Wednesday, June 29, 2011

Two dresses for $500: Bargain or not

Bargain of course! If you read my previous post on the Chanel dress and Burberry coat, $500 for two dresses is a bargain compared to buying just a single Chanel dress for $15000 ;)

"Everyone has a price" is a quote that is often bandied around to illustrate how vulnerable humans are to briberies. It assumes that 'everyone' is only moral to a certain degree and if you throw enough temptations at them, they'll fold and buckle in to your negotiations.

It also has an economic application. Companies and marketers need to price their products correctly in order to get their prospective customers to spend. Price it too high = no sale, price it too low = it's too cheap and they wait for it to get cheaper. If you're interested in reading up on pricing strategies and how it affects our buying behaviour, you can read up on 'price elasticity of demand'.

While I was studying, I spent several years working part-time across several retail sectors such as merchandising, seafood and food retailing. When certain products were deeply discounted, instead of rejoicing and buying tons of the discounted item or food, shoppers would ask me suspiciously, "Why is it on such a large special? Is it off? Is there something wrong with it? Is it damaged?"

If instead, the discount was only a minor discount, it was insane to see how many people thought it was a bargain and thus bought piles of the discounted item/food. I never quite understood that mentality and the cynical, distrustful queries that accompanied any deep discounts yet minor discounts triggered hoarding behaviour.

Would you spend $500 to buy two dresses? Directed at my female readers of course. If you're a male reader thinking wtf are you reading this post, would you be fine with your significant other spending that much on her dresses?

Oddly enough, the "everyone has a price' quote just plonked itself into my mind when two friends were discussing dress prices and how they couldn't believe one of their colleagues spent approximately $500 to buy two dresses.

Their opinions were along the lines of 'It's outrageous...a expensive' and my opinion were along the lines of 'That's cheap...what a bargain...' 

So there we were, clashing in our opinion on how much was too much to spend on fashion and clothing. Having said that, there are other friends out there who buy luxury labels and wouldn't baulk at spending $3k on dresses.

I <3 dresses and yes, I know my weaknesses and dresses are one of them. If you did decide to read about price elasticity of demand, then you'll know why some fashion labels price their products outrageously knowing that the demand for their clothes are price inelastic.

 Check out the drool worthy Christian Dior cream booties that have three buckles and is retailing for $2050. Or the glamourous Salvatore Ferragamo woven gold clutch purse that is retailing for $3290? that's expensive! @_@

So what are your weaknesses?

Tuesday, June 28, 2011

Greece: Are we in for another financial crisis?

When the GFC crisis started in 2007, I thought we were all doomed. Fortunately Australia scraped through relatively unharmed. Our equity market was hammered but employment wise, we weren't losing 500,000 jobs per month like the U.S during the peak of their crisis.

Lately, I've been thinking about the domestic and international economy and the more I think about the situation and read the statistics, the more concerned I get.

The blogger, 'My-Wealth-Builder' wrote a recent post encapsulating his worries and they are similar to my concerns, which is why you are now reading a post about it. In terms of equity, I'm not heavily invested into equity right now and won't be for the foreseeable future. If Greece defaults, the equity markets will be hammered. If anyone thought the GFC crisis was bad, this could be worse because Greece has borrowed off several European banks and defaulting on those bonds may trigger a European financial crises.

Problematic areas:
  • Looming potential default by Greece
  • Struggling nations with huge debts such as Portugal, Ireland, Iceland and Greece, will they require further bail outs too? Are we looking at dominos lined up for a collapse?
  • The U.S deficit, trillion dollar debts and woeful economy that is not recovering anytime soon. When will the U.S deal with their debts instead of printing off more money to band aid this problem?
  • Australia's own flat housing and construction market, call centre and manufacturing jobs lost to cheap labour in Asian nations
  • Japan, the second largest economy in the world is struggling with no end in sight to the struggle
  • China, one of the largest economy in the world, heavily reliant on U.S citizens and their appetite for consumption will be affected if the U.S falters. There are also rumours about their property bubble but we'll never know for sure how accurate those rumours are. If the U.S falters, China's demands for Australia's commodities will drop
Right now, like 'My-Wealth-Builder' I also prefer to ere on the side of caution and am not increasing my equity holdings. I am also not buying any property this year and the goal is to buy one next year but again, need to review the economic situation around the world again next year not to mention our own domestic property market.

My most recent move was transferring some online savings to a term deposit that is earning 6.15% compounded monthly and 100% risk free. I do have equity holdings which I'm not going to liquidate. They're set on DRP (dividend reinvesting plans) and are held with a long term intention since I've got several decades to go before I reach my sixties so there's no harm in riding out the market with what I've currently got in equity.

