Christmas 2007

The holiday season is just around the corner with a few days left to go.

First of all, I wish to thank all the regular readers and to those who have left comments, contributing the on-going discussion of personal finance.

Second of all, I must apologise to the same regular readers for the lack for articles over the last 6 or so weeks. My life getting complicated and blogging must take a back seat for the time being. However, a couple of updates.

1. We have change over to a new car, purchased on a novated leased agreement. The procees from the sale  of our previous car went to paying off all of our credit card debts (~$12K). The remainder was put into an online high interest bearing account.
2. Reduce our credit card liability by cutting the credit limit on the cards to $1000.
   
3. One of the complications was things are not being done, so I am trying to embrace the GTD or similar philosophy . Shall let you know how I go.
4. Start to think about schooling for our son, so expenses for these are sure to mount up.

Third of all, if you are able to spend some time with your love ones, please do so as they are the things that money can't provide.

Merry Christmas!

How to calculate how much of the house you own?

The other day, I wrote an article on visualising how much of your house you own. I am currently trying to work this out. The simplest method is take price you paid for the house, minus the mortgage you took from the bank to help you buy the house.

% house own = ( house price - mortgage ) / house price

If I am going to do this correctly, it will tracked over a long period of time, probably in terms of years, so we need to factor two major affects into the calculations.

1. Appreciation of the house price
2. The movement of the interest rate on your mortgage.

The appreciation of the house price should be adjusted on a yearly basis. However, if the area of your house changes considerably, like it did in the inner suburbs of Melbourne about 5 years ago when it changed by 20% per year, the adjustment period may need to be smaller, like every 6 months.

Do you know how much of your house you own?

House mortgage is one of bigger, if not the biggest, debts that most people get into. While reading the other blogs, I came across a chart at JosephSangl.com that shows how much of the house you own. Instead of a charting the amount left to be paid against time, an outline of your house is slowly filled in to indicate how much of it you own. As your payment gets better, the more of the house is filled it.

I am planning to do this as well, use green for bits of the house that we own and red for the house the bank owns.

It certainly put your house payments into perspective! Incredibly motivating.

LPG vs Petrol

We have chosen our new car, it is the Ford Territory. We test drive it the other day, and my wife loved it! I am unsure if the Ford Territory is sold in only in Australia, but basically it is based upon the Ford Falcon except it has a different body.

The Ford Territory can be fitted with a LPG option. With the current fuel pricing almost hitting the $1.50 per litre mark, having the car on LPG (at about $0.60 per litre) is certainly attractive. We considered it, but after closely looking the maths. It take a while to break even at the cost of it. Lets have a look at the maths.

1. The differential cost between the fuel and LPG is about $1 per litre.
2. The cost of the fitting the LPG option is about $3500 and $4800, excluding the government rebate.
3. The government rebate is $2000, which will being the cost to $1500 to $2800. We would qualify for a $2000, instead of a $1000, as this option is considered as an after market option as Ford does not recommend a LPG unit for the Ford Territory.
   
4. We will start to save money after we have used up 1500 litres and 2800 litres of LPG.
5. The Ford Territory has a fuel economy of about 12 litres / 100km. This works out to be a distance of about 12,500 kilometers or 23,0000 kilometers.
   

With the way, we drive our car, it will take about 2-3 years to reach that distance, which means that our savings does not really start until year 2009 at the earliest.

So we have made the decision to stay with petrol, and will revisit this option again later on.

SIDS and Kids VIC

A couple of blog post ago, I wrote about how SIDS and Kids VIC was promoting a discount coupons books run by the Citibook. Since then, I was contacted by Lisa Kennewell to highlight some inconsistency in my post. She indicated the following

1. The link to SIDS and Kids VIC was incorrectly pointed to the national group. The link to the Victorian group is here.
2. The link that I provided does not download a Citibook that would donate some money to SIDS and Kids VIC. The correct link is here. Citibook does not have any link to SIDS and Kids VIC version of their discount coupons. The link is to the SIDS and Kids VIC version of the Citibook is also available from this webpage as well.
   

By the way, it is very poor form of Citibook to enter into a promotion with SIDS and Kids VIC but don't do anything to promote it. You can't even find a link to it anywhere on Citibook's website! The only version of Citibook that it offers to download is GOLD104.3 version. I wonder if Citibook gets a bigger cut from this version?

I have also edited the inconsistency out of the blog.

Many thanks to Lisa Kennewell to pointing out the errors.

How we got a 32% discount on outdoor furniture!

We have an outdoor area just outside the back door which is disparately under utilised as it is quite bare without any outdoor furniture. So what do we do in this situation? We went shopping!

About half an hour drive away at Narre Warren, there is an large shopping area and includes many of the larger shops like Harvey Norman, BBQ Galores and Ray Tents city.

We finally arrived at one particular shop that specialise in outdoor furniture. We were looking for an aluminum framed furniture with cloth backed chairs. In one corner of the shop floor, we noticed a set for sale, it comes with six chairs and a glass table top. The whole ensemble fits our back area just right, and it is also on sale!

We started the bargaining process by asking if we are able to mix and match the table with a different set of chairs as we are not too keen on the standard chairs. Specifically, we pointed to set of wicker chairs that were also on sale.

The shop assistance went to the counter and came back with a price of $699 for the set. She told us that this is a special price to offload the last remaining stock of these items. We see this as an opportunity to reduce the price further. The RRP on these items were about $840. My wife and I had a chat about it, and asked if she could the deal at $600 as this was budget for the furniture. I was not too sure if she believed about the "budget" line, however after a few moments she relented but stated that this is a pick up price only. Sweet! We left a $100 holding deposit on the items and left the store extremely happy.

One week later, we received a phone call from the store manager saying that they could not find 2 of the 6 chairs that we ordered, and they will have to order it from their supplier if we still want to proceed with the order. Not wanting to let go of a good deal, I said yes. The store manager gave me a couple of choices.

1. pick the tables and the four chairs now, and return later for the other two chairs when they are available.
   
2. wait till the two chairs are available and pickup the all the items in one go.

I felt that there is an opportunity to get a bit more from the deal and suggest to the store manager that we will wait until the two chairs are available and that they throw in free delivery (a $45 cost) as this delay was caused by them. The store manager agreed after a few moments hesitation.

So far, we have gained a total of $295 or a discount of 33% on the package . That was a pretty good deal.

It gets better, the store manager rang my wife yesterday to inform us that they are not able to deliver the goods this week as their delivery truck is fully booked. I think this is their way of recuperating some cost. My wife stood her ground and told them they are not doing what they promise so they gave us a further $30 off the price. The cost of the outdoor furniture is now $570. At the end of the day, we prefer a further $30 discount instead of free delivery as we don't really pay for the delivery, but $30 is hard cash that doesn't get handed over.

So the final discount is a total of $270, or a discount of 32%. Still a pretty good discount.

citibook

Just a quick post to note that I came across citibook today. I read about it in the SIDS and Kids VIC newsletter.

It is essentially a website full of resuable discount coupons that you can print whenever you want. You can either browse through the affiliated business online or download the book which allows you to browse through it offline.

Citibook have two levels of discounts. The free discounts are usually between 5% to 50% off. The next level is the VIP discounts which will usually give your double amount discounts.

