According to the Australian ABC website, "Up to 500,000 people are expected to join a class action against local and foreign banks for repayment of dishonour and late fees" http://www.abc.net.au/news/stories/2010/05/13/2898166.htm
The ABC and many of it's counterparts in the Australian media are reporting that banks have collected nearly $1.2 billion fees in dishonour and late fees the 2008 financial year. The fees are comprised of honour and dishonour fees on bank accounts, and over-limit and late fees on credit cards. It is alleged that the banks have illegally charged in excess of $5 billion over a past six year period.
The litigation proceedings are being funded by Financial Redress, a subsidiary of litigation funder IMF. Maurice Blackburn Lawyers is the legal firm in charge of the class action.
Having studied contract law a for a little while, this case is of particular to me because it will be based on a claim that the fees are illegal because they amount to a penalty rather than a legitimate fee.
The ABC website quotes, IMF's chairman Bernard Murphy as saying "There's a contract law provision which states that if one party breaches a contract the victim of the breach is only allowed to charge a genuine pre-estimate of the damages for that"
Just from my experience in banking, and in particular the very strong feedback I received from angry customers (when it came to dishonor and other penalty fees) I get the feeling that there are going to be more than just a few disgruntled customers seeking revenge. oops, I mean compensation.
Interesting Reading
Thursday, May 13, 2010
Friday, April 24, 2009
$900 Stimulus Package Hand Out
While I agree that the Australian Government needs to do something to stimulate the economy, I'm yet to be convinced that handing out cash to the general public is the best solution, especially after hearing what people are spending their $900 bonus on. For example computer games, televisions, sending money to overseas relatives in need, overseas holidays and paying off debt.
With the country now in debt how will the Labour Government recoup it's losses in the future? I'm afraid increased taxes or curved expenditure will be it's only solution. An increase in land tax, GST and income tax will be inevitable over time and even less will be spent on improving community services. Therefore, we have to wonder if it's worth having a short term stimulus of $900 today only to be paying extra taxes tomorrow and also will the government have to reduce it's future spending in order to make up for the debt it has created?
If not through increased taxes the government will look at other ways to tighten its belt. Will the Rudd Government reduce spending by neglecting roads, schools and hospitals? Under the Liberals Party, Howard and Costello ran a surplus economy and yet limited funds were dedicated towards fixing schools etc..so one is left to wonder what portion of cash will be placed towards these services when our economy is in deficit? I'm not entirely persuaded that solving this financial crisis is to curve expenditure or create debt for our future generation.
Seeing that the Government has chosen the cash hand out path, the only way our economy will be stimulated is if people actually go out and spend their $900 stimulus payments. What the Australian people decide to spend their money on will determine whether the package is a success or a failure. I have heard of people not spending their payment locally or saving their cash hand out to pay for debt and increased land tax bills. So how will this help stimulate our economy? In my view it doesn't. So did the Government think of this when they introduced the stimulus? Did they presume that everyone would go out and buy "books and music" as the media reports of Kevin Rudd. Someone buying Chinese made electrical goods or going on an overseas trip to New Zealand will not help the Aussie economy. In my opinion the Government should have chosen a different way of distributing its cash, perhaps in the form of rebates. Doesn't it make more sense to encourage people to buy energy efficient products (such as solar panel installation) or recycling incentives (such as water tank installation) rather than offer free cash? Rebate incentives create jobs.
While I understand that the government needs an immediate stimulus plan, I think I would much rather see tax payer dollars spent on improved infrastructure, and service/community improvement. That is, money spent on improving transport services, schools, libraries, hospitals, community and social services.
An acquaintence was stating that she received the $900 stimulus payout. She went on to say that she was looking for kindergarten placement for her child so that she could return to the workforce. She approached a few centers in her local area only to be told that there were no placements. Providing simple community services such as daycare would be of greater assistance to this family rather than having a one off $900 payment. (Imaging how many new jobs $42 billion could have created) Having the relevant services in a community provides greater stimulus than anything else. In child care there seems to be a great demand but not enough supply. So why didn't both Governments detect this sooner?