Monday, June 27, 2011

Chanel and Burberry: How thee tempst I

Achieve this stylish look for only $56,110:
Chanel silk dress $15000
Headband $1870, cuff on the right hand $3070
Victorian garnet beetle brooch $5900 on garnet chain $10800
Victorian garnet and gold bangle on left hand $8500
Martin & Stein 18ct yellow gold c.1890 bracelet $10200
Salvatore Ferragamo silk pump $770

OR you can achieve this uber stylish look with $44,973:
Burberry Prorsum cashmere officer's coat $5595
Dami Doma belt from Assin $615
Christian Louboutin Daffodile shoes $1295
Chantal Thomass stay-up stockings $68
Cartier Panther ring with peridot and black lacquer $26000
Lakarda ring with garnet and red onyx $11400

I saw these two gorgeous outfits in the AFR(Australian Financial Review) magazine and thought, omg I <3 the outfits. So I went to look at who, where and which shops stocked the goods. On closer inspection at the price tags, I'll just have to continue looking-at-the-page shopping lol

After adding up what it would cost to possess the outfits, it was an O.M.G moment haha @_@ ... IF and I mean a big IF...If I had wanted to buy the whole outfit, I could but would I do that? Not anytime soon ;p

The elitist publications in oz are usually the business newspapers and financial magazines such as Fortune/The Economist/AFR/BRW/SMH/The Sydney Magazine and their ilk. Their pages are splashed with luxury products vying for their readers' attention. I should stick to just reading the content and be wary of looking at anything advertised inbetween their pages ;p

I know that a friend of mine from back in my Uni days occasionally visits this blog and these luxury items would presumably be up her alley. Last time I caught up with her a few months ago was when she was parading her Birkin handbag around. Afterall, Lady Gaga has a Birkin handbag. It was a heavy, soft leathered handbag that can be bought for $13k. Admittedly, it was soft and luxurious and probably an easier decision to buy if you're a housewife(which she is) and not having to earn your own bread and butter like moi.

It's still hard to look away from that Chanel dress and the Burberry coat because they're gorgeous and I just *know* that they would look good on me ^.^ One day...

Saturday, June 25, 2011

The 135K Project: The Tunnel Movie

Update- The Tunnel movie is a mockumentary. Visitors to this blog from all over the world are using queries such as, "Is the tunnel movie real?". Rest your fearful soul, it is NOT real and it is a fake documentary, hence the genre label 'mockumentary'. It's just creepy because our underground tunnels ARE creepy! 

Where the Radiohead Band Ventured, The Tunnel Movie 

The Tunnel Movie has been released worldwide for FREE so download it now and watch a horror movie showcasing part of Australia's creepy, underground tunnel history. The producers couldn't resist sneaking in some shots of the Harbour Bridge but finally we have a movie that has left out the Opera House. For once we have a local movie that's not trying to appeal to international audiences on's nothing like the infamous movie(Australia) that bored me to tears within the first half hour.

Creepy Tunnels and Creepy Cityrail Train Stations

It's ironic that this movie came out this year because I've been thinking about how creepy some of our underground stations and passageways are at night. Especially when you're the only one walking in the underground tunnel late at night. Alone with the fluorescent lighting, fading lime green shades of tiles and the noise of  your every footsteps echoing through the tunnel. If you have watched the Korean horror movie re-make, 'The Red Shoes' then you would know what I'm talking about. Sometimes I have to get off at stations that aren't very populated at night and it's really freaky. I took a few photos with the idea that I may blog about them one day when this movie was coincidentally released:

Whimsical and Innovative Ideas on the Internet

Does anyone remember that guy that made millions from selling the pixels of his page? Corporate companies and individuals leaped to own a piece of pixel. It's getting harder and harder to attract online attention for crazy marketing stunts because there are so many wacky stuff out there already such as a kid selling a kidney for an Apple product and innocent girls auctioning off their virginity to pay for college, ebaying sections of their bodies to be tattoed by the winning bidder...

Some ideas are intelligent and some are stupid and involve irreversible decisions that are likely to be regretted shortly after. The Tunnel Movie has a great innovative concept of selling parts of the movie to people.

135,000 Frames That They Hope to Sell

This marketing move is to try and recoup some of their production costs and a random frame buyer will win the opportunity to own 1% of the profit should the movie ever turn a profit.

135,000 Frames > 1 frame is $1 USD > 1 second of the movie is 25 frames > 1 minute is 1500 frames

Well yours truly put her money where her mouth is and bought 25 frames. $25USD didn't cost $25AUD cause our Aussie dollar is so strong right now and is crushing the USD in its fist. Sometimes I feel so sad that our movie industry is so flailingly weak and unsuccessful. The success of our own actors and actresses was never at the forefront of my mind until two people I am associated with (directly and indirectly) struggled to find work and mentioned how difficult it is due to lack of funding in the Australian industry.

Part of the problem is because Hollywood movies can afford the publicity yet Aussie movies barely struggle to raise funds to produce films let alone fund a publicity blitz.