They appears to have a large range of businesses offering many discounts, from restaurants to car services.

By the way, if you are looking for a charity to support, consider the SIDS and kids VIC foundation.

Updated: Lisa Kennewell left a comment and posted the correct url that allow the downloading of the citibook that supports the SIDS and Kids VIC foundation. Link is found at http://www.sidsandkids.org/vic

Apologies to SIDS and Kids VIC foundation for not posting this link before.

What to do with $20K from a car trade-in?

We are currently revisiting the issued of getting a replacement car for our Toyota Prado. We have had it since 2001 and had traveled about 135,000 kilometers in it. For a 4WD, it has hardly reach middle age. What caused us to revisit it is the price of fuel and the maintenance cost of it. The car runs on diesel and it is currently approaching $1.50 per litre, plus the fuel economy on it is about 17litres per 100KM.

I had another chat with my HR manager about novated leasing and the following point was made.

The novated lease is only valid for the true value of the car, not the amount needed to change over the car.

In my situation, I will be looking to finance about $40K (value of the car) instead of $20K (change over cost of the cars). This will be OK if all you are considering is the out of pocket expenses at the time of purchase, but if you are looking at it over the term of the lease, it could make a major difference to your wallet.

So what are the options to help lessen the financial hit. I have only able to come up with two possible options.

1. With the $20K cash that we will get for the trade in, we could invest it a high interest bank account that pays monthly. The interest will offset the novated lease repayments. So if the novated leased is financed at 9% and the high interest bank account is at 6.75%, the net effect is the new car is being financed at 2.25%.
2. Take a overall perspective, and use the $20K cash to reduce the current mortgage, and any other high interest bearing debts like credit cards bills. This should cut a large chunk of interest off, especially the mortgage.

What would you do?

What cost should I be considering when selecting a school for my son?

In about two years time, my son will be just about at the right age to start his 12 or so years of formal education. First off, it will probably be kindergarten. Apart from the other non-financial factors such as should it be a single sex school, or what kind of curriculum does the school focus on, what financial costs I should be considering when selecting the school?
I have had a thought about this today and came up with a top three cost items that I should consider.

1. School Fees - The school fees has to be justifiable and suitable for the services that my child will be receiving from the school. One can make the assumption that the higher the cost, the better the quality for the education. However, that assumption could back fire if not enough research is performed.
2. Transport - If the school is not within a short drive away, the transport costs our son to and from school will be significant. If the long term plan is for my son to attended the same school for the whole 12 years, it could be very significant if the only transport option is car. As my son gets older, an expectation would be that he makes his own way to school when it is possible.
3. Clothing - Some schools will demand school uniforms. School uniform is more than just what is being worn to school, there is also a set for summer and a different set for winter. Physical education uniform will also be different as well. This will need to be considered if the uniforms are specific for the schools. If the school only something like a white shirt and dark pants without any logos, than that should be cheaper.
   

The Victorian government does provide some financial assistance towards the educating of your child. This webpage from the Victorian education department outlines the various options available. I think we will only be a eligible for the School Start Bonus.

Some may say that to make these types of decision at this stage is futile as there are more than two years before we decide. The way I see it, selecting a school is such an emotive tasks and an important cornerstone of our children's future, spending as much time on it as possible is the least I can do.

How has the soaring dollar affected you?

In recent months, the humble Australian dollar is soaring against the American. Today, 1 Australian dollar will purchase about 92 American cents, and the financial commentators are predicting that it may reach parity before year end.

What does that mean for the average man on the street? We will have to look at it from two perspectives. There is the perspective of the consumer, that is how our spending habits may change. There is also the perspective of the worker, that is how our jobs and work is going to be affected.

Spending the dollar

The majority of the products that we purchase, especially the manufactured products such as plastic goods, electronics and cars, are manufactured overseas. The goods being imported into Australia should be a deal cheaper, when compared to the start of 2007 where the Australian dollar only was only buying 78 American cents.

I think for the big value items such as cars, it will take a period of time before the current stock are sold and the new stock purchased at the higher exchange rate.

There are already some products that are already being sold at a lower price, such as computer software where the turnover in stock is a lot quicker.

For primary products like fresh fruits and vegetables, the current pricing is high because of the drought, and should not be that depending upon the exchange rate.

One of the products that I wish were more dependent upon the exchange rate is the price of fuel, but for some reason, it is always been high for one reason or another. The oil company always seems to have some reasons.

Earning the dollar

If you are working in an export industry, such as manufacturing or the resources, it will be harder to sell your product overseas as it will be expensive for them to purchase them from the Australians. However it seems that the Chinese is not perturbed by the high exchange rate and buying our coal and others as fast as we can dig them out of the ground.

In some ways, some of the raw materials that goes into the manufacturing industry are purchased from overseas, so the price of these raw materials will be cheaper, and perhaps, the cost of the manufacturing may also be cheaper. It all depends on how and what goods are manufactured.

The bottom line is that job security for the man on the street may be an issue if the Australian increase further. So be prepared.

The increasing Australian dollar will affect people in many different ways. How has the changing currency affected you?

2nd birthday

A wonderful weekend just went past. A few significant events occurred that weekend. Daylight savings just kicked in Melbourne and more importantly, my son just celebrated his second birthday. The celebrations were extremely worthwhile as it allow the family to get past a difficult 12 months. It also gave me an opportunity to get to know his friends a little better.

A few posts ago, I wrote about the Frankston Toy Library, where we hired some playground equipment at a cost of $10 for the weekend. My son and his friends loves the equipment. It was certainly $10 well spent.

That evening, I also though about other ways which we could have saved money.

1. Bake you own cake. My wife baked the two cakes for the day. We actually had two birthday celebrations. One in the morning with my son's friends, and one in the afternoon with the family. By making our own cake, we save money as the cakes only cost about $13 in raw materials. It probably save us about $25 to $30.
2. Host it in your own backyard. Our house has a nice verandah in the backyard. The verandah area was also quite large, and have enough space to house a few of the playground equipments. This gave us a nice area which we can host the party. If we had to go to a indoor gym or similar, it would have cost at least $100 for the day.
3. Make your own wrapping paper. My wife recently started a tradition where my son and her would make wrapping paper by painting a large sheet of butcher's paper. In the gift that it is wrapping, we make note of who painting the wrapping paper. We think that it gives the wrapping paper a personal touch.

In some ways, we did not try very hard to save money. I felt that because it is a birthday celebration for my son, being frugal in not is in the spirit of celebration. My wife and I were more focus on ensuring that everybody at the celebration enjoyed themselves and help to celebrate my son's journey into his third year.

Carnival of Personal Finance, #121

I should have shared the love a few days ago when the CoPF #121 was published, but I was traveling last week and has not managed to catch up. So, lets cut to the chase,

The CoPF #121 was hosted by Ask Mr. Credit Card. There is the Columbus day edition, and there is also an editor's choice edition.

Some of my favourite articles from the CoPF are:

Exjackly has a great article on How to live on minimum wage.

Mortgage Blog has the top 7 tips for using credit cards .

Rather-be-shopping.com tells us about what I learned from my dad about money and finances .

I hope that you enjoy these articles as much as I do.

