Jim's Bookkeeping Blog

Life of Debt & How to Build Good Credit- Final Series

July 29th, 2011

 

How To Build Good Credit

Credit comes with pitfalls. We are told this regularly and for many people it seems to be all they ever hear about the process of paying with credit. However, if managed to your advantage, you can make credit cards work for you. Bear in mind that banks and lenders are quick to add charges to accounts when they feel that there is an opportunity to do so – and don’t give them the chance to do it. Do you believe that it costs them that much to administer to your late payment? Of course not – so make sure you are in the driving seat.

To do this, it is a matter of using credit in ways that the bank won’t recommend. The “monthly” payment on your credit card will usually be set at a small percentage of the balance, and the bank will be happy for you to only ever pay that, because you will pay off more than you ever borrow. Interest, plus any charges, will amount to as much money as you borrowed in the first place. However, you can pay more than the monthly payment, so here is how to make it work for you.

When you take out a credit card, use it as you would use an ATM or debit card. Pay for groceries with it when you get your wages at the end of the month, and then instantly pay the balance off in full. For a while, live off credit and use the money that goes into these costs to make payments to your card. Your credit rating will soar. Your bank will offer you better terms. You’ll be in the driving seat.

Living Debt Free

There is an increasingly widely held impression in society today that in order to get by, you have to get into debt at some time or another. This is actually untrue, but because for many people the alternative seems to be a fairly boring life, they feel that it may as well be the case. However, it is possible to live life debt free if you follow some rules and bear in mind that, eventually, you will find a way to make the best of it and actually enjoy your life. Knowing that you can live a life without debt collectors writing, calling and even knocking on your door really makes a difference.

It will require you to make and stick to a budget. This may sound dull, but when you think about the alternatives – debt collectors generally do not tend to be particularly courteous people – it is something worth doing. When you have money paid to you at the end of the month, write down what you will need to spend. Food, rent or mortgage payments, transport and general housekeeping, as well as bills for electricity, telephone and other necessities – these are essential outgoings.

What you have left over is disposable income.

By doing this monthly you will before long arrive at a point where you know automatically how much money you have. Treating yourself or others need not be a thing of the past. Indeed, without monthly credit repayments to meet, you will have more scope to do this. It is a more serene way to live.

Your Credit File And What It All Means

Credit card companies and other lenders live by their own Bible, and that bible is the credit file. It is this file that they consult when you apply for a loan or a card, and it is to this file that your own conduct of your accounts will be referred, whether you make balance payments, minimum payments, short payments or no payments at all to your credit card. The way you conduct your accounts will be of great interest to these companies, and will usually decide whether or not you get further credit, and how much you get. The credit file is a source of much speculation from individuals, but in actual fact it is something that you can see for a small charge.

It is a little-known fact that things sometimes find their way onto a credit file that should not be there. Banking errors can result in a missed payment being registered when in actual fact the payment was met. If you keep your statements (and you should, or at least keep track of your banking online), then you will know when payments were made and whether any were missed. In cases where the information does not tally up, you are well within your rights to complain to the bank and request correction (and in some cases, compensation). Register online: http://www.vedaadvantage.com/   the major credit agency for the chance to see your credit files, and make sure you aren’t being misled. It happens – don’t let it happen to you.

Find Out Where You Stand

There are many people out there who have been denied credit on the basis of a poor credit rating and have thus been unable to get a mortgage, buy a house or even, in some cases, pay for medical treatment. The reason for their poor credit rating may be that they have run their accounts badly in the past. Alternatively, they may well have run things impeccably, yet it still happens all too often that despite their good conduct they will be denied credit. There are varying reasons for this, some of which are quite shocking.

In a number of cases, people have been denied credit because of the address at which they live. Unknown to them, a past resident may have run up huge bills and fled, causing not only a slew of final reminders and other such threatening letters to turn up in the mailbox, but also black marks to go against that address when it comes to credit searches. Because of a lack of transparency, you may never find out about this, but it could be what is stopping you getting credit.

Additionally, the practice of identity theft, although a major priority for lenders and law enforcement alike, can often pass undetected – fraudsters may be immoral but they are not stupid. Someone could be using your name and your details to run up huge balances they have no intention of paying off. Again it is you who will suffer, in the form of your credit rating being decimated – but if you check your credit record regularly you can catch them out.

Using Credit Wisely

Credit cards are blamed for a lot of the debt problems suffered by a significant section of our society. In some cases, there is justification for this state of affairs, particularly as banks have been caught more than a few times using unethical practices to sell credit cards to people who did not need them, did not know how credit worked and who were ill-equipped to ever use them. This kind of practice is all to easily understood, because banks will pay commission every time one of their staff sells a credit card to a customer. All that is needed is a few lies of omission – not illegal, after all – and a blasé attitude to explaining the process of obtaining credit, and you have a happy, but unaware, customer.

