Thank you

Hi guys,

I just wanted to say a big thank you to everyone who downloaded and read my book.

Please keep up the reviews on Amazon, each one gives me a chance to improve my book and helps the people looking for that kind of information to find it.

Thanks again

You guys are awesome.

Christmas Savings

Christmas is just around the corner.  There’ll be lights and laughter, fun and frivolity.  And let’s not forget the presents! For me, December is also the month I get many of my annual fees such as car rego, and various insurances.  The back pocket begins to hurt around January when I get my credit card bill.  If you are in a similar situation, here’s a few thrifty hints to get you through the holiday season without breaking the bank.

1. Get Real

It’s fun to get caught up in the Christmas hype, and don’t we all see that expensive gift that would be just right for so-and-so?  But if we want to avoid feeling the effects of it all in January, we need to get a bit realistic.  Your friends and family will definitely appreciate nice gifts, but they don’t expect you to go broke doing it. 

2. Win, Lose and Draw

Instead of getting presents for everyone this season, why not draw names out of a hat and have everyone get a gift for just one person – secret Santa style.  Everyone still gets a gift, no-one loses out and we all survive Christmas on a fraction of the cost.

3. Go Hand-MadeYou could set a price limit on gifts for each other, or better still, have a stipulation that gifts be made by the gift giver.  Your gifts will be far more memorable and special if you put your creativity into it.  While you’re at it, why not make your Christmas table bon-bons as well.  All you need is some toilet rolls, wrapping paper and a note to put inside each one.

4. Food Galore

If you are hosting Christmas this year, you’ll want to make sure everyone is well fed.  Instead of buying up big at the shops to cater for everyone’s tastes, how about getting everyone to bring a plate of their favourite dish.  You’ll have plenty of food and it won’t cost the earth.

Money in the Vege Garden

I love fresh vegetables.  But I live 70km from the nearest town and it can sometimes be weeks between shopping trips, so I don't get to have fresh (store-bought) food in my fridge very often.  So I planted a vegetable garden to get some fresh veges more regularly, throughout the year.

Not having ever gardened before, it took me a long time to work out what can work and what can't.  For example, there are winter and summer vegetables and you don't get much success if you plant things at the wrong time.  It occurred to me about five minutes ago that the principles I operate when gardening are similar to the principles of money management and investing.  Here's a few key lessons.

Plant the right seeds for the right seasons.

Like plants, investments do actually have seasons.  At the moment Property and Shares (in Australia) are having a major low period.  If you can help it, now is really not the time to be selling a house and it hasn't been for about three years now.  But with low interest rates and low property prices, now might be a really good time to buy.  Plant the property seed.  It may take another couple of years for your investment to grow in capital, but eventually it will grow.  Shares should do the same thing.  But as with all investments, do your homework and make the right decisions for you.

Be Patient

It takes a while for plants to grow.  If you plant them from seeds as I do, you have to wait weeks to see if they will even come up at all.  Sometimes they don't.  If this is the case, then you need to cut your losses and plant again.  If you picked the wrong shares, or bought the wrong house, sometimes you need to do this with these as well.  Generally though, if you wait long enough, you will find that your investments (and your vegetables) will push through and give you some yield, even if it wasn't what you were expecting.

Plant lots of seeds, something will always come up.

Don't put all of your hopes into one thing.  Most people know that if you had all of your wealth in superannuation, in 2008 your net worth was halved.  If you put a little away in different investments, you should be able to handle losses in any one industry.  I have planted corn every year for 4 years and never got a crop out of it.  Yet, I have never starved because I still have lettuce and tomatos.

When you don't have time to tend your garden, plant things that take care of themselves.

I have two babies, born in the last two years.  Each time, I had to go away to Brisbane for more than a month to wait for them to be born.  I couldn't weed, water or plant my garden in that time.  Both times, I had pumpkin seedlings growing.  The first was from a seed that came up randomly in the front yard.  After I got back from baby delivery, the pumpkins had taken over the entire garden.  I didn't get any other plants for a while, but I haven't had to buy a pumpkin in 2 years.

I view investing the same way.  I don't have time or ability to trade shares, or to do development projects.  So I have a buy-and-hold strategy for both my properties and shares at the moment.  I'll probably get more active in the investment garden when my kids are older.

Do the weeding (check CC statements, budget)

You can't grow veges in the place where you have weeds.  Similarly, you don't have access to money you throw away.  Check your bank statements regularly and make yourself accountable for every dollar spent.  I often find things like fees that shouldn't have been charged on my credit card statement which can easily be rectified by a phone call to the bank.  Also, I can make a decision to hold off on impulse buying if my balance reaches a certain mental limit.

Harvest at the right time

I tend to leave my lettuce too long.  It goes to seed and tastes awful.  I think its because I get such pride in seeing my plants in my vege garden that all too often, I'll put off my harvest. It also comes from a bad habit I have of saving things for later, when I might really need it.

I've done this with shares too.  The market was doing well, share prices were increasing, I had my chance to take 10% and run, I didn't and then the market fell again.  I've also gotten out of a deal that went nowhere for three months. Literally one day later, that share took off and would have given me a 30% return the following week.  It's hard to tell sometimes.

Companion plant (reduce debt and save)

I'm a mathematical person.  I like geometric patterns and straight lines.  It's nice to see my lettuce all in neat rows, but it doesn't always make for good practice.  Some plants need a little shade and others need a little sun.  If you have a tall plant next to a short plant, the lower one gets some nice shade and the taller one doesn't have to put up with weeds growing under it.

Similarly, you don't have to focus only on debt reduction before you give yourself a chance to save.  It can be far more motivating to pay off your debts if you see your savings growing in the bank.  Also if you have some money saved up, you don't have to feel guilty when you buy something, because you don't have to undo all your hard work of reducing debt to pay for it.

Maintain your perennials (have buy and hold stocks and property)

There are a few plants in my garden that have been there forever.  Well not really forever but they are there year in- year out.  They didn't even die off when the pumpkins crawled all over them.  No matter what else happens in my vege garden, I know that I can depend on these plants.  They spruce up a salad nicely and also go in my stir-frys, quiches, fritters, pizzas or whatever.  They are my all-rounders.

I also have my all-rounders with my investments.  The shares I have continue to give me dividends, whether or not they go up and down in value.  My properties continue to provide me with income from rent regardless of market conditions.  I also have my allrounders in bank accounts and loan accounts.  I can pay down debt and save interest or build on savings or whatever I need.

I can't give you much more gardening advice but if you're looking for investment ideas, check out my book,  Do I HAVE To Get A Job? available now on Amazon.

Need some good Credit Card advice?  Have a look at How To Get A Credit Card - And Get The Bank To Pay Interest To YOU!

Where will our kids find work?

I've been thinking about education lately, and today I found myself daydreaming about what I would do if I went back to work.  Back to work for me would mean back to high school teaching.  Last time, I had senior Mathematics but what if I was given to opportunity to teach Business?

I have the luxury of this daydream since I have a teaching qualification and a position waiting for me at a state school for when I decide that my children are old enough not to need me full time.

It occurs to me, though, that many people do not have this option.  People are not only asking, "Where can I get a job", but, "Do I HAVE To Get A Job?"  It seems that news of companies doing massive lay-offs and downsizing is occurring more frequently.  Also, many women are finding that their careers do not suit them anymore after having raised one or more children.  Australian companies are moving offshore to take advantage of lower employee wages and less "red tape". Even jobs that used to be safe, (ie the public service) are being axed as the Queensland government slashes its spending in a bid to pull the budget into surplus.

All of these things indicate to me that our children are in trouble!

Where are they going to find work?

Schools and the education system seem to me to be sending the wrong messages to our kids.  They condition them to believe that if they work hard, they can get a good job and will be well set up financially.  This is simply not true.

