Author Archives: Greg Smith

About Greg Smith

Money expert and author of 17 personal finance books.Greg has a passion for sharing his views and demystifying the money world around you.

The cost of antics and instability

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A recent article in the Business spectator offers a disturbing insight into the state of the Australian property market.

The strange rules and stipulations for new property development and their lengthy approval processes are leading to massive increases in costs.

So much so, that according to Meriton founder Harry Triguboff, as much as $150,000 could be shaved off a $650,000 apartment if the local council antics were stopped.

What we need to do is to get the local governments to realise just how important affordable apartment living is to consumers and focus on finding ways to cut out the cost of ‘red tape.’

Your thoughts?

Little bites are causing a big decay

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A perfect storm is brewing inside Australia with the gap between the strongest and weakest industries being greater than ever before.

From a business confidence study conducted by NAB it shows that there are several factors underlying the deterioration of weaker sectors. The biggest concern was that the gap between two speed economy was actually getting wider. Scarily so it was not due to the larger sectors getting stronger but by smaller industries getting even weaker. Small business is hurting and hurting bad. Who cares you say? You should, as the small business community are a massive employer of Australians and the more that sector shrinks the more people that will be put out of a job.

It seems that in a nutshell simply don’t understand how what’s happening around their own day to day world. Sure they may read the news headlines and take in a few micro seconds of what’s happening in countries like Greece and the US but they unfortunately have no mechanism to aggregate all the news stories together to form one big picture.

Unfortunately that big picture is looking bleaker than the politicians would have us believe. We all seem to so well deluded by our ‘mining boom’ and the rhetoric from the government. The little bits of information you are receiving is hiding the massive decay.

This has been a concern for mine for quite some time now. As I said in a post back in September, we’re all just a bunch of lemmings. But as evidenced by the NAB falling business confidence report I fear that the ‘boom times we are bathing in are short numbered.

Every financial event adds up. The bite sized chunks of news in this country are contributing to the decay which is going to surprise many people and unfortunately cost them dearly. Just think about the last time you went to the dentist and they discovered a tooth that needed some work and cost you fair bit.

Your thoughts?

Time to clean up the sinister activities of banks

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Now I don’t have a problem in general with banks making profits and marketing themselves. But I literally see red when I observe unscrupulous marketing and sales activities that have no regard for the short term or long term financial well being of the consumer.

Take this case for instance. Featured in the Sunday Telegraph was a disturbing insight into just how far the ‘Big Four’ will go to get their bonuses even juicier.

Despite already expecting a $24.2bn combined profit this financial year, the banks have released ‘incentives’ for their staff to “double up” their sales of debt based products and insurances to squeeze even more from their ‘customers’.

Not that is so out of the ordinary but what is really on the nose is that these incentives are for their Christmas parties! Yes, you read it right, Their Christmas parties! What has the world come to?

I thought selling financial products knowing that you will receive a personal gain contravenes multiple ASIC rules and regulations..

Look, I’m sure they can find a million ways to get around this and defend it but let’s take a moral stand on this and pose the question.

Is this right for the working Australian? My answer is pretty simple No! And it should be regulated.

What do you think?

Have you recently been approached by an over zealous bank employee that wanted to flog you extras?

Have they completely lost the plot? Are the desperate to make up for some of the lost revenues. Give me a break. Here we are looking to our banks to be the bastion of financial moderation as we see this behaviour.

Time to wake up and smell the roses – they’re dying!

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As I said in a post back in August, Australia is slowly sliding into another GFC. Now here we are a few months later and despite all of the continuing signs such as the Australian and world share markets collapsing, the Aussie dollar tumbling and big business realizing that Australia isn’t bullet proof. Australians are merrily carrying on with their daily lives, totally oblivious to what’s going on around them.

What gets me hot under the collar is that so many people seem to think the good times will never end. Take for example, a recent study of Gen Yers (18-29 years old) showed a renewed interest in saving, (not a bad thing) but when asked why they wanted to save for, the answer was very simple: to afford bigger ticket items NOT for unexpected expenses down the road.

God help us! I am perplexed. The signs are all around us and still yet we seem to have such a ‘she’ll be right attitude – we’re the lucky country.’