Frankston Toy Library, a wonderful service

My family and I visited the toy library tonight. My wife took my son a few weeks back and borrowed a couple of toys, but tonight is the first time that I visited the toy library. My local toy library is the Frankston Toy Library.

Quoting from the website,

Frankston Toy Library is a non-profit organisation, primarily operated and managed by volunteer to provide services and resources to families, community groups and organisations at a reasonable cost.

When my wife joined up, she paid $70 for a membership. This is an annual fee. Besides paying then annual fee, we must also commit to doing 3.5 hours of volunteer work. After visiting the library, I would consider the fee and the commitment to be a small token to the wonderful services that is provided by the toy library.

Let's explore the benefits of joining the toy library.

1. As my son gets older, his interests in different toys will change. The toy library facilitates this by allow us to constantly change his toys over a two week period. The variety of toys appears to be suitable for newborns right up to about the kindergarten aged kids.
   
2. If we are planning for a children event, like a birthday party, we can hire a party pack from the toy library. For my son's upcoming birthday party, we hired a party pack that includes a non-motorised marry-go-round, a crawl-through tunnel, a big seesaw and a climbing castle for a total of $10. If we had to purchased these separately, it would have cost around the $350 mark.
3. By doing volunteer work, we continue the wonderful services provided by the toy library so that other parents and children can enjoy them.
4. Some of the toys are very expensive to purchase, could be up in the hundreds. So by borrowing the toys, it is allow you to test drive the toys before purchasing it.
   
5. The selection of toys is enormous, I must have sighted about 40 different type of jigsaw puzzles or about 10 different style of bicycles. If you child gets bored with a toy, return it and borrow something else.
6. The staff at the Frankston Toy Library is extremely knowledgeable about the toys and the suitability of the toys to the child. So ask them if you are in doubt.
7. By allowing your child to play with different toys, it promotes them to learn by experimenting, sort of "learning on the job".
   

The Frankston Toy Library is part of the Toy Library Victoria, which is a umbrella group of toy libraries across Victoria.

The service provided by the toy library is a wonderful service, so lets support them by visiting them, donating our pre-loved toys to them and contribute to their on-going by volunteering some of your time.

7 random things about me

Thanks plonkee.

 

plonkee recently tagged me to write 7 random items about me. Well, here goes.

1. The first car that I ever drove is a 1970 toyota carolla. It is green, and my family first car in Australia.
2. Although I don't actively follow any team, my favourite football league in Europe is the Italian Series A, as oppose to everyone's favourite the English Premier League.
3. I prefer to write with a fountain pen instead of a ball point pen.
4. Every time I visit a South East Asian country, I look forward to eating some durian (if they are in season), or mangosteen .
5. My favourite sound in the world is the laughter of my son and my wife.
6. When I was 25, I backpacked around Tasmania for three weeks and it kick start my love of nature.
7. My splin on my legs are bowed.

To keep the tagging going foward, I have tagged the following five fantastic blogs, (not necessary of the PF nature).

The Happy Rock

The Digerati Life

My Journey to Eliminate Debt

Nerd Guru

Money Learner

 

 

Saving on citylink tolls by opening an account.

Like most major cities around the world, Melbourne had a massive system of freeways. Over the years, as the freeways are being constructed, the government introduced tolls as a way of recuperating the cost of building it. Like the Westgate Bridge constructed in the 70s, it was tolled and then after a few years, the toll was lifted.

The tolling system for the freeways were administrated by a citylink which is a subsidiary of Transurban.

The tolls are electronic, so no more stopping at toll booths and throwing a couple of coins into a bucket. They are several ways of paying for the tolls.

Usually when we use a tolled freeway, we just purchase a weekend pass. A weekend pass allows you to drive on any of the tolled freeways, all weekend. A weekend pass cost $11.30.

As we drove onto the tolled freeway, and exited, I realised that it may cheaper to open an account and use an etag. With etag, the charges are based upon you entry and exit points into the tolled freeway. With a pass, you can only purchase a weekend pass, a 24 hour pass and a Tullamarine pass.

Looking at my drive on the weekend, I entered the tolled freeway at Monash Freeway/Toorak, and exited at Burnely. It would have cost me $1.57. However, it actually cost me $11.30 as I purchased a weekend pass .

Citylink has a handy calculator to help you work out your traveling cost.

After looking back on your freeway usage, we ended up opening an account with citylink. Furthermore, I tend to be forgetful after I used the tolled freeway and incurred late toll fee of $10. With the etag, the tolls are automatically deducted from your account.

photo credit: renato cardoso

My son came across a pyramid scheme..

Ever since I had an email address, I have been getting the typical spam where they promise to give me the all the riches in the world given to me from the son from an assassinated army general in Nigeria, well you get the idea. Anyway, when my wife showed me a pyramid letter she got from her group of friends, I was very skeptical. After reading it, I realised that it is a pyramid scheme that could work.

The idea is to get the kids reading books. If you follow the idea correctly, you should be receive about 36 books in a few weeks time.

This is how it works.

1. The letter that my son got has two names at the top of it, the name of the child whom gave the letter to my son and the name of the child whom gave the letter to my son's friend.
2. A blank letter came with the one my son received.
3. On the blank letter, my wife puts the name of my son and his friend.
4. my wife also puts down on the list the names of six of my son's friends.
5. We select a book to post my son's friend's friend.
6. We also post the six letters to the each of my son's friends.
7. Each of the my son's friends that receive the letter will repeat the process.
8. In about two weeks time, my son should receive 36 books.

It sounds a bit complicated so let work through an example.

1. My son receives a letter from his friend, Jack.
2. On top of the letter is Jack's name and Alan, Jack's friend.
3. With the blank letter, my wife would put my son's name and Jack's name on it.
4. Also on the blank letter, she puts down my son's six other friend.
5. My wfie posts a book off to Alan.
6. My wife also post six letters, one to each of my son's friend.

We have just posted our six letters out. When we receive some books, I shall keep you posted.

By the way, we have some blank letters that we have scanned. So if you want to start this off, we can email you a copy of the blank letter.

Let me know if you think if there are any holes in this idea.

photo credit: Claudia Meyer

garlic pesto recipe

My wife and I was experimenting with some pasta dishes and came up with something that we found to be simple, cheap and extremely delicious. It is a recipe that I wish to share.

Ingredients

a handful of pine nuts
2 tablespoon of olive oil
2 cloves of garlic
1 satchel of tomato paste
a quantity of pasta

Recipe

1. Peel the garlic and roughly dice the garlic
2. Put the pine nuts and the garlic into a mortar and pound it gently for about 30 seconds.
3. Pour in the olive oil into the mortar and mix well.
4. Leave the mixture to rest for about 10 minutes for the flavour to mix.
5. Cook the pasta until it is to your liking.
6. Drain the pasta and put into a large steel bowl.
7. Pour mixture into the pasta and mix well.
8. Stir in the tomato paste and all ingredients are mixed well.
9. Serve and eat well.

You probably guess that the ingredients' quantity is not very precise. We have cooked this dish a number of times and found that the recipe works well with a wide variation in quantity. If you pound the mixture to a fine paste, the flavour will be stronger.

It took us about 15 minutes to cook this dish, so it is perfect for something on the run.

