Archive for May, 2012

How To Avoid Being Ripped Off

Friday, May 25th, 2012

I was ripped off once. Claudia and I were on holiday in Mexico just after the swine flu hit and there were absolutely bugger all tourists. We were on a tour (with one other person) to the Teotihuacan Pyramids when we stopped at a shop selling local crafts. I was conned into buying a small statue of the sun god for a measly $300, which, as it is the fertility god, I thought it would make a nice wedding gift for Claudia.


When we arrived at the pyramids there were a bunch of locals selling similar statues for the equivalent of about $20, and I felt like a real knobhead. I justified it by saying to myself that it was only $300 (although it was about 30 billion pesos) and that the locals were really struggling with the tourism industry in tatters. And when Claudia became pregnant with our little chicken, I figured ol’ sun god had done his job.


Getting ripped off is possible without travelling to a developing country. There are plenty of people ripping others off here in Australia and lots of Americans and Brits who are selling crap to us as well. A few of them advertise their wares on Facebook.


I saw an ad on FB the other day and was intrigued what the “strange trick” was used by the 54 year old man to slash his “electric bill by 75%”. Clicking on the ad directs you to a video that spruiks a system of making your own solar panels and wind turbines for only a couple of hundred dollars. “Hmm, connecting my home to the power grid myself might be a little bit dangerous for a guy who swears changing light bulbs,” I thought.


Turns out I’m right, or at least that’s what the insurance companies think. Perform your own electrical work that should only be done by a licensed sparky in the ACT and you void your home insurance policy. I imagine it’s similar in the other states.


The product being sold by the FB advertiser – is a pack of DVDs showing how to build and install your own power system. But wait, there’s more! If you sign up faster than you can google ‘power4home scam’ they’ll throw in 3 free books. At least, they say they will.


Before you click on the Add To Cart button and blow your $50, even if you’re convinced that the product you are looking at is genuine, google the name of the company and watch what the auto-complete spits out. In Power4Home’s case, the second auto-complete is ‘Power4Home scam’. Among the many sites where people have complained about not receiving what they had paid for are a couple that back the system. and a couple of top YouTube hits reek of the company itself setting up pages that say the system is not a scam to divert suspicious customers back to their product.


There would be few people who would complain to the authorities if the rip off that has caught them out has only cost them a couple of hundred bucks or less. But people will definitely vent their rage on internet forums. So before you take on face value statements like power4home’s “I’m going to spit in the face of all the thieves, crooks and liars who have been sucking cash out of your pocket” do the tiniest bit of research to see for yourself if you are at risk of being ripped off.


Ps Claudia still thinks the story of the sun god statue is funny.

Friendly Advice

Saturday, May 19th, 2012

Last Saturday, Claudia and I took our little chicken to a local baby market (note for the fellas – baby markets are not where you buy babies, although after her third tantrum I was considering putting a $5 sticker on our chicken). There are so many pregnant women at these things if you want to make a buck, set up a table selling epidurals.


It was really busy but we managed to run into an old school friend of mine, Angie. We hadn’t seen her since the last baby market we had attended and she looked a great deal less frazzled than we felt. Angie’s a real pro at these things, leaving her boy in the care of dad at home while she goes bargain hunting. She says she arrived half an hour before it opened to avoid the crowds but I’m sure she pitched a tent the day before and braved the Canberra winter (Canberra’s winter starts in April and ends in September). I talked to her for too long because as I said goodbye I looked around to suddenly realise Claudia had walked off. Without her mobile phone. “No worries,” I thought, remembering what Claudia was wearing, “I’ll just look for the woman in the stripey top.


Apparently stripes are in this season, ‘cause every woman there was wearing bloody stripes. Now I know how a tiger feels when he’s hunting zebra. Fair dinkum, if anyone had a barcode scanner there, it would’ve shut itself down.