Schools value further education (different from self-education) and push kids to get into university.  If this does not suit, the only other option you are lead to believe that you have, is to get a job.  Many of our kids, whilst being aware that businesses exist, would not even consider that running a business is even an option to them straight out of high school.  Most would not be able to tell you what investing means, let alone different ways of achieving this.

I believe that the only way many of our young people are going to get employment and indeed financial security is to create it for themselves.  This means developing their own businesses and income streams.  Schools need to catch up on this idea and teach this as a legitimate option to our students.

So what would I do if I went back to work and had the opportunity to teach business? I'd start with the end goal in mind.  My end goal and final assessment would be to have each child making money from their own business.  I'd set up milestones for the students to achieve throughout the year, and only after that would I look at the curriculum.  I'm sure the Business curriculum has a lot of information about what students need to know about business, so I'm sure it would work in well.

For now and until that time (if it ever occurs) I am going to set up as many income streams as I can so that I can teach from personal experience.  Whether or not I get back into a high-school classroom does not matter.  I will learn, apply and pass on my knowledge in the simplest possible way.

I have already begun with a book which outlines the different types of businesses and investments.  If you agree that our teenagers need to be aware of these options, get to Amazon and download "Do I HAVE To Get A Job? - Business And Investment Options You Can Begin At Any Age" while it is still at the low price of $2.99

School's done - what next?

The Jacaranda's are in full bloom.  All our senior students are finishing their exams, waiting for results and gearing up for Schoolies week.  It's a brand new chapter in their lives and as with any life-changing moment, some look to it with excitement whilst others are scared stiff.  Do you remember how you felt?

But what will they do when all the excitement settles down?  Well, that's a no-brainer isn't it?  They'll either go to uni or they'll get a job right?  That's what I did.  I'm betting that's what you did.  But are there other options?  "Do I HAVE To Get A Job?" How many people do you know who started a business straight out of school?  Anyone?  No?  Why not do you think?  Why can't we build a business straight out of school?  Or begin an investment portfolio which returns us better than 10%?

Truth is, we can.  They can.  Anyone can but the problem is that nobody realises that this is an option.  And if they did realise it was, they would probably feel that school did not prepare them for this option. School prepares people for further education.  If you don't want further education, you may find that school has prepared you for the workforce in the sense that you can fill in a resume and application form for a job.  Schools barely teach interview skills.

So what are the options for our school-leavers? There's heaps.  And you may find on reflection, no matter your age, that there are better options out there for you too.  I challenge you to think about what you really want to do with each day (finances notwithstanding).  Are you doing it? Why not?  Where would you rather be? Forget about why you aren't there.... figure out how you can get there in 12 months.

Want some more information about the types of businesses and investments you can start straight away with no money down?  Have a look at my new ebook published on Amazon.  Called "Do I HAVE To Get A Job?" 

Cash Train

One of my readers has asked me to do a review of the Cash Train business as seen on advertisements on pay TV channels.  After looking it up on the internet, I am torn between being thoroughly impressed by the simplicity and efficiency of the business model, and being saddened that this type of business actually has clients.

To its credit, this business outlines every fee and charge that you will pay for the service.  Nothing is hidden.  Whilst most loans are expected to be for short periods (average of four weeks), the website gives an example comparison interest rate as if it were an annual charge.  This is the impressive part.  I wish I could get 1271.18% interest on my investments. I wouldn’t even consider paying this for a loan though. 

This type of business is providing a service for people who have a regular income but have difficulty paying for their lifestyle and are constantly short of money.  It might get them out of trouble once, but I can guarantee that if somebody uses a service such as this on a regular basis, they will get further and further into trouble with their money. It would be like cutting their income by more than one third.  I’m sure we can all imagine how difficult that would be.  

Education vs Entertainment

I read a quote recently which said something akin to, "The wealthy seek education, average people seek entertainment."  And it made sense to me.

I have two children under 2 years old.  I'm sure any mother can tell you how much time that takes up.  I rarely get five minutes to sit in a chair during the day.  So when I do get time to do the things that I want, (after small children go to bed), I want to make sure that I am using my time to the best advantage.  Often that means sleep, but more often I am on the internet learning about the next thing that is going to bring me more money.  I don't watch TV anymore.

In a former life, I sold subscriptions to pay TV door to door. It was not motivating.  But one of the things that I found was that the people who could least afford the service, were also the most likely to buy it.

Like anything though, there has to be a happy medium.  I take a break from my reality by reading sometimes.  But this also gives me insights to perspectives I would otherwise not be privy to.  I used to like watching movies but find them tedious these days.  I guess my priorities have changed.  Since I've had to spend 14 hours of every day feeding, teaching, and attending to the other needs of my family, my spare time is precious and I choose to use all of it to increase wealth or maintain my health.  My education has in a sense become my entertainment.

What to do with your credit card bill

Returning form the mailbox, a wad of letters in your hand, you shuffle through them and take in the familiar windowed envelopes with some hope and a little fear.  And there it is, the one with your bank's logo on the front.  "It's just a statement," you say to yourself.  But you know better.  Do you open it first, to get it over with.  Or does it stay on your coffee table, unopened, for days before you finally pluck up the confidence to look.

If you are wondering what to do next.  Here's a few ideas that may help.

1. Make a paper airplane.

Credit card statements make great airplanes. The paper is exactly the right thickness for a sturdy plane. Forgotten how? Just fold in half and open out again. Fold down the corners into the middle, twice, then close your plane up and fold the wings down to the side.  Pick up your plane and hurl into the nearest waste-paper basket.  Don't worry, the bank will send you another one with a nice big late fee next month.

2.  Start a shopping list.

Credit card envelopes are exactly the right shape for shopping lists.  Use the back, so that you don't run into the window.  If you need more room, you can always cut the envelope to open it up and get some more writing room in the middle.  As soon as you get some money to pay down your card, you can head to the shops to start crossing those items off your list.  Of course, this will mean that you are paying about 20% more than the purchase price for your goods, but hey, if you get it on sale, you may just break even.

3.  Roll it into your home loan.

Some big credit card bills look impossible to pay.  Tapping away at them little by little can pay them off if you are disciplined and go back to using cash or debit cards for all of your purchases.  Discipline can be hard though.  Instead, you can roll it into your home loan and be free and clear to run your card up all over again.  Paying 20% on your card as you pay it off over a year looks like a lot of money, but is a lot less than paying 6% on the same amount over the next 25 years on your home loan.  But a shiny new $0 balance on your credit card makes you feel like you're getting ahead even if you are going backwards.

4.  Pay the minimum.

Paying the minimum on a credit card with a $5000  balance puts you in good stead to pay it off in 65 years, with only $20 000 in interest.  But don't think about it and it won't bother you.  That's what minimum payments are for.  They are something to do which ensures you don't have to think about your bill again for another month.  Of course rounding up your payment, even to the nearest $10 can put you well on the road to paying off your card and you don't miss that extra few bucks at all.  But that's not the point.

5. Set up a BPay

They won't let you do future dated direct deposits.  It's a little trick the banks use to try to get you to forget to pay your bill.  That way they get to charge a late fee on top of the interest.  Sneaky hey?  Here's a way you can be sneaky back.  Open a separate bank account.  Put a weekly direct deposit into your new account of the amount you want to pay off on your card.  When the bill comes in, set up a future dated BPay to pay the bill from this account.  This way, you get to pay your bill on time and not have to worry about saving up for it.  As an added bonus, if the amount you pay clears your card to $0 each month, (and you have a card with an interest free period), you get paid interest on the money in your account instead of paying interest on your credit card.  I like having a credit card, the bank pays me interest to use it.

Don't fret about your credit card bill.  Turn your worries into positive expectations by having fun with the bill.  If this is your monthly paper airplane day, then you may even look forward to it each month.

