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Mind over money and self-awareness; Good debt vs bad debt; 10 ways to rubbish your money; Vision questing your small business; Spending money

Mind over money and self-awareness; Good debt vs bad debt; 10 ways to rubbish your money; Vision questing your small business; Spending money
Protect yourself from financial sharks

By Amanda Morrall

1) Mind over money

I was interested to read that a recent poll on New Year's resolutions found Americans are expressing a steely resolve to spend less and save more in 2012. It was the third most popular ambition, behind losing weight and exercising. It's encouraging news but as the authors of a recently published white paper on behavioural finance point out, it's easier said than done. (Read a summation of the article here via Forbes Money).

Barbara Kiviat, one of the authors, says her research confirmed there is no easy fix and no one solution that works for all. Meaningful and effective transformation seems to be a combination of self knowledge, accessible information (conveyed in a straight forward manner), resistance to marketing and consumer pressures, and a self-imposed backlash against the Keeping Up with The Jones' syndrome. Understanding underlying consumer impulses is another factor.  

Kiviat says, "Changing how people earn and spend often requires broad and holistic thinking about individuals, their motivations, and their financial environments. "

My neighbour shared with me a very effective strategy for putting a quick end to high pressure sales calls. "We can't afford it.''  Click.

I laughed. I use this line quite often myself. There's no shame in it. In fact, you can expect to hear it uttered with greater frequency as householders batten down the hatches and turn the tables on spending.

2) Good debt/bad debt

I get the difference between good debt and bad debt but I don't like the nomenclature one bit. I think good and debt should get a divorce.  

Sure, borrowing money to buy a house for yourself, isn't as evil as borrowing from a finance company to pay off credit cards used for mindless shopping binges, but at the end of the day it's all money you have to pay back...with interest. Admittedly, in the face of a five-armed debt monster, payback logistics can be daunting.

Here's a piece from adaptu.com explaining the difference between good and bad debt and how to prioritise repayment. 

3) 10 ways to waste your money

Every morning, well at least on those days when I am ambitious enough to ferry from the North Shore and ride to work on my bike, I am amazed by the number of boats (re yachts) idling in the harbour. I often wonder just who owns these toys, how much to they cost to buy, run and sit there most of the year bobbing in the water.  Perhaps I'm just envious.

I wasn't entirely surprised to see boats making this top 10 list of common money wasters. The other spends that get dishonourable mention include speeding tickets, unused or underused gym memberships, overpriced dog food (oh, oh guilty as charged), SUVs and cable TV. I couldn't agree more with this caption on the digital TV slag: "How does this make sense, you pay for TV but still have to watch commercials?  Then you pay a fortune for programmes you never watch or forget to cancel." 

This is why my 100 kg monstrosity of TV (which comes complete with '80s vintage rabbit ears) gets used for DVDs on the weekend. Flatscreen, bah, who needs it! 

4) Ready, steady, go 

An acquaintance of mine who works in the leadership area and also coaches corporate executives, writes a blog in his spare time. He's an inspirational character this Brian Martin. I have written about him in the past about how he arrived in New Zealand with $20 in his pocket and went onto become a very wealthy and successful man. I enjoyed his latest blog (the first in an eight step blog on becoming your own boss) so thought I'd share it. In it, Martin talks about the importance of having a dream and a vision as a starting point but also actioning those thoughts in order to bring that vision to life. Here's an excerpt from a longer version I was privileged to read.

To have a dream, is much more powerful than most of us realise.

A dream is like us having a destination, a target, something we are aiming for, something for us to aspire to.  If this is clear, it then becomes something we are ‘inspired’ with.  Inspired means to be ‘in spirit’, it becomes the essence of who we are.

Vision is the big picture of possibilities of what could be.  A vision if we achieve it is our future success.  If a vision is compelling, it almost has a magnetic force that draws us to it.

A vision is a powerful motivator, if we have employees, yes even one employee.

We all want to belong, and if your staff can see their company’s vision, is something they can relate to, then they want to come to work, because it is part of who they are.

Coming to work becomes a ‘want to’ not a ‘have to’.  A vision for your company will probably be about a product or service you want to provide to people, which will add value to their life.

You might like to do this little test?