Top Australian Movies (IMO)

I want to give a shout out to some Aussie movies that were rather impressive given their smaller budgets:
  • Beautiful Kate: Sophie Lowe is beautiful and highly intriguing as the beautiful 'Kate' but this movie is really confronting because it revolves around incest, dawning sexuality, country life in outback Australia and jealousy. Well acted, well filmed and it does portray the loneliness experienced by people living in outback societies.
  • The Tunnel Movie: Finally an Aussie horror that is creepy and is bringing part of our history to life in a movie. Underground Sydney contains thousands of tunnels that are unused, unlit, dank and dilapidated. They were built for various purposes in our history, including war but are now obsolete. Perfect for a horror movie setting. 
  • Wolf Creek: This is one of the creepiest, hair raising movie that you can possibly watch. I've watched my fair share of ghosts, horrors, thrillers and I can state that the perpetrator in Wolf Creek was so creative that he could have been telepathically reading Quentin Tarantino's mind. If you think Hostel, Saw or Sweeney Todd: The Demon Barber of Fleet Street was terrifying, Wolf Creek is on par with those movies and the Aussie desert outback was the backdrop.It's supposed to be based on a true story as well so you've gotta watch it if those type of movies are your thing.
  • Gallipoli: A Peter Weir film based on World War 1 starring a young, sexy looking Mel Gibson prior to his anti-semitic tirade that hastened his downfall into a Hollywood nonentity. WW1 is why we celebrate and commemorate Anzac Day as a public holiday every year. They sacrificed their lives so that we can live in freedom (well at least until Stephen Conroy implements his lame internet filter and chokes the internet).
  • Mad Max: Classic Mel Gibson movies that precedes modern apocalyptic type movies such as Armageddon, 2012, Book of Eli, I Am Legend and Resident Evil. Maybe it's a classic because Tina Turner was such a powerhouse vocal on the theme song. The scene where Mad Max was eating from a dog food tin was seared into my mind. Everytime I fed our pets, the insinuous thoughts ran through my mind - 'If an apocalyptic event happened, could I and would I eat cat food like how Mad Max did?!'  Sadly no and I would probably perish T__T
  • Strictly Ballroom: Romance, ballroom dancing and a decent storyline. If you enjoyed Dirty Dancing, Save the Last Dance, Black Swan, Step Up, Flashdance and all those dance movies like I do then you will LOVE Strictly Ballroom because it's a classic.
  • Romper Stomper: Russell Crowe when he was a teenage gave such an amazing performance in Romper Stomper. I have to compare it to Gran Turismo because for some reason, they're both similar in exploring the violence in neighbourhoods in their respective country. If Hollywood thought Crowe's performance in Gladiator was amazing, that performance was nothing compared to his performance in Romper Stomper and A Beautiful Mind. 
  • Muriel's Wedding: The very beginnings of Toni Collette. She's such an awesome actress. Just as under-rated as Jennifer Connelly. I prefer her movies such as Muriel's Wedding and The Sixth Sense than the TV series, United States of Tara. Julia Roberts has nothing on Toni Collette.
Anyway, if you decide to download and watch the movie, consider buying a frame for $1 or buy more frames if you can. Support the Arts industry and support the musicians, if you're not buying CDs, DVDs or going to the cinema then you can always attend live band concerts, buy merchandise, buy theatre tickets, attend musicals, the opera, the ballet or something. 

    Friday, June 24, 2011

    Relief that house prices are stabilising

    Lack of Housing Affordability

    Family and friends all around me have been panicking over the recent years about the lack of housing affordability.

    Got a spare $900k anyone? Fancy a mortgage loan of $720k? Got a lazy $180,000 in your back pocket to use as a deposit(down payment)?

    House prices were ratcheting up at such a fast rate that we could see housing affordability dwindle before our very eyes. Sure, several of us have bought apartments but less than ten of us have bought a house. We had to start somewhere.

    What Do I Mean By 'House' ?

    A proper house. At least three bedrooms, bathroom and a carpark on a block that is at least 500sqm and larger. A freestanding house. Not a town house and not an apartment. Not any property that has strata levies to pay.

    The property market has settled somewhat due to the increase in the cost of living such as fuel, electricity and mortgage interest rates. It would be a shock if we browsed the real estate websites next year and house prices have yet increased again by $200k or $300k. If it increased $200k in one year, which it has in recent years, that means we would have to save $60k in one single year just to maintain the aim for a 20% deposit.

    My latest discussion with family and friends over the topic of buying a home closer to the CBD leads me to conclude that we are all frantically saving in order to buy a house before prices escalate further.

    Housing Price Crash Predictions for Sydney

    International 'experts' believe that our housing market is overvalued but I challenge them to try and find a rental property. The rental property is tight due to the insufficient number of new housing(apartment+houses) being built and as long as rental yields are decent, investors will keep buying properties and this will support housing prices. It's easy to be an armchair expert sitting at your desk on the other side of the world making predictions about the Australian  property market and it's another matter to be pounding the pavement around Sydney, submitting rental applications and being rejected.