The Millionaire Next Door

I'm reading The Millionaire Next Door by Thomas Stanley and William Danko.  It's a book I've been meaning to read for a while now but could never seem to find it in our bookstores.  I'm not sure why.  I'm guessing it might be due to the fact that it is an American book.  Anyhow, I ordered it and it has finally arrived.  The reason I wanted to read it was because many other money books quote from it or refer to it regarding concepts.  And no wonder.  I've barely started the book and already the information is inspiring.

Apparently (in the USA) most millionaires are self made, or what they call "first-generation-wealthy"  This means they started from nothing, had no lottery winnings or inheritances but became millionaires on their own.  This is great news for all people in western civilisations.  Australia and Europe from what I understand have similar opportunities for wealth creation as the Americans.  So there's no one to blame and nothing to wait for.

If wealth is achievable for any individual, then it is something that can be taught and learned.  Let's get this into schools.  If there is no reason why a person can't be wealthy, there is no reason why a person should be poor because of ignorance.  Being poor because of choice is a different matter, but let's at least provide our kids with the information so that they can make their choice.

Pass this on if you think its a good idea.

Things you shouldn't do with a credit card.

Most people have a credit card.  Some people can put thousands of dollars each month on their credit cards and pay no interest.  Other people can be particularly frugal yet end up paying massive amounts of interest.  Is it luck, good management, or something else? Perhaps this will clear some things up.

Things you shouldn't do with a credit card.

1. Buy an investment scheme.

I'm speaking from personal experience here.  My interest rate is over 20%.  Did I honestly think this whiz-bang computer program was going to make me money over and above that rate and pay down my debt as well?  At best, the novice investor should be happy with a 10% return.  The credit card is not the vehicle for purchasing investments.  Use your savings for this.

2.  Set up a business

You want to start a business?  Great.  Businesses are a great way of making money.  But credit cards have massive interest attached and are not a good way to finance your endeavour.  Instead, you should go to a bank and negotiate a loan with a much lower rate.  If they won't lend you the money, that's a good indication that you may need to refine your business plan.  Making emotional decisions at this point and using the card anyway could lead to problems.

3. Pay up-front course fees.

Getting an education is always a good idea.  The more you know, the more options you have.  But have a plan on how you are going to use your new skills to make that money back and more besides.  Getting a Student Loan may be better for you than using the card because you can negotiate a better rate.  Alternatively, look into payment plans with your education institution.  You may find that the weekly rate they offer, whilst higher than the up-front cost, is lower than the option of paying your course fees plus interest on your credit card.

4. Buy a boat

The boat in this case represents any big expense that is just for pleasure.  This is a bad habit to get into.  If you can't legitimately save up for your hobbies and toys, it's not going to get any easier by putting them on the card.  This is just a symptom of a requirement for intant gratification.  Buy now-pay later habits lead to a house full of new stuff which quickly becomes old, worn-out stuff and massive credit card debt that you can't pay.

So what is the credit card for then?

To learn the answer to this have a look at my blog post "How to use a credit card properly"

Pop Quiz - How healthy are your finances?

Take My Financial Health Quiz

Here’s a bit of fun to see where you are financially.

1. Which musical saying best describes you?
1. I’m in the Money
2. I Will Survive
3. Another Day Older and Deeper in Debt

2. How many credit cards do you have?
1. 1
2. 0         
3. 2 or more

3. How’s your investment portfolio doing?
1. Supporting my lifestyle nicely thank you
2. Some property/ some shares/ some cash – not too bad
3. What’s an investment portfolio? Do you mean my super?

4. What do you do when you decide you really want something?
1. Buy it using surplus funds
2. Save up
3. Use the credit card/ get a loan

5. Who decides your income level?
1. I do
2. My boss
3. A government department

Results

Mostly A’s

Congratulations.  If you are not one of the truly wealthy, you soon will be.  You have realised that you alone are responsible for your financial situation and have put processes in place to maintain your lifestyle for years to come.

Mostly B’s

You’re doing okay.  You use money responsibly to maintain a fairly comfortable lifestyle.  You are probably not much of a risk taker but have realised the importance of putting some money aside for the future.  You may benefit from setting some goals and working with a financial planner to achieve them.

Mostly C’s

Constant borrowings mean that you are always paying more for items than they are worth.  You find it difficult to save because there is nothing left to save after the bills are paid.  You would probably benefit from keeping a diary of everything you spend for an entire month and looking at the results critically.  You may be surprised at how much you actually spend on things.

So many types of credit cards...what's the difference?

I'm in the process of writing a book about everything credit cards.  This is stuff I've learned over the years but it has taken me hours of research on the internet to get the details just right.  It shouldn't have to be that way.  How is a person who may be just starting out in their career supposed to figure out which credit card is best for them.  There are literally hundreds of different types.  Home loans are just as confusing but we'll leave that for another post.

So for all you kids, here's the rundown.

AMEX, DINERS, VISA or MASTERCARD?

These are the big four.  They are the facilitating companies which transfer the money from your account to the person you are paying.  There really is no difference when it comes to service for you.  What you need to consider is not which of these logo's you have on your card but what the terms of the credit card actually entail.  For interest though, AMEX and Diners Club are supposed to be better for people who travel a lot and you get these cards through the actual company.  Visa and Mastercard are all rounders and you get them through the banks and bank equivalents.

WHAT TO LOOK FOR

Credit cards have essentially 4 features which change to suit your needs (and the banks).  These include an annual fee, an interest free period, an interest rate and some kind of rewards program.  You'll never get the best of all of these.  It'd be nice to have $0 annual fee, 55days interest free, 0% interest and massive rewards points per dollar spent but the banks would not make a profit out of you if that was the case.  Instead of looking at each individual credit card to determine which one is the best, decide what you want from these four features and then look for a credit card that fits your description.


Low rate on balance transfers
Do you already have massive credit card debt? You may benefit from a low-interest-on-balance-transfers card.  Make sure you have a plan to pay your debt off as soon as possible and don't use your credit card anymore if you want to avoid further problems.  Also watch out for the massive interest rate you'll be charged when your low-interest time runs out.  Make sure your debt is gone (or moved) by then.

No Annual Fee
Don't use your card much at all?  You might want a card with no annual fee so you're not slugged if you don't use your card.

Low Rate
If your card has a low interest rate, chances are there are no interest-free days.  If you are in the habit of not paying your card off in full, this is your card.  Remember though, every purchase you make on this card is costing you more than the purchase price of the item.

Low Cash Advance Rate
Getting cash out on your credit card is indicative of a budget problem.  Don't take the easy way out and pay interest on your cash purchases.  Instead, get some budgeting advice and try to use your debit card for cash.  This card only encourages bad habits.

Rewards Cards
These are good if you have a specific lifestyle which can take advantage of the rewards.  If you fly often, get a card with good frequent flyer points.  There are heaps of other rewards you can get so shop around.  If you are very disciplined, you can put all of your purchases on this card, get the points, pay the money back before the interest-free period is up and only pay the annual fee.  Beware the annual fee doesn't add up to more than the rewards you get, they can be quite high for these sorts of cards.

Specialty Cards
Some lenders have good deals for businesses which include better rewards and extra cards.  There may be a minimum spend though so read the fine print.  Some lenders will have good deals for students or people with no credit rating.  If this is you, check out the offers.


MY PREFERRED CARD
I don't want to pay any more than I absolutely have to for my purchases and I like being able to see where my money has gone each month.  I put everything I possibly can on my credit card for these reasons.  My card has a low annual fee (I'm not interested in rewards), a fifty-five day interest-free period and a relatively high interest rate for purchases and cash.  The interest rate doesn't bother me though because I never get cash out on the card and I pay my bill in full everytime it arrives, so there is no interest charge at all.  I do get rewards points as well but I'm not focussed on accumulating them.

