Building our Square Foot Garden (2)

I ended up not doing much work on the DS1's vegetable garden last weekend. I spent a while chatting with my parents on Sunday afternoon when I dropped DS1 off for a visit, and then when I started digging out the remaining grass and levelling the area I got a bad headache and called it quits for the rest of Sunday afternoon.

I did manage to track down a supplier of 'bulk' bags of vermiculite in Sydney via the internet. On Monday I ordered 2x100L bags for $72 ($24 each plus $24 delivery), which is less than 1/4 the price per L that I paid for the 5L bags from Bunnings on Saturday! The bulk vermiculate was delivered today, so when I have a day off work on Friday I'll return the small bags to Bunnings and exchange them for some additional blocks of compressed cocopeat. If I get the boxes built on Friday and varnished I should be able to mix the soil mix on the weekend and DS1 can start planting out the seedlings he got for his birthday.

Subscribe to Enough Wealth. Copyright 2006-2008

Horror budget?

Most commentators seem to think that the Australia Budget announced this evening was quite good. The Labor government has apparently delivered on it's election promises, has socked a large part of the surplus into various "Funds" ear-marked for future spending, and has moved to close some "tax loop-holes" and reducing benefits for the well-paid.

However, I found the budget to be more obscure than usual, and haven't as yet worked out what the impact will be on our finances and plans for next financial year. There were many announcements such as new income limits for Family tax benefit B and child care rebate eligibility that might, or might not, have a big impact on us. While at first glance it would seem that the income limits won't affect us (I've seen figures of $150,000 highest income earner limit for Family Tax Benefit B and $110,000 combined income limit for the 50% child care rebate), there were other changes that may apply. For example, there was mention that amounts salary sacrificed into superannuation will now be counted as part of your "income". This could mean that DW's "grossed up" income will be too high to be eligible for the Family Tax Benefit next financial year, even while she's only working a couple of days a week.

It would be nice to think that the increase in child care rebate from 30% to 50% may offset this by making it more worthwhile for DW to work an extra day each week. However, we were never able to claim the child care rebate for DS1 (even though it was costing $75 a day at the only centre close to our workplace that had a vacancy) because the child care was only "registered" and not "approved". Chances are that whatever Child Care centre we can find for DS2 to attend two days a week later this year (after we return from our holiday) will turn out to not be an "approved" centre either. Even if we can find an "approved" centre with a vacancy, the new $110,000 household income limit may preclude us from getting a rebate due to the new way of calculating "income" - apparently tax deductions against rental and dividend income won't be counted when working out "income". This will mean that even though we are negatively geared (overall) into property and shares (and therefore have LESS cashflow than our take-home pay would indicate), the gross value of rent, dividends and superannuation contributions would be included when working out our eligibility for the Child Care rebate.

This may be yet another reason for reducing my level of gearing in the new financial year (the main one is that the interest rate on my margin loans has increased so much in that past year that it's now doubtful that total ROI on the geared investment will exceed the borrowing cost). There's no point borrowing to increase my stock portfolio if it simply boosts my "income" to a level that costs us other benefits.

Overall, I shouldn't be surprised that a Labor budget that delivers a $21 billion surplus might well end up costing my "working family" several thousand dollars a year.

Subscribe to Enough Wealth. Copyright 2006-2008

Will it be worth having private hospital insurance any more?

The Australian Federal budget for 2008/9 will be unveiled tomorrow, but a lot of the details have already been "leaked" by the government in advance. One of the changes will apparently be an increase in the threshold at which the "medicare surcharge" (tax) kicks in. Currently if a couple has a combined income over $100,000 and doesn't have private hospital insurance they have to pay an extra 1% medicare surcharge (on top of the normal medicare levy).

When DW was working full time this meant that taking out basic hospital cover didn't cost much more than the extra tax liability would have cost (if we didn't have insurance). However, over the years I've been less than impressed with the benefits of having private hospital cover. When DS2 was born we weren't even able to use our private hospital cover for the birth as there were no beds available in the private hospital. In any event, there are so many "gaps" in private hospital insurance that we would have ended up paying a few thousand dollars "out of pocket" if we hadn't used the public hospital for the birth. Each year the cost of private hospital insurance goes up, so that it now costs me $153 per month for the most basic level of family cover. I recently looked into enhancing our cover to included dental costs (in case DS1 or DS2 need braces), but the extra $70 a month is unlikely to be worthwhile (especially since having insurance doesn't cover 100% of the cost of all expenses).

Now that DW is working part-time (and I'm using salary sacrifice to contribute pre-tax into my superannuation account) our combined taxable income is too low for us to be liable for the surcharge if I dropped our insurance cover. If the proposed budget change takes effect we also wouldn't be in danger of exceeding the threshold when DW returns to work full-time. I'm giving serious thought to cancelling our private hospital cover and saving the extra $1,836 pa and relying on the public health system. There are plans to build a new public hospital less than one kilometer from where we live (if the State government ever allocates the required funding), so even if we keep our private hospital insurance we'd probably end up using the public hospital in case of emergency!

