Financial Crisis Cloud Has a Silver Lining

With the Reserve Bank announcing another 1% cut in the offical Interest Rates last week
and petrol prices now hovering around $1 a litre there is a lot to be thankful for when it
comes to the current World Economic Crisis!

Admittedly there is possibly tougher times ahead but so far a lot of people in Australia
would be feeling pretty happy with how the crisis is affecting their lives!

Thousands of Australian today will be receiving huge bonusses from the Commonwealth Govt
who are asking them to spend up big with the money. Retailers are out with their cash register
drawers wide open waiting to cash in on the spending spree. I notice at least one promonent
national retailer started a strong radio advertising campaign in the last day or so in anticipation
of the extra cash in people’s pockets going to someone so why not them?

Sadly I missed out this time around; no dependent children, not on a pension and no other way of
qualifying so I guess I’ll just have to go without the shopping spree this time!

Good luck to you if you did get the bonus though.

David Wright
Simply Budgets

25,000 Customers - Simply Budgets is a ‘Best Seller’!

It’s really exciting times here at Simply Budgets. We did it; 25,000 copies of Simply Budgets have now gone out to people all over the globe and the orders keep coming!

I thought it would be a good idea to celebrate this major milestone and so that is what we have done. Over 100 people responded to the special offer of great bonuses and the chance to be the major prize winner over the last few weeks.

Lorelle Urquhart from Brisbane was the lucky 25,000th customer and she won over $3,500 worth of prizes including a holiday for two in Fiji!

With all the talk of global fiinancial melt-down and debt concerns everywhere more and more people are asking for budgeting help. All celebrations aside, that is what Simply Budgets is all about and I am proud to have helped so many people as we reached this milestone.

More next time.

Regards
David Wright

‘Credit Rating Gone Wrong’

Clarissa,

This is very disturbing information. If it was not your partner’s phone bill that has caused all the problems we should all be pretty concerned about the possible implications this has for everyone! It is quite possible that identity fraud is the cause of this dilemma. Someone else has used your partners identity details to obtain phone services and has then disappeared.

I wonder how often something like this happens to other innocent people.

The people who are responsible for keeping credit file records that you need to talk to are at ‘Veda Advantage’ (was Baycorp) on 1300 762 207 (Australia).

Ask to speak to the investigation team.

You could also go to their web-site at www.mycreditfile.com.au and http://www.vedaadvantage.com

Veda Advantage have a monitoring service for $40 a year. Every time something changes on your Credit Report they notify you of the change. This would have allowed you to know the moment the above problem occurred. You could have gotten on to it straight away rather than now going through the problems you have had.

There is another avenue you can try as well. A company called Credit Repair will help get to the bottom of the problem and remove any incorrect information from your file. However you need to be aware that it will cost you money to get them to look into this, but it might be money well spent if you can turn your rent payments into mortgage repayments.

‘Credit Repair’ 1300 349 273 www.creditrepairaustralia.com

I hope this information helps.

Regards
David Wright

I received the following information from one of my readers after first publishing the information above.

Hi David,

I read the story “credit rating gone wrong” (above) with interest as I work as a Telstra fraud investigator and deal with people having stolen Id and investigating wrong default listing. I agree, it can be hell when one is a victim of identity theft. It’s very rare we find the perpetrators, but we offer to help the victim as best we can. People are very quick to place blame with Telstra but more than often Telstra is also the victim.

In this day and age everyone should be security conscience and aware who they give out their personal information too.

Beat regards….
Joanne

‘Line of Credit’ mortgage confusion

Francine,

Thanks for your enquiry.

I am deeply concerned by the fact that you had to go back to your bank to ask them if you had a Line of Credit. I would have thought you should have been aware of the loan type you chose or accepted at the time you signed on the dotted line. I wonder who is at fault there?

I notice you made reference to ‘monthly interest’ a number of times in your e-mail but it sounds to me like you are confusing your ‘monthly repayments’ (which will be the same each month with an Offset Account type mortgage) with ‘monthly interest’ which will vary from month to month with a Line of Credit.

You said that with your previous Line of Credit loan your interest reduced each month. I would be very surprised if it did not fluctuate both up and down because there are times of the year when you tend to have higher expenses and your loan balance would be likely to rise at this time rather than fall (causing the interest to rise as well). Just an thought and maybe you were aggressively paying it down each month.

Your bank manager is sort-of correct in his response to you. As far as overall interest charged by the bank is concerned he is correct, but a Line of Credit has different uses than a Mortgage Offset account attached to a mortgage.

Most people will be far better off without a Line of Credit because it is too dangerous. Your mortgage becomes your day to day bank account and there is no requirement for you to pay it off. Without a budget plan you might never reduce your level of debt and even then it takes nerves of steel and the discipline and focus of a Tibetan Monk.

