Navigating our health insurance

No one likes to pay bills and particularly insurance bills. Insurance is paying for an unforeseen event at an unforeseen time and you hope the 'event' or 'disaster' never happens, but if that insured event or disaster never happens, then it feels like you've wasted so much money for something that never happened. It doesn't feel like you've gotten your money's worth if you never used it, but if something happens, you feel miserable that it happened (eg: burglary, car accident, health problems) but then relieved that you were insured. Insurance is such a lose/lose situation!

How does our health insurance compare with the U.S?
* Some American employers pay for their employees health insurance - we have to pay for our own in Oz
* American public health system is very expensive and is in shambles - our Private Hospitals are expensive, but our Public Hospitals can almost be free with government Medicare help, but in shambles just like America

Inflation on insurance claims and premiums- price revisions apply every April
It's the nasty inflation creep on prices. Every year, insurance bills go up. I didnt' anything on my car insurance (thank God) because I've been incident free for a few years now. As for my crappy health insurance...when you need the health insurance and make a claim, they will only cover a certain percentage, leaving you out of pocket unless you go to a public hospital.

Our health minister will approve any premium increases in February, with all price increases approved to apply on bills from April. You can actually save yourself a few dollars if you pay your premium in advance at the old prices. So if you get your health fund to issue your bill in February and March then you'll get the insurance at old rates for the year.

I've had a few issues with my health last year. From the snowboarding injury to the stomach problems. Turns out I'm lactose intolerant and I got the all clear about my health and that I should stay away from buffets haha ...buffets have too much variety of food and because of that, my allergy could be from anything!

Finances and my health
MBF insurance premiums: $1,200/year (and increasing every single year)
Spending on health and injuries: $3314 (!!!!! yeah, almost made me faint)
Refundable amount: $1,669 (Medicare and MBF partial reimbursements-useless!)
Net out of pocket expenses: $1645
Total out of pocket expenses for 2009/2010: $2845 (ouch, ouch, ouch)

Navigating our health claim system
I'm going to write about this because I discovered a lot of annoying things when it came to our health system. Our health system is behind the times, disorganised and inconsistent. Some places will allow you to claim on the spot, some will be connected to Medicare on the spot, some won't be any of the above so that you have to fill out form after forms, pay all your expenses out of pocket and then claim afterwards. Anyway, to help anyone who hasn't got a clue about navigating our claims system:

Ask your doctor, physio, xray, hospital or whatever medical place you're at:
1) If they can reduce your bill with the Medicare rebate on the spot so you won't have to chase Medicare afterwards to be reimbursed later.
2) If your have private health insurance, ask them if you can claim your health insurance rebate straight away so you won't have to chase your private health insurer to be reimbursed later on
3) If any of the steps above have failed, and they don't offer you a reduction on your bill straight away because they're luddites and not very connected with their technology, then you'll just have to complete paper claim forms
4) The best claim form to fill out is a Medicare two-way claim form. That means you print off the pdf, fill it out, attach all receipts/invoices and complete the health insurance information, and then Medicare does all the running around for you with your Private Health fund. If you include your EFT information, it's insanely easy because before you know it, in one to two weeks time, both Medicare and your Private Health Fund will have deposited the reimbursement amount into you account. No cheques to deposit at the bank.

I wish someone had told me all this before I went through last years tedious health system. I didn't know about asking them upfront for my bill to be reduced because of Medicare and my Private Health Insurance, I didn't know about the two-way claim form. I would photocopy my invoices/recipts and send off the original to Medicare with a single-way claim form and then complete a claim form with my Private Health Fund with the photocopies and ask them to ask Medicare for the originals. Hah! Stupido and convoluted! That's happen when I've never had any health problems and my genes are great as indicated by the lack of health issues from my own parents and relatives. Fortunately I finally figured it out a few months ago and it's been really simple.

Fortunately I haven't really had any more health issues in the past few months. Spending on health issues is the biggest waste but unfortunately it's something that's gotta be done. It may also prevent bigger medical issues in the future as a result of neglecting your health today. But if I stopped snowboarding then maybe I'd save up so much more (less trips and less injuries)...but giving that up...impossible...

Expired gift cards: Extend their life or get them exchanged

Gift cards are great when you don't know what to buy for your friend or family member who has everything already. If you have received any gift cards and they've expired, you should contact the retailer and ask them if they can honour or exchange the expired cards for you. If it's close to expiry, call up the retailer and ask for an extended grace period so that you've got an extended time to use your gift card.

Don't throw them out. Most retailers will usually extend your expiry period or offer you a new card in exchange. There's a new site available where unwanted gift cards can be sold or swapped with other people who don't want their gift card, usually at a discount to its face value though... afterall if there's no discount, there'd be no incentive for anyone to buy because they could just buy a new one at the shop.

I think it's a great idea that's targeting a niche market need. Exchange or sell your unwanted gift cards at www.cardlimbo.com.au

Celtic Tigers losing their economic growl

It's become a worrying trend. Members of the EU are collapsing one by one. Ireland, also known as the Celtic Tigers because of their economic growth in the 90s, is another nation struggling for survival in today's global environment. The Irish were diving into property speculation, much like the British, Americans and us Australians. We've all been guilty of speculating in property and creating property bubbles.

As the Irish became more heavily leveraged in early 2000, housing and construction dominated the economy and almost 13% of the entire workforce was employed by the building and construction industry. Housing can be massive source of economic growth because there are so many associated industries that benefits. From real estate agents, banks, mortgage brokers, solicitors, government taxes and stamp duties to furniture, plumbing, electricians, housing whitegoods, department stores and associated retail stores as homeowners furnish their properties.

Proposed spending cuts by the Irish Government
* 10 billion euros worth of spending cuts
* 5 billion euros worth of taxes to be raised
* cutting minimum wage by 12%
* cut welfare payments by 3 billion euros
* cut 25,000 public servant jobs

Liz O'Hagan, an Australian working in Ireland was quoted saying,

Click on image to zoom in.

The vultures (ie: investors) sure are fast. With the crisis that Ireland has been mired in, buyers of bonds (investors financing the Irish government) have been quick to demand higher yields as compensation for the increased risk. According to Shawn Pogatchnik at Apnews.myway.com, the yield(interest rate) on 10-year Irish notes had increased to 8.18 percent. As it gets more expensive for the Irish government to finance their deficits, it also gets more expensive for private companies wishing to borrow to fund business because of the sovereign risk.

"I sit here every day, taking calls, reading emails and fielding inquiries from people from all walks of life who are getting ready to get out of Ireland...they've lost a job or a family member has lost a job or they're about to lose their position and simply can't afford to live off their income anymore."

The Irish Government are poor at budgeting and saving for hard times
Professor Ferriter has studied Ireland and its history. She is quote in the SMH saying,

"There is the sad recognition that so much was squandered, that when you take the scale of the success of the Celtic Tiger and the scale of commercial activity then...there is such a feeling of regret that excess was not controlled and regulated. There were such opportunities for long-lasting security, now lost."

Times are hard in Ireland, with unemployment rates at 13%.

