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Monday Money – Important Date A Coming!

An important date is coming, it is much closer than you think. How much planning and preparation have you done for the day, and the aftermath that follows? Yes I am referring to Christmas. It is not that far away and I like most people usually leave things to the last minute, have no plans for what I am doing and what I need for the day.

It is not just about gifts for family and friends. There is so much more to Christmas that most of us don’t think about, it is a day with a few extra people around for a meal, we all over eat and drink and suffer the consequences for the next few days. Unfortunately our wallets, and more importantly our credit card suffers for several months after whilst we struggle to bring the balance back under control. We don’t think about it to much because it is only once a year.

For those of us who are paid fortnightly, there are 6 pays to go before the big day, the last one is due the day before Christmas, if your employer is nice you might get that a couple of days before to ease the burden slightly. This appears to be sufficient time before Christmas, no need to panic just yet, plenty of time. But hang on a second, isn’t the credit card close to full, what bills are due, the council rates must have arrived by now, the end of year work parties, all are going to add pressure to the already tight budget.

OK, so I like the dramatic! There is light at the beginning of the tunnel, not the end, we switched that off to help with the Greenhouse and to help with the budget. Start your planning and buying now, don’t put it off and say it can wait. It won’t! Start with working out what you are doing on Christmas Day and Boxing Day, you will have some idea. You don’t need to finalise all the arrangements but you can gradually get things underway for the day.

Pay day on Thursday, the weekly or fortnightly shopping, add a few items you are going to use at Christmas. Write a list of all the things you are going to need, include drinks, then start buying these and put them aside when you get home. Make sure that you let everyone know these items are not for use. Make sure that you check use by dates on items to make sure they will still be ok by Christmas.

Lay-bys are a good idea for the larger item that you want for Christmas. Most larger stores have this available. An expensive item spread over 5 or 6 pays is much easier to pay for than the same item being paid for in one hit. The small cost of the lay-by is worth it if you don’t have to hammer the credit card again.

Before the Christmas cheer arrives, look closely at your finances. I hope that we can all have a Merry Christmas and a more financially Happy New Year. There are a number of ways we can plan for events. Start as soon as possible to plan how you are going to pay the money you ‘borrowed’ on credit to pay for this year’s celebration. Develop a plan of attack and then enjoy your well earned break. May the beginning of the new year be a prosperous one.

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Monday Money – Important Dates

What are the important dates in your household?

  • When is your partner’s birthdays?
  • When is your wedding anniversary?
  • When is your mother’s and mother-in-laws birthdays?
  • When is your father’s and father-in-laws birthdays?
  • When is mother’s and father’s day?

There is planning that goes into these days, some of the planning may happen months, weeks or days before the event, of course there are some that happen on the day! This is so vitally important for the successful running of the event.

Try answering some of these questions:

  • How often do you get a phone bill?
  • What date does your phone bill start and end?
  • How often do you get a power bill?
  • Do you know roughly how much they are?
  • When is your car registration due? (Month)
  • When is your drivers licence due?
  • What is your insurance bill total and how often do you pay it at what rate?
  • Is there a penalty for paying the insurance this way?
  • Do you have private medical cover?
  • When is this due and how much is it?
  • When are the rates due and how much are they?
  • What rate of interest is your home loan?
  • What is your credit card interest and limit?
  • If you have a personal loan, what is the interest rate and how much do you owe?
  • What is the balance of your bank account?

So by comparison, how did you do? Like most people I would say that you got all the dates in the first lot of questions but only managed some of the answers in the second lot. Does this make the second lot of answers any less important than the first, or is it that we have clearly a different set of priorities and values.

From my perspective I changed the values, or moved them up on the priorities list. I now equally value the importance of each set of questions and answers. The results of which are that I am far more in tune with my financial well being along with the other aspects of my life that are important. It isn’t wrong to value these important aspects of our lives. As couples we share and celebrate birthdays and weddings but yet we don’t celebrate our financial successes along the way.

Getting to know your financial well being should not be an unpleasant experience, rather it should be a chance to look at how well you are doing. I hear you groan as you read this, we aren’t doing well, we struggle every week, we have no money, we argue, we can’t afford, etc. However I am sure that if you stop and analyse your situation closely you are doing ok, with room for adjustments that will in the long run assist you with your financial health.

Where to start is always the hard part, for different people the answer is going to vary. I am not trying to state the obvious here, but from experience most people only ever think about starting, they don’t position themselves to start, and if they do, chicken out at the last minute. Getting started is the challenge! I asked a group of 15 people if they knew what interest they were receiving on their savings account. No one could answer, please go away and find out, the next day, still no one knew, another day passed and 1 person had found out. On their $1500 in their account they received 0.05%. When asked if they could have done better, they didn’t know. At the time there were accounts with interest rates at 4.5%, a significant difference (90 times!). So after finding this out, of the 15 people, no one else checked on their interest rates, and none of them went and changed anything. A random sample, but I would say probably very likely to be the same numbers of you reading this information. What you find out will not necessarily make you change your behaviour.

If making money on what you have in your savings account doesn’t spur you into action, would knowing what it costs you on your various loans and credit cards perhaps make a difference? Again I think not as the banks survive on our inaction to make changes to the way we bank. They are there to make money for the shareholders, they run a business and are very successful at getting money from the customer. If you make a mistake, you get charged, the reverse happens and you get an apology, try apologising to the bank and see how far you get! So, how much are you paying in interest to the bank on your loans, home loan around 6% at the moment, personal loan around 10% and your credit card, about 18% to 22%. When there is an interest rate reduction by the Reserve Bank, it is passed on sometimes months after the event. With an increase, the rate rise is passed on immediately. If banks react so quickly there is a good reason, to make money. We should be doing exactly the same, checking and changing with the times so that we can maximise our savings or investments.

