Watch out for David Rhodes and his crazy chain letter

About two weeks ago, I received a letter in the mail addressed to "T. Chin", Upon opening it, I discovered it is a letter from David Rhodes. It had a 5cent coin taped to the top corner of the letter. It certainly caught my attention on what it was all about. Having never heard of David Rhodes, I read a bit more. It dawned on me that this is a classic pyramid scheme/chain letter that no one will ever be the winner. Furthermore, this type of activity is illegal and will incur a heavy penalty if found guilty. The Consumer Affairs of Victoria has a nice bulletin of what this chain letter is all about. The fines are more than $24,000! Wikipedia also has a good article on the history of this letter.

Essentially, the chain letter works by having you sending a gift of $10 to the person at the top of a list of 5 people. Of the 200 letters you send out, the person on the top of the list is removed and you placed yourself at the bottom of the list. The person that receives your letter will do just as you have done. You get your $10 when you have reached the top of the list.

That evening, I read it again trying to understand why so many people would be drawn into it and give it ago. Let's have a look at some of the letter characteristics.

• The plan itself appears to be extremely plausible for it to work, and the instructions looks thorough enough for it work. It even contain steps on how to fold the letters so that the creases in the folded letter does not mess up any future photocopying by your receiver.
  
• The chain letter contain a calculation of a scenario where it appears to be reasonable and realistic. It used a 3% response rate on letters that you sent out.
  
• The outlay for the participation is about $200. Most people may think that this is not such a large outlay and would be willing to risk to receive the "guaranteed" $70,000 return.
• Everyone loves a rags-to-riches story and caused them to think "if it happen to him, it certainly can also happen to me as well." The letter also contain several other rag-to-riches testimonials.

This is the first time that I have ever received such dangerous spam through the post. However, it is only dangerous if I acted upon it. The best thing I can do is take the 5cent coin off the letter and throw the letter into the recycling bin. At least that way, that letter did increase my wealth by giving me 5cent, better than nothing.

By the way, just found the Make Money Fast Hall of Humiliation. Reading the comments, I am amaze on how gullible some people are.

Rental crisis and what you can do to avoid it.

The ever increasing affordability of housing in Melbourne is causing some grief in the rental market. The landlords may be loving it as there are no shortage of potential tenants. This situation has inflated the rents of properties. I don't believe that the situation is isolated to only Melbourne, the other capital cities are also experiencing similar effects, especially in Perth and Brisbane.

Unfortunately, the rent for a property is almost dictated by how many people wants to live it. In today's rental market, I would not be surprise if the rent is higher than a mortgage's repayment.

In the Frankston area, just a short drive from where I live, the landlords are being opportunistic in trying to extract as much rent as possible. This article from the local paper discusses the sad state of affairs.

So, if you are renting, what you do to help with the rising rent rates.

1. Move the an area with cheaper rent. Some suburbs has lower rent rates than others for many reasons. If you are happy with the reasons on the lower rent rate, consider moving to these locations.
2. Negotiate with your landlord. Most land lords are reasonable people, and an attempt with communication with them shows that you are willing to discusses the crisis with them. In most cases, most land loads are happy with a good tenant with a reasonable rent rate than a bad tenant at a high rent rate.
3. Know your tenant rights. If your land lord is not is reasonable, have a good knowledge of what your rights are. For rentals in the state of Victoria, you can contact the Consumer Affairs for more information. The are similar government bodies in the other states an territories.
4. Consider purchasing a house. If the rent that you are paying is so high that it almost as high, if not higher, than a mortgage repayment, then consider purchasing a house. In today's market where new house purchases are declining, the developers are extremely accommodating in the terms and conditions. Have a chat with them. Be aware that purchasing a house is not something to be entered into lightly, it is littered with traps and pitfalls.

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Happy New Year

Happy New Year!

Today is the new day of the new financial year in Australia. For most of Australian businesses and general public, the financial year ends on the 30June, and the new one starts on the 1July.

So what can be expected for this financial year, from my perspective, I can't see as many positives as I can see the negatives. Lets start with the negatives.

• The interest rates are expected to rise. My prediction is that mortgage rates will hit 10% by the end of the year. Recent reports of the slowing down in the economy such as spending in retail and housing will probably stop the interest rate from going much further than 10%.
  