Future of Ireland
* Their banks need to recapitalise- the government is trying to rescue them but needs borrowed money to do this
* The Irish Government needs to borrow approximately 100 billion euros, which will increase their sovereign debt
* The funding may be coming from the European financial stability mechanism (A fund guaranteed by EU members)
* Funding from the IMF (this usually has strings attached)
* Other loans

Foreign exposure to Ireland by bank nationality @ 31st March 2010Total foreign bank exposure(including derivatives and other credit) is 583 billion euros and this consists of the following nation's financial involvement:
* 155 billion euros - Britain
* 143 billion euros - Germany
* 79 billion euros- US
* 64 billion euros- misc Euro nations
* 60 billion euros- France
* 39 billion euros- Rest of the world
* 20 billion euros- Italy
* 16 billion euros- Japan
* 11 billion euros- Spain

Some shocking statistics

I want to buy a few golden bullions

Reading about inflation, devaluation of fiat currencies and the instability around the world makes buying little golden nuggets more and more tempting. Now before anyone who read this blog thinks that it's time to burglarise my place and make off with my little golden nuggets - I haven't bought any yet and when I do, it will be left at the mint vault. I won't be stupid enough to be storing them in the cookie jars in the pantry.

A few years ago a few friends and I were having dinner and we were joking about buying a few chunks of gold. Too bad we were only joking around! Gold has gone up in price and gold is looking more tempting as Greece, Ireland, Spain, the UK and the US battle their deficit demons. With the US printing money like crazy, the central banks are getting twitchy holding USD (US Dollars) as a reserve currency. A lot of central banks hold gold bullions in their vault as well. Afterall, gold was previously traded prior to nations having their own fiat currencies.

Oh well. No regrets. It's not like we've gone and blown the lot on discretionary expenditures and consumer junk. Most of us either have shares or properties or both, or a mixture of everything. And earning dividend + rental income can beat holding gold which doesn't pay an income in any shape or form.

As always, Perth Mint is quick on the uptake and has opened up a site specifically for those wishing to indulge in buying golden coins or bullions. I'd prefer bullions but any investor who has a numismatic bent, may prefer to buy the gold coins instead. I've previously written about how you can value your gold jewelleries to sell them for cash but why go flogging off the family jewels when you can wear them and over time, they go up in value as well.

I've always wanted to buy a few golden bullions in my portfolio so when I do that, I'll be sure to outline my bullion buying adventure for anyone who's interested. 2011 is the year to bling up my portfolio with some yellow metal.

Australia's richest woman - Gina Rinehart

You've got to give credit to Gina Rinehart (previously Gina Hancock). Even if her empire was started off from inherited wealth, it's probably not easy competing in a male dominated field such as mining. Rinehart is Australia's second wealthiest woman with $4.75 billion according to BRW magazine rich list for the year.

She's been quoted saying:


That quote does show how tenacious she can be and why she's a success in the mining world. Good on her.

Rinehart married her second husband when she was 29 years old and he was 57 years old.  Whether she sought a father figure in Frank Rinehart or whether true love did exist, only they will ever know. Catherine Zeta Jones, one of the world's hottest actress married Michael Douglass and there's a 25 year age gap between them.

What does Gina Rinehart and Andrew Forrest have in common?

They both built their wealth (or in the case of Rinehart, built wealth upon wealth)on the back of iron ore deposits and operating mines. The vast majority of iron ore mined is used to make steel. Australian mining companies are one of the world's largest suppliers of iron ore and we've been benefiting from the past few years of Chinese economic boom.

Andrew Forrest is most likely just as tenacious as Rinehart. His company Fortescue Metals Group (ASX: FMG) had to battle RIO and BHP and compete in their market. Despite oppositions from the larger mining companies, he's been stubborn enough to fight his way through opposition and criticism to become Australia's richest man. He had a pretty ordinary background - graduated with double majors in economics and politics. Then he worked as a stockbroker. He founded a mining company in his early thirties. Simply amazing.

Further reading:

1. Australia's Richest Person: Gina Rinehart
2. Top 10 Books on Wealth
3. When you start to lose customers one by one

Image source: http://www.theage.com.au/news/national/ironore-heiress-joins-nations-21member-billionaire-club/2006/05/17/1147545391218.html

"Whatever I do, the house of Hancock comes first. Nothing will stand in the way of that. Nothing."

Car loans are a rort

If you can't afford to buy a car outright then the next best option is to see how you can get around using public transport such as buses, trains/subway and push bikes. Car loans are one of the biggest rorts around although not necessarily an evil if you really do need a car.

A friend of mind was telling me how his little brother recently signed for a 7 year, $5,000 car loan @ 15%. His little brother said that the loan was cheap...only $30 a week in repayments. If you check out the image I've attached above, on a weekly payment the car loan will be paid out when he's in his late twenties and he'll end up paying interest amounting to 62% of the original value of the car.

So for around $30/month in repayments, he'll end up paying $3,000 in interest. The car itself will end up costing about $8,000 by the time he finishes paying the loan. Hopefully it'll still be functioning when the loan is paid off. If you can survive without a car, I recommend that you do that. My car has been the bane of my life...it drinks fuel like a dehydrated person in the desert and the associated costs are increasing every year.

Wish lists and gift giving

I haven't got many items on my wish list which is a good thing. Problem is, what I do have on my wish list is rather exxy and that's a bad thing! I've spent quite a few thousands on gifts this year for friends, family and on myself!! Birthdays, functions, events and weddings really do add up over the year but not much I can do about that.

Larger items I'm planning to buy:
* Flash for the DSLR $380
* 50mm prime lens $330
* 17mm-55mm $1200
* Canon point and shoot camera $300-$1000 (Update 04/04/11: Got one!)
* Nespresso coffee machine $300-$600
* Pot for cooking Hot Pots and Steamboats $100 (Update 04/04/11: Got one!)

I've wrecked my point and shoot camera from the countless snow trips and from failed jumps at the parks where I landed belly first -really uncool haha... fortunately we did land some awesome jumps so it wasn't a total fail!! That photo image at the top is not me of course - coz I ain't go guy and I can't get that much air on my jumps yet :P

On my wish list are two dresses below. I have a bad habit of buying things I like in two to three colours. A bit like how Bernie Madoff used to buy his polo shirts before they chucked him into prison.

Asking for higher interest rates on my funds

I've been dumping spare funds into my 'high' interest saving account. The funds that I'm saving to buy an investment property have been dumped into the CBA Netbank Saver account. My 6% high interest deal with my bank was going to expire on 30th November this year so it was time for a friendly call to my bank with the usual request:

"Hi, the special high interest rate on my account is about to expire soon. I've just checked your website and you've got a new and higher interest rate on offer. Can you increase the interest rate on my Netbank Saver account to 6.25% as offered on your website?"

The lady on the phone says, "Sure, I can increase the rates on both your accounts for you today."

Score!!

Mind you, the wording on their website is a deterrent to people like myself (click on the image I've attached if you're too lazy). They specify that the higher interest rates are for new account holders only. This is untrue and all the major banks will match your rates to their introductory rates (these are on offer all year round) if you ask so just ignore their wordings and make your request.

