Financial Lessons From My Grandparents

Grandpa Watering the Garden
  1. Use physical cash – My grandparents never owned a credit card, or a bank card.  They got cash out once a month and that was it.  If you ran out, you ran out.  A recent behavioural economics study showed that bidders at charity auctions allowed to use a debit card will bid twice as much as those only allowed to use cash.  Physical cash is harder to part with. If you are trying to manage your money better get cash out of an ATM once a month and use that. It’s easier to keep track of.
  2. Don’t use credit – My grandparents made a pact that they would never use credit, apart from a mortgage for their own house.  True, credit cards did not exist during the early years of their marriage, but store credit was widely available and widely used.  When they bought their first house, they had purchased brand new gas appliances but didn’t realise that gas wasn’t connected to the house. They didn’t have the money to connect the gas.  So they waited 6 months and saved the cash.  In the meantime they used a wood stove and a copper boiler.  Make a commitment to not use credit, you will find a way without it.
  3. Take care of your stuff – Grandad always had the car serviced on time.  Tyres kept pumped up.  Tools were always oiled.  Painting was kept up regularly.  Clothes were washed properly and repaired.  Grandad used to have his collars turned around on his shirts when they were worn out and he would even have new elastic sewn into his underwear when the elastic went.  If you take care of your stuff, it’s going to last longer and save you money.
  4. Buy good quality – They didn’t buy things often but when they did they bought great quality.  Consequently everything lasted.  Their washing machine is still running 45 years later.  Their fridge lasted for 30 years.  Buy much less, but buy great quality.
  5. Second hand is fine – They bought their cars at auctions and the furniture in their house, I found out after they died, was left there by the previous owner.  They used linen my Nanna bought at a hotel liquidation auction. The good news is it’s much easier to buy second hand these days with eBay and Gumtree.
  6. Keep your fixed expenses as low as possible – A fixed expense is something you can’t cancel.  They only ever had one car and lived a non-credit-dependant life.  This insulated them from financial problems if one of them lost their job.  If you’re leveraged to the hilt and something goes wrong, you don’t have any wiggle room.  You may have to sell your assets in a hurry and for less than their worth.  To disaster proof your finances, reduce your fixed expenses.
  7. Fun can be frugal – They preferred a BBQ with family over dinner at an expensive restaurant. The BBQ’s were never fancy affairs either, some rissoles, potato salad and whatever soft drink was on sale. They never bought books, always went to the library. They were involved in community activities; choirs, tennis clubs, church.  You don’t need to spend a lot to have a lot of fun.  Focus on people and relationships.
  8. Values – My grandparents had their values a little different than many people today.  There was a time when if you held down a steady job, paid your bills on time, had polite children, a modest house in good repair, and a good reputation you could hold your head high.  Now too many of us derive our value from the things we own.  We need a bigger tv, a new car, or bigger home.  Too often we pay for it with credit.
  9. Teach others – I used to go to my grandparents after school.  They would make me Sao’s with tomato and a Milo and we would sit at the table.  They would get out a notebook where they’d written down everything they’d spent that day and make sure it added up with how much money they had in their pocket.  They encouraged me to get a job as a paper delivery boy.  They taught us how to manage our money.  Make sure you pass on good money habits.

 

kard_link

The Best way to use your Tax Return

Tax return money
  1. Invest in an espresso machine – A cup of takeaway espresso costs about $4 but made at home costs about $1 to make. If you had 2 cups per day thats a saving of $6/day or $2,190 per yea
  2. Buy Homebrew equipment –  Coopers Homebrew beer will costs about $6/carton. Commercial beer is about $40/carton.  Assuming you drank 1 carton a fortnight that’s a $884 saving per year.
  3. Pay off Old Bills – a tax return can be the best way to catch back up. Some bills also have high interest rates.
  4. Wipe out High interest debt – If you have debts put it all on the debt with the highest interest
  5. Create an emergency fund – To protect against financial disaster you need 6 months of savings.
  6. Top up your Superannuation – It’s hard to find a better investment than superannuation, it’s low tax and it has the benefit of being difficult to touch.

kard_link

How to Improve Your Credit Score

Excellent Credit Score

Having bad credit will reduce the life options available you.  You’ll find it difficult to acquire a home loan, a car loan or get finance to start a business.  If you have bad credit the process of improving your credit will take months, if not years.  If, however you don’t start working towards a positive credit history, it will never improve. These following steps are to be taken if you wish to improve your credit.