Hmm… that’s what the USA and Greece thought – and now look at them.

What’s your take? Are we fine and I am overreacting, are we all too busy to see what’s going on or do you simply not care?

What do you think?

We’re all just a bunch of lemmings

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Today’s release of the Consumer Confidence statistics has totally cemented the fact that Australians are living in ‘la la’ land and literally have got no idea of what is happening (or worse still what is about to happen) to them from a financial point of view.

According to the Westpac-Melbourne Institute Index of Consumer Sentiment consumer confidence has rebounded strongly in September, as a recovery in economic growth and fading expectations of an interest rate hike reassured households. As a result the index, after falling to its lowest level in more than two years in August, rose by 8.1 per cent in September to 96.9. Interesting, just one month ago the index was at its lowest level since May 2009.

Surprising how simple Australians really are. All we look at is what is happening to interest rates are to measure our confidence.

Clearly we need to look a little further and read between the lines more.

All is not as rosy as it would seem.

Let me show you.

Business failures are rising

According to credit agency Dun & Bradstreet, business failures in Australia rose 12.1 per cent in the June quarter, compared to a 4.1 per cent rise in the prior quarter. The reason for this is that outside the mining sector, business sentiment is generally still poor, and the strong Australian dollar is straining profits. Insolvency activity in Australia is up across almost all sectors, with a significant deterioration in retail and service sector failures, reflecting subdued confidence.

New home starts down

Take the data released this week on new home starts. Surprise, surprise, they unexpectedly fell in the three months to the end of June, pointing to a further weakness in the housing sector. Here, the number of new homes starting construction dropped 4.7 per cent in the second quarter of the year.

Unemployment unexpectedly rises

Recent data shows that the unemployment rate rose unexpectedly to 5.3 per cent in August, up from 5.1 per cent in July, taking the jobless rate to a 10-month high, and raising fears that weakness in the job market may be worse than initially expected.

Steer clear of ‘la la land’

Whatever you do, start to read between the lines and connect the dots from the various news articles out there. Don’t be lead astray by what the government and the bank economists are saying about how strong Australian economy is and that we are protected from the economic worries of the world. If you believe that you are just one of the lemmings

So as you can see the Australian economy is not all as rosy as it would seem. Yes we have a two speed economy, but the cogs are beginning to show signs of significant wear and tear.

Don’t believe the ‘la la land’ rethoric by the government. Keep on reading my blog and see the real story.

Tell me what you think?

Here comes GFC 2

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I’m going to make a prediction that I can guarantee will raise a few eyebrows.

The Australian economy will slide into a slow motion GFC over the coming 6 months.

A big call I know. But if you read between the lines of all the data and hype put out by the government and the media – Australia is up to it’s eyeballs in debt and hurtling towards an economic train wreck of train wrecks.

Oh, but what about the boom that we are in you say? Well, unless you are in the mining sector, not many other industries are experiencing boom time growth (just ask the retailers).

Leaving the rest of us mere mortals hocked up to the hilt and facing ever increasing day to day cost of living hikes. When it comes to debt, we as a nation over the past 20 odd years  have been partying like there’s no tommorow, consuming things for the now and payng for them using someone else’s money (ie the banks). The amount of debt we have racked as a result up is staggering having grown from $500 billion to just over $1.1 trillion in 5 years!!! All of which on home loans, credit cards and personal loans.

Now if you add this ticking time bomb to the government debt problems of the US and many European Union members it is little wonder why the world is teetering on the brink of a GFC 2. Sooner or later their weak economies will affect us. Not so much directly but indirectly as ultimately China is dragged into this financial mess.

You see China’s major export partners are the US and Europe and with them slowing down the Chinese ecomomy will start to slow. Hence, you guessed it, they will slow down on their need for the massive quantities of raw materials from Australia.

So as you can see in this simple scenario, our lucky country may not be luck for too much longer. Batten down the hatches as slow moving ecomomic storm cell is approaching.

Can’t think it can happen to Australia? Just ask anyone from the US, UK and Ireland.

Am I being too over reactionary? Maybe!

Your thoughts?

Show some interest in your interest!

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Rather than just focusing on home loan interest rates can I suggest that you spend a few minutes examining how much you are actually paying in interest on your credit cards.