Before asking, "what is the best card", decide how you are going to use it.  Then match your lifestyle and money decisions to the features you want on your card and go look for a card with those features.  The other way can be very confusing and time consuming.

How to use your credit card properly

Most of us have got a credit card.  It is a useful tool for accessing large sums of money quickly. This, unfortunately is also the worst thing about it.  And since nobody is teaching us how to use a credit card properly, many people end up paying interest bills on their credit card every month.  They do this without getting the full benefits of the use of the card as it is usually at its maximum limit.

So for those of you contemplating getting a credit card for the first time, this is for you.

1. Your credit card is used to make purchases not to finance things.

That means, don't use your card to buy equipment for a business.
Don't use your card to pay University tuition fees.
Don't use your card to buy anything that will take many months to pay off.
Don't use your card to purchase shares or other investments.

Why not?

Because the interest rate is too high.  If you need large sums of money to finance your business, studies or investments, there are better loans out there.  Go and talk to your bank manager about getting a start-up loan and what these involve.  If they won't lend you the money, then that's probably as good an indicator as any that you shouldn't be spending it.

Do use your card for daily purchases like groceries.
Do use your card for anything you would otherwise pay cash for.
Do use your card for paying for haircuts and movies and clothes and restaurants.

Why?

Because it makes it so much easier to keep track of your spending.  At the end of each month you can look through your credit card bill and see exactly where your money has gone.  If you have spent $500 on take-away food in one month, you can assess this and decide if you should perhaps cut back on take-aways.  Also you can check your balance throughout the month.  I have a mental limit (not my credit card limit) not to spend more than $2000 each month (Total).  This includes groceries, bills, treats, everything.  If my balance on my card is $1850 on the 23rd of the month, I might decide not to bother grocery shopping at all until the first of the next month.  I'd use up all the rest of the food in the pantry first, even if it means going without bread or drinking powdered milk for a week.

2.  Pay your card off IN FULL each month.

Your card is used to make your life easier, not to buy things with money you don't have.  Your card should have an interest-free period.  This way, the first purchase you make on the card does not get charged interest until the following bill is due.  If you pay the balance of your bill (not the minimum payment) on or before the day that it is due, you will not be charged interest.

Why is this important?

Because otherwise you could end up paying $100 for that $50 shirt you just bought on special for $30. It's all well and good buying products on sale, but what's the point if you then go and put it on your card and pay interest on it?  $30 at 21% means that if you never pay your card off in full, by the end of the year you have paid $36.30 for that shirt.  Let's say you've maxed your card out at $2000.  At 21% you'll be paying $420 each year for NOTHING!!!  I can think of much better things than NOTHING to spend $420 on can't you?

3. Set yourself a limit.

Your credit card limit as directed by the bank should not be the limit you set for yourself.

Why?

Because life happens and you may still need money in an emergency.
Because the bank wants you to overspend so that they get the interest payment.
Because the bank will always give you a greater limit than you should set for yourself.

Decide on how much you can reasonably pay off each month.  Factor in the cost per year for car services, roadside assistance, electricity, insurance etc. Don't go over the limit.  Check your progress via internet banking each week to see how you are going.  If you are overspending, you can cut back.  If you get a particularly large bill in, your savings should be able to cover this.

Lets look at an example.

Say you are earning $4000 per month.  You are putting money into savings, rent and paying off a car so you decide that you can reasonably afford $2000 on the rest.  Your irregular bills (insurance etc.) come to around $5000 for the year.  So set yourself a limit on your credit card of ($2000x12-$5000)/12 = $1583 per month.  Round that down to make it easier.  Your credit card mental limit should be $1500 per month.  Don't spend any more than this except if you get one of those bills in.  Still put it on your card though, that's what it's there for.  When your credit card bill comes in, transfer the whole balance from your usual account onto your credit card.

4.  Don't get cash out on your card.

Why not?

Because it does not come with an interest free period.
You'll be paying interest on it from the second you have the cash in your hand.

What to do instead.

Let's face it, there are always things that are easier to pay cash for.  You don't want to have to spend $10 just so that you can put that $3 coffee on the card.  Instead, factor in some cash each month to your regular spending and get that out from your usual account.  Using our previous example, we have a $1500 mental limit.  Get out maybe $100 each month for cash transactions and reduce your mental credit card limit to $1400.  Once the $100 is gone, don't get any more out.  Or alternatively, if you have a night out planned with drinking and merriment, check your credit card balance, make a mental note to reduce your limit, get out what you think you'll need and don't go back to the ATM.

Any Questions?

Five great reasons to get a personal finance coach

It may seem expensive, especially if you're struggling to make ends meet but here's how a personal finance coach can benefit you:

1. They can teach you how to do better than just making ends meet. 
Let's face it.  If you are struggling financially, then you can't afford not to get a coach.  Your coach can give you some great tools for learning how to find and save money so that you can get your life back and not worry so much about what you can't afford.

2.They can keep you motivated.
Having a coach is like having a Gym buddy.  You are more likely to put in the effort if there is someone cheering you on and keeping you accountable.

3. They have done all the reading and research.
If sifting through finance books to see what is relevant to you puts you to sleep, don't worry.  Your personal finance coach has already read all of the books and can direct you to a number of strategies to help you improve your situation, or at least give you a list of chapters to read for yourself.

4.They have experience working their own finances.
Who better to explain what works than someone who has been there and done that.  Want help to learn how to keep track of your finances?  Here, use my spreadsheet.  Want to know why you're having trouble saving?  This is what happened to me.  Want to know how to get those debts down?  Check out these strategies.  Want some tips and tricks to get the best deal from retailers?  I've got the inside scoop. Come and see how I achieved my financial goals so that you can achieve yours.

5.They can be a sounding board for you to bounce ideas around.
A coach is a supportive person who is willing to listen to your point of view.  They'll help you to work through your ideas and help you build an action plan to achieve your goals.

If you want to see what a personal finance coach can do for you, email michellecroner@y7mail.com and introduce yourself.  Put "Coach me Michelle" in the subject line to get a personal reply.

Three stages to wealth

I used to pride myself on paying my bills on time... and I was always broke. Now I can pay my bills on time and I'm rich.  The secret?  Learning how to NOT pay your bills on time.

Let me explain.  Back when I was broke, I tried to save money. Every pay I would look at my bank balance and see the amount grow and grow.  Then a bill would arrive and I'd pay it.  Then another would come, and another, and another.  Eventually I'd be back at square one with no savings.  Does this sound familiar?  What was I doing wrong?  I tried to save.  I was being stingy with my spending but still my money just seemed to disappear.

Lets look at my situation now.  I save money.  Each time money comes in, I look at my bank account and see the amount grow and grow and grow.  Then a bill arrives and I pay it... on time.  And another arrives and another and another.  But I never get back to square one.... ever.  My balance always gets bigger and bigger and bigger.  Am I earning more money?... actually no.  I'm earning less now than when I was broke.  Have my expenses decreased?  No, I have two small children now.  My expenses have increased significantly.

Am I lying to you? No again.

So what is the difference between then and now?  The very significant attitude change that facilitated the change from broke to rich.

And now the secret.  Not paying the bills on time.  You see, I put my savings as a higher priority than paying the bills.  I didn't even know how to budget and this began to work.  After I learned to budget, it worked better, but the key to success was the attitude shift.

STAGE 2

I'd get paid, save some money and then a bill would arrive.  Instead of paying the bill with my "savings", I would wait until more money came in.  This was pretty easy because I had a job and was getting paid regularly.  So then, I'd get paid, save some more money, and pay the outstanding bill.  I'd watch my savings go up and up and the bills still got paid.  Not immediately and sometimes not even on time. But they always got paid AND I still managed to save.

Lets recap on the THREE STAGES TO WEALTH

Stage 1
Pay your bills on time and stay broke.

Stage 2
Save first, pay your bills when you get money in later.