It sounds to me like you really need to get that budget happening because it is the key to paying off your credit card successfully (and your mortgage as well for that matter). If your Credit Card is not being paid off in full each month then you should not be using it at all unless there is an essential payment that you can not make any other way. You should pay with cash, EFT, or EFTPOS using money you do have rather than money you will need to pay back later with interest.

For this reason, when you are setting up your ‘Simply Budgets’ budget I would recommend that you do not activate the Credit Card facility until you can pay the Credit Card off in full each month. In the meantime, treat it as if it is a personal loan that requires regular repayments and budget for these each month in the Regular Expenses part of your budget.

Go to http://www.simplybudgets.com.au/hints-tips/8.html to find out more about Line of Credit loans and ‘interest free’ Credit Cards.

I hope this helps.

Regards
David Wright

Some other comments that apply to this issue:-

A line of Credit can be very useful once you have created enough equity that you are in a position to be looking around for investment opportunities. You have the ability to pay instantly without having to wait for a loan approval and that could mean the difference between missing out and not missing out on the deal.

In certain instances an investment opportunity will require you to hold an asset while improvements are being made. I’ll use purchasing a house and renovating it before putting it back on the market is an example. If you have enough equity available in a line of credit you may be in a position to make no repayments at all while you do the renovation and wait for it to be re-sold. The interest will accumulate, but your personal cash-flow is not affected.

You can not do this with a normal mortgage because regular repayments are mandatory and you would find yourself having to make repayments the whole time you are renovating and marketng the property whereas with a Line of Credit there is only one requirement; Do not go over your limit.

You should get financial advice before taking any action of this nature. The above is merely an example and your personal circumstances need to be carefully considered before attempting something of this nature.

Moving in together - Second time around

Hi David

My partner moved in with me approx 4 mths ago and we
both see a long term future together.. I am paying off my house ( the one
we live in ) and I am struggling to pay it and am just paying interest…
though I have about $200,000 in equity in the house and don’t wish to get rid
of it as I love it… and he presently has savings just sitting in the
bank… we are looking at him coming into my loan…. do you have any
suggestion how we can do this. As I have a considerable amount of more
assets than him we both are very cautious of this as we have both been
burnt by divorces… would love to get your advice on this and what you
think would be the best loan for us..
Yours Sincerely,
Ruth

Ruth,

Thanks for your e-mail. You have a bit of a dilemma there and I know you are not alone.

I have pondered for some time over what my reply to you should be as I have concern over your comments towards the end of your e-mail about the imbalance in your assets. My concern is that if you are asking questions of this nature, then there is still doubt in your minds about your relationship and you should not be talking joint mortgages yet.

They say that when debt comes in the door, love flies out the window. Have you moved in together too soon? You have both been burnt before, so it is logical that you may take longer or have more difficulty trusting 100% in the other person second time around.

I see it is imperative that you get your finances in order because there is nothing like financial problems to throw cold water on what might have been a burning love affair. I am not just talking about the equity issues you are asking about. Your weekly budget is just as important; maybe even more so.

As I see it, the actual problem that you are looking for an answer to is really about not being sure your relationship is going to last. You have both decided to live together because it feels right, but the problem is that one of you has more material wealth to bring to the table than the other. You have moved in together but you still have ‘MINE’ issues to resolve.

It would have made a lot more sense if these issues had been resolved BEFORE you moved in together but love and logic are firmly lodged at the opposite ends of a spectrum so lets talk about what to do now you are in this situation.

You realise that if it does not work out, you could be the biggest loser. You might get ripped off! Your partner can see this too and it sounds like he wants to assure you that he is genuine, but how can he absolutely guarantee that to you?

Hollywood movie stars sign pre-nuptial agreements but there is something a little ‘off’ about that. It is like saying, “I’m sure we are in love and want to spend the rest of our lives together, but just in case we discover we are wrong we’ll sign here to say that it was for love and not for money”. It almost sounds like a really loving thing to do until you realise that the one with all the money is really saying “I’m happy for you to be mine and I’m yours, but my money isn’t.”

So a prenuptial agreement may be an answer to consider but it doesn’t sound like you are planning on marriage yet so I suspect that it is not a solution at all. Maybe a pre-mortgage agreement is a possibility? You could ask a solicitor but gee it is not high on my list of 10 ways to have a romantic outing!

I wondered if you should sell your house and then purchase one together. You could then put equal amounts in and remove that inequity that exists at the moment. Your surplus money could be placed into a trust account that only you are the trustee of. You could invest the money from your trust account separately and the two of you would have equal ownership in your new home. The down-side would be that the mortgage would be bigger than it really needs to be because you are keeping your surplus money separate. You could use the income from the trust investment to help repay the mortgage but the return on your investment is likely to be less than what you would save if you borrowed less so this is not ideal either.

The other problem is that you said you love your house!