    Everyone is entitled to their opinions, armchair experts inclusive.

    Will our property market collapse like the U.S or the U.K? I think not after looking at these factors. To buy a block of subdivided land cost around $300k. To build a new home on that block is a further $300k. If the price of a house and land package is around $600k then it would be absurd for the D&G(Doomers and Gloomers not Dolce and Gabbana) crowd to think that housing will crash 40% and not find support before that. There would have be high unemployment before investors and owners will start liquidating their properties and the labour/job market in oz right now is tight.

    Cheapest House Listed for Sale

    In my image above, I've circled suburbs about 30 minutes travel to the CBD. Properties with greater proximity to the CBD will usually be more expensive. I'll be doing a search on and ordering the search results by price, low to high and will post up the CHEAPEST house that is in the search results.

    Note that the cheapest house in each suburb are usually on main roads, nowhere near public transport facilities or public transport routes for trains and buses, usually nowhere near amenities such as shops, cafes, schools, on smaller than average size blocks as well, unrenovated, are cottages or fibro, pitiful landscaping and have something glaringly unattractive about them which is why they are the cheapest one in the suburb:

    $910,000 at Freshwater
    69 Lawrence Street, Freshwater NSW 2096: 3 bedroom, 1 bathroom, 1 car, 423sqm block

    $898,000 at Roseville
    38 Malvern Avenue, Roseville, NSW 2069: 4 bedrooms, 2 bathrooms, 2 car, 862sqm block


    $720,000 at Epping
    55 Carlingford Road, Epping, NSW 2121: 3 bedroom, 2 bathroom, 2 carpark


    $569,000 at Parramatta
    2 Symonds Avenue, Parramatta, NSW 2150: 3 bedrooms, 1 bathroom, 1 car


    $600,000 at Kingsgrove
    221 Stoney Creek Road, Kingsgrove, NSW 2208: 3 bedrooms, 1 bathroom, 2 cars, 510sqm land

    $870,000 at Matraville
    81 Jennings Street, Matraville, NSW 2036: 4 bedrooms, 2 bathrooms, 2 car, 632sqm


    How was that for a taste of the CHEAPEST house in the suburbs that are at least 30 minutes drive and longer to the city? Dingy, old and unrenovated houses that are poorly positioned and yet still be paying over half a million for them? At least house prices are having a bit of a breather right now and we all need that period of price stability to even have the opportunity to aim for a decent house.

    Wednesday, June 22, 2011

    Savings Accounts: Pitfalls of having too many

    Savings accounts are great. Having savings in them is even better. But having too many savings account is not only a nightmare but can possibly be doing yourself a disservice.

    Disadvantages of having multiple savings accounts with small amounts:
    • Fees may be payable on each of those accounts
    • Harder to manage and efficiently rotate into higher interest accounts
    • Tax time can be a nightmare when trying to calculate how much you earnt in the financial year across the multiple accounts
    • You may not qualify for higher interest returns if you don't meet minimum establishment/investment amounts
    How can anyone possibly be tempted to open separate savings accounts for categories such as holiday, house deposit/down payment, car, taxes, education and lump sum bills to name a few? Just trying to keep on top of multiple accounts can be accompanied by a headache.

    The biggest problem that you encounter due to separating your savings into separate accounts is that you may not qualify for higher interest accounts that require a minimum $X amount of money to establish such as $5000 or $10,000. Some term deposits also have different rates depending on how much funds you have. Usually you can qualify and request higher interest with the more funds that you have.

    You don't have to open up separate accounts for all these categories. You could simply work out how much you need to save across each of those categories and then ensure that those amounts are direct debited/transferred out of your salary and deposited into a single, high interest savings account. Simple, easy and fuss free. After that is sorted, you can start negotiating with the bank for the highest advertised interest rate or you can move them to different financial institutions if the rates are more competitive elsewhere.

    The Envelope Budgeting Method Should Be Called 'The Flawed Method'

    And the envelope budgeting method? Where you put certain amounts into envelopes labelled electricity, water, gas etc? I remember when I turned 18, I told my parents that I was moving out to relocate myself closer to Uni and would survive just fine on my own. In the panic that ensued realising that I knew nothing about moving out, I read piles and piles of books on personal finance, managing my finances, how to budget, my rights as a tenant/renter, what my expected housing, living and entertainment costs were going to be and all the other expenses involved with the student Uni life.

    I even bought enough non-perishable food to fill up a 70 litre box. Oodles of cans, tins, drinks, biscuits, chips, snacks and anything I could think of. The box was so large that it wouldn't fit in the kitchen so it had to be stored in my bedroom. That's how silly I was back then ;p

    Once I moved out, the first method I tried was the envelope method. I look back fondly on my introduction into the big, not-so-bad world of supporting myself. Every time I got paid, I diligently withdrew money from my account and stashed them into the appropriate envelopes. When the bills came, I used those funds from the envelope. It was a bit stupid really. Since I'm not a crazy spendthrift I didn't need to use the envelopes at all. Instead, I had dudded myself out of earning interest. Fortunately I realised that rather quickly, tore up the envelopes and instead rotated my funds into higher interest savings accounts and term deposits whenever I had excess.