If I didn't ask for higher rates, I'd be getting the usual 4.75 %pa just like millions of other depositors. So I'll happily demand the 6.25% pa rate. Considering the interest is paid monthly, the annual effective rate is actually higher than 6.25% pa.

That's an extra 1.5%pa in interest and that's a huge gap. The more funds you have, the more you're missing out on. Why should they pay me 4.75% for my funds only to lend it out at 11% or 24% to someone else for their personal/credit card loans? Gimme some of that profit :p Just some rough numbers for you below, ignoring the fact that the interest is paid monthly so I haven't accounted for the compounding effect. I've just used simple interest as if interest is paid annually:

* $1000, @4.75%pa= $47.50, @6.25%pa= $62.50, an extra $15 interest per year

*$10,000, @4.75%pa= $475, @6.25%pa= $625, an extra $150 interest per year

*$50,000, @4.75%pa= $2,375, @6.25%pa= $3,125, an extra $750 interest per year

*$100,000, @4.75%pa interest=$4,750, @6.25pa interest=$6250, an extra $1,500 per year

I could always stash the funds into some shares for higher returns but I don't want to expose the capital to any volatility. Plus, I don't expect the savings to be sitting in the Netbank Saver account for an eternity. Once there's enough there, I'm going shopping to buy some bricks and mortar.

Charitable giving and my conscience

Australians are living in a lucky country. We're not living on top of any tectonic plate and thus, rather immune to natural disasters such as huge earthquakes and volcanic erruptions. Our farmers are prone to drought and floods, and we do have massive bush fires every year so those are probably the worst natural disasters that we have.

South Africa is so poor and lacking in resources. Same with South Asia- there's so much corruption that poverty is virtually part of the landscape. America has devastating hurricanes such as Hurricane Katrina and the Gulf hotspot. Yes, we really are lucky. The only thing we need to face are hot 44 degree summers and cold winters where it can be about -1 degrees at the coldest point in winter. Nothing like Canada and their -55 degree winters. I wouldn't permanently migrate to any other country.

Timothy at WealthArtisan posted his story '7 Dollars and the World Around You' and if you like being aware of how you can help other people, it may offer you a different perspective on how your actions can help or change other people's lives.

Human welfare versus animal welfare

Because we're such a lucky country, we're more of a donor nation than a recipient country. I'm constantly torn between whether I should donate to human charities or animal welfare charities. If I donate to charities that provide food to poor nations, then what about the animals/pets who have been dumped on our streets, what about the strays in Greece and what about the countries that support bull or cock fighting, bear baiting and other stupid events that abuse animals?

The different types of giving and donations and how you can help:

• Giving money directly (eg: either one off donations or regular monthly/annual donations)
• Buying fundraising goods (eg: raffles, toys, pens, badges etc)
• Supporting others on their fundraising endeavours (eg: biking, fun runs, baked goods etc)
• Volunteer work and giving your time (eg: petitions, helping with fundraising, helping with admin etc)

Choice of charity and who to give to

There are a few issues that I dislike when it concerns some charities - the ones that pay their directors or chairman a few hundred thousand dollars for working for them, the ones that waste a lot of donations in admin support cost. I've supported the following charities:

• Salvation Army - they help our local poor individuals and families + homeless
• WSPA - they fight and petition for the change in animal welfare laws in countries that abuse animals
• WWF - they support animals and wildlife conservation
• RSPCA - local charity supporting animals that have been dumped and are homeless
• Cancer research - Particularly breast cancer and prostate cancer
• World Vision - poverty in the world

I've been raising funds at work by supplying drinks in the staff fridge. Whenever my colleagues buy the drinks, the profits raised will go to supporting the charities I plan to support next year:

• National Breast Cancer Foundation and their projects involving cancer research because so many women are diagnosed with breast cancer every year
• RSPCA and their multiple projects involving animals
• Doggie Rescue and their projects involving finding new homes for pets that have been dumped by their uncaring owners. Unlike donations getting lost in administration, I can buy them something on their wish list and give it to them, knowing that every dollar has been used on the doggie's welfare
• Find volunteer work to assist the homeless in Sydney

I hope you're giving something back to the community in the form of your time or some donations. If not, please think about it. It can make a difference to people and animal's lives. It really is lucky that some of us can be born in a world of choice and opportunities while some of us are born into a world of poverty and deprivation.

Seeing a homeless man eating food from the rubbish bin really touched me

He was in his late 30s or early 40s. When I first saw the pile of half eaten food waste on the ground, on a ratty pizza box, I thought someone had dumped food on the floor. Until I noticed a man riffling through the rubbish bins looking for food that was dumped. I wasn't sure whether I should approach him or not. Until I saw him eat some steamed broccoli straight from the bin. He is the first homeless person in Australia that I have ever seen going through the bins to find scraps of food to eat.

There I was, at Bondi Beach, where the homes overlooking the beaches are valued at over several millions of dollars. Where there are so many tourists and wealthy people (or maybe over leveraged people!) are living and yet this very skinny, homeless gentleman is eating from the rubbish bin. I asked him if it was alright to give him enough money to buy a few meals.

I didn't want to offend him or embarrass him because it's awkward for him to be doing that in the first place, but he accepted, thanked me and gave me a wide, toothless smile. I could see that he was undernourished and suffering malnutrition. I wish I could do more to change things in this world. I wish I could have offered him a job or more long lasting assistance.

I'm a bit wary with some of the homeless folks. Some of them are sitting surrounded by empty booze bottles and they don't look underfed, only unkempt. I presume that they are fed by the soup kitchens and charities at night so that any donations that go their way are spent on booze and drugs. The average homeless person in Australia living on the streets for 11 years. What can we do to help them?

If that same homeless gentleman had sat there and waited for donations, I'm sure he would have received enough to buy some meals, instead he was proactively going through the bins and not waiting for handouts. In some ways, it demonstrates to me that he is trying to live his life instead of waiting for charity. It makes me wonder, what happened in his past, that led him to this future.

Spending everything on the house

Housing in Sydney isn't cheap. Particularly anything within 30km radius of our CBD. We were at a friend's house for her birthday BBQ. Almost all of us aspire to buy a house eventually with the backyard and space so that we can have cats and dogs as pets...and kids too I guess.

The wishlist:
* 3 bedroom (or more) house
* 2 car garage
* 600-700 metre square property - this ensures a backyard
* Within 30km radius of CBD
* Close to shops, public transport (trains + buses), schools and arterial roads (motorways and main roads), parks
* Proximity to the beach would be a dream (this requiring a few millions!!)
* Facing east for morning sun

The reality is that almost all of us live either with our parents, in apartments, town houses or villas. Town houses and villas are more spacious but has no yard. Houses can cost anything between $600,000 to a few millions in the 'desirable suburbs' and the starting points are 2 bedroom houses with no carpark. Or 2 bedrooms, with car park but no yard.