What would you chose to do, if you could NOT fail.  This should give you a strong clue of what type of product or service, that you might like to get your live involved in.

A vision is an image of the future, it is not yet real.  It is a dream that you can aspire to in your mind.  Many people undervalue or do not understand the power of the mind.

Communication is very important in sharing your vision to your employees, family, and suppliers.

It needs to be communicated in such a way that people can see value in it for themselves, then they will willingly commit their time, energy and resources to your vision and it becomes their vision.

The vision then becomes the foundation of a strong corporate profile.

It can become the heart of your organisation and what your organisation stands for.

Vision creates alignment, which is very powerful.  It means everyone is moving positively forward, working in cooperation, to achieve the vision.

It helps to build confidence, many businesses develop a slogan around their vision.

A vision keeps us focused, it gives us a discipline to create objectives and strategies to achieve the vision.  In other words, vision can help us to pursue our dreams, our future opportunities.

·      Vision without action, is merely a dream

·      Action without vision, just passes the time

·      Vision with action, can change the world

5) Spending money

My eldest son is a planner. He's only 9 (and a half) but already he has planned his 10th birthday party. After a recent visit to Kelly Tarlton's he informed me that he would like to be caged and submerged into the water so he could visit face to face with the sharks. I looked at the price and said, "Mmmm, okay but that means you'll forego any other gifts.'' He sat on it for awhile, then raised the issue again a few days ago saying 'Yeah, I'll take you up on that offer, but by the way, I have five friends coming.''

After I explained to him the financial etiquette of birthday party attendance and how we did not live up to Remueraesque standards, i.e. that he would be swimming alone with the sharks, he has settled upon a sleep-over.  Being the shrewd negotiator that he is, he came back to me later suggesting that as he will soon be double digit in age, it was only appropriate that he have a spending allowance of $1 per week for each year  lived. "That'll be $10 mum."  I told him to get a job instead. I'm so cruel.

Thank you for indulging me in that anecdote which came to mind after reading this blog from myjourneytomillions.com pondering how to best invest gifts of money given to one's child. 

Any suggestions? Also, if you have any rug rats, do you give them pocket money, how much and are there any strings attached? I'd like to know. Email me directly at amanda.morrall@interest.co.nz or write into the comment thread. Cheers.

To read other Take Fives by  Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

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31 Comments

If you refinance your. Credit card debt with a mortgage. Topup have you converted bad debt to good. Debt?

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Hahahaha, you've converted your house into a credit card.

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re Dreaming:

All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make it possible. This I did.

T E LAWRENCE, aka Lawrence of Arabia, Seven Pillars of Wisdom.

I suppose it applies to females too    :)

Re yachts: they can actually be a very satisfactory home., you know. They cost less than an Auckland house, and you can change the view without selling up. True, most don't move much, but that's a common problem; he wants a boat, she doesn't, they sail a few times, she begs off (it's not a comfortable nest - wait for the sexist howls but t'is true) and he doesn't wan't to drop the dream. So it languishes.

I've spent years afloat now, and I'll give you the tip, you're living more when you do, than folk who accept the treadmill as their lot.

Oh - and you spend less afloat. No Jonses out there, and the folk who are there, don't judge you by the radiance of your raiment.

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An Eskiomo who has never heard of Palm trees can never dream of sunbathing on a tropical beach, with palm trees.  All thoughts come from experience, and the best way to have a dream is to increase your experience.  Reading, watching, visiting, learning etc.  If you live in a box, all you can dream about is a box.

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Noctural dreams and day dreams are to be distinguished, non? Gender differences? I doubt it. And yeah house boats are another story. Used to see heaps of them in Vancouver & Seattle, they actually looked well loved and used and pretty comfortable actually. I don't see too many here, at least not many occupied by humans but maybe I'm just going too fast.  Perhaps I need to slow down and book a fishing day:)

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Here's one who had a dream.

I wrote an article about the three of them, before they sailed (Jessica Watson, Abby Sunderland and Laura Dekker) .

http://today.msnbc.msn.com/id/45977088/ns/today-today_people/t/dutch-teen-days-away-completing-solo-sail-around-world/

They're as mich an example to youngsters today, as  those Dutch authorities aren't.