Stimulus packages are short term solutions and don't avoid recessions. The last stimulus reflected this as it did not make our country recession proof. If money is spent on infrastructure or rebates, the effect of the money spent will be a long term solution.
The other point (I believe) is that not everybody needs a $900 payment to help stimulate the economy. Although I understand that someone on $80,000 pays tax, I cannot see how someone on this income needs "government assistance" to stimulate the economy and someone on low income doesn't. For example, causal workers or low income workers who paid tax but received a tax refund because the tax threshold was not met, do not get the stimulus.
If you are one of the lucky ones to receive the $900 cash hand out, make your spending count. An important point to note is that if the money is not spent in Australia it really won't help the Australian economy in any case.
What will you spend you $900 cash hand out on?
Wednesday, April 22, 2009
Why have interest rate fluctuated recently
Why have interest rates fluctuated recently in Australia?
In March 2008 the cash rate peaked at 7.25%. By September 2008 the cash rate slowly started to lower to 7.00%. The cash rate is now the lowest it has been for 30 odd years. We might even see these figures drop further as experts predict another cash rate fall by 1 to 2.25%.
The reserve bank has had to reduce it's rates after the realization that the global recession would have severe consequences on families and jobs. The government has had to reduce it's interest rates so borrowers can meet their debt commitments more easily. By reducing interest rates, people with loans have more disposable income and therefore are able to spend more. Spending creates employment and in turn greater economic activity. Hence, the reason for giving the stimulus package.
Sunday, April 5, 2009
Planning A Budget Wedding In Times Of Recession
Planning a wedding can be a very stressful time as there are so many things to prepare for at the best of times. In this time of economic downturn and impending recession the stress factor is multiplied many times over.
I don’t want to sound disheartened or unenthusiastic but once you say “I do”there are lots of expenses you need to consider for example the Engagement Dinner, Rings, Pre Education Program, Ceremony, Wedding Dress, Grooms Attire, Bridal Party attire, Flowers, Wedding Stationary, Photography, Video, Car Hire, Reception, Bomboniere, Caterers, Cake, Master of Ceremony, Music, Honeymoon, Hair, Makeup, Hens Night/ Bucks Night, Residence and the list goes on. The media now advertises that the average cost of a wedding is $49,000. This becomes an enormous expense to a young couple or couples family who want to experience their "dream wedding".
Money Matters
Most of the time you will be busy organising all these things, but another important aspect of your new life together is how you will handle your finances as a couple. Do you continue to operate separate bank accounts (i.e. have divorced finances) or do you combine finances? If you have purchased a home together and need to make repayments or service a home loan then it’s probably easier to open a joint account. There are also other household bill like gas, water, rates and shopping that will be a shared expense. It’s a bit hard to say “I’ll pay for my half out of my account and you pay for yours”. The other alternative is to transfer money from your account into your partners but this becomes very time consuming and if you forget one month your partner may incur overdrawing fees on his or her bank account. I think that once you because a couple the time has come to opened a joint account. Whether or not you close your existing accounts is entirely up to you but it does make life a little easier if you operate from the one account.
There are many advantages to opening a joint bank account. For example you only have to monitor one account, there’s no need to transfer funds to and fro, there are less bank fees and if it is a high interest earning account you may receive more interest because you have a higher balance. But having a joint account requires a lot of commitment, trust and you must not be a careless or selfish spender otherwise it will lead to questions and arguments. The other alternative is to open a joint account but not close your own self titled accounts.
The down side to opening a joint account is that your partner becomes fully aware of all the purchases you make. For example, trips to the hairdressers, work lunches, new clothes and new appliances just to name a few. You may find it difficult to adjust your spending habits especially when you have been financially independent for so long. But what happens when you still want to visit your hairdresser every month or buy that new computer game? Personal purchases can easily start fights within the relationship especially when one partner uses more of the family savings than the other. I’d be pretty upset, if I was trying to save towards "our future" as a couple and I saw my partner going off to the hairdressers every month for a new colour or off to buy yet another expensive accessory for the computer. And the last thing you want to do in the relationship is to put your partner off by using the money as a sign of power in the relationship. If it comes down to this, then you really need to sit down together and discuss the spending boundaries and revisit your family budget.