From a cost perspective, this recipe is dirt cheap. I think that the most expensive ingredient is the pine nuts.

Hope you enjoy this recipe.

Free to a good home...

As I have been writing this blog over the last few months, and reading the other PF blogs. It appears that one of the easiest way of getting ahead in your finances are to save your money by minimising spending. Well, I was thinking about the flip side of this concept, the concept of giving away things. From year to year, I would typically move through various items, in particular mobile phones, clothes and kitchen items.

Why should you give your items away? Let see,

1. No good sitting in your shed or cupboard - The items are probably sitting in your shed or the cupboard gathering dust. Someone else might as well get some use out of it.
2. Help others - There are plenty of others out in the community could benefit from our items that are not used. If I coupled that mobile phone sitting the cupboard with a pre-paid SIM, it could be a very useful item.
3. Society is too cash driven - Our society is very much cash/money driven. I believe that our society would be better if we less cash dependent and return to a society that is closer to our agriculture background.

I wrote about Freecycle in one of my first post, and it is a really good resource for advertising what you want to give away. I believe that craig list is also a very spot for free giveaways, although I haven't use it yet. You can also do the following.

1. Donate it - Your local church group or charity that runs a opportunity shop would gladly take what you have. Be aware that some won't accept electrical items as they don't want the public liability of selling faulty electrical items at their shops.
2. Post a notice at work - Your workmates will more likely to take these items off your hands as there is a certain level of trust they have of you and your items.
   
3. Leave it on your nature strip with a "FREE" sign - you will be surprise how fast the items will disappear. We left a roll of chicken wire and some sheets of roofing covers in the morning on our nature strip and it disappear that evening!

Go on, give it away...You will feel better for it.

These are just the wrong reasons.

The current news of a couple suing an obstetrician for giving them twins via an IVF program is giving me a bit of headache. Some of the details are in this article from The Age newspaper. The couple only wanted a single birth, but instead, received multiple births. My head hurts because of the amount of money involve, and the circumstances of the case.

The couple is suing for $400,000 and, according to the newspaper article, it would cover the raising of the one of the two children. Included as part of the $400,000 is $158,000 for a private Steiner school education. I don't know about you, I get a feeling that the figures does not quite add up.

Sending your children to the most expensive private school in Melbourne for the twelve years would be getting close to the $158,000 figure. The questions are, does the couple's children deserve to this type of education, and why should this couple be allow to afford this education for their kids?

My son is just about to become two years old. To me, he has just as much right to receive the best education as my wife and I can possible afford. I think the key word is afford. Affordability comes from money that you have earned and saved. Earning money though legal channels as this couple is doing is just a very nasty way for this society to be heading towards, especially on the grounds which the couples are suing.

On one hand, I would like to see this case thrown out of the courts as the reasons for doing it are just not morally correct. However from an education perspective, it would provide a rather high quality of education for the kids, admittedly, it is a bit alternative.

What are your thoughts?

photo credit: Eyup Salman

Educational opportunities, class mobility and nomadic chinese

A couple of months ago, SVB over at The Digerati Life wrote an interesting article on class mobility, especially as the generation in your family becomes richer or poorer. I read it when the article was first published and never gave it much though until recently.

My heritage is Chinese base, and a nomadic Chinese as well. As most nomads know, in years gone by, we travel for many reasons, but it is not usually for pleasure. We may have moved on because of economic reasons, or because there isn't enough food here or many other reasons.

This artifact of my character was brought up during a discussion over a recent family gathering. It seems that it is in our character to always strive to provide the best opportunity for the next generation of succeed and live a better life. To provide this opportunity general requires some sort of sacrifice on the current generations. The family discussed this point and looked at the generations present at the family gathering.

There were three generations present.

My parent's generation - We migrated to Australia so that our educational opportunities were increased as opposed to living is South East Asia and being educated there. I am not saying that the education system in South East Asia is bad, in fact it is particularly good. However, the opportunities to obtained a placed at world recognised university are difficult. Among other things, my parents sacrificed being close to their brothers and sisters and familiar surroundings for the kids, the next generation, would have a better foundation.

My generation - My parents sacrifice paid off as my brothers and I are in good jobs that pays well, and that has allow us to live a pretty comfortable life. With our well paying jobs, we are able to setup a nice foundation for our children to build upon to live an even better life than us.

My children's generation - My son is only coming onto two years, so all we can do is develop the opportunities for him. However, I hope that given the correct opportunities, he will be able to take it and provide a better life for him and his family.

SVB calls this phenomenon migrating upwards in class mobility. Migration downwards in class mobility is always a sad occasion in any family, and it could be dangerous. Sometimes a download migration is difficult to stop.

Tax free food

Well, tax free food has arrived at my work. Hang on a minute, food is already free of GST isn't it? Yes, it is but it is also taxed because you use your after-tax dollars to purchase your food, so in an in-direct manner you are being taxed for buying your food.

While I was overseas, our HR department has introduced a program where you can purchase your food with your pre-tax dollars, essentially salary sacrificing for your food. The organisation that is running with this program is EzyBite, which is part of the Accor services.

This is how it works.

1. You sign up with EzyBite to get onto the program.
2. You nominate how much you want to spend on your food per pay period. So for me that would be monthly.
3. When you are hungry, you order on-line and your food will be delivered at agreed timed, usually be lunch time.
4. Enjoy the food and the savings.

According to EzyBite, an average saving of around 31.5% could be made but it is largely dependent on which tax bracket you fall into.

However, there are a couple of rules.

1. You must order through the EzyBite program to get this savings. So you can't just walk into the shop and order over the counter.
2. You must eat your food on your work premises.

These two rules are quite strict and is one of the reasons that the food can be purchased with pre-tax dollars.

I am still thinking if it make sense in my case, but will probably sign up for about $10 per month. I sometimes forget to brown bag my lunch and just buy it from the take-away across the road. This program will become quite handy. $10 per month equates to a purchase power of around $13, that should buy me a nice juicy burger with the lot!

I shall let you know in a few months time if this is working out.

photo credit: Maira Kouvara

24th Carnival of Money Stories

I was part of the 24th carnival of money stories, which was hosted at Enough Wealth just recently. My entry about small expenses leading up to a large expense was included.

Two articles that caught my attention were:-

Money and Such - The most expensive loan in history

teaspoonfinance.com - Solving Our Savings and Budget Issues - The No-Budget Budget Way

There are also plenty of other money stories that has personal spin to it as well. Happy reading.

real cost of bulk purchases

I was at the local Chemist Warehouse this evening to buy some Blackmores vitamin pills and noticed that they come in three different quantities.

- 60 pill bottle @ $20.99
- 120 pill bottle @ $29.99
- 180 pill bottle @ $46.99

The obvious assumption is to go for the 180 pill bottle as the general rule of bulk purchases is " the larger the quantity, the cheaper it gets". Well in this case, it is certainly not true.