 

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hypertiger    Downward Mobility is Crushing the American Dream

Today, 12:53 PM

dream is the positive word used to describe a delusion.

Who wants to invest into a delusion?...no one...so then when you are marketing a delusion to someone to invest in...you call it a dream.

the American delusion which is called a dream has derived all the power it requires to sustain its existance by taking more power than it gives.

In an take more than you give system or the absolute capitalist hierarchy...

the top employs the bottom to supply the top with everything...the top take their cut and supply the middle which are the rich servants...the ytake their cut and what is left over is supplied to the poor slaves.

the top lives off the yield from the bottom

but when the bottom reaches their maximum potential to supply the top with the yield the yrequire...the only place to make up the difference is by cutting what the middle or rich servants recieve...

The poor slaves are alrady supplied with the mininum so that the top can obtain the maximum...the middle is where the cuts will come when the bottom either refuses to or can't supply the required yield of power the delusion requires to sustain it's existance.

The result is that the supply of poor slaves or the lower class expands while the supply of rich servants or the middle class shrinks.

Taking more than you give is the same as chopping down trees faster than they regrow...

So then as long as there are enough trees to chop down to sustain the required power the delusion marketed to the massses as a glorious dream needs...It will be sustained and the hierarchy will expand...

But once the trees begin to run out...the supply of power to sustain the continued existance of the expanding delusion can't be obtained the flow of power dries up...and the delusion begins to shatter.

bascially the power requirements to sustain the continued existance of the American delusion have become greater than the 1944 global trade system can supply...and it's shattering 

All the other delusions in the other economic zones or absolute capiatlist sub hierarchies within the global absolute capitalist hierarchy are derivatives of the American delusion...So they are all beginning to shatter as well.

A science fiction type horrorshow has been unfolding for the past decade...the collapse of the bretton woods global trade scam that was postponed in 1971 until 2001 is now reaching the point where further postponement is becoming impossible.

The greatest mass cherished delusion in all known recorded history is shattering.

The last 10 years since 911 was sustained by massively engineering yield rates lower in search of volume...

that is basically almost over.

there is maybe one last desperate gasp left at most...generally it's theoretically possible to engineer long term yield rates lower and then subsidize any shortfall with quantative easing...but beyond that and the system will be negatively yielding...It will be impossible for the global system to produce a viable positive yeild that can be extracted wiithout causing contraction.

It will be negatively yielding until it collapses to oblivion and the billions of fundable assets that were created the past 66 years that transfom into unfundable liabilities are liquidated....what the Austrian priesthood calls the natural cleansing process.

One way or the other.

Controled collapse or uncontrolled collapse...It's going to happen and is happening.

Bascially the USS Delusion has hit an Iceburg of reality on it's way to the bright glorious future of fantasy and the pumps were turned on to pump the water out to slow the sinking...but the pumps can not stop the sinking...they will be overwelmed...and because the global trade system is the only ship that exists...There is not going to be another global trade system to stop by and rescue the passangers of the USS Delusion.

controled collapse or uncontrolled collapse...it's going to happen and is in progress.

Just like every other time in recorded history everywhere on Earth.

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Thanks for that Lawrence quote, its a while since I read it.

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I doubt my kids will ever get pocket money.  I used to think I was pretty hard done by, not getting any, but now I can see the other side of the coin. Hey at least he is learning how to price something, a year of being alive is worth $52.  I'd be more inclined to give my kids pocket money if they left home, thats a win-win, not quite old enough yet though.  Maybe give him a business like mowing the neighbours lawn, when you look at what the guys that mow lawns for a living make, he would be comparatively rich compared to $10pw.Maybe charge $25-$30 for mowing your neighbours lawn, and then if he has a friend he can pay his friend $15 and pocket the change, just like a real businessman.

100kg 22" FTW!

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Good idea skudiv but I have no grass! One of my boys is pretty handy with the vaccum tho and I get him to clean the car on occassion.

Last fall I tried to get the kids to sell bags of mandarins in Takapuna as we had an abundance but my eldest son was so mortified he ran away. I might try again if we get a good crop. Otherwise my colleagues will be swimming again in citrus in a few months. As Bernard exists on chocolate and caffeine, he might suffer a shock to the system.

