Tips and Advice

Large numbers of Australians have debts such as credit cards, car loans, personal loans, and home mortgages. Debt levels are rising every year, especially high interest credit card debt. If you are having trouble paying all these bills then you may want to consider consolidating your debts into one low interest rate loan. This will reduce the amount you have to repay each month as well as making your finances easier to manage.

Depending on your financial situation, you can choose from a number of lower cost loans when you consolidate your debts. You could get a personal loan, a line of credit or an interest free credit card which may be interest free for a set period such as six months. The latter is a good option if you are sure you can pay off the debt during that period and you are sure you won’t use the card for further transactions.

If you have a mortgage on your home then you may be able to get a line of credit. For this you need to have a certain amount of equity in your home, this varies from bank to bank, but is a good idea as this type of loan has a relatively low interest rate compared to other forms of credit.

A personal loan is a good idea if you want to consolidate your credit card debt into one loan. This type of loan is usually fairly easy to get and the lower interest rate will make it easier to make repayments. The important thing to remember if you pay off your credit cards with a new loan is not to then go and use your credit cards again. This will get you into financial difficulties for sure. The best thing to do is close your credit card accounts, perhaps keeping one for an emergency. Don’t keep this card in your wallet but leave it in your house where you won’t be tempted to use it.

You can extend your mortgage to pay of your short term debts but this is not necessarily a good option. You may find it easier to make your payments each month because the interest rate is lower but don’t forget you will now be paying for those credit card purchases over the life time of your mortgage which may be up to 25 or 30 years? Do you really want to be paying for your big screen tv, digital camera or the latest fashions over 30 years. Although the interest will be lower in the short term you should consider how much you will be paying for these items in the long term.

I think it is generally best to get a short term low interest loan to pay off short term high interest debt. This way you will be debt free in a relatively short period and then you can save that extra cash for investments for your future. If you are not sure what to do then consult a financial advisor or discuss your options with your bank.

Almost all banks offer online banking if you are considering using this service. If you do a bit of research you will see that there are quite a few benefits to using online banking. Probably the number one reason is convenience. You can do your banking from home or work at any time of the day or night.

Many people are concerned about online banking and security. You may be wondering if your information would be safe. The banks spend millions of dollars each year on online security and they are constantly monitoring and reviewing the situation. There is really no need to be worried and many people have safely been using online banking for years. All you need to do to ensure your information is safe is to keep your password to yourself. If you never tell anyone your password and never respond to an unsolicited email regarding your login details then you should be fine.

Any small risk is easily outweighed by the benefits. As mentioned before the biggest benefit of online banking is convenience. You can check your balance, transfer money to another account, pay bills and verify your credit card transactions. Whatever you would normally do in a branch or with telephone banking, you can do online.

Some banks charge for the use of internet banking but many do not so be sure to look around before opening an account. HSBC Australia offers fee free internet banking with a good interest rate.

When you have decided to go ahead with this excellent service, review the online information provided by the banks and follow their instructions for opening a new online bank account.

Investing in the share market can be scary if you are new to investing. However, if done correctly, it can be very lucrative. You can always start out with a small amount until you get a bit more experience and feel a bit more comfortable. An investment club is a good way to get that experience and is becoming a more and more popular way to invest money.

An investment club is where a group of people pool their money and knowledge and invest in the share market or the property market. They learn from each other as well as from their joint experiences. The goal is to learn and make money but it is also a friendly social gathering. You can also use the knowledge you gain in the investment club to build your own share portfolio.

Starting an investment club lets you be part of the action from the beginning. This will also allow you to have more control over the direction and goals of the club as well as to who can join. However, it does involve more risk than an established club with a strong existing portfolio. Either are viable options.

An investment clubs involves both money and like minded friends and/or relatives. If you don’t do your research then you risk losing at least part of your initial outlay. When starting an investment club each member must contribute start up cash and then they generally contribute a set sum on a monthly (or regular) basis. This will enable your portfolio to grow and hopefully become more diversified and thus less risky. The difficulty is finding members who agree on how much to invest and how often. Members must also be aware that they can lose money. Share markets go up and down and the short term risk is considerable, especially for those with little experience. Investing in the share market or the property market is a long term investment requiring plenty of patience.

The steps for starting an investment club are:

• Find compatible members
• Make a plan
• Arrange monthly meetings
• Set up a partnership agreement
• Open a bank account
• Research the stock market
• Research different sectors
• Research individual companies
• Decide how you will invest
• Set up an account with a stock broker

Success is most likely to be achieved by a club with committed members who do plenty of research and have a plan for the bad times as well as the good.

When you purchase an item such as a camera, television, or fridge, the salesperson will often ask if you would like an extended warranty. My response to this question was always a flat out no, I thought they were a complete waste of money. That is, until recently when I purchased a new fridge. Even though the extended warranty put an extra 10% on the price, I considered it well worth it. Not that I think fridges have a tendency to break down, quite the opposite in fact. What convinced me to get it was that if the fridge did break down then they would come out and repair it on the spot and only take it away if they really needed to. All I would have to do to get it fixed is make one phone call. The convenience of this far outweighed the cost. So I now have a five year warranty on my fridge and I figure if it breaks down after that time then I’ll be ready to buy a new one anyway.

An extended warranty provides extra coverage on an item, beyond its regular warranty. You should read the fine print carefully before purchasing the warranty but it should cover any faults with the item, damage which was not a result of negligence, and repairs. Check carefully to be sure you understand exactly what it covers to determine if you think it is worth while. I think generally it is worth while, especially for larger items such as fridges, washing machines, and flat screen televisions.

Also look at the typical life of the product and its likelihood of breaking down. A camera, for example, is something we might upgrade every few years, so do you really need a five year warranty? A computer is also something which we generally upgrade often, however, they have a tendency to break down often, or is that just me?

So the things you need to consider are convenience - do you really want to be lugging that big screen tv around to get fixed, the expected life of the product, and its likelihood of breaking down. I would say if it is an expensive item which you intend to keep long term, then get the extended warranty. If the item can easily be repaired or replaced then forget about the warranty.