So for anything feasible for an average couple with two cars and planning to have kids, it needs to be at least 3 bedrooms, with car space for two cars and a backyard for the 'potential' kids.

One set of couple, are essentially engaged and they bought an apartment in the Upper North Shore (where the house prices start off from around $1.2 million). Problem is, they said that they spent all their money on the apartment and haven't got enough to buy the rings or get married. This isn't the exception though. Another friend said that she couldn't get married either because they were in the exact same situation.

Their mortgage payments are too much and they can't afford to save up for the wedding.

Mortgage versus diamonds and getting married

With a property, you have a home that you can live in. If they're directing all their spare funds towards their housing mortgage instead of a wedding, it's a form of forced savings. Despite not having much discretionary income left to spare, the savings are at least going towards building housing equity which is ultimately increasing their net wealth. That's a good thing.

The cost of getting married versus paying off the mortgage

Spending $10-$15k, on a diamond ring and then $40-$50k on a wedding is rather insane but that's the average nowadays. To be conservative, if the ring and wedding costs $50k in total, once it's spent, it's gone and it's a sunk cost. If however, you were to use that $50k to pay off the mortgage, you can save hundreds of thousands of dollars in interest savings. I'll illustrate using two scenarios:

Base assumptions: Interest rate of 7.5% fixed for the duration of the loan, 30 year mortgage loan

Example 1: $100,000 mortgage loan
Using the $50k to pay off the mortgage will save you $135,254 in interest over the duration of the loan. Instead of paying $151,721 in mortgage interest, you only pay $16,467 in interest

Example 2: $300,000 mortgage loan (the reality for most Sydneysiders)
Using the $50k to pay off the mortgage loan will save you $245,249 in interest over the duration of the loan. Instead of paying $455,155 in mortgage interest, you only pay $209,906 in interest

So for the average couple in Australia, with the average mortgage of $300,000, spending $50k on their diamond ring+wedding, the cost of marital bliss means paying an extra $245,249 in interest. If you're interested in trickier maths, assuming the couple pays the average 30% tax rate, to earn that $245,249, they need to earn a gross income of $350,355 (before tax).

Photography and travel

I love to travel but unlike most people, I don't crave it. I love visiting other cities, experiencing their cultures, their amazing architecture (I have a weakness for beautiful architecture, patterns and history). The food is tantalising and the natural landscape is very different to Australia's.

Despite having travelled to a few countries, I still think that Sydney is amongst one of the best city to live in. We have so many restaurants and so much natural beauty. Our beaches are beautiful, clean and plentiful. I think I'd go mad if I had to live in the middle of the dessert (which we do have) and getting to the beach would involve having to fly by plane.

This weekend is a bit of a washout. Cloudy and looking like it's going to rain. I didn't get a chance to post up the photos from last weekend since my laptop gave me such grief.

Sculptures by the Sea, Tamarama Beach and Bondi Beach

The weather was hot so when we decided to see the Sculptures by the Sea exhibition, we encountered hundreds of tourists with the same idea!

Started off at Tamarama Beach for the walk:

Plenty of sunbathers and tanning going on at the beach. The surf picked up later in the afternoon with the slight wind.


Top left: Horse sculpture carved from wood
Top right: Sunbathing woman pondering, from stone pieces
Bottom left: Seaweed carpet constructed from bottletops (see my photos below to understand the effort it took to create the artwork.
Bottom right: Dining table and chairs by the sea, integrated with nature (aka overgrown with weeds)


Hundreds of thousands of bottlecaps were tied together with cable ties to achieve that sculpture!


Above on the right: There are two images superimposed, see if you can figure it out.


Above: Bondi Beach, saturated and heaving with sunbathers, tourists and locals seeking the sunlight and the crowd.

US Minimum wage of $5.85/hour versus Australia's minimum wage of $15/hour

Have a look at the table above listing the unemployment welfare payments available for the unemployed in Australia. Could this be why there is no incentive for people who are long term unemployed to actually go find work? In America, unemployment welfare expires after 99 weeks or so. In Australia, it gets paid indefinitely.

Assuming you're single and living in Australia, government welfare is around $235 per week. The people earning minimum wage in America needs to work the equivalent of 40 hours per week to even earn the equivalent that the unemployed Aussies earn for sitting on their backside and doing nothing. It's a bit loopy and crazy isn't it?!
It's even crazier when you consider that if married or defacto couple were living together, and they were both unemployed, the Australian social welfare payment would be $424/week. While this may seem generous compared to the income of minimum wage workers in the US, it would be a struggle to survive in Sydney with that amount unless you moved out to the suburbs and away from the CBD inflated living costs.

I've been to the US on holiday and things aren't cheap over there. New York is just as expensive as Sydney. Santa Monica was possibly even more expensive than Sydney. So if the cost of living is roughly the same as in Sydney, how does one survive if they earn $5.85/hour?

Over at GRS (Get Rich Slowly), J.D Roth blogged about minimum wage in the US(Edit 25/07/15 hyperlink removed by request of new site owners) - some of the comments elaborate about how most states have higher minimum wage than the Federal minimum wage. But seriously, it probably feels like living in poverty trying to survive on those wages. The best thing for anyone earning that little, is to try and learn new skills and get a new job. They can also cut their expenses by share housing and living in really dingy, overcrowded share housing, put up with the torture for a year or two until they can save up some type of financial cushion and then move out to something nicer once they've organised their finances somewhat.

Working 40 hours @ $6/hour would mean earning $240/week. That's what the Australian government pays our unemployed folks each week for doing nothing at all. Australia's minimum wage is around $15/hour. I know which country I would want to live in if I was given the raw end of the deal! If I was living in the US earning those minimum wages, I'd beg for that little bit extra for a plane ticket to OZ.

Poverty in Asia

Many Asian nations don't even have minimum wage protection. Or social benefits for those unemployed. Sure everyone defends the poor wages and counteracts the argument by saying that the cost of living is a lot cheaper. But a lower cost of living doesn't mean that they're living comfortably. I was talking to a friend about Cambodia and she was telling me that the average income there is $100 USD per month, which is approximately $3-$4 USD per day. If they can't find work, they starve.

Asking for a pay rise

Wisebread.com had a great article about how to demand and ask for a pay rise or negotiate your pay. There's nothing freakier and more offsettling than asking for a pay rise. Maybe that's why people find it easier to just change employers. If you're working at McDonalds or some fast food place, it's probably a dead end asking for a payrise - probably a better idea if you can get additional qualifications and move out of that industry. Most employers expect justification as to why you're expecting a pay increase. What value have you added to the company and your department. What measures have you exceeded and expect to succeed. Sometimes the best way for the increase is to change to a new firm or to get additional qualifications.

That's the best thing about passive investment income, you never have to justify why you've got a capital gain in your property or stock portfolio, it goes up with demand, you never have to demand an increase in dividends, because as the company earns more, you get an increased share of their dividends. If rent goes up in the area where you have an investment property, you don't even need to justify why your rent will go up, because renters can see that the rental rate for the area has gone up and they won't argue with paying your rent.