    The Envelope Budgeting Method is really flawed if you have no problems with managing your finance. If you do, maybe it'll help but essentially you're not earning any interest on those funds that are stashed in those envelopes.

    Chasing the high interest and opening multiple bank accounts

    A few years ago, I was on the war path for higher interest. High rates were advertised in all the business newspapers so I started opening up one account after the other. Whichever account had the highest advertised interest, I would rotate those funds into the appropriate bank. At the end of the financial year, tax time would arrive and I'd find myself buried neck deep in bank statements and interest from piles of term deposits, savings accounts and online savings accounts. It was an absolute nightmare >.<

    Now that I'm older and wiser (so I like to think), instead a simple call to the financial institution requesting a more competitive rate to match other banks will suffice. They will usually match or give me a more competitive rate if I ask for it. It's so much simpler than opening up new accounts frequently, transferring funds around and completing tons of paperwork.

    Who should have multiple savings accounts?

    If you're really bad with your personal finance and can't resist maxing out your credit cards, maybe having multiple accounts could work for you. Some people just like to compartmentalise everything in their life to feel a sense of control and that's fine if you're like that. It's important to know your own psychological behaviour in relation to money so that you can find something that works for you.

    Afterall, some people out there are still stashing their life savings under their mattresses and I'm not even going to explore the pitfalls with that particular option because there's far too many.

    Tuesday, June 21, 2011

    Do you love gardening, plants and indoor herb gardens?

    I do. I think I've inherited my parents' green thumbs.

    I love gardening as much as I love my family, friends, cats, food and snowboarding in winter. Some people associate growing herbs, food or fruit with saving money and it's true, you DO save money when you grow them yourself BUT...there's a wide range of non financial benefits you can derive from growing any plant, whether they're edible or not.

    The indoor plants clean and filter your air. The outdoor ones can encourage you to do a bit of pottering around, some mild exercise and best of all, lures you outdoor to the fresh air and sunshine. And if you plant edible stuff, there's the bonus of something to eat and use in your cooking after about four to twelve weeks.

    I spent a huge part of my life on the farm with my family and because of that, have fallen in love with gardens, flowers, herbs and plants. My parents have a really random way of growing fruit trees. Their garden has an unusual assortment of fruit trees such as guava, paradise pears, peaches, peacharine(peach x nectarine), lemon, lime, apple, nashi, grape fruit, pears, nectarines, cumquats and kaffir lime trees. They've even got a curry tree and a patch of sugar canes growing happily in one section.

    The yard, which is distinct from the actual farm, resembles an untamed jungle of edible herbs and fruit. As a partially self confessed food junkie, whichever way you look at it, it's great to beable to just step outside and pick a few herb leaves to cook with, or to cut fresh stems of lemon grass to pound in the mortar and pestle. 

    I usually grow from seeds, transplants or cuttings. It's a lot cheaper and much more rewarding. Thought I'd post up some pictures of my efforts with gardening as a change from dissecting the benefits of good debt, bad debt, buying cars, calculating interest and all that personal finance stuff (yeah, I know you subscribe to this blog because of the PF stuff that I write but allow me to venture off topic, frequently! ;p ):

    The pot about two weeks after planting and after approximately 4-6 weeks have passed we had herbs to eat:

    After I had a disastrous biking accident which grazed the skin off half my face, I used this blessed Aloe plant's gel to recover and it is the best, most miraculous healing plant. Aloe Vera plants thrive on neglect and watering once a week is more than enough for this succulent. It has grown and grown and provided us with three independently planted offsprings and more little babies on the side to transplant soon (before and after). Hard to believe :

    The basil plants were so stressful because they were so productive and literally produced more leaves and shoots at a faster rate than we could eat them. Almost every dish for a few weeks had to contain basil so that we could keep the plant in check lol ^ ^ ...Well they've finally matured and flowered so I've got to see how I can collect seeds:

    Winter is pretty hard core in terms of trying to grow anything because the cold weather hampers plant growth so I've taken the herb planting indoors. All herb plants require some sunlight to grow so ensure you position them so that they get a bit of sunlight. Here's a new batch of corriander(cilantro) from seeds:

    Mint is usually a very hardy plant that will suffocate all other plants in the garden if left untamed. I transplanted a few from the garden but for some reason they haven't really liked being planted in the pot so I was surprised to see that it is alive after almost giving up on them:

    I planted iris bulbs in late April (I think)...first time that I've grown bulbs and I thought they had rotted in the soil since it was almost one and half to two months before I saw shoots sprouting. The daffodils are even more stubborn - it was only a few days ago that I finally saw shoots sprouting. Hard to believe that they could just lay there in the soil, dormant for up to two months without even growing and yet not be rotten:

    On the weekend, I had a really busy and hectic time assisting with dismantling a glasshouse. I don't know why it's called a glasshouse when it's made of plastic? I also got the opportunity to ogle at glasshouse grown tomatoes and farms in Dural - my old childhood stomping grounds. When tomatoes are grown in glasshouses, instead of producing tomatoes for only one or two months or so, they can be fruiting for up to one year:
    Well that's the end of show and tell. If you would like to see more, I blogged about wedding, weeding and zucchini plants which illustrates the type of back breaking activities that I get involved in on the weekends. Maybe that's why I save so much? lol ... If I'm way too busy and preoccupied with helping family and friends with their gardening and outdoorsy tasks then I'm too busy to hit the shops and rack up bills on my credit card! Plus I get a lot more exercise and never have to go to the gym. Ever.


    Sunday, June 19, 2011

    Mythbuster: Is your house or car an asset?

    Is your car an asset?

    When you approach the bank for a loan of any type, they always ask you to complete forms covering your income, assets and liabilities.

    Income: Money coming in
    Assets: Investments that appreciate over time and brings money in
    Liabilities: Debts and money owed, causing you to pay money out

    At the end of the day, the accountant's definition of an asset simplified, is any item/investment whether tangible or intangible, that you own and control that can be sold and converted into money.

    Technically your car is considered by the bank as an asset, however it's not the best type of asset to have. Its value depreciates(decreases) over time and it requires you to constantly pay money to maintain it and drive it around.

    I never consider my car as an asset because it doesn't generate any income and it really is a big noose around my neck figuratively speaking in terms of all the upkeep expenses. I'll never know its resale value until I try to sell it so how can I include it as an asset when I'm unsure of its resale value?

    Is your home an asset? Not according to Robert Kiyosaki.

    Robert Kiyosaki (author of Rich Dad, Poor Dad) created an uproar when he wrote that your house is a liability.

    Technically the banks consider your house to be an asset. So why did Kiyosaki write that your house is a liability?

    He considers the house to be a liability because you live in the house, pay money to fix up and maintain the house AND it doesn't generate an income for you unless you rent out a few rooms or rent out the entire house.

    The house is unlike a car because its value generally increases over time so personally, I use it in my calculations as an asset.

    I know housing in the US and the UK has had a crash lately but at the end of the day, looking long term in a few decades time as population increases, housing price(particularly land value) will increase and someone will want to buy it from you. Whereas your car will be an utterly worthless piece of junk in a few decades time.

    Although it sounds like I'm being anal and making a huge fuss over nothing, if you cruise the PF blogs and check out what other blogger's net worth is, you can't quite compare the bloggers because some omit the car and the house, some omit just the car and some include both.

    All of them will tell you whether they include the car or the house because they're just as anal lol Anyhoo, just thought I'd do a bit of myth busting on the topic of cars and houses and whether they're assets or liabilities.

    Cheers x

    Friday, June 17, 2011

    Plants are sprouting with green shoots

    We've just had a succession of two weeks worth of rainy days and today finally the sun is out and we're going out to a farm in Dural to help dismantle a few glasshouses for relocation.

    Wednesday, June 15, 2011

    Do you really want to buy a car?

    Do you hate paying car bills? I'm not particularly fond of them myself.

    When any friend mentions their desire to buy a car, I can't help but think that their innocent days will soon be over. Nothing is as demanding as a car with all its associated running costs. Even our cats could be considered docile and undemanding in comparison to my car.

    Some months can really suck because there are never ending bills to pay. June is one of those month for me. I've just paid a swag of car registration bills to keep my car legally on the road.

    Pink slip (car safety inspection)                    : $34
    Green slip (compulsory third party insurance)  : $491
    RTA road registration                                   : $312
    Comprehensive insurance                             : $993
    Total $1830

    Sometimes I feel like my car is bleeding me. *sigh* It slurps up the fuel like how I slurp ice cream milkshakes...way too fast. Even if I didn't drive it around, it's still costing me $5/day just to loll there and $35 each week regardless of whether I'm using it or not.

    That's equivalent to $152.50 a month and on top of those expenses, there are fuel bills, servicing bills, car part replacements such as battery, tyres, windscreen and wipers and wheel alignment bills.

    Fortunately I bought my SUV outright so I don't have any repayments to make in terms of car loans. I would never buy a car with financing. I'd rather ride my (push) bike to my destination regardless of how long it takes me than buy a car using financing. Seeing as I'm rather unfit, it's probably a good thing that I don't have to make that choice.

    Car expenses and bills are simply painful because it feels like I'm dumping money into a giant black hole that doesn't return much and is infact, merrily depreciating every single day.

    One of the blogs that I subscribe to 'Punch Debt in the Face', wrote about saving money like crazy so that he and his wife could build a $100k down payment (for the Aussies:deposit) to buy their first home. When I'm not busy haranguing and moaning about my car bills, I've been busy saving money like crazy too because I really need a huge ass lump sum to use as my deposit next year. All these bills are like little bumps along the way...