Chances are, your nice and friendly Bank has not dropped your rate over the past few years as rates have fallen. Quite to the contrary, they have actually risen!

Having just read this, my suggestion is that you spend a few minutes right now – looking at your credit cards and ask yourself if you really need them all and whether you can find a cheaper deal. I would probably say that you can. Check out www.creditcardfinder.com.au or www.ratecity.com.au  

With credit card debt hitting yet another all time high of $49 billion (June 2011 – Source RB) and with one in twenty families running into debt to survive – now is certainly the time to do something about your short term debt.

Don’t just say, hey that was interesting Greg. Do something about it.

Your thoughts?

Credit card loyalty is dead!

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Next time your credit card statement arrives take a look at your credit card interest rate.

Chances are that you could be charged up to a whopping 20%pa. Now for those who pay their credit card off within the interest free period this may not be that relevant but for those who don’t, (the 77% of the Australian population who hold credit cards) this may serve as a wake up call and prompt you to find a credit card with a lower rate.

Reward programs are just not worth the increased interest rate premium you are slugged with. It just does not make sense to be paying such high interest rates just to get a free flight somewhere down the track and who knows the program may change and make it even harder to get a flight.

The moral to the story is that if you are going to use a credit card and you can’t pay it back in full before the interest free period then go out and find a card that has a low rate.

Loyalty is dead, just go for the lowest rate, no matter the institution.

Your thoughts?

4 simple switches that can save you $1,632 a year!

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With inflation now running at 3.6% and the cost of day-to-day living items going through the roof, here are a few simple ideas to put $136 back in your pocket each month:

  1. Switch your energy suppliers – hop onto www.goswitch.com.au or www.switchwise.com.au to find a better deal for your gas and electricity. There are plenty of savings to be made here and all the work can even be done for you by these sites. In terms take a typical suburban 3 bedroom home with 3-4 occupants here you can save at minimum $16 a month on your energy bills simply by spending a few minutes doing some research.
  2. Switch your home loan – with the new rules regarding the removal of switching fees on bank loans now in force – it may be worthwhile for you to look into refinancing. All it takes is a bit of investigation on your behalf to trawl through loan comparison websites such as www.ratecity.com.au or www.infochoice.com.au. Alternatively, you can of course call in a mortgage broker to do all the work for you. Whichever way you choose, you can stand to save some big money. To illustrate how much, take for example a $350,000 25 year home loan at the standard variable rate of 7.8%pa. If you refinanced at a new rate of say 6.95%pa (which is a rate available right now) you could end up saving around $20,175 in interest over the life of that loan and put back an extra $67 in your pocket a month.
  3. Switch your credit card – while we are on the topic of switching banks why not look at switching your credit card to save on your interest rate there too. Check out www.creditcardfinder.com.au or www.mozo.com.au to find the card that suits your needs. Now, if you are like many Australians and have the average credit card debt of around $5,000 plus pay around 20%pa in interest, you can easily save about $24 a month by simply switching to a card at 10%pa. Check out http://www.anz.com/Credit-Cards/Credit-card-repayment-Calculator/ to see how you can fast you can pay back your credit card and of course how much you can save.

It pays to speak out

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I received a telephone call last week from a reader who was in a state of panic as the bank was coming later that morning to repossess their home. This person had recently lost their job back and not told the bank.

Being single and having no one to assist in the repayments they repeatedly ignored any letters or phone calls from the bank hoping that they would just give up and go away. Unfortunately the Bank never does and unfortunately it all spiralled out of control and the bank took possession of ther home.

Now, had this person been in contact with their bank earlier, ie soon after they lost their job they may have been able to work out alternative arrangements and avoided this situation. Sure, going to the bank and telling them you have lost your job may be embarrassing but believe me if you don’t you may lose your home and ruin your credit rating. Many Banks have special teams set up to handle this and they will work with you to find out a better way to pay off the loan. In major job loss situations Banks have even come to the party and offered the suspension of repayments for three months without penalty. 

The moral to this story is plain and simple if you lose your job and have a mortgage do not be afraid of going to the bank and telling them. Better go to them first before they come looking for you.

Your thoughts?