Stock investing fundamentals and a slice of my portfolio

Getting excited about Agribusiness and Agriculture

It was interesting to read about fertiliser in the SMH Money back in October. It's always interesting to read about anything that covers my stocks and their industry. And yes, I have stocks in Incitec Pivot (ASX:IPL). They are Australia's largest supplier/manufacturer/producer of fertiliser. I bought the stocks at two separate intervals as you can see on my childish chart :)

There are a few emerging fields that have been of interest to me on the investment landscape. Uranium and nuclear energy, agriculture and agribusiness stocks. Just a warning that I'm not a purely ethical investor and my stocks may not necessarily be ethical stocks.

Food and water is something that is going to be a global issue. Fresh water supplies around the world are running low, if they're not polluted in the first place. Our inconsistent weather, droughts, cyclones and floods are damaging food crops. Arable farm land are being directed from food production into growing corn, sugar cane, manioc and potatoes to produce ethanol and fuel. The problem is that those farmlands were previously producing food for human consumption and instead they are now producing ethanol for fuel consumption.

The remaining arable land needs to be more productive and pushed to produce as much as they can. Hence, this is where fertiliser plays a role. Fertiliser can ruin rivers, dams and waterways but without fertiliser, land must be left to regenerate or else consecutive crops will deteriorate more and more. So by using fertiliser, farmers won't have to wait for natural land regeneration and they can plant their crops back to back on that same piece of land.

Wisdom from Australia's largest mining company

The world's biggest mining company BHP - an Australian company. Probably our one and only claim to having the world's biggest company in a singular industry. They provided some notes in their investor briefing:

• Increasing demand for food
• Decreasing arable land per capita
• Shift to higher- protein diets (my note on this - particularly the Chinese population and their changing diets)
• Need for more balanced fertilisation to maximise yields

Both BHP and Rio Tinto have expressed an interest in moving into the Potash busines. Potash is a key ingredient in the production of fertiliser. If you have the world's largest and second largest mining company directing their interest towards a field, it's worth having a look to see what their analysts and forecasters have been researching.

As an active investor (constantly buying and selling), if you see large companies starting to look at acquiring companies, your next move is to look for the companies that are prime takeover targets. Ideally find a good company to buy stocks in so that even if the company is never taken over, they are still great investments. If you're an investor, look for good, quality companies that you can happily hold for 3-5 years or longer.

What type of features should you look for?

These are some features that you should look out for. It's not an exhaustive list because this would have to be a text book to be an exhaustive list. But they are the main features that I personally use myself before investing in any particular stock.

Even if you start off with a great stock, the trading environment changes and you can find yourself with a dud stock. That's why you need to be investing in a handful of stocks and not just putting all your entire savings into a single stock or fund. If it was easy to get rich from trading or investing in stocks, almost everybody would be rich, however, this isn't the case.

• One that has growing revenues and Earnings per Share(EPS) growth - eg: increased sales, innovation, new products and developments, expansion into different markets or international markets, acquisition of competitors that will provide cost savings and economies of scale
• Check to ensure the PE ratios aren't too low(no potential) and aren't too high(overpriced) compared to their industry PE ratios
  
• Check who are on the board of directors and management - steer away from companies where directors/managers have been previously involved with bankrupt and insolvent companies
  
• Check to see their dividend payout ratio - beware of a company that has a high dividend payout ratio, they may not beable to sustain the dividends and this may artificially inflate yields
  
• Check to see if they have any franking credits - this means the company has already paid tax on their dividends and if your tax rate is 30% or less, you will receive a refund or the credits will reduce your tax payable
  
• Check to see if they have any contingent liabilities on the horizon - eg: a looming court case
• Check their financial statements, financial ratios, analyst commentary, recent and historical news articles and mentions of them in the press
  
• Check the cash flow and their cash holdings - be wary of companies with a lot of revolving debts and the ones requiring massive financing and loans that will require refinancing in this environment

If you're new to the game and you don't understand any of the above, it's probably best that you find a low cost ETF or Index Fund to plonk your money into. If you wish to dabble your toes into investing directly, open up an account with a broker (if you need human interaction) or an online trading account (if you're tech/net saavy) - and start off by buying a blue chip stock.

What are Blue Chip Stocks?

Good old trustworthy companies, with good trading history and stable revenues behind them. I've given a few examples below to start off with.

Blue Chip American Stocks: Apple, Coca Cola, Caterpillar, Google, Microsoft to name a few
Blue Chip Aussie Stocks: The big four banks (CBA/NAB/ANZ/WBC), the large mining stocks (BHP, RIO TINTO), the large retails stocks Woolworths (WOW), Coles and Wesfarmers etc

It's always unnerving to buy that first stock. When I got some free stocks from work, it was exciting but not as exciting as buying my first set of stocks. I remember when I bought my first few stocks, my heart was pounding ridiculously that it's pretty laughable to think about it now :) Once you own at least a stock in one company, you will find your knowledge and awareness increasing, watching out for the stock in the news, earning anouncements, price volatility and you will find your learning curve increasing exponentially in regards to stock investing.

You don't need to be a guru to start investing. Take that baby step of buying one stock to start you off on your learning curve. The younger you are, the more it will benefit you to learn as knowledge is rather powerful when acquired at a younger age. It means that you have many more years than someone older than you, to apply your knowledge and invest in an investment that will compound. I have my long term holdings on a DRP (dividend reinvestment plan) and they just keep growing and compounding every year.

My poor laptop and the blue screen of death

If you haven't backed up your laptop or PC recently, do it now!

Or you can find yourself in my situation. Total regret. I'm not having much luck with laptops. My previous laptop was a Toshiba. Renowned for their reliability. The motherboard pretty much fried and that was the end of it. Fortunately the hard disk drive could be removed and built into its own enclosure so that I could move my data off it.

I went with HP for my next laptop. All was going well until it unexpectedly blue screened. I hadn't performed any backups in the past few months because I had planned to buy some portable drives that I could backup onto. That was a huge mistake. In hindsight, and this will ensure I don't find myself in this situation again, if I need a drive to backup onto, I will get it ASAP and not leave the purchase pending.

Fortunately, my smart friend can most likely (so he tells me) recover my files. Since I'm not an expert in I.T, I don't know how he's going to do it when the laptop doesn't even get past the booting up stage. He tells me that my OS is corrupted.

I hope my data is salvageable. I've got 2 x 1TB drives ready for backing up whatever he can recover for me. They were a bargain at Office Works - $300 for two 1TB Western Digital drives. It was only just a few years ago that $300 could only buy a few gigabytes worth of storage. With the two drives, I plan to backup my laptop weekly and alternate my backups on the two drives so that even if one of the backup drives were to be damaged or fail in any way, I will have a spare drive and the most data that could be potentially lost could be only one week worth of data.

There are technology out there where you can have your backups backed up automatically but it's beyond me about how I could set that up!

Your data, files and photos are precious

If you haven't backed up your data and files, and your data ends up unrecoverable, you can't fathom how lost you can feel without it. Or how sad you will feel if you lost photos that captured memories of fun times. Most of us have procedures at work where the data is backed up regularly.