    Peace x

    Thursday, June 9, 2011

    What are people Googling?

    Any decent website or blogger would have installed some type of traffic analysis code on their site so that they know why people are visiting their site, how many pages people read, the links that people exit on, the length of visit etc

    Every now and then, I check my statistics to see what the Google queries have been so I can see what readers are looking for or are interested in. The last time I wrote about Google queries was in a post, 'Why do people think they are anonymous on the internet?'

    It's been a while since I've done a recap of the wacky query results so I thought I'd do another recap, particularly with the queries that would not have been answered in the post that they landed on:

    Query> we've saved $50000 should we invest it, put it on our mortgage or splurge on a holiday? : $50,000 isn't that much at all so if you have a non-deductible home (PPOR)mortgage then you should stash that amount in the offset and as an incentive, save up some more and then you could use it for a holiday.

    If your tax rate is 40% for example, then you can calculate similar scenarios such as:

    a)If you leave it in a normal bank account earning 6% interest, after-tax the the yield will be 3.6%

    b)If you bought $50k worth of stocks, fully franked at 5% dividend yield, due to the 30% franking credits, at a 40% tax rate, your after-tax return is 4.5%

    c)If you deposit the funds in your PPOR/home mortgage then you save yourself the (after-tax) interest rate of 7.5% (current average rate)

    d)If you use it for a holiday, there's no return and it's all gone and you lose the opportunity cost of that $50k working for you for the rest of your life

    Comparing the after-tax returns of 3.6%, 4.5% and 7.5% is a no brainer. You can even compare them on a gross-up yield basis ie: 3.6/0.6 =6% before tax, 4.5/0.6=7.5% before tax, 7.5/0.6 grossed up is 12.5%.

    The best option in that scenario would be dumping the $50k into the mortgage loan offset account and if you want to use it to invest, then you need investment returns of 12.5% and greater to make it worthwhile in taking risks. If you have the money and are unsure what to do with it, it generally helps to compare what the various results will be from your various decisions.

    Query> australia agony aunts : For my post about relationship and money

    Query> tweets, dora bondi vet : Dora, the dog that was bitten by a snake has survived and is back with her family

    Query> food stockpile addiction : Can't help you there, I've got my own bad food stockpiling habits that I've been trying to resolve (and it's working because our larder is looking a lot emptier and so has the freezer and all the half opened jars)

    Query> is eating out cheaper than cooking : Emphatically the answer is NO. Cooking will always be cheaper if you use fresh ingredients, less meat and ingredients that are in season. It's always cheaper to cook your own meals because you're saving on labour cost by using your own labour. Takeaway foods are priced to cater for raw material cost, labour cost, rental costs and overheads (such as business insurances, accounting fees, legal fees etc)

    Query> ivan caple, indonesian abattoirs etc : After the Four Corners expose on the Indonesian slaughter industry, the Govt has temporarily banned all live export to Indonesia. The inhumane slaughtering in some of the Indonesian abattoirs were horrifying and a shameful display of cruelty

    Query> valuation of hancock coal pty ltd : If any of the companies are listed, you can find out from their Annual Financial Reports. Valuation is achieved by multiplying the quantity of shares issued by the stock price. If it's a private company and unlisted, then there's no way that you can find out their valuation unless you've got some buddies on the inside working in the accounting and finance section

    Query> $150000 income poor : $150,000 income isn't poor at all and if you can't survive on that then it's time you had a look at your spending. Things you can do: downsize your housing, don't use any air conditioning, turn those wide screen tvs, gaming consoles, multiple laptops and computers off and read a book in the family room together under one light, eat pasta and rice everyday, don't buy bottled water, get rid of those consumer debts...

    Query> any luck with principal reduction for investment properties and rental properties : Ya dreamin' ....

    Query> australians stock piling food 1011 : If you want to look at Aussies and their stock piling habit, read about the Queensland floods and how people went crazy in supermarkets and bakeries because food supply routes were destroyed and they were worried about starvation

    Query> boq account scammed : You should call the Bank of Queensland and request them to reimburse you. Most of the time if it wasn't through your own ignorance(Nigerian schemes, lottery scams etc) then you'll be reimbursed

    Query> can my 3G ip (sic) address be traced back to me : If you have a fixed(ie static) IP Address then yes. If you don't then they can only track it back to your ISP carrier

    Query> debt in 20's bad : Depends what type of debt. If it's an investment debt to buy investment properties or a stock portfolio which is earning an income for you then it's generally considered good debt. If it's debt on your credit cards, your car or debt on that sofa that isn't earning any income for you then it's bad debt

    Query> how to save an emergency fund when unemployed : It's a bit late to be saving for an EF when you're already unemployed. Best thing you can do is cut your expenses as much as possible and plan for the worst case scenarios such as being unable to pay your mortgage or rent and what if you were homeless, at what point do you think you will need to start liquidating assets to feed yourself? Don't wait for those last desperate days before trying to flog your assets off at huge discounts because you're so desperate...