The solution to maintaining a joint account efficiently may mean that you have to have three accounts. Your individual accounts and then the joint account. If you choose this avenue then it is important that you create a personal budget and only use the account for spousal expenses. Work out your net wage for the week and decide on a certain percentage to allocate together. For example 70% of your wage can be directly transferred to the joint account and the remainder is left for you to do what you want, no questions asked. The remaining cash can be added to your own personal savings, your superannuation or you can purchase personal items for yourself. But if you do decide to split your finances this way there needs to be a rule in place so that no matter what your partner brings home you will not scrutinise, comment or judge his or her purchase.
The down side to having a joint bank account is that one partners idea of what is a spousal expenses may not be yours and also one partner may dip into the joint account once they have depleted their own funds.
Wedding Expenses
Even the most modest of weddings can cost you about $15,000-$20,000. Along with the celebration comes the expense and some people spend their entire lives planning for a wedding day, not to mention their life savings. I knew this elderly couple whose son was getting married. They needed to keep up appearances with their relatives. Instead of opting for an intimate wedding they could afford they chose to have the "big show" so they took out a personal loan to finance it. The son is now married but took the parents few years to pay off the loan. My point here is that this family could have had a smaller wedding with no associated debt but they chose to have a bigger wedding and so came along the bigger expense.
Weddings don’t have to break the bank as long as you buy what you can afford. A acquaintance of mine was in a live in relationship with her partner whom she desperately wanted to marry. She also wanted the big fairy tale wedding but her partner knew he could not oblige. She resented him because she saw all her friends celebrating their weddings with a big bang. When she spoke to me about it she said “As a little girl, I have always dreamed of the big ball like wedding, I want to be a princess for the day”. My opinion was that not everybody could afford such a big celebration and maybe she should compromise and have something smaller with her immediate family and a few close friends, that way she could still celebrate her special occasion. She disagreed. Personally I think a big wedding is a waste of money, why anyone would want to have one hundred guests or more at a wedding I will never know. I have attended many weddings in my time and one of the most ridiculous was one that had over 400 guests. The couple didn't even get a chance to spend time with their invited guests.
Everybody’s concept of a dream wedding varies. The most important thing is that you enjoy yourself on the day. You want to be able to experience the day and not be bogged down by formalities. I find the best weddings are the smaller weddings. Some of the best weddings I’ve been to have only had 20 people. The couple got to speak to all their guests whilst having lunch. They did not compromise on food or attire and the celebration was much more intimate. My belief is that simple is best.
Tip on how to save on wedding expenses
I don’t want to sound disheartened or unenthusiastic but once you say “I do”there are lots of expenses you need to consider for example the Engagement Dinner, Rings, Pre Education Program, Ceremony, Wedding Dress, Grooms Attire, Bridal Party attire, Flowers, Wedding Stationary, Photography, Video, Car Hire, Reception, Bomboniere, Caterers, Cake, Master of Ceremony, Music, Honeymoon, Hair, Makeup, Hens Night/ Bucks Night, Residence and the list goes on. The media now advertises that the average cost of a wedding is $49,000. This becomes an enormous expense to a young couple or couples family who want to experience their "dream wedding".
Money Matters
Most of the time you will be busy organising all these things, but another important aspect of your new life together is how you will handle your finances as a couple. Do you continue to operate separate bank accounts (i.e. have divorced finances) or do you combine finances? If you have purchased a home together and need to make repayments or service a home loan then it’s probably easier to open a joint account. There are also other household bill like gas, water, rates and shopping that will be a shared expense. It’s a bit hard to say “I’ll pay for my half out of my account and you pay for yours”. The other alternative is to transfer money from your account into your partners but this becomes very time consuming and if you forget one month your partner may incur overdrawing fees on his or her bank account. I think that once you because a couple the time has come to opened a joint account. Whether or not you close your existing accounts is entirely up to you but it does make life a little easier if you operate from the one account.
