Monday, February 23, 2009

The forgotten secret of financial savviness

In the story I wrote in this month's Madison magazine, I outlined the 10 biggest mistakes we make with our credit cards.

Well, guess what? I forgot one (plus, let's face it, 11 is just not as nice and round a number as 10).

So, in the interests of sharing information and giving added value, here's number 11.

11. WE FAIL TO FILE

It sounds so innocuous when you see it written like that, doesn't it?

The fact is that if you keep tabs on your financial information - so that you can actually put your hand on something when you need it - you're halfway there to keeping on top of your finances.

Think about it: no more late fees because you 'forgot', no more missed opportunities because you 'threw them out'. Lissanne Oliver - check out her blog - is the Australian queen of organisation, and she reckons that getting your financial, um, stuff together puts you in the driver's seat.
Here are five basic steps to get you started:
1. Put everything related to your finances in one place - even if it's a shoebox.
2. Open your mail over the bin - if you don't need it, don't keep it.
3. Don't take every receipt you're offered - those three apples from the fruit shop are probably not tax deductible.
4. Cull. Understand how long you need to keep things (five years for tax records, for instance) and once that time has passed, get rid of them!
5. Deal with your financial stuff regularly - get it out once a month and look it over. The more often you do it, the less arduous it is.
Simple stuff, but very powerful...
For more about organising your finances, check out this story I wrote for Ninemsn's Money website.

Wednesday, February 18, 2009

Credit cards: Back away from the microwave



Saving may be the new black and money the focus of every women's mag on the shelves this month, but the fact is that your will to stop spending is sometimes not as strong as your urge to splurge. And a credit card is what's known as an 'enabler' in this situation.
So, what to do? The trick is to put some distance between you and the card. You could try the old credit card in the freezer trick - but you only need to see the trailer for Isla Fisher's new film 'Confessions of a Shopaholic' to see how ineffective that can be. It only takes a large hammer and a few stress points and you're away.
At least she didn't try to microwave the card: there's more than one sheepish credit card addict out there who's discovered that the quickest way to render a card useless is to try to defrost it in the microwave.
You could give your card to Dad/older (grumpy) sister/disapproving boyfriend, forcing you to weigh up the benefits of the purchase versus your loss of pride. You could simply leave the card at home when you shop, assuming the long and difficult journey back to your place puts paid to impulse buys.
Or you could, gasp, cut the damn thing up until you've paid it off.
The only way to make serious inroads into credit card debt is not to use the card. Cut it up and your problem is solved...Unless, of course, you work out you can still use the number to shop online.
But that's a whole different story.

Thursday, February 12, 2009

An interesting thought: all that glisters could compound

Albert Einstein is quoted as saying 'the most powerful force in the Universe is compound interest'. Yes folks, compound interest has more effect on your life than a poorly groomed beard (see below - that's Gwyneth with the formerly handsome Joaquin Phoenix).

Question is, is it working against you?
Compound interest is interest on your interest. If you borrow $1000 on your credit card, you pay interest on that - say 15 per cent. Every month, you pay 0.15 of not only the $1000, but the interest accrued the month before. At the end of the year, you'll owe $1347.35, assuming you've made no payments over the year.
The key to winning against credit card debt is paying off as much as you can every month. The minimum repayment is not enough to make inroads (unless you have about 11 years to pay off $1000, but that's another story).
Take a stand. Don't let the force win! Or you could end up looking like Joaquin Phoenix ... who used to look like the picture below.

Pictures: GoFugYourself and GreenFrogStudio


Friday, February 6, 2009

GOING FOR GOAL: how to always get what you want

Freida Pinto went from slumdog in that fabbo movie Slumdog Millionaire ...


Working towards a financial goal sounds about as much fun as doing a tax return. DULL. But creating money goals helps you envision the future you really want, detail the resources and time you need to make it happen ... and squeeze in all that glorious lifestyle no-one wants to miss out on.

Creating a financial goal is all about deciding what you want - which can actually be half the battle. Most of us spend our time thinking we want stuff but let our finances go haywire instead of implementing plans to make sure all the lovely things we've been dreaming of actually happen.

... to glamour girl who gets the guy. It's GOAL, GOAL, GOAL!

How To Go For Goal:

  1. Waddaya want?
    Start thinking big and write down everything you want. Easy peasy. Now it gets harder because you have to work out how long you think it will take to achieve them. Place goals that can be accomplished in under six months under Short-Term, goals that can be accomplished in six months to a year under Medium-Term and goals that will take more than a year to accomplish under Long Term.

  2. What's it worth?
    How much money will it take to reach each goal? Create an estimate, and write the resulting figure under a new Estimated Cost category. Now write down what it's really worth to you. What will each goal bring to your life, lifestyle, loves and dreams.

  3. Set a target date.
    When do you hope or need to meet your goals? Set a target date for each goal on your list, and use this as your deadline to meet or beat.

  4. What's the wish tax?
    Divide the estimated cost of your first goal by the number of weeks until your target date. This shows how much money you need to save each week- also called The Wish Tax. Enter the resulting figure in a"My Wishes" column, and repeat for all of the other goals that you've listed.

Be realistic about how much time and money it will take to accomplish each goal – an estimate that is too low will only frustrate you. Keep your motivation by revisiting your list frequently. Next time you're tempted to splurge on a non-wish-list item, get out the list for revision purposes.

SO WHAT'S ON YOUR GOAL WISHLIST?

Thursday, February 5, 2009

STRESS-ISTA SAYS ... Let There Be Air


Clean or vacuum that air-conditioner filter to help it operate more efficiently – it will reduce the energy costs and spew forth cleaner, cooler air. Or maybe open the house up to fresh air instead?

Pictures: Karen Walker paints for Resene, pictures styled by Katie Lockhart

Wednesday, February 4, 2009

HOUSEHOLD BUDGETS: 3 tracking points


The idea of budgeting is scary - imagine limiting your spending? EEEEEEK! But there's a simple way to make a budget easy and work for you. And that's to create the budget tailormade to your spending habits, wishes and wants. It's only a piece of paper with a financial plan attached, nothing scarier than that!

So a budget works best if you understand how and what you spend, and why you spend.Just like Weight Watchers asks dieters to track food consumption, all good budgetters should note how and when they spend every single dollar. Try this:

1. Carry that notebook
Taking notes of how you spend, why you spend and how much you spend feels like hard work but will generate amazing insights. How many of us have had a $50 note that just seems to disappear? Tracking your spending is the best way to find out where it went. Keep track of every packet of chewing gum you buy or Diet Coke you splurge on all day, every day for a month. If you really hate the idea of carrying a notebook, try tracking on your computer with this neat trick.

2. Start taking note of yourself
Tracking helps you work out how much you're really spending (most of us underestimate and just wonder where the money went). The other bonus is that writing something down makes you conscious of what sort of mood, events and emotions are going on that might trigger certain purchases. A month of writing things down purchases seem rational and which are emotional.

3. Assess what you really spend day-to-day
At the end of your tracking period, work out what you spend in a week and times that by 52 and divide by 12 to get an accurate monthly average of your day-to-day cash spending. This becomes an invaluable planning tool to get a handle on your spending, budgeting and financial goals.

Pictures: Polyvore