Stage 3
Learn to budget, save first, pay your bills out of money allocated for that purpose.

The only difficult part is changing your attitude to one that is more relaxed about paying your bills on time.  But if you are prepared to go through stage 2 then eventually you can get to stage 3 and you can be rich and still pride yourself on paying the bills on time.  Have faith that this stage will come and you may find it easier to change your priorities.  After all, who is more important? You? Or the Internet company/ Telephone company/Electricity company/Somebody other than you?  I think you'll find the answer is quite obvious.

The Family Budget

When I think about budgeting, I can’t help comparing it to dieting.  Both seem to induce negative attitudes from people and nobody wants to talk about it or think about it and it gets put off.  But it doesn’t have to be that way.  A healthy diet is not about limitations and what you can’t do.  And neither is a healthy budget.  It can actually be quite liberating.

            If you don’t have a budget, you will often be scared to spend money because you don’t actually know what you can afford.  You may even have yourself convinced that you can’t afford anything you want and therefore don’t let yourself want anything.

If you don’t have a budget, you may spend everything you earn and then be surprised by a regular bill and not be able to pay it.  Or you may have ‘maxed out’ your credit card and be stuck paying large amounts of interest for things you no longer have or can’t remember purchasing.

But if you know what bills are coming up and have a set amount put aside for ‘play money’ then you can take full advantage of opportunities to spend money on things that you want.  You can even enjoy the planning for the purchase of these things rather than buying something on impulse and feeling guilty later.

The best thing about budgeting is that you don’t actually have to stick to it.  It’s like any new skill, you won’t get it right the first time, but have another go next month and work at continually improving.  If you make a mistake, don’t beat yourself up or throw the whole thing out the window. Acknowledge that you tried and try again.  Here’s a simple starter template for you to have a play with.  Make sure $A = $B+C+D+E+F.  You can do this just for your income or you use it for your end of month bank balance as well.  Happy budgeting.

Income	$A
Investment fund	$B
Emergencies	$C
Regular Bills	$D
Savings for expensive stuff	$E
Play money	$F

Teaching children a positive attitude regarding money

We all want the best for our children.  We try to make sure they are safe, are going to a good school and are getting enough love and attention at home.  But how often do we stop to think about what they are learning with regards to money in their daily lives.  After all, they will have to handle money eventually.  Should their financial education begin when they get their first job or earlier when they are at school, or should we be conscious of their financial education from an even younger age?

I'm here to argue that regardless of when we begin a formal education strategy about money, our children will form their own opinions at a very young age.  By the time our children are school age, they usually know what a book is and have some idea about letters, words, numbers, shapes and colours.  It makes sense that they also know what money is and have an opinion about how to use it.  They have seen us shop innumerable times in their lives.

Our children have also heard us discussing money.   We probably haven't even been aware of the messages they have been receiving.  But if we want to give our children an advantage in the world financially, perhaps we should be thinking about what we say.  Is the subject of money in your house associated with arguments and negativity or does it bring about a positive feeling?  Is it a taboo subject to which each member of the family acknowledges the unspoken rule not to speak of it?

Have a think about what type of feeling you get when you think about money.  Chances are, your children feel the same way.  What beliefs do you have?  That money is scarce, evil, abundant, fluid, powerful, useful, easy to get, difficult to keep, never enough, not important? If you haven't really thought about it here's a quick exercise.  Have a think about the phrases you use in respect to money.  Or when your child asks for something what do you say?

"Money doesn't grow on trees"
"Money is the root of all evil"
"I don't get paid enough for that"

or is it something like

"Money provides opportunities"
"Money is easy to come by"
"You can have anything you like, with careful planning and budgeting"
"If you can save up half for that, I'll put in the other half"

To give our children a head start in their financial education, it is important that they can speak freely with you about money.  It is also important that they develop a positive attitude towards money.  But here's the trick:  If you have negative beliefs about money it will be difficult for you to teach your kids a positive attitude.  So here's an exercise that you can do.

Get the whole family together.  Turn off the TV, phones and computers and sit around the dinner table with some paper and coloured pencils.  Get everyone to write down some beliefs that they have about money.  Decide as a group whether these are positive or negative. Discuss how these beliefs affect how you handle money.  If your catchcry is something to the effect of, "We can't afford it" then you probably don't allow yourself to want anything because there is no possibility of ever being able to get it.  For your children's sake and your own, entertain the idea of turning this around at least to "How can we afford it?" if not to, "We can have this if we really want it" and do some brainstorming about how you as a whole family can earn more money for your purchase or at least save up for it from existing income.

Now write a new list together which contains only positive comments about money. These should be new beliefs that you'd like to have.  You don't have to believe them straight away.  Once you have a list of between five and ten new beliefs, put them up on the fridge for everyone to see and read daily.  Get used to saying these words instead of the negative ones.  Your children, creative beings that they are, should develop a positive outlook with regards to money and be on their way to learning to negotiate ways to get what they want, even if it seems impossible to you.  Try not to stifle this creativity by being a "realist".  Instead, foster their excitement and give them the responsibility for saving and budgeting.  They should quickly learn what purchases are important to them and temper their need for instant gratification.

How to teach your kids about money

This will be the first in what I hope will be a series of blog posts about how you can empower your children by giving them practical skills in money management.  Financial education for children is a passionate subject area of mine.  I believe that if money management is/was taught formally, much of the financial problems that people face in their daily lives could be avoided.  I heard a quote the other day which suggested that the poorest person in Australia is one of the richest people in the world.  If that is the case, we shouldn't all struggling so much just to make ends meet and we don't have to.

Children learn about the world from a very young age.  Everything you do and say is taken on board as they soak up knowledge.  Therefore I suggest that there is no minimum age in which you begin to teach your kids about money.  So here are some things that you can do starting right now, no matter how old your child is, to begin their positive financial education.

1. Be aware of what messages your are sending
Children learn from what you do, far more than they learn from what you say.  It is difficult to tell your child not to swear if you are using profanities in every sentence you utter.  It is the same with money.  You may not think that they know anything about your financial situation but they will pick up on subtleties that you don't even think about.  If you pull out your credit card for every purchase you make, they will know and subconsciously develop the opinion that this is a good thing to do.  If you ask for a receipt for every purchase you make and then check these against your bank statements every month, they will learn this as well.  Do they get the catch-cry, "Money doesn't grow on trees you know" when they ask for something or do they get taught value by identifying priorities for how and when they will spend their pocket money? If you don't know what ideas your children are getting about money, ask them (if they are able to talk), and be aware of what you are doing and saying in front of them.

2.  Discuss money with your kids
I know of some families who find it difficult to talk about money.  For some reason it is a taboo subject.  So when they have to discuss something, it's a strained conversation and often put off for too long.  Make money a subject that your children feel confident in discussing with you.  If they have a question about your financial situation, answer them truthfully instead of brushing them off with a half answer or a smart remark.

3. Find a way for them to model good habits
To learn the value of money, you really need to be handling it yourself.  Some people don't begin their financial education until they get their first job and then often they make huge mistakes and end up in trouble.  Trial and error is not the best way to learn money management.  I've also found that being told what to do can only take you so far.  Instead, show your kids some good money management by giving them some responsibility with money.  One way to do this is with pocket money.  The younger the child, the more important it is for the money to be tangible so give them cash.  If you want them to save it, don't put it in the bank for them so that they never see it, this teaches them nothing.  Instead give them two money boxes or jars to put it into.  Say that they represent different bank accounts and make one a savings account and the other a spending account.  Make sure that a minimum of 10% of their pocket money goes into the savings account and don't let them spend this on anything that does not make them money.  If they want to save for a consumable item, then a third jar might be necessary.  Your children will learn quite quickly how money can accumulate if saved regularly.  For older children, you might set up actual bank accounts but make them responsible for depositing the money themselves.  They can easily see how their money is growing by registering for internet banking.