Unfortunately, our own personal laptops and PCs are left to our own devices and its our responsibility to ensure we backup our own drives. So don't be an idiot like me and ensure you back up your data regularly.

Feeling lost without the laptop

It's very hard not to feel lost without the laptop. Unfortunately, as I've gotten addicted to surfing the net, reading my RSS feeds and playing various media on my laptop, being unable to use mine makes me feel lost and I'm left to reading books, magazines and newspaper. Not to mention, watching crappy programs on TV that I wouldn't be watching if I could be reading stuff on the net.

Light at the end of the tunnel

Fortunately the situation could be salvageable. As mentioned, my data is most likely recoverable. My poor laptop will have to be reinstalled with a new OS (operating system) and all the programs will have to be re-installed. I'll have to go through the settings and change them again. It'll take several hours and probably a few days but at least there's an option, short of buying a new laptop.

Lesson learned

• Back up regularly.
• Buy hardware and storage devices immediately if you need it to backup your data - don't wait to buy it and make it a priority.
• If you use a laptop, watch out for overheating.

Top 10 Books on Wealth

BRW 26th May 2000 (yep from way back then)- Top 10 Books on How to Get Rich

1. Rich Dad, Poor Dad - Robert Kiyosaki
2. The Cashflow Quadrant - Robert Kiyosaki
3. The Millionaire Next Door - Thomas J. Stanley
4. Building Wealth Through Investment Property - Jan Somers
5. Your Mortgage and How to Pay it off in 5 Years - Anita Bell
6. Making Money - Paul Clitheroe
7. The 7 Habits of Highly Effective People - Stephen Covey
8. Think and Grow Rich - Napoleon Hill
9. Share Trading - Daryl Guppy
10. The Richest Man in Babylon - George S. Clason Signet

If you google "top 10 how to get rich books 2010" you'll get a similar list with the same authors and same books as 10 years ago. I've read all of them with the exception of two- Paul Clitheroe's and Stephen Covey's. Provided you enjoy reading, I recommend the books by Kiyosaki, Stanley, Somers, Bell, Guppy and Signet.

Put the stuff you read into action

Reading them won't achieve that much. You have to put all those theories into practice. Putting them into practice can take years and years. There is no such thing as a get rich scheme except a scam scheme. If you want to get rich quick, it's by innovation involving the internet (eg:ebay/facebook) or being an entrepreneur and they work very hard to get to where they are.

The best classic book for anyone who wishes to have a solid foundation of understanding money - read The Richest Man in Babylon. It was written in 1926 and is still popular in print. And still very highly relevant in today's world.

Did JK Rowling know that her Harry Potter books would go on to change her life and dominate the fantasy book publication and fantasy movie world? That her written words would propel her into the Richest U.K women billionaire spot. Or that she would be the seed for other people's wealth and ambition? Afterall, Daniel Radcliffe, the main actor of the Harry Potter film is 21 years old with an estimated fortune of 42 million pounds. That's 67.8 million AUD and he is just one actor.

Boom and Bust. The business cycle will keep repeating.

I always find these old retro articles interesting. Particularly when they show that the world keeps spinning and humans keep going through the same old cycle of boom and bust in the most fundamental sense.

This is one of the most ironically, illuminating quote that I've seen- Kinghorn, from Rams Homeloan, in 2000 was quoted as saying:

"In this market, you have to do some credit enhancement before you can issue mortgage backed-securities. That usually involves taking out mortgage insurance. In the US, investors will buy subordinated bonds that have not been made bankruptcy-proof; they are preparared to take the risk for a higher yield.
We have done bond issues in the US and Euro markets, and we may look at doing a sub-prime bond issue in the US. With that sort of financial structure in place you can do more unusual loans - investment loans, development finance and lending to impaired credits (borrowers with poor credit ratings)."

I find this rather ironic and self serving on behalf of the financial institutions and investment banks. Firstly, the investment banks were prepared to take on increased risk for higher yields because the funds weren't coming from their own hip pockets. They were using funds from investors and individuals. They knew that there were risks involved but they wanted the commissions and their cut. They didn't care about the future so much as their current bonus and what cut they would get in the immediate future.

Considering this quote is from 2000, 10 years ago, it is still relevant in today's world. Investors are always seeking higher yields and a lot have sacrificed their stable income investments in exchange for high risk investments. The cycle is always the same. Market crash in 1928/1930s and the great depression, market crash in 1987 with overgearing/over leveraging, technology crash in 2000 (dot com boom) where the market was so crazy hot that people bought at IPOs, paying millions for IT companies that weren't producing any sales nor profits.

And of course, our recent 'global financial crisis' starting in late 2007.

• Before the financial crises and sharemarket crashed, there was greed, euphoria and investors investing in riskier and riskier assets in the chase for high returns. Ordinary folks want a cut too, they start to move in but usually ordinary folks starts buying and investing when the market has peaked. Backyard BBQ and party conversations involving funds and sharemarkets.
• The market crashes.
• When the market crashes, people start to withdraw their funds from investments that have crashed, from riskier investments and start to direct them towards 'safer' more stabilised investments. Their capital is less prone to fluctuations in stable income investments (government bonds, term deposits, bank saving accounts etc)
• Investors innovate and create more financial/investment/sucker products and start investing again once profits and yields start increasing. The market starts rising again.
• Ordinary folks see this and want their slice of the pie.
• If you're an investor and you start noticing that your firends, relatives and neighbours - the ones that have never been interested in the market, start talking about the markets and their investments, it would be a good idea to start looking at how you can exit the market.

It really is interesting to note that history replays itself. And the top 10 classic wealth books will probably be almost exactly the same in another 10 years. If we revisit the top 10 list from above in 2020, the list from 2000 will probably still be valid.

When you start to lose customers one by one

The slow bleed of a poorly run business

It's rather sad to walk past a dining establishment that has their lights switched on, service staff ready, and no customers to serve, night after night. Customers don't avoid restaurants unless there's something wrong.

Just like the shocking Noodle House restaurant at Top Ryde. During the peak hours of dining, the ravenous hordes were nowhere to be found and the tables were all sadly vacant and sorry looking. We gave it a try. We really did. But when you're the only ones at the table and the service is still poor you just know what went wrong (maybe the waitress is the owner's daughter - goes to show that nepotism can really be a backlash). The food was very bad. The service was even worse. So bad that I felt sorry that we had not patronised our own local Chinese restaurant since their food is significantly tastier and they make an effort to provide service.

Last night we dined at Red Spoon, Top Ryde. It's a new Thai restaurant. Maybe they've become a franchise? Or maybe the Red Spoon at Gladesville is the owner of both? If the owner of Red Spoon Gladesville also owns the Top Ryde one, they should probably rush over to start looking after the new start up. If Red Spoon @ Top Ryde maintains their poor service, they will end up with no customers just like Noodle House.