After I eventually found her (or more accurately she saw me and yelled out), I ended up in a line in front of a man with what seemed like two female friends, and couldn’t help but overhear their conversation. After all, they were talking about money and that always makes my ears prick.


One of the women was talking about loans and the guy was telling her about rates of tax. He was talking with a degree of confidence that would undoubtedly have made the two women confident he knew his stuff. Problem was, he didn’t. Every single figure he was telling them was wrong.


I realised that these women were financially savvy enough to be at a market that sells secondhand baby and children’s clothing, toys and books, but naïve because they were lapping up what their friend was saying. One thing was very obvious to me – this guy was no professional. This is a very important thing to take note of – unless the friend or family member who gives you money advice is an expert in the area of finance, talk to someone who is.


Don’t take advice from family and friends about money. Guidance is one thing, like “don’t take my word for it, speak to my accountant” or “read what Paul Clitheroe says about this stuff in his book”. Advice like “you should get an interest only loan on your property” is something altogether different.


Family or friends who have been successful in a certain area are likely to steer you towards those same places to try to help you – and it does come from the best intentions. But their situation is different to yours, therefore the best financial tools for you will be different from the tools for the person giving you unqualified advice. Of course I am assuming that the person giving the advice is not your identical twin who is married to the identical twin of your spouse, who you live with and who shares the same job as you. I know, big assumption, and if you are actually in precisely the same situation as the advice giver it will probably work really well. If not, seek out an expert.

The Fine Print of Debt Consolidation

Saturday, May 5th, 2012

I received some junk mail the other day (sorry, unaddressed advertising material, I’d hate to offend anyone) from GE Money. They were selling a glossy, happy, brightly decorated lifestyle change under the guise of a debt consolidation loan. Using terms like “surprisingly affordable”, “life could be a lot easier if you rolled all your debt into a GE Money Debt Consolidation Loan”, “fits your lifestyle” and “enjoy the certainty of fixed repayments” you could be forgiven for thinking these guys were a charity (debt consolidation loans of $2 and more are very rarely tax deductable).


Before you consider rolling all your credit card, car loan and personal loan debts into a debt consolidation loan, please make sure you read the fine print. For a full list of all the conditions you would need to go through the loan paperwork, but the info on the back of the junk mail pamphlet gives you some insight. Using their figures (but not their online inflexible loan calculator, I had to visit a reputable site to crunch the numbers) the minimum loan amount of $3,000 paid off over the maximum 5 years would cost over $1,280 in interest and $850 in fees. So your initial 3 grand loan ends up costing you over $5,130. That’s a lot of money and an awful lot of fees, particularly when one of the selling points they use relates to avoiding multiple fees as a benefit of taking on one of their loans.


GE Money says – “You’ll be surprised how little it could cost you each week!” which, when you read the figures above is another way of saying “You’ll be shocked how much debt consolidation costs you over the life of the loan.”

The interest rate is fixed at a massive 14.99% so you can “enjoy the stability of a fixed interest rate”, but I don’t think you would enjoy it much when you see the Reserve Bank lower official rates.


So if you have looked at consolidating your debts and are now sitting there scratching your head, what is the best thing to do? Start by making extra repayments onto your highest interest rate debt. Pay every spare cent that you have into this loan while making the minimum repayment on all your other loans. When the highest rate debt is paid off, put the money that was going onto it into paying off your second highest interest rate debt (as well as the minimum payment that you had already been making on debt number 2). Keep going until all the debts have been extinguished, then chuck a party to celebrate (nothing too big, you don’t want to end up in debt again!)


If you really knuckle down and make a huge effort to get rid of your debts, you will notice a couple of things. Firstly, the hardest part is the first extra repayment on that first loan. Every subsequent debt will be paid off with increasing speed, probably a lot faster than you thought possible and certainly a lot faster than with a debt consolidation loan. The amount of money you pay in interest gets smaller and smaller, and as time goes on your confidence with your financial situation grows.


And you end up realising just how crazy those debt consolidation loans really are.