I'll put up some more practical strategies for teaching money management to your children in subsequent posts.  In the meantime, check out my older posts for ideas and see if you and your children can work out a way to implement these strategies together.  If you have some strategies that work or you come up with some new ones, leave a comment so that other readers can also benefit from your creativity.

Tax cuts and what to do with them

I heard a comment on the radio this morning about the new tax cuts for this financial year.   You may already know that in Australia this financial year, the tax-free threshold has tripled.  It was $6000 but now individuals can earn up to $18200 before having to pay any income tax. The other rates have been adjusted accordingly so that a person earning $80000 or more is taxed similarly to last year.  Everybody else gets a tax cut.  We also have money coming to us in the form of the Household Assistance Package and some people are also eligible for the Schoolkids Bonus.  The radio program also mentioned a decrease in petrol prices and interest rates.  All of this adds up to more disposable income for low-to-middle income earners.

I love that word "disposable", don't you?  It implies that we have money to literally "throw away".  And as much as we would disagree that this is the case, chances are, most of us will effectively do that - throw our money away - if we are not careful.  You see, without a working budget, the average person gets their wages, pays their bills and spends whatever is left over.  The fact that there is an extra amount (whether that be $5 or $50) doesn't change their spending habits.  People do not tend to purchase the same things they did before a payrise and then have the exact extra amount left over at the end of the week or month. "But what is it spent on?" I hear you ask.  Perhaps a small treat for getting the payrise, perhaps an unexpected expense such as new brakes on top of the car service.  Perhaps a new toy for the kids or something that you should have been saving for but have decided to charge to the credit card instead.  You wouldn't be able to trace the amount because your expenses vary each week anyway.  There is no conscious decision to spend $37 on something if you know you have an extra $37 in your pay packet.  In fact, the radio program I was listening to mentioned in increase in "Consumer Confidence" which sparked a debate about how this would have been measured.  They speculated that it might mean that people are spending more.  Wether this is the measurement or not, it is likely true that people are spending more money, since they evidently have more to spend.

So what can we do?  Well, it has been proven time and again that if you put money aside to save before the bills get paid and you follow your existing spending habits, then that money doesn't get spent with the rest.  I would suggest that we compare our wages and benefits and our estimated tax with previous  years and put some or all of the extra amount either into your savings or to pay off your debts.  Do this at the beginning of your pay cycle not at the end.  That way we'll be further along the road to financial freedom.  If you don't already have a savings plan in place then have a look at my post on  Saving 101 and Separate Bank Accounts to get some ideas on how to set one up.

Enjoy your extra "disposable" income.  Try not to throw it away.  But if you do, make sure it's a conscious decision and have fun with it.

How to get what you want

How do I get what I want?  That's the million-dollar question isn't it?  Sometimes I find it impossible to believe that I can get what I want.  Maybe I'm just impatient.  Maybe I'm not being realistic in what I can actually get.  Or is the form of what I want inconsistent to the how the universe works.  Let's say that I want one million dollars to appear in my bank account.  I realise that this is perhaps a silly wish.  After all, if one million dollars suddenly did appear, and it wasn't a bank error, would five minutes actually pass before I started to spend it?  So for that reason alone, I would never really achieve my goal.  Perhaps I need to think things through a little more.  On the other hand, certain things like my million dollars, seem like such an impossible dream that I don't even allow myself to want them.  The thought is so fleeting that I don't even realise that I even entertained the thought that I wanted something, let alone remember what that something might have been.   My mind automatically dismisses the idea before I'm even conscious of it. 

So how do we get what we want? The first step would have to be, to allow ourselves to want something.  After all, if we don't want anything, or don't let ourselves want anything, nothing is going to change is it?  So... step one.. decide what you want.  For people who have never let themselves want anything, this can be the hardest part of getting what you want.  Get yourself a piece of paper and write down anything and everything that comes into your head that you might want.  When I start doing this, I tend to think of cliche-type stuff. Private Jet, Helicopter, Jet-ski, Beach House, Yacht, etc.  I actually want none of these things but I write them down regardless just to get them out of my head and move on to the things that I actually want.  I try to write down at least twenty things because then I have to really think.  I really can't get excited about those first few, not because they are so far out of my reach that they are silly goals.  By all means if you really want a private jet then you should keep it on your list, but I don't regard them as realistic goals for me because, I don't like travel, I don't like salt water and sand irritates me.  My parents have a beach house and when I go there to visit, I can spend an entire week without touching the sand or surf, or sitting on the balcony looking at the water.  So lets get these ridiculous fantasies onto the page and then really think about what we actually want.  Stick with this step for a whole day.  Like a shopping list, put it somewhere handy and keep coming back when you think of something else.  Go do your daily routine and let your mind wander back on its own accord to add to your list when the inspiration arises.

So we have a list... now what?  Pick out the thing that speaks to you the most and let's work on that.  It's all well and good having your wish on paper, but if we do nothing else, it's like my million dollar wish and probably not likely to happen.  What we need to do is tweak the wording or our goal to make it more achievable.  A good way to do this is to use the SMARTIE formula.  SMARTIE stands for Specific, Measureable, Attainable, Realistic, Time-bound, Inspirational and Emotional.  If we review these one by one and change our wording of our goal, I think you'll find that it goes from a silly wish to something that you may actually be able to get.  Lets use my million dollars as an example and really work it through this system.

Be Specific.  What is it that I actually want?  Do I want one million dollars? Or do I want something that the million dollars can buy?  What would I actually do with one million dollars?  When I think rationally about this, I imagine that one million dollars would be completely wasted, sitting in a bank account. After all, interest on bank balances is pretty pathetic.  I'd much rather have my money working harder for me than just earning bank interest.  Personally, the million dollars represents the opportunity to purchase investments such as property or shares.  These would be used to produce an income which I could use for the option of enhancing my lifestyle or increasing my investments.  Here, I'm going to change my original wish for one million dollars and instead, replace it with a One million dollar investment portfolio.  Still, I don't know that we've gotten specific enough so I'm going to get even more specific by suggesting that I want two $350 000 investment properties and $300 000 worth of shares.  There.  That's one million dollars.  It's not in my bank account but it is in a recognisable form.

That takes care of the S in SMARTIE.  Now for the M.  M stands for Measurable.  Can this goal actually be measured.  Will I know when I have attained my goal?  How will I know?  If my goal had been to maintain good health, this would be difficult as I wouldn't know when I have achieved this.  Even my investment portfolio is not quite measurable as I could have these things but with borrowed money.  The question is, does it count if I had to borrow the funds? And if so, how much of it can be borrowed and still have the goal considered to be achieved?  Let's explore the option of having my million dollar investment portfolio completely debt-free.  I would then have a net worth of one million dollars.  That's measurable.  I would know this has been achieved when I have two $350 000 properties and $300 000 worth of shares with no borrowings on them.  That works for M.  Let's see if it stacks up with the rest of the SMARTIE.

Moving on to A.  A stands for achievable.  This is a little harder to measure.  How do I know what I can reasonably achieve.  Is it possible for me to have this investment portfolio?  What would be an unachievable goal?  Flying to the moon using my arms as wings comes to mind as something completely unachievable.  Owning two houses and a bunch of shares is probably reasonable.  While I have the ability to earn an income, my portfolio is probably not out of reach.  It may take me fifty years to get there (hopefully not) but I'm going to suggest that we've covered the Achievable criteria and move on.