It may sound bizarre, but credit card companies are often perfectly happy to let people miss payments on their card. It has been remarked upon that statements often fail to arrive at the customer’s home – frequently because they were never sent – and with the payment missed, the bank adds a late payment fee to the card’s balance. If this takes you over your credit limit, you may well get an over-limit fee as well. Now that most banks have been required to take their systems online and let customers see their statements one way or the other, you can always be one step ahead. This will enable you to stay on top of your accounts and out of the red consistently.

What They Will Tell You To Make You Pay

It seems bizarre that in this day and age, companies will use processes that verge on the illegal (and often stretch all the way into immorality) to make customers pay their credit accounts. This may seem like a scare story, but it is actually completely true, and in fact the scare story habit is one that can more accurately be attributed to the credit companies themselves. Scare stories are just one way in which credit card lenders will make people pay up on their credit accounts – even if they need to work themselves into an early grave or a hospital to do so.

The action from collections agencies will usually begin with letters taking a fairly light tone, advising you that you have missed your payment and that unfortunately, unavoidably, they have had to apply a late payment fee to the account. However, even if you then make your payment, the next step should you miss another will be to send a letter telling you that your conduct of the account is unacceptable. Often it will go on to say that “continued poor conduct” may see you lose your house, car and other things which are dear to you. It is threatening conduct, no matter how officially phrased.

The truth of the matter is that, for all their threats, a company will not be entitled under the law to take your house or your car off you unless the debt was secured on these items. As long as you show willing to deal with your account, such conduct is outside the law. The companies are banking on you not knowing that.

The Light At The End Of The Tunnel

Being in debt can be a genuinely awful situation for anyone. Anyone who has spent much time speaking with people in debt, or who has been in the situation themselves, will be familiar with descriptions like “the phone rang and I jumped”, “the doorbell went and I hid” and other, sometimes quite chilling descriptions of the depression caused by being in large-scale debt. People have ended up committing suicide to escape the frustration and the misery caused by being unable to escape the situation they are in. debt, make no mistake, can be a horrendous situation to be in.

The good news is that no matter how heavy the debt you are in, as long as you demonstrate an intention to get back on track there is a way back to the land of the living, financially and emotionally speaking. However bad things may happen, there are debt solutions and organizations looking to help you, aware that the banking industry often goes too far and ready to play a part in helping you break the chains. 

It is essential to retain a belief that things will get better, because on the balance of things you haven’t killed anyone, attacked anyone or actively stolen anything. Taking out a credit card in good faith, and then being unable to meet payments on it does not make you a bad person and it should not make you feel like there is no way you can carry on. By keeping your head up you can battle on and improve your situation. Take the help that is there.

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4212)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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A Life of Debt – part 3 or a 4 part series

July 16th, 2011

Is a Loan the Way To Go?

In the society in which we live, we all see from day to day people who have possessions which we would like to own for ourselves. Unfortunately, budgetary concerns make this impossible, in some cases. To overcome this situation, more and more people are looking at taking out personal loans as a way of raising the money to fund their purchases. Of course, there are other reasons for taking out loans. Some people take them for business purposes – in order to raise the capital for an acquisition. Others, indeed, will take out loans to consolidate their debts into one big debt with more favorable repayment terms.

Whatever the reason for taking out a loan, it is important to bear in mind that repayments will stay at the same level for the duration of the account. It is important, then, to be completely sure that the amount you pay to a loan will be covered for the life of the loan. Many loans have attached insurance policies (the cost of which is attached to the balance) and if you are unable to work through ill health these can cover the monthly payment. However, you should read the small print on the terms of the insurance policy, because many insurance companies will try everything they can to avoid paying out.

If you are unsure that you will be able to keep up payments, it is essential that you look for other ways to raise the capital you need. As well as seriously infringing upon your daily solvency, poor credit history will affect your ability to get credit in the future.

Secured Loans – The Pitfalls

Taking out a loan for a small amount to pay for a purchase that is just outside your usual spending power should be quite a manageable situation. If you take the loan out at a reasonable rate of interest over a decent term then you should be able to make the repayments even if you find yourself out of work for a period. However it is a different story if you take out a mortgage to pay for a house, or a car loan. These forms of credit are often “secured” on your purchase, which means that, should you default on the loan, the lender will be able to reclaim the property from you as a way of making their money back.

Secured credit has such pitfalls because, without the possibility of reclaiming their money in this way, banks would need to charge higher rates of interest and keep the term of the loan much shorter than they currently are. This would put the purchase of a house or a new car far outside the range of most people. It is, however, vitally important to be sure that you have a contingency plan should you suddenly lose your job. In such cases, becoming unemployed can also mean becoming homeless.

Further to this, a default on a mortgage can stay on your credit file for some time, meaning that another mortgage any time soon will be an impossibility for you. Take into account all the perils of taking a mortgage before you sign any documents, because the drawbacks to secured credit could be prohibitive.