Doing the maths, we get the following

- 60 pills is 35c per pill
- 120 pills is 25c per pill
- 180 pills is 27c per pill

From the figures, it is clearly cheaper to buy the 120 pill bottle. I guess that assumption isn't always correct but may be true most of the time, which is why I like the saying " if you assume, you will make an ASS out of U and ME".

photo credit : dima v

Saving on currency exchanges while travelling

Recently, I was travelling to Gothenburg, Sweden on business. As I was starting my trip from Melbourne, I had a couple of connections, one in Bangkok and the other in Copenhagen. If I had only two hours in either of those airports, it would not be too bad. But I was in Bangkok for three hours and in Copenhagen for four hours.

Anyway, when I purchased some food, I forgot one of the less enjoyable things while travelling, handling many different currency. Having a think about the situation, I came up with a two tips to save money from the currency perspective.

At the departing airport, I exchanged some Australian Dollars to Swedish Krones. At travelex, they offer a service to buy back your converted currency at the same exchange rate as they have sold it to you. Travelex call it their Buy Back Plus, and it has cost me an extra $10. This could make a significant difference as the foreign exchanges usually would offer to buy foriegn currency at a significantly different exchange rate that they would for selling it to you. For example, Travelex offered to exchange the Swedish Krones at approximately 5.6 krones per dollar. I looked at the buying rate, and it was at 6.1 krones per dollar. At these rates, I would have got 2800 krones for my 500 dollars, and if I didn't spend any money, I would have got about $459 when I returned into Australia. In this example, I saved about $41 dollars.

To save on fees, when shopping at airports, buy from shops that accept the currency that you have. When I was Copenhagen, the majority of the shops accepted Swedish Krones, which I good as I don't need to exchange for Danish Kronas. The trick with this is ask for the change to be in the currency you use to pay, especially if you are just transiting at the airport.

Travelling for either pleasure or business is usually an expensive activity. Juggling many different currency is always a challenge to keep the fees low and not to lose over the currency exchanges.

Is $22 too expensive for a book?

My wife and son has just left for a trip to the Murray River. The day before she left, we went on a shopping trip to stock up on some baby supplies. While we were walking around, she also bought a novel to read during the trip. Now we haven't bought a brand new book for a long time, we have always bought second hand books, at book liquidation sale or at the library. I was a bit taken back by the price. It was $22 for the book!

In the scheme of things, $22 is probably not that much if it meets the following 3 criteria

1. It provides good entertainment - a novel is usually a work of fiction and it provide nothing more than entertainment. If it provides some positive insight, then we managed to get bonus.
2. It is easy to understand - This is highly dependent on the reader as everyone's ability to consume visual information is different, and choosing the right book is key to providing a good entertainment.
3. It is not overly expensive - There is no way that if the book was anymore expensive, the cheapskate in me would try to persuade my wife to look for another book, but I would not need to do this as my wife has a fantastic sense of worth. She would have know what is good value and what is bad value.

J.D. over Get Rich Slowly wrote an article about getting a debt to pleasure. He spent the day playing paint ball. From a financial perspective, he broke his activities down and found that it cost him $10 per hour. Whether that is expensive or not totally depends how J.D. views on how much recreational activities are worth.

From my perspective, paying $22 dollars for a book is well worth it as I know that my wife will totally enjoy it, especially give the month that we just had.

How much is too much for you?

photo credit: Manu M

What to tell the kids if your family is in financial hardship?

Recently I did a guest post over at The Happy Rock about raising financially savvy kids . I want to explore one of the points a bit further. In that article, I wrote

Be upfront with them - Don't colour the family financial situation for the kids as this may bring up false expectations in the kids. You know, if the family can't afford to go on the big holiday this Christmas, let them know and the reasons why. Or if the big holiday is happening due to strong financial commitment from family, let them know that as well.

I have been thinking about this point today as I was watching son play with his toys. If we were in financial hardship, how would I let him know? I don't think I would not tell me about it, and I definitely not lie to him and tell him that everything is OK. It would him give a false sense of security, and if the financial hardship were to become something worse, the situation would be hard on his emotions.

I think I approach it in the following manner.

1. Tell him that we will be short on money over the few months, and explain to him what it means to our lifestyle. The language that I would have to be suitable for my son's age.
   
2. Show him some of mum's and dad's activities that will be changing.
3. Allow him to select some of his activities that will be changing.
4. Allow him to contribute in a positive manner towards the good family life.
5. Most of all, I would show him a plan that would get the family out of the financial hardship. This would give him hope.

There many other ways to approach this situation, and will largely depend on the family dynamics and the relationships between the family members.

How would you approach this if you were in this situation?

ACCC links discount fuel vouchers and increase grocery prices

Today, I read an article in The Age newspaper regarding a report by the ACCC of an increase in groceries' pricing by Coles and Woolworths due to fuel discount vouchers. If the report is true, then it supports the an observation that I have had over a number of years.

I have noticed that if the petrol station is near an affiliate supermarket, the price of the groceries from that supermarket is inflated to cover the cost.

In Australia, if you spend more than a threshold, typically $30, in a single transaction, you are entitle to a discount to an affiliate petrol station. The discount is usually 4 cents/litre, up to a maximum of 150 litres.

I have always had a suspicion that if the supermarket is attached to a service station, the cost of the groceries is higher to cover the cost of the discount. I was not able to detect the price increase. I feel that the pricing has only be very slightly increased, and is amortise over a period of time.

In some ways, I should be shopping at one of the other independent supermarkets like Foodworks or Ritchies. However, even these independent supermarkets are also offering fuel discount vouchers. So you cannot really escape it.

Assuming that all supermarkets has the same practice, it is almost compelling that you visit the affiliate petrol station so that the savings could be recuperated. If not, the supermarkets wins.

I have previous written about the discount fuel vouchers here.

I decommissioning an alarm line and saved $130.

One of the things that we did not ask during our negotiations of the house is what are actually connected to the house. Beside the standard utilities like the electricity, water and gas, they could be other things connected that may affect the operation of the house.

We have been in the house for about one week and continue to find things about this house that we should have known in the first place. We found that the house is connected to a security alarm monitoring services. These monitoring services are connected with a phone line, and will ring the monitoring services if there are any problems with the alarm system. The previous owners has closed their account but have left the line connected.

From our perspectives, we are going to decommissioned the line to the monitoring services, to save on any out-going phone calls to the monitoring services. The thing that got me a bit peeved is there is a call-out fee for the service man to decommission the phone line, the call out fee is in the order of about $130.

Looking around the house, I have found that alarm box with a phone line attached. I think I will decomissioned the line myself by unplugging the phone line from the alarm box. Problem solved.

This is definitely one of those items that will be locked into my memory bank for the next house purchased.

3 days in the house

We have just relocated into our new home. It was just as well we opted for some removalist to help out, especially the moving of the big and heavy items like the fridge, study desks, bedding and sofas. It ended taking about 6 hours for the professionals to do the moving. I think if it was us, it would taken about 3 days! The removalist were great, they were able to transport it without any hassles.

Due to other circumstances beyond our control, we weren't as prepare for the removalist as we would have hoped for. If we were more prepared we could have some on some money. The three main items that were really obvious on the day are:

1. Put small items into boxes - We found that the removalist were packing absolutely everything. They were even carrying small little baskets, unpacked into any cardboard boxes, into the massive truck. Amazingly, when they unloaded, the small little baskets were in great conditions. However, as they were charging by the hour, these small items were taking up time. If they were packed into boxes, they could have taken a bunch of small items in one hit.
2. Have large items dismantle - If your furniture could be dismantle, do it. It saves time on the on the removalist
3. Have the removalist transport everything - By packing all of you items securely in boxes, the removalist could transport it in their truck. We were transporting some of them items ourselves because of our fear of the items being damaged. If we had packed the items securely, they removalist could have transported it for us, and save us the transport cost on fuel.