R stands for Realistic.  Is my goal realistic?  Possibly.  But I think that I can make it more realistic.  Having two properties and a share portfolio completely debt-free doesn't actually make a lot of sense to me.  After all, there's the theory of compounding to consider.  By this I mean that the more money I have working for me, the faster it will grow.  I could use equity I already have, to get a loan for a property and watch my net worth increase as the value of the property increases.  If I'm going to do this for one property, why not do it for more?  I don't think that I would realistically stop at two properties if I had enough equity to buy more.  More investments mean faster growth and a shorter time period towards reaching my goal.  I still want my million dollars in net worth but it makes more sense to me to use borrowings to get there.   Also, if I was to buy two properties worth $350 000 each, by the time I had these paid off, they would be likely to be worth a whole lot more because of capital growth.  I may even get to the point of having a property worth $550 000 and only owing $200 000 on it.  That would be the same as owning a $350 000 property outright wouldn't it?  Let's imagine that I get to that point.  I'm not likely to trade this one in on a lower priced property just to achieve my goal specifically.  So to make my goal more realistic, let's change it to this:  My goal is to have an investment portfolio consisting of shares and property which has a net value of one million dollars.  I concede that this is not quite as specific as the two properties and $300 000 in shares but I think that it is still specific enough to be measurable and it is far more realistic.

T is for Time-bound.  Here's where it get's a little scary.  Up until this point, I can brush off this exercise as a bit of fun or a bit of a dream but now we get to the point where we make ourselves accountable for actually achieving the goal.  In this part of the goal setting process we decide exactly when this goal is to be achieved.  Without this step, you can drag the process out indefinitely.  I'm reluctant to place a time on this.  What if I fail?  The answer to this question is this: It doesn't matter.  If I get the timing wrong, I'm still going to have made some progress towards the goal aren't I?  That's got to be better than not trying at all hasn't it?  After all, life happens and we can't predict what's around the corner.  But without a goal, without an estimated time for achievement, I have no real accountability for my actions (or lack of).  Let's just get something down.  I can always change it later if I think that I might get there faster or if something gets in my way.  Okay here goes:  My goal is to have an investment portfolio consisting of shares and property with a net worth of one million dollars by my fiftieth birthday.  That gives me about fifteen years.  Since the average home loan is for thirty years, this means I will have to put in considerably more money than the average repayment on a loan.  This should still be achievable and realistic as I will have tenants paying rent, and dividends from my shares. Is it still SMART? I think we're still good.

I stands for Inspirational.  So the question now is do I feel inspired by this goal?  Well, it started out as an example for the purpose of this blog but now that I have worked it through, I have to admit that I'm actually inspired by this goal.  Since I've been through all of the steps and decided that it is realistic and attainable for me, I  think I'll go for it.  It's even more inspiring since I know that I'm already on my way.  The vehicle for achieving the goal is already in place, so why not?  I'm inspired.

The last part of the SMARTIE is Emotional.  What is this and why is it important?  Attributing emotion to your goal is about getting up front and personal with it.  Have a think about the benefits that achieving your goal can provide for you.  What's so good about having a million dollars in net worth?  For starters, it can provide me with an income which means that I don't have to work.  It gives me options for the education of my children and that is really important to me.  Being able to enjoy a holiday without looking at the prices on restaurant menus is a big plus.  Mostly, having this money gives me choices.  I probably don't necessarily need a million to achieve this same outcome but it's a nice round number and a specific figure to aspire to.  Let's get excited.

That covers goal setting.  But it hasn't actually covered the how question.  We've decided what we want, made it specific, measurable, achievable, realistic, time-bound, inspiring and emotional.  What's next?  How do we actually achieve said goal?  We by now you should have enough motivation to start.  So start.  I decided that I want property and shares.  If I didn't have one already, I would look into setting up an online trading account.  I might start researching property investing.  I might go to a bank and ask about investment loans.  You have your goal, start.  Do something, anything that will make that first step towards achieving it.  You don't have to know the complete route to your destination, that will become more obvious as you move towards it.  Just begin moving in the general direction of where you want to go and you'll find yourself picking up momentum in no time.  Good Luck!

How much is too much debt?

Is there such as thing as too much debt?  One person may be comfortable with $5million worth of borrowings yet someone else may be struggling with the $5000 on their credit card. How do we work out how much is the right amount for us?

           

How loans work

There are two things you need when borrowing money, equity and serviceability.  Equity refers to the value of the asset you are borrowing against.  If you are buying a new car, the car is used as insurance against the loan.  The same goes for a house or property.  In the event that you can’t pay your loan, the lender has the right to sell your asset to recover the cost of the loan.

Serviceability is the amount of income you have that you can put towards paying off the loan.  If you have no money coming in, it doesn’t matter how much your assets are worth, you won’t get a loan.

When borrowing, a bank may lend you up to 60% of your rural property or 80% of your residential property provided you have serviceability.  But that doesn’t mean that you can afford your loans.  Banks have a formula for determining how much money a person can reasonably live on.  Any surplus is considered for repayments of the loan. 

If you borrow right up to the amount that is offered, you could get into financial trouble if your standard of living requires more than the banks have allowed.  Also, if interest rates rise or you change jobs, move house or have a medical situation, you may find it difficult to repay your loan.

Work out what’s right for you.

Each person is comfortable with different amounts of debt.  If you are borrowing for something that will increase your income, factor this into the equation.  If you are borrowing for something that will be used up quickly, factor in repayments so that you are not still paying for it when it is gone.  If you are looking for a simple formula, a standard rule is not to have your total repayments exceed 25% of your income.  This should give you a good buffer for those emergencies.

Sticking with it

Forming new habits is hard.  How many of us start each year with a resolution to quit smoking/ lose weight/ start a diary/ get our finances in order or any number of other things only to lose interest and motivation mere weeks later? Down the track we remember what it was that we were planning to do and what happens then?  Do we take ourselves on a guilt trip?  Do we beat ourselves up over our lack of self-discipline?  It's not difficult to take a hit to our self-esteem if we acknowledge that we failed in our goal.  So we often justify to ourselves why it was never going to work in the first place, or instead try to forget that we ever set that goal or downplay its significance.

You don't have to accept failure from yourself for anything.  The goals that you set, or even a slight whim that you would like to happen doesn't have to be completely out of reach.  Here are five simple things that you can do to achieve the goals that you set for yourself:

1.  Don't be too hard on yourself.
You slipped up.  Big deal.  Life happens.  Acknowledge the positive.  You set a goal... That's a big step towards achieving it.  Good for you.  You started to move towards achieving that goal.  Another big step, another commendation.  You lasted ...... days!  Woohooo!

2. Don't play catchup.
Okay so you were going to eat better food and exercise half an hour a day.  You lasted two weeks then spent three days eating only chocolate cake.  This does not mean that you have to starve yourself tomorrow and exercise for a full hour and a half.  Acknowledge that you tried.  Acknowledge that you slipped up and start again tomorrow with the original plan.  This goes for your financial goals as well.  You may have decided to save $100 per week and did really well for three weeks then something happened and you didn't get to save for a month.  Don't try to find the extra $400 in the next pay check.  Acknowledge that life happened, and begin again with the original plan. Save only the $100 and try to stick with it for longer this time.

3.  Reevaluate your goals
Just because you said you were going to save $100 per week doesn't mean this isn't flexible.  If you goal was too ambitious, adjust it.  You tried it, it didn't work, this doesn't mean that the plan was no good in its entirety.  Perhaps you would be better to save only $50 per week.  Keep trying until you find a goal that you can stick with.

4.  Move your deadline.
If your plan was to achieve something by a certain time, and you realise that this is all of a sudden impossible, that doesn't mean that it can't happen eventually.  You want to save $5000 for an overseas trip in September but you're $2000 short.  Does that mean that you give up on your dream?  Heck no!  Keep saving... even at a slower rate if need be, but you can go next year can't you?  If you give up now, all you'll do is lose your confidence and possibly blow the money you have already saved on something that gives you no real pleasure.