There are many advantages to opening a joint bank account. For example you only have to monitor one account, there’s no need to transfer funds to and fro, there are less bank fees and if it is a high interest earning account you may receive more interest because you have a higher balance. But having a joint account requires a lot of commitment, trust and you must not be a careless or selfish spender otherwise it will lead to questions and arguments. The other alternative is to open a joint account but not close your own self titled accounts.
The down side to opening a joint account is that your partner becomes fully aware of all the purchases you make. For example, trips to the hairdressers, work lunches, new clothes and new appliances just to name a few. You may find it difficult to adjust your spending habits especially when you have been financially independent for so long. But what happens when you still want to visit your hairdresser every month or buy that new computer game? Personal purchases can easily start fights within the relationship especially when one partner uses more of the family savings than the other. I’d be pretty upset, if I was trying to save towards "our future" as a couple and I saw my partner going off to the hairdressers every month for a new colour or off to buy yet another expensive accessory for the computer. And the last thing you want to do in the relationship is to put your partner off by using the money as a sign of power in the relationship. If it comes down to this, then you really need to sit down together and discuss the spending boundaries and revisit your family budget.
The solution to maintaining a joint account efficiently may mean that you have to have three accounts. Your individual accounts and then the joint account. If you choose this avenue then it is important that you create a personal budget and only use the account for spousal expenses. Work out your net wage for the week and decide on a certain percentage to allocate together. For example 70% of your wage can be directly transferred to the joint account and the remainder is left for you to do what you want, no questions asked. The remaining cash can be added to your own personal savings, your superannuation or you can purchase personal items for yourself. But if you do decide to split your finances this way there needs to be a rule in place so that no matter what your partner brings home you will not scrutinise, comment or judge his or her purchase.
The down side to having a joint bank account is that one partners idea of what is a spousal expenses may not be yours and also one partner may dip into the joint account once they have depleted their own funds.
Wedding Expenses
Even the most modest of weddings can cost you about $15,000-$20,000. Along with the celebration comes the expense and some people spend their entire lives planning for a wedding day, not to mention their life savings. I knew this elderly couple whose son was getting married. They needed to keep up appearances with their relatives. Instead of opting for an intimate wedding they could afford they chose to have the "big show" so they took out a personal loan to finance it. The son is now married but took the parents few years to pay off the loan. My point here is that this family could have had a smaller wedding with no associated debt but they chose to have a bigger wedding and so came along the bigger expense.
Weddings don’t have to break the bank as long as you buy what you can afford. A acquaintance of mine was in a live in relationship with her partner whom she desperately wanted to marry. She also wanted the big fairy tale wedding but her partner knew he could not oblige. She resented him because she saw all her friends celebrating their weddings with a big bang. When she spoke to me about it she said “As a little girl, I have always dreamed of the big ball like wedding, I want to be a princess for the day”. My opinion was that not everybody could afford such a big celebration and maybe she should compromise and have something smaller with her immediate family and a few close friends, that way she could still celebrate her special occasion. She disagreed. Personally I think a big wedding is a waste of money, why anyone would want to have one hundred guests or more at a wedding I will never know. I have attended many weddings in my time and one of the most ridiculous was one that had over 400 guests. The couple didn't even get a chance to spend time with their invited guests.
Everybody’s concept of a dream wedding varies. The most important thing is that you enjoy yourself on the day. You want to be able to experience the day and not be bogged down by formalities. I find the best weddings are the smaller weddings. Some of the best weddings I’ve been to have only had 20 people. The couple got to speak to all their guests whilst having lunch. They did not compromise on food or attire and the celebration was much more intimate. My belief is that simple is best.
Tip on how to save on wedding expenses
- Have a friend make the wedding cake or buy a plain marzipan cake. Fruit cakes are very simple to make. If you are happy with a very plain cake then you can even make it yourself. Once you have put the icing on the cake you can dress it with a bride and groom topper.
- Consider using the family home to host the wedding.
- Reduce the amount of people, only invite people you keep in touch with or matter most in your lives.
- Organise your own wedding instead of using a wedding planner.
- Employ student services e.g. musicians.
- Customise your wedding to what you want, not what is expected.
- Have wrist corsages for the bridesmaids instead of flowers bouquets.