Previously, I have written about various options for moving houses.

Posting comments as an "other".

While I love getting comments, I would also love it if the commentators would not post anonymously or as a blogger identity. It would be much better to post a comment as an "other".

By posting as an other, it allows you to specify a URL for your blog. Why is this better? Well, posting your comments anonymously does not allow me or others to visit your blog. Posting your comments via your blogger identity also makes it harder to visit your blog as well.

So next time your post a comment, consider it doing it as an "other". Share your blog with the world.

The small costs of shifting house adds up to a large expense

We are now in the full swing of packing our house into many, many boxes and preparing ourselves for the move. I have shifted a number of times, and each time I am amazed how much it cost to shift. I have previously written about moving houses, outlining a few options. I think it is the little things that that adds up to a large amount. Let see what we have been hit for so far.

1. $30 - Fee at the local rubbish tip for disposing of items that we haven't used in a number of years.
2. $300 - Removalist to help shift the furniture. I previously wrote that we might be doing the removalist thing ourself, but we really ran out of time as our son became quite ill during the last week of packing. So to play it safe, we thought of hiring some removalist to do the shifting.
3. $570 - Renting our old house for three weeks while we wait for the our new house to be settled. This worked out quite well as there isn't a high pressure to shift out as soon as our house is sold. But I think that three weeks is too long. Next time, I will go for one week instead.
   
4. $30 - The cost of redirecting our mail to the new address. Although we will tell everyone necessary that we have moved and what our new address is, there will always be someone who misses out. So a mail redirection service is essential. We have opted for the three month service. This should be long enough to capture all mail.
5. $50 - Insurance for the transport of our belongings to the new house. The removalist that we are using only has insurance if he has accident and is the truck is write-off. My wife and I though that some of stuff could be damage with a small accident. So we are getting some insurance for the delivery.
6. $75 - boxes, tape and packing paper. The boxes are not cheap. We have tried many source of boxes, and have found the cheapest one to be about $3 per box. We have also managed to get some boxes from friends, the local shop and have some boxes left from the previous move. We need about 30 boxes of various sizes.
7. $75 - eating out and take away. Since we are trying to eat all the food in the fridge before moving, we have also eating quite a few take away.
   

So far that is a total of $1460. There will be more expenses to come as we move into the house, such as cutting the new keys, migrating our ADSL internet service to the new phone line and connecting fee for all the utilities. I am not looking forward towards these fees coming in.

photo credit: Ove Tøpfer

Home phone plans.

A few days left

Only a few days left before we start to shift into our new house. There are so many things to look at and to decide upon, especially things that we will have to make a commitment to that will last for a number of years. We have to look at the electricity, gas and phone.

We are currently quite happy with our current service providers, but as I am always looking out for a better deal, I started to investigate other providers.

First off is the phone services. In Australia, there are the two big players, Telstra and Optus. Telstra was the old telecommunications monopoly in Australia, sorta like the AT&T in USA. Optus is one of the early providers when the telecommunications industry was deregulated about 20 years ago.

Optus has several great deals at the moment could suit us quite well. I was looking at their optusOne plans. Currently, we are currently with Telstra and spent about $120 per month on phone calls and services. This includes line rental, mobile phone access and calls and long distance phone calls. Although we get a couple of "benefits" like 50 free SMS, and free 1 hour mobile phone usage, our usage patterns does not really exploit these "benefits".  The lowest our phone bill has been about $100. With optusOne $99 plan and our usage pattern does not change significantly, we are already $20 in-front. If the plan is for 2 years, that is a savings of $240. I think it is time to read the fine print on these Optus plans. Optus also has their basic home phone plans.

Telstra has these home plans to choose from. Telstra plans mainly focuses on the home phone line, and try to not the mix in their mobile phone offerings.  However, they do have some discounts if you have your home phone and mobile phone with them.

Differences between the optusOne plans and Telstra plans

1. Optus has included phone calls, Telstra does not unless it is the homeline ultimate or homeline advance.
2. Optus include mobile phone access as part of the plan, Telstra's plans does not.
3. Optus include line rental. It is not clear with Telstra if line rental is included in the price. Line rental is about $30/mth.
   

Similarities between the plans

With these plans, to maximise the value of money, the following needs to be considered.

1. mobile phone access needs to be bundled in with the home phone
2. if you can provide your own mobile phone, it will be much cheaper as these plans does not provide you with an actual mobile phone. You are a only paying for access to the network for your mobile phone.
   
3. there are too many plans on the market, so choose carefully
   

Alternatives

There have been some discussions around the net about using a purely VOIP phone for a home phone. Personally, I am not too keen on it as I don't have that high confident in ADSL technology yet. Over the years, my ADSL connection has dropped off a couple of times, and for that emergency, I would feel safer if it was connected all the time. Having said that, I don't think that having a land line gaurantee you a connection all the time, but I guess that it is a less likely chance that access is not available via the land line. I'm sticking to the land line for the time being.

1K readers!

This morning, sitemeter just told me that I have made it to 1024 readers! This is a huge milestone for me.

Thanks to all that had read my articles and left comments, I hope that the readers have gain some positive insights to my articles.

I would especially like to thank a couple of the sites that regularly sents me some traffic.

My Journey to Eliminate Debt

The Happy Rock

Apologies for the lack of the articles in the last few days. We are currently shifting houses, and there have been some health problems in the family.

Dedicated to my youngest brother.

The 29th of July will always be a day of mixed emotions for our family. Firstly, it is my birthday. I turned into a ripe age of 37 this year. Secondly, it was the day my brother disappeared during a surfing holiday in Bali last year.

My brother, the youngest of my siblings, loves his surfing and is on his fourth trip to Bali. On the morning of the 30th, we received a phone call telling us the news that he disappeared, the night before, among some very large waves in the southern part of Bali, in an area known as Uluwatu. The break the he was surfing was call "The Impossibles", in between Bingin beach and Padang Padang. The whole experience was extremely traumatic for the family as we flew over to Bali, spent the next few days searching and found his body in a town 3 hours drive from Kuta. The whole family is tremendously upset, and are still working through the grieving process.

We miss him enormously.

After 12 months, we are still sorting out the financial aspects of his estate. Through out the whole process, my wife and I had a long hard look at ourselves in that we have the correct plans in place. Looking back on it, the financial lessons are:

1. Have a will in place - A will is a must regardless of your financial position. A will is a way of reducing the burden on the family that is handling your estate. Handling the estate is never a easy task, and having a will certainly reduces the pain.
2. Have comprehensive travel insurance - When we were sorting the logistics of transporting my brother home, the logistics company was concern on our ability to pay the bills. We were able to cover the expenses, but if we weren't, we would have to make the heart breaking decision as to whether to bury him in Bali or not. It is not a decision that I would have like to be part of.
3. Keep your accounts in good order - As we are sorting his accounts at home, his paper work is in good order and we were able to notify the necessary parties and take appropriate actions, ie: closing his utility accounts or advising his work place etc.
4. Hire the best lawyer that you can afford - We could have hired a better lawyer to deal with the legal aspects of my brother's passing. Since there were international matters to consider, we should have hired a lawyer that is experience with such matters. Our lawyer was not. He was not very thorough and the whole process were stalled at a couple of stages and was prolonged. One of the things that slipped through was that we didn't realise the Indonesian does not supply the actual death certificate, but only an extract. This caused some problems when getting some superannuation to release my brother's money. The lawyer was not aware of this and advice that we persue it through the Indonesian embassy.
   