5.  Get a coach.
It's much easier to stick with your goals if you share them with someone.  Having someone meet you at the gym for a workout is far more motivating than going on your own.  You don't want to let your friend down so you make the effort to go.  The same goes with any goal.  Get a friend or mentor to keep in touch with you on a regular basis to see how you are going and keep you accountable.  You'll find it harder to put off the work you need to do if you know that you will be getting a phone call in the next week checking up on your progress.  Professional coaches can also help you to find realistic goals and give you the tools that you need to achieve them.  Also, if you are paying for the service, you are far more likely to keep yourself accountable because your wallet depends on it.

Give yourself permission to succeed by not giving yourself an excuse to fail.  An to finish on a cliche: If at first you don't succeed, try, try again.

Bills Bills Bills

A few months ago a woman contacted me for some help with her finances.  Up until that point, her husband had been paying all of bills and now he had handed responsibility to her.  The big question was how to make sure there was enough money available for when the bills came in.  She noticed (and I have the same situation myself) that many of her bills all came in the same month.  For me that month is December which is really handy (not) around Christmas time.  I also get a second big month in May/June.

The bills I am referring to here are the big ones that we tend to forget about until they arrive.  Things like car registration, services, rates, roadside assistance, insurance, electricity and telephone bills to name a few.  When you get a few of these within a matter of weeks it can really stretch the budget.  So how do we make sure there is enough for all of these bills, and also enough for our usual activities as well.

The short answer is: Save up.  But that's not the slightest bit helpful if you are already living week to week.  So here's a step by step solution that may be of assistance.

The first thing you need to do is find out what all of your bills are.  Have a rat through all of your old bills and bank statements and find as many bills or payments as you can from the last twelve months.  Write down on a piece of paper what these are all for.  Then in a table, also write down the approximate month that these are due, and how much you usually need to pay.  Actually knowing when to expect these bills is a huge step towards being able to pay them on time.

The next step depends on your current financial situation.  If you have a bit saved up and the next bills aren't going to cause you too much stress then the rest is just a matter of mathematics.  Add up the total of all of these bills, divide the answer by 52 and that's how much you need to allocate for your bills each week.  Put this amount into a separate bank account on the day you get paid before other expenses come out.  This will ensure that your provisions are made and you don't have to stress about having enough to put aside at the end of your pay cycle.  Now, when the bills come in, you should have enough to be able to take it directly out of this account to pay for them.  Of course, for the short term, you may have to do a bit of a top up if your big month is just around the corner.  But after that, this system should work, provided you haven't forgotten any bills or grossly underestimated the fees.

If that last paragraph was less than useful because you already have bills coming in that you can't pay, then here's a method that may help.  Many companies have pay-by-the-month plans.  Rather than put off a large bill and be uninsured or something, give these companies a call and see if they'll let you pay monthly instead of annually.  Otherwise, you could prioritise your bills and pay the most important ones first.  For the others, give the companies a call and see whether or not they will allow you to put off the payment for a month or two.  Most people are understanding, but it is better to have communication than to wait for more notices.  Organise some direct payments to get these bills out of the way before your other expenses.  If the payment for the bills does not fit in with your income cycle then put money in a separate bank account on your payday to provide for these, and have your direct debits come out of this account.

Paying bills should not have to be stressful.  All it takes is a little organisation.  If you do this properly the first time, then it shouldn't be too much trouble to keep your bills in check in future, even if you change companies or have increases.  Just don't be afraid to pick up the phone.

Separate Bank Accounts

One of the things that I always recommend to people is to have more than one bank account.  This is very different to having more than one credit card so don't get the two confused.

When I first started reading about personal finance management, I learnt the 10% rule. If you save 10% of your income, every time you get paid, you are on your road to wealth.  I  had every intention of doing this and more but for some reason, the money just would not stay in my account.  At the end of each pay cycle, the 10% wasn't there.  Or else, I would see my bank account increase over the course of a couple of months only to dive back down again when a bunch of bills all came in at once.

The solution was pretty simple but it took me many years to figure it out and to implement it.  It's all very well saying put this money aside, or save that, and when you are doing those things it is obvious how they are to be done.  It is not so obvious if you have never entertained the concept before.

So here's the step by step process:  Go to the bank and get them to open up a few more bank accounts for you.  I recommend having at least four.  If your credit card has a zero balance, then this can be one of the four.  Have your ATM card linked to only one of these, and the others only accessible via internet or phone banking.  They should not charge extra account keeping fees for the extra accounts and if they do, find a bank that doesn't.

Here's what they are for.  One will be for your investment funds or retirement.  One is for the bills that only come once in a while.  One is an emergency fund for unexpected bills like car accidents or theft etc.  This one can be your credit card if you don't regularly max it out.  The other account is your regular transaction account that your income goes into and regular bills such as groceries get paid from.

Now, on the day you get paid, put 10% of your income into the investment fund.  If this sounds unachievable, start with a smaller amount.  It is the habit that's important not the amount, so even if its just $5 per fortnight, get this one started.  You will find it easier to add to later.  Work out what the total of your irregular bills are for the year, divide by 52 and that's what you put in the second account for each week.  When these bills come in, do a transfer from this account to get them paid.  Put aside a little each pay for emergencies, so that if something comes up, you don't feel compelled to dip into your investment fund or money allocated for other purposes.  You should feel comfortable spending the rest of your pay in the regular way, knowing that you have saved money and that everything else is covered.  Remember to do your direct transfers on the day your pay goes in, otherwise you may find that you have run out of money before you get around to it.

The Millionaire Mindset

I've been reading a lot lately about the 'universal law of attraction'.  There are plenty of books out there which advocate that if you think positive thoughts, positive things will happen for you.  And money is no different apparently.  The theory goes that if you put yourself in a positive vibration, or imagine yourself in abundance, that money will be attracted to you.

If you ask people about whether they have enough money, most will admit to wanting more.  Many will by lottery tickets in the hope of winning "The Big One" so that they don't have to worry about money anymore.  Worrying about money is apparently a negative vibration which keeps money away.
I have been practicing positive thoughts about money for a couple of years now and I admit that (in conjunction with good money habits), I no longer worry about money.  I always have enough for what I want or need at the time.  If I need more, there is always an opportunity for me to get some more from somewhere.

It wasn't until yesterday that I actually saw this theory work in reverse.  A friend of mine has a business in town and I happened to run into him.  After a short conversation, I asked him to do a quick job for me which was related to his business.  He wasn't busy and fixed me up in about fifteen minutes.  I tried to pay him the going rate, but he wanted to waive the fee because we are friends.  This must happen a lot to my friend.  We live in a small town where everyone knows each other and you will always stop for a chat in the street with someone.  If you gave a free service to every one of these people, you could not possibly make a living.  And that's exactly the type of friends that we are.  We don't interact socially except at community functions.  We have never phoned each other, and our interactions are really limited to chance encounters when we both happen to be in town, which is about once every 4 or 5 months.  I insisted that my friend take payment, or I would not feel comfortable asking for his services again.  He took the money.  Then he did the most extraordinary thing.  He threw it away. The money stayed in his hand for about a minute and a half before it got handed over to the newsagent.  If my friend had bought stationery or a magazine or something he wanted, then fine but the entire amount was spent on a lottery ticket, which he promised to split with me, should it be a winner.

This really cemented the theory in place for me.  Good money habits are all well and good but if you don't like money or you think negatively about it, you will find it impossible to hang on to.  It appeared to me that my friend felt so guilty about having my money, even though it was earned, that he had to get rid of it as quickly as possible.

Does this happen to you?  Do you think money is 'dirty' or 'evil'? If so, you may never get ahead financially.  Have a good think about what your money beliefs are.  Do you feel like you have to get rid of it, or are you happy to accept payment for reasonable work? If you don't feel like you deserve to have money perhaps you need to work on changing your beliefs.  If people give you money willingly, then that is a good indication that you are worth it.  Take the money and do something worthwhile with it.  I approach taking money the same way that I take compliments.  I say "thank you".