Unsecured Credit – You Still May Lose More Than You Gain

Although there are obvious pitfalls to taking out a mortgage or a new car loan which are not a problem with unsecured credit, there is no doubt that unsecured borrowingvery risk can still be a very endeavor. Just because the lender cannot repossess your possessions to make good on the loan, this does not mean that you cannot be put in a very risky situation financially. The first thing that will happen when you miss a payment on a loan or credit card is that you will go into the company’s “collections” file and they will pursue you for payment.

As well as entering the collections department, you will find that your credit record will contain the information of your missed payment. There are certain kinds of borrowing that are available to people with perfect credit ratings, including loans that have extremely low interest rates. A black mark on your credit rating will be enough to disbar you from ever qualifying for such lending, and will mean that any credit you do get will be very much on the lender’s terms.

Borrowing money can be the solution to a problem in a number of situations, but it is important to realize that without the continued means to pay the money back you will be placed in a very troublesome situation. Sometimes the best way to deal with the pitfalls of unsecured lending is just not to borrow at all. It may make for a difficult situation, but it will be one without unpleasant letters and phone calls.

 A Debt Management Plan Could Be Your Salvation

Although we as a society have become used to the potential pitfalls of irresponsible lending and borrowing, there are still countless people who have to face a situation where they are placed under extreme pressure to make repayments because unforeseen circumstances interfered with their ability to keep up with the account. If it appears that you are going to be among them, debt management can be the answer – however it is important to be able to differentiate between the debt management plans that work in your favor and those which are out to make a quick buck.

Debt management should, if done correctly, be a way of reducing the debt that you are required to pay by getting in contact with the credit lender and negotiating a stop to interest being placed on your account – along with an agreement not to place late payment fees. Additionally, this process can be paired with a concerted policy of credit repair where an expert will go through your credit file to find the unfair penalties applied and look to overturn them. This means that with time you may be able to borrow again in a situation where it becomes necessary.

Debt management is not ever going to be the most simple process. Banks are tricky to deal with when they feel that they are going to be able to get money out of you one way or another. Think before choosing your debt management partner. The right one can be your pathway to financial security – the wrong one could leave you even worse off.

 Sometimes Counseling Can Help

The word “counseling” is one that can trigger some pretty extreme reactions in people. Given its long association with people under the effects of depression or other mental stresses, it is viewed by many people as being something with a stigma attached to it. However, the simple fact is that counseling can be extremely helpful, and applying yourself to a course of it need not be an admission of weakness – more that you had the strength to admit you needed help. Counseling exists today for far more things than mental stress – although it tends to be used in situations which can be enormously mentally stressful.

Debt counseling is a process that people are using more and more these days, in recognition of the fact that finding yourself unable to make your monthly payments can be an extremely stressful situation. There are many different approaches to debt counseling, a lot of which center around your reasons for ending up in the situation where you have major debt to deal with. If you can address these problems, with the help of a qualified specialist, then you can put yourself on the right track to get rid of your debt once and for all.

Look around for the counselor who you think will help you best, who will understand your reasons for falling into debt and who you think can provide common sense answers to your problems. The situation of having to pay off serious debt is something that can have unreasonable effects on your mental and physical well being. Don’t let it drag you down.

 How To Turn Things Around

It is a very rare kind of person that does not have money problems at some point in your life. It is important to realize in the circumstances that missing a single payment on your credit card does not make you a bad person, a financially reckless individual or a debt risk. This is not because it is fine to miss a credit payment – ideally, it won’t happen to you – but because there is a way back from credit problems. You need to be concentrated on finding that way back and taking it – but as long as you keep a clear head, this is more than manageable.

Missing one credit card payment is unlikely to strip you of a positive credit rating in one fell swoop. What you need to keep in mind is that there are very good reasons to treat your first missed payment as a warning sign. If you fall into longer term problems with debt, it will be much harder to escape them. For this reason you should focus on that payment and tell yourself that it won’t happen again. Pay attention to making the payment when you can, and meeting the next one when it becomes due. By sticking to this promise to yourself you will make it far more likely that the one missed payment was an aberration. If you think that you will have problems making payments going forward, look for alternative solutions such as consolidation or debt management, rather than letting the problem grow.

Part 4 and final series next week

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4212)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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A Life of Debt – Part 2 or 4 part series

June 28th, 2011

What Does Debt Mean To You?

The very word “debt” is enough to bring fear to a great number of people, suggesting as it does a range of worries from being unable to make mortgage payments, keep a car on the road, take holidays and even, for some people, to eat three good meals daily. There are of course several different kinds of debt, and it is not necessarily a given that debt will always lead to financial meltdown. The key thing to remember is that debt should always be manageable. There are many of us who have a certain amount of debt, but make sure that it is covered. Taking out debt to pay for something you want and assuming that “something will come along” to pay for it is not a plan that will work. 

Managed debt can be a life saver, and people who know how to manage their debt give themselves a lot more options than those who do not. There are ways and means of making sure that your financial position is protected, but being able to count on those ways and means demands that you will be ready to pay close attention to your incomings and outgoings at all times. If you are assured of money being available to make payments on a credit arrangement – for the duration of that arrangement and not just for the foreseeable future – then you are not doing yourself any harm by borrowing. It is just a way of spreading the cost.