    Query> roger munro ponzi, roger munro australia, roger munro properties : Read my previous post about Roger Munro, 'How to lose your life savings'. It's with the list of 'popular posts' because there have been a lot of traffic to that post from a lot of people who have lost money

    Query> Final HECS lump sum : If you can make your final lump sum of $500 or greater before you lodge your tax return for the year, then you will also get the discount. The amount that has been automatically withheld from your salary will probably be refunded depending on your tax return. If you can make a final lump sum payment, ensure you do it before 1st June (which has already passed but take note-for those doing it next year) and before lodging your tax return so that you can get your 10%, soon to be only 5% discount.

    Query> my hecs-help debt keeps going up but I am paying the compulsory yearly payments why : Because if your compulsory yearly payment is less than the indexation to inflation then your debt balance will keep rising. Eg: If your debt was $25,000, inflation rate was 3% (indexation of 3%*$25k = $750) BUT your yearly compulsory repayment is $500, then this is what happens in chronological order >

    A) $25,000 + yearly 3% indexation on 1st June of $750 =$25,750
    B) Less $500 yearly compulsory repayment after lodging your tax return between 1st July and 31st October
    C) Balance = $25,250

    There are heaps of wacky Google queries but that's all I'm writing about for today. Peace x

    Wednesday, June 8, 2011

    The Simple Dollar(TSD) and confusion over the maths

    The reason why The Simple Dollar's readers are confused is because IF at the end of year 1, the amount was $1,015 only, then it implies that he is using flat interest of 1.5% per annum and that interest is paid only at the end of the year.

    Yet the later years utilises some type of semi-annual or quarterly compounding which you can see in my calculations below. There are only a handful of blogs out there that have thousands of subscribers and the The Simple Dollar has 13,000 subscribers. I wonder how many people actually read what they subscribe to? Or better yet, take action on what they've read? Could 13,000 people have simply glossed over TSD's numbers without even noticing something has gone astray?

    Screenshot from The Simple Dollar: Trent has posted up some confusing numbers and maybe one of my dear readers can correct me if I'm wrong but I can't seem to generate the figures that he provided with using either simple interest, compound interest or simple interest with additional principal amounts of $1,000 invested.

    He has some confused readers commenting about how they can't figure out how he calculated his numbers and I'm just as confused. To check what he may have done, I cranked out some numbers on the spreadsheet and you'll see why his calculations from the screenshot above has me baffled:

    Scenario 1: $1,000 initially invested at the start of the year, all interest earned is reinvested at 1.5% per annum. In 15 years you would have a balance of $1,250.23

    Scenario 2: $1,000 initially invested at the start of the first year, all interest earned is re-invested and compounded monthly at the rate of 1.5% per annum(ie: interest compounds monthly for 15 years). In 15 years you would have a balance of $1,252.15

    Scenario 3: $1,000 initially invested at the start of every year for 15 years, all interest earned is reinvested at 1.5% per annum. At the end of 15 years you would have a balance of $15,240.23.

    I don't know how Trent arrived at the figure of $16,932.37 without knowing how many times he compounded the interest in the year.

    If he used $1000 invested at the start of every year, with 1.5% per annum interest compounded quarterly, the balance would be $16,942.64 and this is the closest that I can get without having to recalculate using interest being paid every half year. I can't be bothered to run another lot of calculation but judging by how close it is to his numbers then we can narrow it down to the rate of compounding and the way he is rounding his numbers up and down that may cause the numbers to be a few dollars off.

    Why does it matter? As you can already see by the numbers provided above, it makes a HUGE difference depending on whether you keep re-investing or whether the interest is calculated and paid monthly, quarterly, semi-annually or annually. The best option is when your interest is paid monthly and is re-invested because then you get your interest income compounding every month. The interest that you earned in January is working hard for you every single month, every single year...until you spend it of course.

    We are simply discussing the investment of $1,000 per annum. Imagine if you were saving $20,000 or $50,000 every year. You would be looking at differences of hundreds of thousands of dollars over the course of a few years and it could either be in your favour, or working against you. If you don't think you'll ever get to that stage, then you need find some bigger dreams for yourself.

    Wednesday, June 1, 2011

    Sigh. Our politicians are such an embarrassment

    If we weren't such a powerful nation rich in minerals, we'd be a laughing joke to other countries.

    Our politicians have got large problems on their hands and yet they're being paid taxpayers' money to hurl obscenities at one another. 

    People are right. Where's the focus? Woeful public transport, poor retails sales, roads are a shamble, public/private partnership infrastructures failing, long queues for hospitals and the list is endless.

    Instead, we find them on front page news making "meow" and "mincing poodle" jibes at one another. Sigh. Pathetic and embarrassing.