I have covered 2 aspects that for me have been critical in getting a better handle on my financial health. I started to plan ways of covering all the expenses, whilst also developing a plan for reducing the debt, both go hand in hand. Does your household have a budget and do you manage to stick with it? There are a number of really good online planners available, one of the simplest is available at: http://www.understandingmoney.gov.au/content/consumer/tools/planner/ it is very simple to use, fill in the fields and it does the calculations for you. If you can use Excel then it is even easier to use and understand.

What is the financial health of your household?

Monday Money – Starting the Conversation.

This is the first of a series on Finacial Literacy where I will look at the things that I have done to change my personal financial wellbeing.  It is based on experience, the good, the bad and the ugly of getting financially healthy.

I am not an expert, nor do I claim to be anything other than someone who has experienced a number of different factors and am achieving financial success. Both my parents worked when we were growing up, six children plus a number of foster kids, a number of pets, the usual type of crazy household. Money was never a topic of discussion that I can remember when growing up. Both my Grandfathers were the bread winners in the family, whilst one of my Grandmothers had an academic position at the University of Western Australia her income was never a consideration. As I grew up I learnt that hard work didn’t always pay off, whilst it went some of the way to achieving success, alone it wasn’t enough. One set of Grandparents ended up in State housing, never owning their own house, the other Grandparents did very well. Both worked equally hard. So why the difference? I’ll look at this question later.

As a result of the way I was brought up, I believe I have a fairly liberated view on a number of things, I have four sisters and one brother (he’s gay so I’m not sure how to count this). I was, and still am interested in all the sports and outdoorsy types of things. I wasn’t taught to be male, in fact my parents worked very hard to bring us up with a balanced view on life. Despite their best efforts, I fell into the role of being the bread winner and financial manager of my first household. The woman I first married was an outstanding financial manager, she had saved a huge amount of money in her own right. I on the other hand was living pay to pay and just managing to make things last.

Our marriage, purchase of our house and then the arrival of our first child threw all sorts of different things into the mix. We went from a two income family to a single income in a matter of months, with then the sudden increase in interest rates to 17%, it became a struggle of a magnitude that you have to live through before you realise how hard things could be. We had done the cut backs on living expenses, trimmed to a point where there was nothing left, especially food. So I got a second job, then a third and the odd fourth one to make ends meet. I managed to keep the family afloat without having to refinance the house or lose anything along the way. Of course as the interest rates came down again, life became easier.

Ok, so if you are still reading this, then I haven’t totally bored you! The reason for starting off the introduction this way is to let you know that I am an ordinary family man, yes I am special in lots of ways and am proud of what I have achieved. So what have I done? I am on my second marriage, have 2 little children, survived the first divorce (wasn’t something I had planned or thought would happen), own 2 properties outright, have 2 investment properties that are positively geared (they make me money) have about $60k savings, no credit card debt, own my own cars (yes there is more than 1) and best of all can pay all the bills when they come in not having to stress about where the money is coming from.

There are 2 ways that I have been able to succeed financially in my life, in the 80’s it was a case of working harder, more jobs with more income, and now, 20 or so years later, it is a case of budgeting to make the money go further. Looking at the first scenario in the 80’s we had cut back on all that we could doing everything to make the fortnightly income go as far as we could. Things like not turning on lights, no phone calls (mobiles weren’t an issue) walking to the shops, nothing extra. When that still didn’t achieve the desired result, get another job! Sounds easy, but it wasn’t at all, it meant that I had less time with the family which wasn’t what I wanted as I wanted to be at home with my baby son. It worked for us at the time, put food on the table and kept the roof over our heads.

The financial situation wasn’t something we discussed. As the bread winner, it was my responsibility to make enough money to cover the expenses. When we did talk about money it ended in arguments every time. So the point of all this is to consider how do you start the conversation about money without it leading to an argument?

I am not saying that I am the typical male because I really am not sure of what that actually is. I would say though that I do react in the way that a lot of my male friends do when it comes to discussing money, especially with my partner. No matter which one of us brings up the topic, there is an air of defence on my part and apprehension about what is being asked or questioned, even discussed in the conversation. I have no idea what evokes this reaction to having money discussed as it is our money and I am not solely responsible for it, yet I am.

Knowing that having a conversation about money is going to be an emotional roller coaster leads many people to not having the discussion because it is safer. So how best to start talking about money, being open and honest with each other, to work together in getting ahead financially? From the male’s perspective, I don’t think there is a good way to start. Sorry for the females. If a cold beer, favourite meal, something special is organised, suspicion is raised. When the husband comes in with the flowers or chocolates, suspicion is raised. It is just an automatic response that needs to be worked through. Of course all the reassurances along the way don’t help either! It really is tough for the wife in this situation to bring up the topic of money with the husband. I don’t think it matters how strong a marriage is, there is going to be a reaction of some sort by the husband that there is a question about their fiscal management ability, even if this isn’t the intent.

From the male side of things there are similar issues about bringing up the topic of finances. Is it a sign of weakness or am I not doing something right to be able to make the money go as far as it should? If I bring up the topic, is she going to think that I am questioning what she is spending the money on, how she manages the shopping and other running costs of the house? As I sit and pay bills on pay day, knowing that there isn’t enough money for all of them and the fortnightly expenses, how do I say we have a problem as I am the one in charge of the money!

Financial management is one of the household chores, something that needs to be done on a regular basis. Think about how the household chores are sorted out, has there been a discussion about who will do what? Do you work together on any of them? Are there chores that you could work together on? Or are there chores that you really WON’T work together on? So many questions. Is this perhaps the place to start talking about financial management as part of the overall running and management of the household or family unit, as a whole rather than an individual chore?