But for too many people, the issue of debt is that it is unmanageable, or manageable up to a point. But what if you lose your job or your hours are cut back? What is you or a family member falls ill? Then it stops being manageable, and you need an alternative.

How Times And Views Have Changed

There was a time when to talk of having debts was like openly admitting that you liked to pull the wings off flies. People simply would not confess to having debt, even if it turned out that they did have debts, and quite substantial ones at that. Now, it really doesn’t seem that way. Debt is seen as an accepted hazard and a fact of life by many people – and there have been some good outcomes to that, with many responsible people on lower incomes able to spread the cost of necessary outlays. The problem comes when the debt cannot be managed.

It might be more beneficial for everyone if we started to differentiate more between kinds of debt. Rather than assuming that all debt was bad, if we could all tell the difference between unmanageable and manageable debt, necessary and unnecessary debt, then we would be able to judge when debt was an acceptable step, when it was the best option, and put together some ideas on how to stop people getting into damaging, excessive debts of the kind which can blight a life.

It would not be true to say that the present-day prevailing view on debt was the right one. Nor would it be right to say that the old-fashioned attitude was strictly fair or correct. What we can hopefully all agree on is that debt awareness is more important than anything, and that we should all learn to apply the common sense that none of us are shy of handing out to everyone else.

Can You Get Credit?

One thing that has been made very clear to people over the last few years is that taking out credit comes with some risks attached. If you are borrowing either on a credit card or a loan, it really is not advisable to borrow “as much as you can”, when the amount that you can borrow tends to be dictated by the bank or institution from which you borrow it. There is some link between your monthly income and your credit rating, and the amount that the banks will lend to you. However it does not seem to apply in the same way with all banks.

Most people who have worked in credit control will tell you of an account they saw which showed a customer defaulting on a credit card where their credit limit was pretty huge and their monthly salary was comparatively small. Due to the limitations of the process used to judge some bank’s credit limit provisions sometimes there will be excessive money lent to people who give in to the temptation to spend it even knowing that they cannot afford to pay it back.

Alternatively if you have not shown a good history of paying back credit when you get it, you run the risk of either not getting credit or getting it in woefully short amounts. Depending on your reasons for needing the credit in the first place this may not matter so much – indeed it may be good news – but it is still something to be aware of.

Irresponsible Lending, Spending and Borrowing

One of the major criticisms of banks which emerged as the extent of the global credit crisis became clear to everyone was that they lent money irresponsibly to too many people. Most of us, if offered the chance to have a spending pot of more money than we earn in a month, would be sorely tempted. And maybe that is the problem. There are those who argue that credit should only be given to those who can show they don’t need it. While this is a tad harsh (short term borrowing can be a responsible solution in some cases), it might at least be argued that credit should only ever be given to those who have never abused it in the past.

Part of the problem is that banks saw fit to speculate on the continuing boom in the global economy and felt that by lending to people who were looking to become upwardly socially mobile they could cash in on those people being successful. However, for some potential borrowers it became clear that banks were taking risks and lending to people who had little hope of comfortably repaying the debt. Knowing that some contingency has to exist for these eventualities, people took advantage of this profligacy to take out big loans and enjoy a short-lived period of financial windfall – knowing that even when the money ran out they would simply be back to living the life they led before. Banks seem to be learning the lesson – but look at what it took for that to happen.

Where The Banks Have Gone Wrong

It would be very simplistic to place the blame for the global financial crisis at the door of one financial sector, or at the feet of any organisation operating within that sector. The reason why the finances of so many major countries are now unstable cannot be pinned down to one thing, but part of it is certainly attributable to unwise lending by banks and other financial institutions. While it could not securely be argued that this was what caused the financial crashes we have seen, there is no doubt that it hasn’t helped.

Quite apart from anything else, there is a sense that risky lending looked like a good idea for the banks and risky borrowing looked like a great idea for the customers up until very recently. For the banks, the idea was that the risks would bear greater rewards as money made more money and for the customers it seemed to be a case of all their Christmases coming at once. As it turned out, there were big warning signs that everyone ignored – leading to the banks having tons of bad debt on their books and the customers being hamstrung in a place where they suddenly had greatly reduced means and a raft of payments to meet.

There are other reasons for this crash, of course, and no-one would try to deny this. But the upshot for most of us is that banks will not be so free with their money, so borrowing from now on has to be extra diligent.

Is Life Fantastic With Plastic?

We in society have become used to using plastic cards to pay for our purchases, because it promises convenience, speed and reassurance about our situation. While today we may not have the money to pay for that stereo or that holiday, a quick call to a bank can be all it takes to allow you to make the purchase one day and worry about paying it off in the future. When used correctly, credit cards can be beneficial for the user, as they allow a situation where you can control the cost of living. They are, it should be said, best used as a kind of progressive weapon against delays. The problem comes when one is used as a shield against debt. The thing they simply fail to offer is thinking time.