A friend was celebrating her birthday with a dinner. Red Spoon @ Top Ryde was the designated choice out of the 15 to 16,000 restaurants in our fabulous Sydney city of culinary delights. The restaurant business is highly competitive. Not only does your food have to taste good, service must also be good as well. Unlike the US, waiters and waitressing staff over here earn an average of $15-$17/hour and that's not counting the tips and overtime loading. If they had to rely on tips for a living, I'm sure service would improve vastly. Service staff don't have to rely on their fantastic service in order to earn their bread and butter, so at some food establishments, you can get the crappiest service. So crappy that you wished you stayed home and cooked a meal instead.

How good was the dining experience last night? Considering it's almost dawn, and I've spent the entire night tossing and turning, unable to sleep with the food churning around in my stomach, I won't be heading back there. We decided to go for the $45pp tasting menu. The five on our end decided to choose this option and did not prepare ourselves for the next 4 hours of relatively disappointing food.

When things start to go downhill

They had some decent dishes - an exquisitely tender scallop entree, the soft shell crab and green mango salad was deliciously tangy and as for the other ones...nothing special. The pork belly was chewy, the pork hock was all bones and the vermicelli chips were soggy. The serving time between dishes meant that we had to wait for what felt like hours. It probably was, considering we got there at 7.45pm and left by 12pm. Should have known that something was wrong when they came over and said they had run out of the rainbow trout and will substitute with soft shell crab.

Should have known something was going astray yet again, when our entrees arrived, with minute servings and we sat there hungry while our fellow friends who had not selected the tasting menu, received an array of entrees and main dishes. Practically finishing their mains before any of our mains arrived. The chefs have a time management problem.

Should have known that something was wrong yet again, when they brought out two mains when there was suppose to be three. A friend followed up with the waitress about the missing dish. Apparently, the chefs had forgotten to cook that dish. Considering we had finished our mains 30 minutes prior to realising they had forgotten a dish, we didn't want to wait another 30 minutes for them to bring that dish out.

Ok, so they forgot a dish. No problem. However, when they brought out the dessert, it was crazy. We love our desserts. Imagine a glass of sago pearls with mango sorbet and passionfruit swirl on top, a scoop of icecream on top of black sticky rice and small slivers of mango on sticky rice. Now imagine that each of those three fit into the palms of your cupped hand. Now imagine having to split that portion between five.

So there we were looking at the dessert and doing rough visual calculations, better not take more than three teaspoons each or else there won't be enough for everyone to share... ridiculous and quite funny if it wasn't so crazy. We've never had something so crazy before. Particularly when it works out to be about $60 per person at the end of the night. We all love our ice cream so sharing a scoop of ice cream between five people is just unfathomable.

Our friend brought her cake along. The staff lit the candles and all was going well until it came time to divide and conquer the cake. We were given about 10 to 15 plates when there were 24 people. At least the poor chefs didn't have to take responsibility for that stuff up.

Most restaurants in Sydney are fantastic. Usually, for $30 to $50 per person, you can get the most amazing assortment of dishes, great serving sizes and the most amazing cusines on offer. Fusion or authentic, food from around the world - Thai, Japanese, Greek, Spanish, Modern Australian, Korean, Chinese (northern and southern specialties), Italian, Singaporean, Malasian, Bavarian cusines etc ...the list is endless and it's a great city to live in. Thanks to Australia's migrant intakes from all over the world, we have so many restaurants offering food from their culture and whenever we go travelling, it's the one thing that I miss when I'm away from home.

The comparison. When you don't live up to expectations.

Red Spoon @ Gladesville is almost authentic in their flavours. Considering most of the clientele are westerners/Aussies, most don't offer the truly gastro palate challenging dishes that involve pickled fish and too much shrimp paste (that stuff may taste great, but it really stinks and is not for the faint hearted). They had great service, great food timing and the serving sizes were decent.

Don't expect Red Spoon @ Top Ryde to be anywhere near the same in terms of service, food quality and serving size. What went wrong with this second restaurant?! Maybe some restaurants just weren't meant to expand their food empire.

Only time will tell whether they will survive the cutt-throat restaurant business world. Customers are pretty quick to realise when they're getting the short end of the stick. If you want to charge a decent or hefty price for your food, you must offer quality, taste and service. If you don't want customers to return, give them poor service or crap food. To be a bit more generous, they've just newly opened a few weeks ago so maybe they're having teething problems.

I can understand that running out of rainbow trout is a teething problem, but forgetting to serve a dish on your set menu is a management problem and tiny serving sizes won't change with time. Most of us won't be going back. I'll visit them again if I feel like I'm in need of a sleepless night and an upset stomach. Particularly when the Japanese restaurant right beside them has the most delicious food!

If anyone is thinking of going there, try and give them a few more weeks or months to sort out their inventory, management and service problems before going.

What's mine is mine, what's yours is yours

Hey Spender, meet Saver and their property + shares portfolio...

About 48,000 Australians divorce and separate each year. It's not just something that happens to other people. It's something that can happen to you and your partner too, you never know what the future brings.

If you're in a stable relationship and contemplating the big move to living together, you need to sit down and discuss your finances and how you expect to split expenses when you're sharing a place together. Especially since the Family Law for de facto relationships changed on 1st March 2009.

Don't co-sign or guarantee anybody's loans, not your family members, nor your partner's:

Do not ever co-sign on any one else's loan. If they can't afford to qualify for the loan or purchase on their own, they'll just have to save longer for it. If you guarantee their loan, if they default, the debt collector will be chasing your ass for it! Don't ever let anyone pressure you to sign one. Don't ever sign loan contracts on the spot. If you are signing on as a witness, double check that you're only signing as a witness. Read the documents and if in doubt, get legal advice.

A friend of mine, for all her kindness and generosity, guaranteed her boyfriend's phone contract. She ended up with a $2,000 phone contract when he skipped the state and left no forwarding address for the phone company. That's a cheap mistake compared to mistakes where people have co-signed their significant other's car loan contract or credit cards. So, moral of the story is, just don't sign it.

Before moving in with your partner. Have the 'finance and money' talk.

I don't want to be the one to break up a relationship, but it will save you a lot of heartache and possibly STD (Sexually Transmitted Debt) later on if things go awry. Particularly if your partner has been hiding their debts and liabilities from you. As long as you've lived together for 6 months or longer, if you split up, our laws may have classified you as being in a defacto relationship and thus, all your assets plus superannuation fund are liable to being split by the court if the relationship goes sour and your former partner takes you to the Family Court.

• If you both have similar amounts of assets and liabilities: It's not really much of an issue to worry about.

• If you're the one with the house and the savings while your partner has no assets, you should look at protecting yourself with a BFS (Binding Financial Agreement) - previously known as a Pre-Nup. If you end up splitting, you will protect yourself against being taken to the cleaners.

• If your partner has more than you in terms of assets then if they don't bring the topic up, it's up to you whether you wish to raise the issue or let sleeping dogs lie. If however, they bring up the topic, you shouldn't get angry or upset with them, fair is fair. If you were on the other side of the fence, you'd want to protect yourself too.