- Hand out a few cameras to friends and employ the photographer for the formal shots only.
- Have friends or family take video, it won’t look as staged.
- Just as the groom buys a suit and wears it again, the bride can choose a formal dress that can be worn again.
- If you have a small gathering consider having your reception at a restaurant.
- Very expensive weddings are for couples with more money than good sense. Cut down on your guests and put the money towards a home loan deposit.
- Stick to a budget.
- Ask your guests to pay for their own lunch instead of giving a gift.
- Choose a beautiful garden or mansion as your backdrop eg. University this will save on decorations as the location is beautiful in itself.
- Do away with the bridal party and have 2 witnesses instead.
Saving For A House | Home Ownership For first Buyers
In these turbulent economic conditions, many home owners are losing their houses. In the United States the sub prime mortage crises has been the root cause for many owners losing their homes and as the owners walk away and leave their houses to the banks, the values of housing plummets in some areas of the USA. In other countries such as Australia, home owners are also defaulting on their mortages, yet the primary issue in that the country remains in a crises due to housing affordability. Disciplined saving practices and prudent debt consideration before purchase make for a stronger financial position during tough economic conditions.
Saving for a home will most likely be the biggest investment you will ever have to save for in your life. If you are just starting to save for a home you might be finding it a bit discouraging due to the ridiculous prices that homes sell for at auctions these days. But it is important to remain positive.
Rising interest rates remain a chief financial concern for those of you that have home loans already. When applying for a home loan it is important to take interest rate rises into consideration. If you don’t then the slightest increase of rates will see you struggling to make repayments and meet household bills.
Tips To Consider When Buying A House
It is important to remember that lenders take all debt into consideration when approving a home loan. For example if you have a limit or $10K on your credit card but only use $2000 (and keep the remainder as an emergency) the lender will still evaluate the entire amount because he or she will consider all liabilities when evaluating your serviceability. The entire $10K is made available to you and could be spent tomorrow. Regardless of whether you use the full amount or not it is still accessible and available for you to use. Therefore if you are wanting to apply for a home loan then one of the first steps to take would be to reduce the limit on your credit card.
Prices of goods, services and the cost of living increase every day. The media constantly reports on how there is a progressive increase in prices relating to goods and services, but we don’t need the media to tell us that prices are going up. Our weekly shopping bill is a clear indication on how expensive the cost of living is becoming. Purchasing a home and renting is also increasing at a fast pace. If the cost of goods and services are expensive now or the thought of buying your own home is an unattainable dream today, then image how unobtainable owning your own property will be when it is your child’s turn to purchase a home. It’s understood that not everyone is interested in buying their own home and some people like the flexibility of leasing, but even renting is becoming expensive and there have been cases where renting has become an auction due to the amount of interest expressed in the property. So really whether you are buying or renting you are still faced with similar problems.
Housing Affordability
For those of you that are just beginning to enter the housing market, you have a long road ahead. Especially when housing sales are reaching record highs. Also people with huge mortgages are struggling with repayments and are putting a strain on their personal finances due to spending and rate rises.
Housing affordability also makes you live in suburbs that you wouldn’t ordinarily choose. For example moving to the country because city prices are so unaffordable. Moving too far away means that house owners are sometimes far from work, far from family and friends and far from community services. This becomes an added expense and detracts time away from loved ones.
In the 1960’s families spent 2.5 times the average income to obtain a family home, now it’s approximately 9 times the average income. This means that less people can afford to buy their own homes. But what has pushed the prices of houses up? A few reasons are: Two income households, population boost (i.e. skilled immigration), reduced interest rates, first home owner’s grant and looser lending standards. I remember a personal lender at work saying that everybody could be a potential target for a home loan, even someone on a government pension. He told me about a client of his who was on unemployment benefits and he approved at $20K loan.