 

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You could try selling Beer

http://www.youtube.com/watch?v=dzrWMIumZ1s

Selling madarins and stuff is a great idea.  I was thinking he might get paid more if he was working for other people (mine definatly would), maybe wash the neighbours cars or something.

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#2 Totally agree no such thing as good debt. Mortgage less bad than cc but much worse than no debt.

Debt for an investment someone else is paying of is all good IMHO as long as people "fully" consider the risks.

As far as cat food - from being married to a vet I can say that quality cat foods are sometimes worth it (the cost of getting a cats bladder cleared because of cheap nasty food will far outweigh the savings). If you can get it cheaper all good but often pet stores exclusively stock certain brands.

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Cheers Minime. Glad to hear that re cat food. That's been my rationale for shelling out for Science Diet with all my cats over the years. Healthy cats, no rotten teeth, very few visits to the vet. Put the pooch on a raw diet for similar reasons...supposedly same price or cheaper than "quality" dog food. No end of stories about dogs dying prematurely from cancer and all sorts of other nasties. Can't help but think it has something to do with the garbage they put in commercial pet food. Pets are a financial liability but I love them and the returns for me are high. I just scrimp in other departments..Here's my hairy kari incarnate.

image here

 

 

 

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Same principle works with the old folks homes : Ensure you park your elderly Mum in a good retirement village ......

 

...  nothing worse than grannies getting bladder infections and gummosis from the low grade cat food they get for dinner at the cheaper joints , whilst waiting for God  ........

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Only the best for gummy mummy I'm sure. Sadly a lot of pets are treated better than our oldies. At least with more dignity at the end...and they're spared having to wait, and wait, and wait for the arrival.

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My Dad used to work as a sales rep in the early 70's and serviced a lot of Dairy's. That was when Ponsonby was thick with new immigrants and was generally lower class. He said the orders for tins of cat/dog food was way out of proportion to the population in that area.

The trick for pets is to look at what they naturally eat in the wild, raw for a start. Chicken necks keep the cats teeth in very good order:)

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I would agree with Mist42, good debt pays for itself, I have used debt on many occasions, and I would still be saving now without debt, instead of clearing debt every 18mths.  I'm going for 3-4 year terms now and have built up assets that provide income.  I own the assets and the debt is gone.  I never have much cash, I keep pouring it into debt as quick as I can, and use equity instead of saving a deposit.  I don't like rental property because the returns are low, but they seem to be very low input.

Inflation is govt policy, yes they talk about saving, but look at how they act.  Govt policy is to punish savers.  Yet they teach saving at school which is sinister.

You have to learn how to use debt, not abuse it.  I live a simple life, and am using debt to provide assets that will give income, so that one day I can increase my standard of living.

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Red flag red flag red flag...

“In the last three months, the number of people visiting open houses has been cut by half. And buyers may show up to auctions, but they don’t bid.”

http://www.bloomberg.com/news/2012-01-19/hammer-falls-on-australia-home-auctions-as-bids-scarce-in-faltering-market.html

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Wolly: Its worse than that .. a lot of "for sale" signs have suddenly appeared in the surrounding neighbourhoods in the past 4 weeks. I think the banks are putting the squeeze on in the hope of capitalising on two anticipated rate cuts on the first Tuesday of February and March and clearing the books of some deadwood they are carrying.

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an email from a client today .. on local thinking and how bad it is

Gee this is as difficult as I have ever seen the markets when trying to feel comfortable with predicting a direction for more than a week. I think I am getting too old and sensible to take risks trading anymore. I might have to give it up.

Because you didn’t ask here are my thoughts.

I cannot remember anyone (economist, broker, financial planner, Government or Share trading Guru) who predicted the 2008 crash or GFC and its severity until it was well under way. I might be wrong, maybe someone did but they sure didn’t tell me.

So how is it that many of these so called financial experts that failed to predict the decline are now suggesting 2012 will be the year of a sustained and possible fast recovery? The answer is they cannot.

My observations of the EU crisis has tainted my thinking such that I can only conclude that whilst demonstrable truths of one nation continue to be dismissed as merely a matter of opinion by other nations nothing will be done to implement the required changes. Therefore it follows that a recession of major proportions in Europe will not be avoided.