• If your partner has no assets but a bunch of liabilities and debts: Three words - sexually transmitted debt. Protect yourself with a BFS (Binding Financial Agreement) - previously known as a Pre-Nup. If you end up splitting, you will protect yourself against being liable for their debts and loans. Saying, "Babe, I think we need to get a BFS/PreNup drawn up before moving in together" may not be the sweetest, most romantic thing to say but bear in mind, that when you move in together, all your assets are vulnerable to being divided in the event of a split.

• If either of you have kids from previous relationship, both of you should definitely discuss financial matters, assets and property beforehand and get a BFS drawn up.
  

What if your partner doesn't want to talk about their finances?

You could try bringing up the subject gently by saying, "Do you think we should get a BFS/PreNup drawn up before we move in together so if anything were to happen, we would end up with what we entered the relationship with?"

If that triggers a lot of anger and resentment, I'd probably avoid the topic entirely and don't even contemplate moving in with them. It's not romantic anymore if the situation turns ugly. Arguments, fights, recrimations and bitterness and for some, the desire to be nasty and take you to court.There's really no beating around the bush about this topic. If your partner is neither keen nor interested in discussing their finances with you, moving in with them probably should be avoided. Especially if you have a lot of assets. In the old days, people never moved in with each other before marriage anyway.

If you both decide to get a Binding Financial Agreement/Pre-Nup drawn up

Pre-Nups were used previously a few years ago. The problem was that they weren't recognised by the law officially so even if couples had Pre-Nups drawn up, sometimes the court would just divide things up based on the case presented at court.

With a Binding Financial Agreements (BFS) in place, provided you don't have children together and you've been together for just a few years, it's more likely that the court will uphold the BFS in the case of a split and your ex takes you to court to demand a share of your assets.

Your BFS should cover how you'll be splitting assets brought into the relationship (usually it's what's mine is mine and what's yours is yours!), how you'll split assets that were acquired and built up while in the relationship (usally a 50/50 split or some other ratio depending on who the higher income earner is and whether they're unhappy with the 50/50 ratio or not).

Ensure that your BFS has future actions, scenarios and what will happen if those scenarios were to occur and how property will be divided or retained. Other grounds that you may wish to cover on your BFS can be existing mortgages, future mortgages, kids, future loans and liabilities, personal items etc. If your financial situation changes in any dramatic or distinctive way, ensure your BFS is updated if you don't want to risk having your BFS challenged in court.

I really recommend you visit the two links below and have a good read to understand how BFS works and when they won't be binding. They also have a few case studies used as examples that will help you understand how BFS works:

* http://www.legalcontract.com.au/binding_financial_agreement.php
and
* http://www.rk.com.au/uploads/File/Binding%20Financial%20Agreements%20Article%20FINAL%282%29.pdf

If you and your defacto partner or marital spouse has not got a BFA and they are taking you to the Family Court, Elrington Boardman Allport Lawyers has outlined their Four Step Approach to defacto relationship property claims which is an interesting read.

A few important points about a Binding Financial Agreement

"The Agreement need not be fair or ‘even handed’ and can favour one party over the other. The Court will not set aside an agreement simply because it is “unfair”. This is partly because prior to signing the Agreement, the parties must each obtain independent legal advice from a solicitor, including advice as to the advantages and disadvantages of entering into the Agreement.

Once the advice is given, the solicitor for each party will attach a Certificate confirming that advice was given before the parties entered the Agreement. This prohibits parties from arguing that, at the time of signing the Agreement, they were unaware of the consequences of signing it."

Some reader questions and examples

Noel Whittaker is one of the SMH's financial specialist who excels in answering reader mailbag questions. He received a few questions from readers concerning realationships and money. This is an extract from the issue that was printed on 3/11/2010:

Reader question: I'm 40, have a good job and have never married. I own a debt-free house and have $250,000 in super. Three years ago I moved in with a man who had left his marriage and who had few assets because of his divorce. Our relationship is now rocky and I'm concerned he will get a hefty share of my assets when we break up. How can I protect myself?

Noel's reply: The Family Law Act 1975 applies to de facto relationships. Your situation matches the definitions under the Act, so you should be taking proactive steps now. Consult a family law lawyer to determine the extent of rights your partner may have against you and your estate. Your super is part of this. This should be a warning to anybody contemplating a serious relationship- taking legal advice before the domestic relationship starts could provide you with protection once a binding financial agreement is entered into.

My reflections on this: I definitely agree with Noel's advice regarding consulting the family law laywer ASAP. She might end up having to create a trust account to transfer her assets into in order to protect them. She needs an emergency plan, needs to organise double signatories on all joint accounts for all withdrawals, changing the pins on personal accounts and printing out copies of bank statements and loan statements on the date of separation. Ensure there are no overdraft facilities- if there are any, cancel all the overdraft facilities so that they can't be exploited. If there are any joint credit cards, cancel those cards and get them stopped immediately.

Reader question: You recently discussed retirees providing money for their children's house deposits. You suggested that such large gifts should be made "in the form of a registered mortgage with interest capitalised, to protect the family's wealth". What is a "registered mortgage with interest capitalised" and how does it protect a family's wealth?

Noel's reply: You would have your solicitor register the mortgage on the title deed through the relevant state lands and title department (in NSW, it's the Land and Property Management Authority; in Victoria, the Department of Sustainability and Environment), thus giving you a legal claim on the property should it be sold. You then hold the title deed, just as the bank does when you owe the bank.

By capitalising interest, the property owners do not pay you any interest but it is added on to the mortgage — the debt compounds over the years and you have the right to claim that the debt be repaid, with interest. The strategy protects the family wealth in the event that your child's marriage or de facto or same sex relationship should fall asunder and the bitter ex-partner demands half the house. Then you, as mortgagee, can have your solicitor step in and demand that your mortgage and its accrued interest be repaid before any of the remaining amount can be split between the warring parties.

My reflections on this: This is one of Noel's classic great advice. There are a lot of parents out there giving financial loans and gifts without any paperwork or registering any interest in the property. And a lot of relationships going sour where the bitter, former partner demands half of the property and more despite not having contributed a significant sum for the property acquisition. If you live elsewhere outside of Australia, you should visit a solicitor or lawyer who specialises in family law. There's nothing like laying the legal framework to protect yourself before going into relationships that may turn defacto or you ultimately marry each other.

What are the costs involved?

ResolveConflict, a family law firm provides us with a few estimates of separation costs where the other party wants a share of the property/assets:

$3000-$5000 to have the the documents prepared jointly
$30,000-$100,000 each if going through the courts
$10,000 each day, if it's through mediation involving lawyers and documentation
$15,000 each for alternative forms of dispute resolution

Going through the courts will be costly and acrimonious. If you want to still be friends and have a civil relationship(kids or no kids), the best method is always the mediation route.

I hope what I've written may help someone, someday. The law is pretty poor in respect of being unable to conserve property that was previously acquired prior to the relationship becoming defacto/married. That's the worst part of the law. That what you have worked so hard to save up and invest (over a period of several years) can be so easily ripped away by the family court when you've lived with your partner for just six months. Romance exists but on the flip side of the coin, when relationships start falling apart, things can turn really ugly, very quickly.