Renting | The Rental market
Unfortunately housing affordability may result in social divide, that is those who can afford or own their own homes and those who rent. Finding a place to rent is harder than it sounds. Household rent has risen as well as buying due to demand. Across the road to where I live, are a block of four units. Within 3 weeks the existing residence all moved out due to rent rises. In 2004 the rent was $270. Now the rent increased to $520 per week. Renting is like buying a house these days. The agent arranges an open for inspection day, people line up to see the house and then the bidding war begins. It’s like an auction. I knew a couple who where looking for a place to live 5 km of the city. It took them about 6 months to find a place. They finally asked the agent what they were doing wrong. The agent gave them a few reasons and one was that they weren’t bidding high enough.
Saving for a home will most likely be the biggest investment you will ever have to save for in your life. If you are just starting to save for a home you might be finding it a bit discouraging due to the ridiculous prices that homes sell for at auctions these days. But it is important to remain positive.
Rising interest rates remain a chief financial concern for those of you that have home loans already. When applying for a home loan it is important to take interest rate rises into consideration. If you don’t then the slightest increase of rates will see you struggling to make repayments and meet household bills.
Tips To Consider When Buying A House
- Calculate potential repayments e.g. up to 15%.
- Fix part of the loan prior to interest rate rises.
- Buy somewhere affordable, if you can’t afford a seaside home then opt for cheaper suburb.
- Get a no frills loan instead of a revolving line of credit.
- Shop around.
- Become financially literal.
- Reduce credit card limits to maximise your home borrowing power.
It is important to remember that lenders take all debt into consideration when approving a home loan. For example if you have a limit or $10K on your credit card but only use $2000 (and keep the remainder as an emergency) the lender will still evaluate the entire amount because he or she will consider all liabilities when evaluating your serviceability. The entire $10K is made available to you and could be spent tomorrow. Regardless of whether you use the full amount or not it is still accessible and available for you to use. Therefore if you are wanting to apply for a home loan then one of the first steps to take would be to reduce the limit on your credit card.
Prices of goods, services and the cost of living increase every day. The media constantly reports on how there is a progressive increase in prices relating to goods and services, but we don’t need the media to tell us that prices are going up. Our weekly shopping bill is a clear indication on how expensive the cost of living is becoming. Purchasing a home and renting is also increasing at a fast pace. If the cost of goods and services are expensive now or the thought of buying your own home is an unattainable dream today, then image how unobtainable owning your own property will be when it is your child’s turn to purchase a home. It’s understood that not everyone is interested in buying their own home and some people like the flexibility of leasing, but even renting is becoming expensive and there have been cases where renting has become an auction due to the amount of interest expressed in the property. So really whether you are buying or renting you are still faced with similar problems.
Housing Affordability
For those of you that are just beginning to enter the housing market, you have a long road ahead. Especially when housing sales are reaching record highs. Also people with huge mortgages are struggling with repayments and are putting a strain on their personal finances due to spending and rate rises.
Housing affordability also makes you live in suburbs that you wouldn’t ordinarily choose. For example moving to the country because city prices are so unaffordable. Moving too far away means that house owners are sometimes far from work, far from family and friends and far from community services. This becomes an added expense and detracts time away from loved ones.
In the 1960’s families spent 2.5 times the average income to obtain a family home, now it’s approximately 9 times the average income. This means that less people can afford to buy their own homes. But what has pushed the prices of houses up? A few reasons are: Two income households, population boost (i.e. skilled immigration), reduced interest rates, first home owner’s grant and looser lending standards. I remember a personal lender at work saying that everybody could be a potential target for a home loan, even someone on a government pension. He told me about a client of his who was on unemployment benefits and he approved at $20K loan.
Renting | The Rental market
Unfortunately housing affordability may result in social divide, that is those who can afford or own their own homes and those who rent. Finding a place to rent is harder than it sounds. Household rent has risen as well as buying due to demand. Across the road to where I live, are a block of four units. Within 3 weeks the existing residence all moved out due to rent rises. In 2004 the rent was $270. Now the rent increased to $520 per week. Renting is like buying a house these days. The agent arranges an open for inspection day, people line up to see the house and then the bidding war begins. It’s like an auction. I knew a couple who where looking for a place to live 5 km of the city. It took them about 6 months to find a place. They finally asked the agent what they were doing wrong. The agent gave them a few reasons and one was that they weren’t bidding high enough.
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