So websites overseas within minimal overheads and not store front premises are able to offer shoppers a much better price compared to when they go down to their local store or shopping centre.
How much impact is this really having on local retailers? Are the savings the only factor here or are there other things to consider? For instance, I find it more convenient to purchase from a trusted online store located in the UK (www.wiggle.co.uk) for all my sporting / triathlon related products. Admittedly, the savings are very good but the other big factor for me is that I know the site, I trust the site, payment process is easy and secure, they have the products I like and delivery, communication and customer service are first class.
I would much rather search this website for sporting apparel than go to Rebel Sport or Sportsmart as its 1) more convenient for me, 2) I don’t have to deal with potential poor customer service 3) everything I need is at one location and the 4) the prices are 20% - 30% less.
For some people, there’s more to shopping than price, it’s an experience. For people like me who try and avoid shopping centres as much as possible, purchasing online in a far more attractive offer. Is the impact of online shopping effecting local retailers as much as they think or is that we’ve mutiple interest rates rises over the last 6 months and people are concerned about their disposal income, mortgage repayments with the ever present threat of more interest rate rises. Will the long term impact of buying online result in potential job losses because retailers are losing business? Some people (retailers of course) say yes!
I’ll be interested to see how long this plays out or whether it’s just a bit of media spin to get back some sales from a sluggish pre-xmas period?
UPDATE - it's taken all of 48 hours for Gerry Harvey to back away from calls to introduce duty and GST on purchases under $1,000 from overseas websites. Consumer backlash including posts on websites, Twitter and a campaign on Facebook to boycott Harvery Norman retail stores has no doubt been the driving force behind this decision. The power of social media has spoken again!!
Started preparing your budget for 2011 yet?
Wednesday, 29 December 2010
Happy New Year!! The time when we celebrate the passing of another year and make a resolution that we're going to take control of our finances. What does that mean exactly?
The answer to that question differs from person to person. Some people may have significant debts and need to drastically reduce their credit card debts, some people may have multiple investments that they need to reassess and some people feel like they're pretty much in control of their finances but would like to save a little extra.
A good way to start the process of taking control of your finances is to undertake a process of calculating your "net worth". This process requires you to list all your assets (cash, super, shares, property, investments etc.) and you liabilities (credit card debt, mortgage, investment loan etc.). Effectively, this is your own personal Balance Sheet comparing what you own (your assets) and what you owe (your liabilities) and this is what you are worth, your NET WORTH.
When calculating your net worth, do it like the accountants do it, debits (your assets) on the left and credits (your liabilities) on the right. For example, the right hand side of the ledger will include the value of your home, any cash savings account, the market value of shares etc. and let's say it totals $1,000,000. Then the left hand side has your mortgage, credit card debts and a car loan and let's say it totals $600,000. Your net worth is $400,000 (assets - liabilities).
Once you've complete the net worth process, it's time fo you to review the data…. assess your asset base and ensure you're in control of your liabilities.
Ok, on the left hand side, list all of your assets, everything you own.
Your home is your home and unless you’re thinking of selling it in the next 6 - 12 months, then make an assessment of the current market value and include at the top of the list.
Cash - pretty simple really, just list the cash savings you have. If you have a home loan make sure your cash is held in an offset account which will reduce the interest payable on your home. If you have term deposits or savings account, then list the balances and the interest you're earning and the interest rate. Just like loan, shopping around for interest on savings is good practice and can lead to additional returns!
Have a look at your other assets and assess whether they are performing as best as possible. Is your investment property still performing or is it time to sell and look for an alternative property or investment? Share portfolio need a revision, too aggressive or too conservative etc. Car with a car loan attached to it?
With your super, although it's not available until retirement age, it's still an asset. What you can do is asses how your super fund is performing. Should you look at adjusting the allocation of the assets in the super portfolio? Do you have multiple super accounts that could be consolidated? Fees or commission…can it make a difference?
Now, on the right, list all liabilities, everything you owe.
When listing you liabilities, it's good practice to list the interest rate, the regular amount payable and whether it's tax deductible or not. Listing the balance, interest rate and regular payment due really helps you to identify exactly how much you're required to finance each month.
For example, home loan of $300,000 at 8% with a monthly repayment of $600, not tax deductible. It's good to distinguish between tax deductible and non tax deductible as these are two very different types of liabilities.