Traveling with insurance is probably one of the the biggest financial lesson that I have learned from this. I would have hated to think that if I am unfortunate enough to pass away during my travels that I would be a further financial burden on my family to bring my body home, or sorting our an overseas funeral.

I dedicate this article to my dearly missed brother.

Finishing at five

In today's busy life, I have always wished that there were more hours in the day to fit in all the things I want to do. I would like to have an extra hour to read that new sci-fi novel, or just to fix that problem at work.

What usually happens is that we hardly ever put a dead line on the things that we want to do. However, by putting a dead line on things we want to do, we actually have a better chance on doing it. At work, I aim to finish what I have to do by 5pm every day. So what this means is that every morning, I have a simple plan to complete what I have to do. There are a few major time during the day that I use to get my things organised.

8:30am: I arrive at work, review my notes from yesterday and spent the next 10-15mins working what I want to achieve. This is in general terms like, I want to complete writing the first draft of design analysis report for my manager by the morning. I also want to review the meeting minutes from yesterday and action some items.
12:30pm: After lunch, I would assess if I am on track. Make some changes to my plan.
5:00pm: Make some notes for tomorrow, and go home

That is what I hope would happen every day. But what actually happens is that during the course of the day, I would get interrupted by request and questions which would throw my idealised plan out the window. I usually complete about 85% of the work I want to achieve for the day. I will always leave at 5pm unless there are something really urgent that needs to be worked on. It also gives me the necessary time I want to spend on more important things like my family.

This idea of finishing at five is something that I read in one of Scott Adams' Dilbert book. It might have been The Dilbert Principle.

Would this work for you?

Photo by Josep Altarriba

Things that money can't buy

Story girl over at My money and my life posted article Money and happiness. She challenge us to list down what is it that we would like to do more that does not cost much money. Thinking through the challenge, it could be quite difficult to come up with a list. There are a lot of things that cost money, either directly or in-directly. Having said that, there are also many things you could do without any money, or with a small amount of money.

My list would be something like this. Remember that these are things that would be bring happiness.

Taking the time to read a book with my son, and listen to him trying copy me reading the words.

Send a SMS to my wonderful wife during the day to say that I miss her and can't wait to see her after work.

Spending hours in a bookshop, just browsing. I love books and the information that it contains.

Hike through the forest in the nearby Victorian Alps during spring time, and smell the wild flowers blooming.

Talk with my wife about what our future holds, I really enjoy this as she is such a positive person and always gives a positive spin on what our future holds.

Making a nice hot cup of home brewed coffee and enjoy it with a slice of banana cake.

I want to be able to help at least five people every day. Simple things like picking up rubbish that someone else has dropped to going to beyond the call of duty at my work.

What would your list be?

First time tenants

We have just settled on the house that we have been living in for the past two and a bit years. We are now officially renters.

After so many years, this is the first time that I have rented a house. Previously, I have always bought houses, or lived with my parents. My dad help me out with my first house purchase by helping me out with a nice cheap loan.

As this is my first time renting a house, I was quite surprise as to some of the rules that the tenant must adhere to. Some of these are:

1. No nails or picture hooks can be used on the walls
2. Upon vacating or every 12 months, the carpet must be steam cleaned.
3. The gardens must be kept under controlled or a levy of $20 will be charge for garden maintenance.
4. The curtains and blinds must be cleaned every 12 months or upon vacating.

Some of these rules are mainly to save the owners some repair money when the tenants leave the property, some of them are downright bazaar, especially the one about picture hooks.

What are some of your funny or crazy tenant rules?

The Happy Rock, guest article and welcome.

My guest article at The Happy Rock

The Happy Rock has just posted my guest article on Raising Financially Savvy Children. Head over to The Happy Rock and have a read.

The article has 5 tips for positively influencing your children from a financial perspective.

The Happy Rock also has many other great personal financial articles. This blog is on my list of must-read blogs. Check it out.

Welcome to Happy Rock readers

If you are direct here from The Happy Rock, welcome to the cheap as chips. I hope you enjoy my articles.

You are welcome to subscribe to my feed, either via rss or email.

Handy Suburb Calculator

I came across a real-estate calculator that not only works out how much you can borrow, but it also tells you which suburb is in your price range.

The calculator uses data from www.infochoice.com.au and www.residex.com.au. The calculator is here.

To use it, you simply entered enter some basic details about your income and it initially calculates how much you can borrow. Using this figure, it provides you a list of areas in the greater Melbourne area that you can choose from. After entering all the values, it displays the names of the actual suburb which it thinks you can afford.

In my situation, this is what it calculated of my borrowing capacity. It is calculated at 6.75% over a 25 year load period.

Monthly Income	$5000
Borrow Capacity	$418,000
Month Repayment	$2,888.01

From these calculations, it indicated 13 suburbs among which are the following. These suburbs in the Frankston area.

Aspendale Gardens @ median pricing of $430,000
Waterways @ median pricing of $392,000
Frankston North @ median pricing of $193,500

From what I know of these suburbs, it appears to be somewhat accurate. I mean, it is accurate enough so that it is useful. This is extremely useful for an investor looking for a rental property, or an area with growth potential. I also like that the growth over the last 12 month is also shown.

Searching for your next home or investment property takes an enormous amount of effort. Using something like this suburb calculator could take a lot of the guess work out of your hand, especially when it comes to the pricing. Getting pricing information on property is like drawing blood from a stone, and the blood is also like with gold as it is usually extremely expensive.

Of course, buying a house should also include other factors such as how nice the neighbourhood is, or what the schools in the area like etc.

Give the suburb calculator a go, they also have a postcode slider. It is an interesting tool to indicate the chance of finding a property in a price range.

Carnival of Personal Finance #110

The 110th edition of the Carnival of Personal Finance is up over at Fat Pitch Financials .

My article on advice is also part of the carnival.

There are some very nice articles in this edition. My highlights from the carnival are

Does Achieving Wealth Make You "Upper Class"? Facts About Class - The Digerati Life discusses wealth and social class.

10 tips on saving money on a family trip. - Frugal finance has some fantastic tips for trips.

10 credit card practices that he disapproves, - Mr. Credit Card tells us 10 of his most hated credit card practices. Some of them are down right sneaky.

costs of cable and TV - The Happy Rock talks about how the cost of cable and TV.

how to avoid losing more things - MoneyNing has a great article on how NOT to loose things.

personal finance junkie - A humorous article at My Weath Builder.

Random Advice

This is the last article is a series of articles about various sources of advices. Previously, I talked about advice from trusted source and advice from friends. This article explores random advice.