With a credit card, you can make a purchase and not have to worry about the money not being there. It is there, it just isn’t yours. As long as you can replenish that money within a suitable time period, no-one will get angry. However, there is no way of the vendor knowing that you will be in a bad position to actually pay for the purchase, and indeed they have no reason to care. It is the bank who will have something to say about it when you fail to make payments that they were expecting you to make. And the thing about that is that banks have a way of making their displeasure very clear indeed.

Next week is Part 3 of this 4 part series…

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4212)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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A Life of Debt – Part 1 or a 4 Part Series

June 16th, 2011

Since about a decade ago, the rise in numbers of people using credit to fund larger purchases has been steep. We have definitely become more impatient as a society, and this has meant that where we see an opportunity to acquire expensive consumer items we are unlikely to spurn that opportunity. Due to the rise in availability of credit in the early part of this century, this has seen people taking out loans or putting expensive purchases on a credit card, to spread the cost over time. But is it a good thing? Certainly, none of us are complaining when we get home with our big screen TV or new car, but what about when the payments start?
There are people who pay off their credit card balance in full when they receive their statement for the month, and in doing so build an excellent credit rating. By doing this they also avoid the dangers of interest and late payment fees, and keep the card clear for purchases which need to be made at short notice. It is entirely reasonable to use credit in this way, but the big risk is when you are making only the monthly payment each month on the balance of your card. Doing this, it will take forever to pay it off. If you are using credit to pay for continuing, necessary costs, then you are likely to run into problems somewhere along the way. Work out a budget and live by it – it may be tight, but you’ll never have to hide when the doorbell rings.

 Your Credit Rating And What It Affects
Any time you take out credit for the purposes of making a purchase, or for any other reason in fact, this information goes onto a file. Any payments you make (or miss) and any changes to your account are recorded on this file. Depending on the agency, your credit rating is judged on the basis of the information held on this file. Any payments you make are given a positive score (the higher the payment, the better the score) and any you miss are given a negative score.
The scores are tallied into an overall score marking your credit history, and your worthiness for further credit. This is then consulted by any company or lender who wishes to appraise your application for credit. If you have a history of missing payments, then the low score you receive will make it less likely you can secure credit for a further purchase. A history of making payments on time and in full will make it more likely.
Of course, there are other things taken into account. Your monthly income is also important, as even people who are very responsible when it comes to making the payments expected of them will struggle when it comes to paying a monthly payment that makes up a significant portion of their monthly income. Over commitment is a major reason why people fall into serious debt, so pay attention to your commitments.

Why Do We Use Credit?
When someone falls into debt due to a history of using credit there is invariably a rush of questions as to why they saw fit to borrow so much in the first place. Part of the reason is the way that credit has been sold by the banks – if you apply today you could have that new car tomorrow – and part is due to the fact that people always feel more secure the more money they have. The word “credit” has always been associated with positive things, but in a financial sense it actually has more to do with debt than with anything totally positive. The overall issue is that “credit” actually relates to debt.
If “credit” was always called “debt” it is likely that fewer people would be as willing as many of us currently are to take large amounts of it. When we use a credit card, we are not using our own money, but actually borrowing from a bank to pay for something. Sometimes this is unavoidable, or at least the “best” option – in the case of medical treatment, for example, or unavoidable travel. As often as not, though, it is for something we want, not something we need.
Being credit aware is more important now than ever. Banks, who once were happy to give credit in the knowledge that they would get it back with interest, are now a great deal more careful in terms of who they give money to. Extending the terms of your credit may not be as easy an option now. It is wise to think before taking the plunge.

Cash vs Credit – The Battle Lines Are Drawn
It is a certain fact that where credit used to be the preserve of a few people with major disposable income, now loans and credit cards are common parts of life for most sections of society. This has led to situations where it is assumed that the less well-off are the people who like to take out credit and get into difficulties, believing that society cannot do anything about it. However, it seems clear now that even billionaire and trillionaire banks have been just as slack in their credit control as anyone else. It is more a question of who applies common sense in their banking practices than anything else.
An increasing number of people who have seen friends, family or anyone else trying to use credit to run their finances and making a mess of it are now deciding that credit is not for them. In times of plenty, a credit card can be a convenience tool to make purchases at short notice, safe in the knowledge that the money to pay it off will be there when needed. In the present day, however, there is a lot less certainty about this and people are unwilling to take the risks attached to credit.
By making sure that you only use cash to make the purchases you need to make, you can guarantee that you only use money that is available here and now. It may not be as much fun sometimes, but it allows you to keep a close eye on your finances.