• The petrol prices will continue to increase. Even though there was a recent conference among the oil producers to help reduce the cost of oil, I feel that the days of seeing the pricing at around $1.20/ltr are long gone. I expect to see the price of unleaded petrol to hit $2/ltr by the end of the year.
• Australian manufacturing industry to slow down dramatically. The current Australian economy is really riding on what the land can provide, more correctly, what the underground can provide in mining. Another industry such as manufacturing, services and farming will probably suffer due to environmental reasons and economic reasons. Personally, I would like to see the manufacturing industry enjoying the same economic boom as the mining industry, I don't think it will happen in the near future.
• Due to the on-going drought and increasing fuel pricing, the groceries prices will be increasing.
• Our superannuation fund is on its way to give one of the worst return ever. We can blame the US subprime problems for this.
  

Feel free to shoot me down in flames with these predictions, and I hope that I very wrong with some of these predictions.

A couple of the positives are

• The personal tax rates have changed, which means that you should be getting a little bit more in your pocket each payday.
• With the increase of petrol, focus on alternative energy are being looked at in a serious way. So hopefully, a commercially viable solution is not too far in the future.

With those predictions, let's try make the best of the new 08/09 financial year by viewing the negatives as problems which solutions are to be created for, especially on a personal finance level.

Quick post towards the end of Apr08

I haven't been keeping up with one of my goals for 2008, that is to post at least articles per week on this blog. There are many things to talk about, like the inflation rate has just hit 4% today, the level of mortgage stress is at a record high and how the fixing our interest rate is working out for us.

Things on the family front and work front have been extremely busy. My wife is about half way through carrying our second child, and project deadlines are looming at work!

Hopefully, I will get back to regular posting sooner than later. However, if any one wishes to do any guest posts, drop me an email via tehn.yit.chin@gmail.com

CoPF #147 - Q1 financial advice edition

Carnival of Personal Finance #147 is up at MoneyNing. Many great articles, some of the ones that caught my eye were...

• Wide Open Wallet - The pawn shop are thriving. This article gave a scary thought of pawning items that are financed. I guess when folks are desperate, crazy things are done to get money.
• You might as well burning $5! - The $37 Latte. This a great article on keep track of you finances.
• On Financial Success - Can we afford college? A good range of tips on how to go about getting a university/college fund ready for your kids.

My recent article on you are only worth at market value was also included. Many thanks to MonyNing. Happy reading!

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Did Earth Hour 2008 really work?

Well, Earth Hour 2008 came and went last weekend. I even wrote an article about it. Unfortunately, I was not able to participate in it as our 2 year old was caught the croup a few days previously and needed some attention.

How did it go for you? Even though I was not able to participate in it, it has made me more aware of the my usage of electricity. This also goes for the other resources such as water, gas and food. So Earth Hour wasn't just one hour for me, it is going to be an effort for me to apply it to my day-to-day living.

The one thing that got me beat is the amount of energy used to increased the profile of the event, to create the infrastructure to support the event and to celebrate the event.

Earth Hour's blog has figures quoting a reduction of 264MWatts in Toronto, Canada but it hosted huge public music/party for the event. It also has figures about Bangkok, Thailand saving 73.34MWatts.

I can't help but think that if we all just stayed at home and turned off the lights, it would have been an even more significant savings. A cynical person would think that many people got into the spirit of Earth Hour because it is the in-thing to do for the environment. Think about it, imagine the public music event in Toronto, what kind of infrastructure is necessary to support it, and the energy consumption of that infrastructure.

Am I just a bit too cynical about this type of events?

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CoPF #146 - Online Broker Tip edition

The 146th edition of the Carnival of Personal Finance is up over at Stock Trading To Go. I was fortunate enough for my post on revisiting my superannuation to be included among the many fine articles.

A selection of the articles are:

Dreaming of Ferraris - Personal Benefit of Savings
Blunt Money - The high cost of inertia
The personal financier - How to make sure that this is your dream home: 7 Practical tips
Smart Easy Money - If you build it, they will come
Mommy gets paid - Friends and Money

These are only a small selection of the many articles being hosted. Go and check them out.

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