Those that hold office in the EU, USA, China and IMF have not so far influenced my thinking that anything that they have done and intend doing will stop the situation from getting worse. Some how many of these Nation's leaders can restate fantasies with a little recalibration to have them accepted by other nations as facts. It’s a major worry. I only included China because they are really only buying bargains for economic advantage and not really helping the situation. A study of the demographics of the EU nations, their Government policies and actions so far suggests there is no one with even a tiny bit of Thatcherism in them to tackle what needs to be done. Forget political leanings whether left or right I only see what is wrong.

Every problem has a solution and most can see what needs to happen but those in power only come up with suggestions that put off the eventual hard call. They should refer to someone real like Yoda of Star Wars fame who suggested to Luke Skywalker “ either do or do not there is no try” or words to that effect. Only last night watching ABC 24 and seeing the posturing of Presidential candidates in the USA, the antics of Bob Brown and the comments of our PM on logging in Tasmania, I had to turn it off before the cricket news as it seemed like I was watching the continuation of a Monty Python movie. Talk about a Government led confidence booster??? Will anything happen in 2012 that you can foresee happening that will improve our market or the world markets so as to enable a platform from which with a little bit of confidence I could again heavily invest in Australian companies?

In the meantime I will remain bearish on the SPI and I am not falling for a continuation of the mining boom to save the day. Increased immigration, particularly Muslim immigration, increases in the welfare bill, a mining tax to go with the Carbon Tax and it will not be long before Australia is in the same situation as the UK and Greece and Italy and Spain and Ireland etc. That is Big Government favoring controlled Labor markets, big expenditure to pay for unrealistic welfare and an insufficient workforce to pay the bill. I will not take a decade to be proven correct as this is going to happen quickly. Just watch Germany fall over next. China cannot save us and India is a decade off in its development to take our commodities. Sufficient to prop up the expected standard of living and manufacturing is in melt down so the Indigenous population may well be all that is still here in 100 years. You better buy that block over in Kiwi Land pretty quickly.
 

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Will he stay in cash or go physical?  With ZIRP to infinity and a poor investment environment what to do with all that money?

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This is a fascinating play by China, I missed that one when it first made the waves back in August. It will be interesting if the yanks have a counter move to that.

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It has been rumored for a while that China wants to have at least as much gold reserves as the US is purported to.  In reality I think the US has no gold, they leased it to the fed a long time ago.

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Icono...can you please suffer our intrigue and post here your response to your client!!

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RE 5 Pocket money.

It's a funny thing but one of the things my dad did was split the profit with me on a litter of puppies my dog had, on the basis that he paid for the dog food but it was my dog. This may seem like a small thing but it left a lasting impression.

At the time I think I got 6d a week as pocket money so getting GBP 5 was quite noticeable. Think it might have set off an entrepreneurial streak.

For those who have no memory of a pre-decimal world, there were 12d in a shilling and 20 shillings in a pound.

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and a pound was a pound of silver?

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I had 3 dozen hens, and sold the eggs. Dad staggered home with the wheat and the mash, but we boys paid for it. Evening deliveries around the neighbourhood. Nothing like teaching kids they have to work for stuff, makes them value things. Otherwise, they just expect....

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Makes me smile.  I was chasing cows over hills and through scrub, spending days in a hot shearing shed loading the pens, drafting, drenching, docking, weaning.  Clearing manuka, cutting firewood, fencing, grubbing etc etc.  Never got a cent (there used to be 1c & 2c).  I can laugh about it now.  I learnt to work hard. 

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It's probably not wise to let on you were chasing cows......

But yes, there's nothing wrong with hard work. It's actually good fun to get stuck in and do a hard-yakka job - I've been outside most of today (you never get ahead of a block this size in spring/summer. That first pale ale will be welcome.

 

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Well its a step up in the world from a sheep I suppose.

I was building huts in the bush from early on, but I never figured out how to make that one pay:( At least they didn't leak:)

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Can totally relate to all of that but it is still even now ( dispite knowing that its smart moves and not hard work that makes money ) that hard psychical work can be the most satisfying hours we spend.

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