The Risks of Living On Credit
It is always difficult to live frugally when all around you seem to have more possessions, more money and simply more fun. There are few people in the world who do not enjoy having new, enjoyable possessions which can make life easier, more varied and overall just more fun. The risk of seeing life in this way is that it can make people go to extreme lengths to keep up. No small amount of the financial turmoil that is seen on an individual basis very frequently happens for this very reason. When people around you always seem to have the best clothes and gadgets, and be enjoying life more, there is a real chance that they are living beyond their real means.

Spending money is fine, as long as there is money there to spend. Otherwise, it needs to be considered long and hard in the context of your situation. If you are making a purchase on a credit card, ask yourself if you can afford to make the payment that is required at the end of the month (or whenever your payment cycle places the due date). If it is a matter of making the purchase now and worrying about how you will pay for it later, it is really a good idea to refrain. 
Think of it like this: credit cards make it easier to spend money, but that money is not technically yours. Spending money that you need to pay back, and not having the means to pay it back, is like trying to outrun a hungry lion. The credit card may act as a vehicle to escape the lion, but sooner or later you run out of fuel.

How Debt Can Ruin Your Life
Most of us, at one time or another, have looked at an item and thought “That would make my life so much better – now if only I had the money to buy it”. Credit is the solution used by many people in this dilemma. In many ways, it is as though a bank were saying to the person “No problem, you can have that item. I’ll pay for it now, and you can pay me back over time”. In this, the bank is acting as the generous friend who reassures you that you can have what you want without needing to worry unduly about how you’re paying for it. The major problem with that is that banks need to make their money back, and are not your friends.
A friend would, in most cases, be willing to forego some of the money if you really couldn’t pay it back. They would understand your good intentions and would know that someday you would do them a favor for which they would be thankful. Banks do not – and cannot – operate in this way, as their business relies on being strict with how they control credit. They cannot afford to be your friend. So when you borrow money from a bank and cannot pay it back, suddenly you are on your own.

For this reason it makes sense to be very careful when borrowing from any financial institution. It really makes sense to be careful with any borrowing – no-one likes letting a friend down. But when financial institutions or money lenders are involved, being in debt can be a very lonely experience.

Next week is Part 2 of this 4 part series…

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4212)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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Achieving Cash Flow Management through Accounts Receivable Factoring…

June 4th, 2011

Accounts receivable factoring is another mode of receivables management and working capital funding to eventually increase the cash flow.

Accounts receivable factoring involves buying and selling of accounts receivables in order to obtain immediate cash or working capital.

Accounts receivable factoring helps in acquiring cash for the product or the services rendered. It results in immediate cash inflow without creating any debt or transferring the business ownership.

Accounts receivables are the most valuable assets for any company. It is one of the modes for increasing sales and expanding business. The payment is done of the 80% of the invoice value. The 20% of the value is kept as reserved and is paid after deducting the fee once the amount on the invoice is due.

This practice if accounts receivable factoring is most suitable for small and medium business owners. Due to accounts receivable factoring small and medium business owners are able to generate cash and avoid the debt trap. It also helps in representing string financial status and avoids interest on any loans if otherwise taken.

Accounts receivable factoring also results in increased working capital as receivables are conditional on customer’s creditworthiness and not the business owners. It helps to avoid loan repayment, transferring business equity, engaging the assets, and also avoid yearly loan review process. For a small business owner accounts receivable factoring represents gaining working capital without overtaking any debt or loan. It is also a mode to increase sales without any repayment tensions for any loans etc. Thus business is able to meet demands and the circle keeps on auto-rotating as accounts receivable factoring increases sales and increased sales asks for more money to complete more orders.

Accounts receivable factoring also provides relief from non-paying clients or slow paying clients. It generates more sales due to increased orders. It also offers flexible funding program to help heighten the sales graph and take vendor discounts due to availability of cash.

This practice of accounts receivable factoring generates cash to fund the payrolls and taxes due. The funds thus generated also help to increase the inventory or buy new equipment, tools, etc to flourish the business.

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4212)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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The Green Thing…

May 26th, 2011

With the looming Carbon Tax and the effect it will have on us all in so many ways it brings to question ”What can I do as an individual in some small way?” 

I thank my North Gold Coast Chamber of Commerce for this article:-

In the line at the supermarket, the cashier told the older woman that she should bring her own grocery bag because plastic bags weren’t good for the environment. The woman apologized to her and explained, “We didn’t have the green thing back in my day.”
 
The cashier responded, “That’s our problem today. The former generation did not care enough to save our environment.”
 
She was right, that generation didn’t have the green thing in its day.
 
Back then, they returned their milk bottles, soft drink bottles and beer bottles to the shop. The shop sent them back to the factory to be washed and sterilized and refilled, so it could use the same bottles over and over.  They were recycled.
 
But they didn’t have the green thing back in that customer’s day.
 
In her day, they walked up stairs, because they didn’t have an escalator in every store and office building. They walked to the grocery store and didn’t climb into a 300-horsepower machine every time they had to go two blocks.
 
But she was right. They didn’t have the green thing in her day.
 