With your home loan consider whether you're getting the best possible deal on interest rates, offset account, early repayments etc. Banks are very competitive and it's easier for them to retain a customer by matching a more competitive offer from an alternative lender compared to acquiring a new customer.
When you take out an investment loan (be it for an investment property or to finance any other investment) you should structure the loan so that it is "interest only". That way, you're using your free cash flow to pay for the costs which are tax deductible only meaning you can save the excess to help pay down non tax deductible loans.
Credit cards - list all cards, credit limits available, current balance and interest rate. I do try to avoid paying the minimum balance instead try to pay the balance at the end of the month. This is a good habit as then you don't pay any interest! If you can’t repay the whole amount, pay as much as possible and work on reducing that debt every month as the interest is a killer!
Other loans - car loan, student loan, boat loan or any other personal loan. Again, current balance, interest rate and minimum monthly repayment.
Ok, now you've got you assets listed on the left and liabilities on the right, it's time to calculate your net worth. Like any balance sheet, simply deduct your liabilities from your assets and that's your net worth.
You are now ready to start assessing you own personal balance sheet and determining what and how you’ll manage your balance sheet over the next 12 months. This, coupled with a good savings plan and regular budget, will help you control your finances.
In the next post we'll start looking at budgeting. If you want to take control of your finances, the first step is to understand exactly where all your money is going.
Note: if you've completed your personal balance sheet and your liabilities are more than you assets, double check the information to ensure all your assets are properly listed and it’s properly calculated. If are double or triple checking the data, then you may require some professional financial advice. I recommend you contact your accountant to work through this in more detail to ensure you're doing it right and/or determining what are the next steps.
Good luck and happy budgeting!
I'm not that big on new year's resoltuions but I know some people who make a big deal about "starting afresh" on 1 January and changing all those things in their life that they don't necessarily like.
Looking at the list of popular new year's resolution, I think it's great opporunity to connect your list of changes to another regular resolution, save more money.
Get fit / lose wieght - this is one resolution that most people have on their list. Given it's the middle of summer here in Australia (not that you'd know with the cold weather in the south and wet weather in the north!!) don't spend you time, and money, stuck in a gym, get outdoors for your regular exercise. 30 mins of moderate exercise a day is recommended for healthy weight loss and fitness....you'd don't need a gym for that! Take the dog for a walk, go for a swmim or run around your local park.
saving = approx. $20 a week or approx. $1,000 a year
Whilst we're at it, why not start making you own lunch. That way, your can make healthier options and also save money. Nowdays, buying a chicken salad or a ham and salad sandwich and a drink can set you back about $10.
Making a sandwich at home or cooking a bit extra the night before so you can take leftovers will be at least 50% cheaper. Ditch the soft drink and you're bound to save at least $5 a day.
saving = approx. $20 a week or approx. $1,000 a year
Cut back on drinking - this one can also be related to getting fit and losing weight. If you drink regularly, that's a lot of calories getting into to your system that you need to burn by exercise and it adds up financially, expecially if you drink at the pubs / clubs where a beer costs over $6!
saving = this depends on the individual but if you cutting back I'm sure you could save at least approx. $200 a year
Quit smoking - if you're one of those unfortunate people who can't quit smoking then this one may be a hard one but if you seriously consider the health benefits and not to mention the financial savings, it should be easy. Speaking as an ex-social smoker, I can say I'm far better off not smoking and now I can't stand the thought or smell of smoking.
Make a serious effort, get help from places like QUIT in Australia or SMOKE FREE in America or QUIT in the UK, improve your health and save some cash.
saving = approx. $50 a week (depending on your habit) or approx. $2,500 a year
Reduce debts - this is not only a popular resolution, it's something we all want to do, all the time. No one really likes debt and the quicker we can reduce it, the better. To reduce your debts, you need to either earn more money or save more.
I've just listed a few new year's resolutions that can potentially save a lot of money and if you put your mind to it, I'm sure you'll be able to find more. Take those savings and apply them to your credit card or mortgage and you'll pay off your debt quicker and reduce the amount of interest you need to pay.
Of course, the best way to get in control of your finances is to budget regularly, so go to EasyBudgeting and download the budget planner so you can start budgeting. Not just as a new year's resolution but do it every month. Life changes and your budget should change with you, so regularly review it and stay on top of your finances.
Happy New Year