You can’t get away from it, if you love this man and you stay together, he will benefit financially from the union. Come to think of it, so will you, but just not as much! I doubt that you have a problem with the imbalance in the benefits if the relationship lasts. I sense that the problem is more that you are not sure yet that you will be together ’till death us do part’. Until you are sure, I strongly recommend that you do not have a mortgage together and that he does not contribute to your mortgage repayments. If you allow this to happen you will be setting yourselves up for a bitter dispute over money if it does not work out and it gets ugly.

Of course, it was logical financially for you to start living together because now you only have the cost of one home between the two of you. Previously you had the cost of two houses. Your new partner would have been paying rent, so a more sensible idea would be for him to pay rent to you for living in your house. You could put that money towards your mortgage repayments. Then there would never be a question of you owing him money if you don’t stay together. He was just a boarder!

Of course the problem then becomes; at what point do you stop asking for rent? When you feel sure that your relationship is strong enough to last? How do you decide that? Does he stop paying rent when you get married (assuming that that is a possibility)?

Maybe a better alternative would be for him to pay for the groceries, fuel, insurance car registration etc and then your income is freed up to pay the mortgage and there is still a clear line of separation until you feel safer about the imbalance.

This then raises the question, “What should he do with his savings until you are both sure you will stay together”? Should he put money in a trust and invest it and use the income to help him pay for groceries etc?

At every turn it comes back to the one thing; Love and Trust. You are ready to live together so you feel your relationship is strong enough to risk an emotional loss should it go pear-shaped but the problem is around the question, “Are you ready to risk financial loss?”

I have some other thoughts that keep coming to mind that you should think about as well…

Why do you have a lot more money than your partner does? Did your prosperity come from a property settlement after your previous relationship? Did your partner get screwed over by his ex-wife and you fared much better? Could it be that your good fortune was due to more favourable property settlement circumstances? If so, do you really have the right to be concerned about the financial imbalance? Were you just lucky?

What if you were the one with fewer assets to bring to the table? Would your partner be concerned by the financial imbalance or would he be happy to accept you with whatever you have to offer? Is your partner worse off financially because he is lazy or does he deserve to be blessed financially through having met you? Would you still be as happy together if you had no money and no house and were starting from scratch?

If you aren’t happy without money you will not be happy with it!

I will leave you with this thought… When neither of you care if one of you benefits financially from your relationship if it should end, then you are ready to move forward as a couple rather than two individuals living together!

I hope this helps!

Regards
David Wright

P.S. If you do decide to keep your house and you do refinance the mortgage to a lesser amount using his savings, he is then the one taking all the risk because I expect the house is in your name only.

If you want to add his name to the title at any time you may have stamp duty to pay so that may be another issue you will have to consider if you want to jointly own the house. Stamp duty would be payable if you purchased a new house and if you sold your house there would be agents commission to pay so keeping your house has a lot of merit if you can sort out the other issues.

Some other comments that apply to this issue:-

In a perfect relationship there would be absolutely no question about asset ownership. The problem is that we do not live in a perfect world. People get used and hurt by others and usually by those who are supposed to be the closest to them.

Without a doubt, one huge weakness we humans have is around relationships. No matter how you look at it, there is no getting away from the fact that love and trust are Siamese twins that cannot be separated.  As you love more, you entrust more of yourself to the other person and you become increasingly vulnerable in the process. There is no way you can enter into a loving relationship without becoming exposed. You allow another person to come into your ‘inner sanctum’ and as you allow them in, YOU have to move out to make room. While there is still a ‘YOU’ in there, the job is not complete.

Of course, in that perfect world there would be no need to worry about “will I lose my shirt if I give absolutely ALL of me away” because in response, your partner would be giving everything of them to you in return.

I know that sounds all gooey and fluffy and idealistic like it came straight from a wedding script but it is the truth. Every one of us knows we humans do not have a perfect love for anyone. Most of us try our best but we fall way short of the mark, only giving because we expect something in return. There is always still something for US in our giving.

There really was a lot of merit in the old fashioned systems and values around marriage that the baby boomer generation has chosen to throw out the window and it is obvious that while those systems and values came primarily from Christian beliefs and principles, they were based on more than just religious ideology. They were the blueprint for harmonious relationships in spite of our human failings.

Finally here is some feedback relating to all things legal that came to me from another reader in response to the information above and I think it is good advice.

Hi David
I am a pastor on the Sunshine Coast and dealing with people and some of their situations I learn from their predicaments (as well as some of my own!).

One little hint which your readers may want to keep in mind if they haven’t already become aware of it - if you ever give ANY documentation to anyone - eg solicitors/lawyers et.
al.- you should ALWAYS ALWAYS keep a photocopy (preferably the original) of EVERY scrap of documentation you give someone else.

Why?

Because the documentation may get lost or misplaced for one…

AND it stops people like solicitors holding your documentation (and therefore possibly your ability to progress your case through other avenues) to ransom if there is a dispute over something between you - eg payments they are demanding which you may not think are justified.

Just a little bit of experience dearly paid for by someone else

Regards
AG

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