Back then, they washed the baby’s nappies because they didn’t have the throw-away kind. They dried clothes on a line, not in a 230 volt energy gobbling machine – wind and solar power really did dry the clothes. Kids got hand-me-down clothes from their brothers or sisters, not always brand-new clothing.
 
But that old lady is right; they didn’t have the green thing back in her  day.
 
Back then, they had one TV, or radio, in the house – not a TV in every room. And the TV had a small screen the size of a handkerchief, not a screen the size of a cricket pitch. In the kitchen, they blended and stirred by hand because they didn’t have electric machines to do everything for you. When they packaged a fragile item to send in the mail, they used a wadded up old newspaper to cushion it, not Styrofoam or plastic bubble wrap. They didn’t have air conditioning or electric stoves with self cleaning ovens. They didn’t have battery operated toys, computers, or telephones.
 
Back then, they didn’t fire up an engine and burn fuel just to cut the lawn. They used a push mower that ran on human power. They used hand operated clippers to trim the shrubs.  They exercised by working so they didn’t need to go to a health club to run on treadmills that operate on electricity.
 
But she’s right; they didn’t have the green thing back then.
 
They drank from a glass filled from the tap when they were thirsty instead of using a plastic bottle every time they had a drink of water. They refilled their writing pens with ink instead of buying a new pen, and they replaced the razor blades in a razor instead of throwing away the whole razor just because the blade got dull.
 
But they didn’t have the green thing back then. 
 
Back then, people walked or took the bus and kids rode their bikes to school or rode the school bus instead of turning their mums into a 24-hour taxi service. They had one electrical outlet in a room, not an entire bank of sockets to power a dozen appliances. And they didn’t need a computerized gadget to receive a signal beamed from satellites 2,000 miles out in space in order to find the nearest pizza restaurant.   
 
But isn’t it sad the current generation laments how wasteful the older generation were just because they didn’t have the green thing back then?

Article from North Gold Coast Chamber of Commerce:  http://www.gcncc.org.au/

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4121)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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Superannuation – Directors are now personally liable

May 23rd, 2011
  • The Federal Government’s 2011/12 Budget confirmed that from 1 July 2011 directors will be personally liable for any unpaid employee superannuation. That liability will be for more than the mandatory 9% superannuation guarantee contribution, extending to the Superannuation Guarantee Charge (SGC) calculated as follows:
    1.  9% of employee’s total salary or wages (instead of just their ordinary time earnings – shortfall amount);
    2.  Interest on the shortfall amount from the beginning of the quarter in which the contribution was required to be made.
    For example: for the 1 July – 30 September quarter    , until the later of the lodgement of a superannuation guarantee statement outlining the shortfall amount or the 28th day of the second month after the end of the relevant quarter (being 28 November for that quarter);
    plus
    A $20 per quarter administration fee for each employee

The government has emphasised that this expansion of the existing director penalty regime is intended to improve tax compliance and counter fraudulent phoenix activity where the assets of the employer company are transferred to a new company at less than market value and the employer company wound up, preventing the Australian Taxation Office (ATO) from recovering the unpaid SGC.

The application of this amendment could have far reaching and potentially harsh consequences for principals/directors that engage contractors if the ATO subsequently determines that the contractors are in fact deemed employees for superannuation law purposes. This is particularly relevant in the context of the Australian Building and Construction Commission (ABCC) inquiry into “Sham Contracting.” In these circumstances, directors will be personally liable for the SCG despite a genuine belief: that the person engaged was a contractor; and that part of the higher fee paid to the contractor compensated them for not receiving superannuation contributions.

Weighing the relevant factors to determine whether a person is engaged as a contractor or deemed an employee for superannuation law purposes is the principal difficulty. As no single factor is determinative, it is necessary to consider the total principal/ contractor relationship. “The nature of the work” .  This inevitably provides scope for various opinions, with potentially serious consequences for directors. 

Article from Gold Coast North Chamber of Commerce http://www.gcncc.org.au//

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4121)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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Truth About Office Chairs in the Home Office

May 14th, 2011

An office chair is easily the most important furniture found in an office.  Not only for the look of the office, but also for the health and well being of the entire staff.  Over the last several years, office chairs have come a long way.

Office chairs of today are designed to promote health, ergonomically designed, and even improve your posture while you work.  Even those with bad backs will find the office chairs of today to be quite relaxing.

Below, you will find some types of new office chairs that are available for your office:

1.  Kneeling office chairs – Kneeling office chairs have no type of back support. They incline forward and therefore allow the hips to slide forward. Kneeling chairs will naturally align the neck, shoulders, and even the spine.

2.  Saddle chairs – These chairs are aptly named as sitting on them is almost like sitting on
a horse.  They can help to solve lower back problems quite well, with the height being easily
adjustable.  This chair will work great as a desk or even a computer chair.

3.  Exercise ball chairs – Ball chairs almost resemble a ball.  They are very difficult to
slouch in, as they demand you to keep an upright position.  They also encourage movement as they tend to be a bit bouncy.  The bouncing is a good thing, as it helps to keep the blood circulating and your muscles in constant use.