I think the idea of random advice may seem strange. What exactly is random advice? For me, random advice is advice that you get from source least expected. These random advice may surface when you least expected, but sometimes it is difficult to identify a random advice. The characteristics are random advice are

1. when you least expected
   
2. difficult to identify
3. not immediately applicable

What makes these advice random is that it is advice that we get is unsolicited. I usually find this random advice while I am reading magazine on totally unrelated topics, but somehow, the ideas that I get out of the magazines could be applied financially. I also find reading totally unrelated blogs also brings out ideas and insights that could be applied in financial situations.

The amount of random advice that I receive is extremely small, but it is usually valuable as it applies ideas from a totally different domain.

The application of a random advice is also difficult to gauge. As the advice is random, the situation to apply it is usually also random. I think that the advice needs to be just kept in the back of your mind and be aware of it. When the right situation arises, you will have some ammunition to tackle it.

That is the end of the series of articles on advice. If you have enjoyed these articles, or have some feedback on these articles. Let me know about them in the comment section.

Advice from friends

This is the third article among a series of articles that I am writing about advice. The first article is about an interesting conversation that I had with my father-in-law and the second article is about advice from trusted source.

Friendly advice

Well, among the many advice that you may receive, one of the main sources will always be from your friends. This group of adviser includes your mates at work, your neighbour or your golfing partner. How dependable are these advice from your friends?

On one hand, these advisers do have a degree of dependability, and that dependability will increase if the friends are close to you, especially if they are family members. Discussing financial matters with this group of advisers will usually create some positive advice. The top three types of advice that can be sought from friends are:

1. Financial strategies - There are literally thousands of financial strategies, and many new ones could be uncovered during these discussions. It may also be a good sounding board on your current strategy, perhaps it could be tweak to improve it returns or it is just wrong and need restarting.
   
2. Support - With a group of friends, you could draw support when you need to, in particular if you find yourself in a tight financial situation.
   
3. Renewed focus and motivation - Sometimes the advice are not directly related to finance. It could the retelling of a story from a friend that motivates us and give us focus on our personal finance adventures. I guess that this one of the main reasons why so many of us are reading other personal finance blogs.

Their experiences in dealing with financial matters will also dictate their level of dependability. If your friends actually work as a financial planner or accountant or similar jobs, they have just upgraded themselves to be a trusted source.

On the other hand, these advisers may have a low degree of dependability, especially the adviser has a history of giving low quality advice. In this cases, all you could do is use their advice as an indication, and search for more supporting information. However, due to the low quality of the advice, spending too much effort would be a waste of your valuable time.

I have always found that discussing financial matters with my friends usually positive and generate ideas that would normally be forgotten or not thought of. I always look forward to these discussions.

As always, it is important that the advice that you received make sense for you in your situation, and seek supporting information before acting on the advice.

I shall be writing about random advice in the my next article.

Photo by Steve Woods

Advice from trusted sources

Yesterday I wrote about an article on where my father-in-law get his advice from. So if the advice he gives is a bit suspect, who should you be getting your financial advice from. This may be quite a basic question to answer, but it is a critical question which has many different answers. The correct answer will be dependent on what you are looking for. I was thinking about this over the last few days.

The source of the advice can be divided in to several groups. I shall discuss advice from trusted sources. In the next two posts, I shall discuss advice from friends and random advice.

Trusted Sources

This group is qualified to provide you with financial advice. They are qualified in the sense that they have had recognised training. For the financial planners in Australia that are qualified, they are part of an association such as the Financial Planing Association of Australia. This is certainly true as well if you are seeking an accountant, ensure that the accountant is qualified in the area that you want advice in. I mean, it is not much good to go to an tax accountant if you want some advice on book keeping.

But how do you trust the financial planner or the accountant that you have just chosen. If you can get a recommendation from someone that you truly trust, that would be ideal . You could be introduced to them.

If you are not able to get a recommendation, you may have to get advice from a number of financial planners. By getting advice from a number of financial planners, you will be exposed to a number of options and strategies. If a number of these options and strategies are similar, then perhaps the advice is sound.

Some of the other signs to look for are:

1. Ask for full disclosure - typically, the financial adviser will be recommending a financial product. Is he recommending this product because he is getting a commission from it? Full disclosure also includes how he is getting paid.
   
2. Consistent advice - The advice that you receive should be consistent over a period of time. If it is inconsistent, it is a sign that adviser may not have clear understanding of your situation and what you are aiming for.
3. Value for money - the fees that your adviser is charging you needs to be reasonable. What is reasonable? It really depends on your situation and how valuable the advise is. If the advice you receive can generate high level of wealth, the fees may be a lot higher.
4. Availability - How available is your adviser to you questions? Depending upon your situation, you may want to obtain financial advice quickly. Maybe, you may only talk to your adviser during certain time of the year such as the end of the financial year, but make sure that he is available when you need him, maybe not immediate availability, but at least within a day or two.
   

The number 1 question that you have to ask yourself about any advice is "does this advice make sense for someone in my situation? If it doesn't, what do I need to know for it to make sense." This is something that your adviser could explain to you as well.

I shall be discussing advice that comes from friends and random advices in the next two articles.

Add some comments if you have other ways of finding trusted advice.

Taking a chance on good advice

I had an interesting conversation with my father-in-law today. It really made me think about how I should assess advice that I receive in the future. I have always be wary of any advice that I receive from anyone, except from my wife which I accept faithfully. However, my father-in-law is someone that are willing to accept advice from an un-authoritative source, and is happy if he got the advice from a single source as well. He is also happy to pass on these advice as gospel.

He is retired from his work and has been for a number of years. My mother-in-law is retired as well, and is collecting the old age pension from the government. During the conversation, he gave us the following advice,

If I win tattslotto, you shall get an equal share among your family and you will not have to pay any tax on it because I have registered all my lottery tickets to the family.

Essentially, he is saying that if he wins any money, he will share the money among the family members, and because the family has bought the ticket, the winnings are not subjected to tax. He said that if family did not buy the ticket, the shared winnings would be subjected to gift tax as the family members would received the tattslotto winnings as a gift.

I heard this, and proceed to ask him where he got his advice from. Apparently, he got this advice from this financial planner and some of his friends.I get the feeling that my parents-in-law's situation is totally different from ours and could actually be applicable to them.

Looking at the advice on the surface, it does not sound right. The winnings itself is not taxable, as this advice from the ATO states. Also if he does win, and then distribute the winnings among the family members, the ATO is also clear on it not being taxable as the family members would receive it as gift. Gift is only usually taxable if it is received within your work environment. For example, you receive a bottle of scotch from your client because you did an excellent job on the project. I believe that the bottle of scotch is subjected to fridge benefit tax.

This conversation made me think about the source of information which we receive on a day-to-day basis, especially on the financial matters. It is really essential that the advice that we received are supported from several sources, possibly sources with some authority in the matter.

This goes from the information that I write about on this blog. I am probably the one person whose authority on finance is next to zero, so do not depend on it. I am only exploring financial ideas and methods. If you gained some positive insight of your situation from my articles, then I am really happy for you. However, before acting on these ideas and methods, please seek independent advice from a few people who know what they doing.

Good advice is the one thing you don't want to be a lottery.

photo by Uffe Nielsen