  1. Get your credit history.  This is available for free through Veda if you’re willing to wait.  For a small fee you can obtain it instantly.  Have a look at the type of information on it.  People are often surprised by how little info there is.
  2. Check it for inaccuracies.  There are occasionally errors on a credit history. You need to dispute these with the organisation that lodged the entry.
  3. Stop applying for credit.  The more you apply for credit the more it seems you need the money.  The first rule of banking is – don’t lend to anyone who needs money.  If you are shopping around for credit ask that they don’t make a credit history enquiry.  When you’ve decided who you will go with allow them to make an enquiry. As a rule don’t apply more than twice a year.
  4. Don’t apply for certain types of loans.  Be discerning.  A loan from a payday lender or appliance rental provider is a red flag that you have experienced problems your finances.  This goes for non-conforming mortgages and “second chance” car loan providers as well.
  5. Make all your payments on time.  Automate your payments with direct debits and automatic transfers. If you don’t have the money, call your bank before your payment dishonours and work out a payment arrangement.

These aren’t technically included in your official credit score but are taken into account.

  1. Demonstrate balances reducing.  Banks want to see you borrow and then the balance reduce.  If the amount of credit you have is always increasing this is bad sign.
  2. Reduce your credit card balances.  Banks use the credit card limit when they assessing borrowing capacity.  If your limit is $10,000 but only owe $1000, banks will do their calculations assuming you’ve used the whole $10,000.

kard_link

Elisas – Debt Free and Overseas

holidays-palms

We were in a very bad financial situation and needed money badly. I decided to get a loan from the bank, which I found really hard to repay, so I got a credit card and used the credit card to make the repayments. Then I end up with more debt.  I found it impossible to repay. Things had gotten out of control.  The interest was building up and I could not pay.

The creditors started calling and asking for money.  They were demanding repayments that were so high I could not afford them and threatened me with further action if I didn’t make the payments. My life was a nightmare. I was so stressed. All my income was being used to make the payments. I was so scared of what would happen if I didn’t make the payments. I was working so hard. I was ignoring my life and family and I hit breaking point. I decided that I was going to become debt free whatever it took.

I was watching TV and I saw an ad for Debt Mediators. At first I was worried because I have never done something like that before, but I knew I couldn’t go on, so I gave them a call.  The lady was very nice and very friendly. I told her my story, she asked for some details, my spending, about how much my repayments were with my creditors. She then tailored a debt agreement based on what I could afford to repay.

As soon as I gave Debt Mediators the creditor’s information they stopped calling me and harassing me. Debt Mediators helped me get my life back. They got my agreement approved, and when I started the repayment I was surprised at how manageable it was.

I was financially comfortable again, and my life was better. I was less stressed and there was no harassment or calls from my creditors. I was so happy with Debt Mediators. It took me 4 years to pay off my debt.  I would pay extra when I could. Sometimes it was difficult to make the payments. The guys in the call centre were helpful and gave me hope. They would work with me on a payment plan to get back on track. It was important mentally to pay something, even if it was only $1, to see my debt go down and know I was still making progress.

The big mistake I made was trying to cover my debts with other debts thinking it would work out somehow, just trying to get to tomorrow and not thinking long-term.

I see others get a credit cards spend up big. They don’t work hard to pay it off and end up paying huge interest. Instead they could be saving their money!

After finishing my agreement life is great. I have learned not to get loans or credit cards. I have been saving my money and budgeting. I have taken my first holiday outside Australia

I never thought I’d be debt free and get my life back, but I did it.

If you are in difficulty or need help with your debts don’t be scared to give Debt Mediators a call and have a chat.
I assure you, they’re a great help.

If you’re experiencing financial hardship, we can help.
It takes less than 10 minutes for a debt management solution to be tailored to your current circumstances.
For a free, no obligation phone consultation with our caring team call 1300 171 351
You’ll be glad you did.

kard_link

Paying Yourself First

Pay-yourself-first

You’ve probably heard the expression “pay yourself first” but just for those who haven’t, paying yourself first means; before you pay any other bill or expense you pay yourself first by saving money for investment.  For many people they never get around to it. You pay your bills, then you have fun and there’s never anything left over to save.

Why pay yourself first?

It doesn’t have to be a lot but put something away, and don’t touch it.  It’ll help you believe you can save and build that confidence.  Every dollar you invest is going to earn more dollars, and if you never start investing, you’re never going to get those dollars and you’re always going to chase your tail.  The main reason to save and invest is because YOU DESERVE IT!

Even when you’re in debt?

Yes, even when you’re in debt.  You are never going to get debt free if you don’t have some cash so you don’t have to use debt.  If the car needs emergency repair and you don’t have the cash, you’re going to get out the credit card again and that’s going to destroy your confidence.  Even if you’re in debt, find $20/week and put it away.  Give it to your Grandma and tell her to hide it if you have to.  In 12 months when you’ve got a $2,000 be proud of yourself, but DON’T SPEND IT.

How to pay yourself

If you don’t see it, you won’t miss it.  Have an automatic deduction set up out of your account into a high interest savings account.  Every so often, say every 3 months put it in a more permanent investment, e.g., a managed fund, an index fund or superannuation.

If you’re experiencing financial hardship, we can help.
It takes less than 10 minutes for a debt management solution to be tailored to your current circumstances.
For a free, no obligation phone consultation with our caring team call 1300 171 351
You’ll be glad you did.

kard_link