4.  Recliner chairs – A reclining office chair will help you work in a reclining position.  For
those will spinal injuries these types of chairs can be a blessing.  You can even attach a small
table to the chair as well for working.

5.  Balan’s Kneeling chairs (as picture)- These office chairs will keep your legs at the right angle.  They will help your lower back as well, all while keeping your spine nice and even.

The office chair you select should be the one that best fits your needs and requirements.  No matter which type you end up getting, it should offer ergonomic benefits as well as support for your back

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4121)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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Owning A Small Business is Tough

May 6th, 2011

Running a small business is tough because the buck stops at you for absolutely everything. The difference between success and failure can be a fine line. A small mistake in the first two years can knock a small business owner for six whilst a large new customer can propel you very quickly to new horizons.

Small business owners need to deal with all aspects of the business from book keeping, marketing, innovation, distribution, finance and customers that refuse to pay. Large companies have a separate department for each of the above tasks.

If you make a mistake in your record keeping the ATO comes knocking on your door. They work on the rule that you have read all their pamphlets and do not class ignorance as a defence. What a bunch of losers!

Countless sleepless nights, arguments with bank managers, disputes with suppliers and angry customers can all lead to stress overload.

And this is just the start, especially if you have gone into business with a friend! Make sure that everything you have agreed on is in writing so that further down the road there are no disputes about what was agreed. Better still do not go into business with a friend!

The first couple of years are the hardest as most banks have very tough lending criteria for small businesses. Do not hesitate to change your bank manager or even your bank if you are not getting a sympathetic response. Not all banks are the same. Some even offer free banking for the first couple of years!

Having a good accountant who will not start billing you the second you call, can help a lot. If you have friend who also happens to be an accountant then this could prove invaluable. Do not be scared to change your accountant or lawyer at the start. Building the right relationships at the beginning is critical.

Another problem small business face is absenteeism. If one member of staff is off ill it can reduce the entire workforce by fifty percent! It’s a great idea to have someone you can rely on as a backup. Another great idea is to possibly take on two part timers rather than one employee. They can both act as back ups for each other.

It’s important that you plan your growth. Obviously we would all like to see really good growth but if a business grows too fast it can lead to disaster. In some cases you might have to rein it until cash flows allow for another spurt.

Factoring your debts – where a finance company pays you upfront 80% of any outstanding invoices and then does the job of chasing payments can really help here.

Never be afraid to change tracks if the something is not working. If you are selling products that are not making you money – change direction. If you have a customer who takes up too much time for very little profit – dump them. If you have a supplier who keeps letting you down – find a new one. If you have an obnoxious employee – find someone else now before you waste too much time training the wrong person.

Be creative and always on the lookout for that special idea, promotion material or something different to get your customers talking about you.

Once you have run your own company successfully and got used to making your own decisions, it can be very exhilarating & chances are that you will never work for someone again.

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4121)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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Believe it or not – there are Bookkeeping Basics!

April 20th, 2011

Paper messMost people probably think of bookkeeping and accounting as the same thing, but bookkeeping is really one function of accounting, while accounting encompasses many functions involved in managing the financial affairs of a business. Accountants prepare reports based, in part, on the work of bookkeepers.

Bookkeepers perform all manner of record-keeping tasks. Some of them include the following:

-They prepare what are referred to as source documents for all the operations of a business – the buying, selling, transferring, paying and collecting. The documents include papers such as purchase orders, invoices, credit card slips, time cards, time sheets and expense reports. Bookkeepers also determine and enter in the source documents what are called the financial effects of the transactions and other business events. Those include paying the employees, making sales, borrowing money or buying products or raw materials for production.

-Bookkeepers also make entries of the financial effects into journals and accounts. These are two different things. A journal is the record of transactions in chronological order. An account is a separate record, or page for each asset and each liability. One transaction can affect several accounts.

-Bookkeepers prepare reports at the end of specific period of time, such as daily, weekly, monthly, quarterly or annually. To do this, all the accounts need to be up to date. Inventory records must be updated and the reports checked and double-checked to ensure that they’re as error-free as possible.

The bookkeepers also compile complete listings of all accounts. This is called the adjusted trial balance. While a small business may have a hundred or so accounts, very large businesses can have more than 10,000 accounts.

  • The final step is for the bookkeeper to close the books, which means bringing all the bookkeeping for a fiscal year to a close and summarized.

Shared with you by – Maureen Millar

Jim’s Bookkeeping Northern Gold Coast (Helensvale QLD 4121)

Maureen Millar is the owner of Jim’s Bookkeeping Northern Gold Coast and she supports small business’ in Helensvale and across the Northside of the Gold Coast. To find out more about Maureen, visit her profile page at http://www.jimsbookkeepingbrisbane.com/maureen-millar.html or request her free report to discover “How to Stabilise & Grow Your Business in 7 Easy Steps“

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