Subscribe to Enough Wealth. Copyright 2006-2008

How I plan on saving 50% of investment trailing fees

I'd seen a couple of services advertised that will rebate you part of the trailing fees that many investment products pay to financial planners, insurance and loan brokers. So I recently visited YourShare.com.au and joined up. The service offers an annual rebate of 50% of the trailing fees they get paid if you nominate them as your "fund broker" (70% for trails above $4000pa). I sent in completed nomination forms for my income protection insurance, three margin lending accounts, and various fund investments. I got a confirmation email acknowledging receipt and processing of my forms a few days later, and was advised that a few of the investments didn't actually pay any trail (Timbercorp and Rewards agribusiness investments). Also, Commonwealth Securities doesn't pay a trail on margin loan balances, although the form will still be processed so I receive a 100% rebate of the entry fee on any mutual fund investments I make via Comsec.

This means I should be getting a rebate on the trailing fee paid on my "loss of income" insurance premiums (probably 1%-2% of the amount paid), plus I'll get a around 0.25% of the value of my margin loans with Leveraged Equities and St George Margin lending. The rebate cheque is due each anniversary after joining the service, and will cover all trailing fees received during the year.

Although I'd always known that margin loan interest rates are around 1% higher than variable rate home loans, I hadn't realised that most margin lenders are paying 0.25%-0.35% trail to financial planners! As with most investments, if you invest directly in these products (without going through a financial planner or broker) you don't normally get any of this fee rebated (the investment manager simply pockets the trailing fee). Since I have investment loans of around $220,000 through LE and St George, assigning YourShare as my "broker" for these accounts should generate an annual trailing fee rebate of around $550. Not bad for a few minutes work.

There is at least one other similar trailing fee rebate service available, but although it rebates a larger percentage of trailing fees it also charges an annual fee. This makes it better for investors with a large portfolio, but would be similar (or slightly worse) in my case. Anyhow, once I get the first annual fee rebate cheque I'll be able to tell if the other service would provide a larger rebate, and can change broker nomination on my investments if that is the case.

Subscribe to Enough Wealth. Copyright 2006-2008

Net Worth of PF Bloggers: April 2008

Here's the current financial situation of some personal finance bloggers who post their net worth each month.

Monthly Net Worth of some PF Bloggers for April 2008:

Blogger    Age   Net Worth      $ Change  % Change
An English Major's Money  24    $23,613.00   $1,052.00   N/A
Aspire 2 Wealth           2x    $31,326.00   $2,489.00   N/A
Blogging Away Debt        2x   -$27,616.00   $2,827.00   N/A
Consumerism Commentary    30   $146,738.00   $3,564.00  2.5%
Debt Free 4 Ever          39    $50,099.00     $183.00   N/A
Enough Wealth             46 $1,072,448.00  $27,840.00  2.7%
How I Save Money          27   -$17,128.00     $657.00   N/A
Lazy Man and Money        2x   $218,825.00   $5,794.00  2.7%
Map Girl                  32    $50,847.00   $1,802.00  N/A
MaxLoot                   25    $42,986.00   $2,747.00  N/A
Moomin Valley             42   $485,756.00  $19,130.00  4.1%
My Money Blog             28   $257,939.00  $15,592.00  6.3%

nb. Some ages have been adjusted as follows:exact age provided = listed as given"20's" = listed as 2x"early 20's" = listed as 22"mid-late 20's" = listed as 27and so on.

Previous monthly reports can be found in the Net Worth category.

If you have any corrections, let me know as soon as possible after the post and I'll edit immediately. If it's more than a few days after the post, email me and I'll make the change the following month.

Note: Most of these figures are in USD, but some are not (eg. mine are in AUD). Also, some bloggers post combined net worth of a couple, others are single, or, like me, only post their personal net worth.

The N/A figures are either a lack of monthly data, or where I've not included % change data because the net worth is less than +/- $100K.
I've had some appreciative comments about this regular monthly post - if you like it, please link to it from your blog, or add a link to EnoughWealth to your blogroll. ;)

Subscribe to Enough Wealth. Copyright 2006-2008

Building our Square Foot Garden

I bought more materials today for constructing DS1's vegetable garden. It's loosely based on Mel Bartholomew's "Square Foot Gardening" concept, but I may end up compromising on the soil composition. The official "Mel's Mix" is supposed to be 1/3 compost, 1/3 peat moss, and 1/3 vermiculite. I had 1 cubic meter of "vegetable soil" delivered last Wednesday (which is around 75% compost), so today I wanted to purchase some peat moss and vermiculite to make up the required mix. It turned out that peat moss is not readily available, so the closest I could get was Cocopeat, which has very similar properties to peat moss, but is produced sustainably from coconut husks rather than strip mining peat bogs. Although I could only buy it in small packages (a brick that makes up 15L of peat when rehydrated), this isn't too expensive at $1.81 per pack (around $120 per cubic meter).

The vermiculite was another story. Although it's available (in small packs), the cost is very high at $7.51 per 5L bag. That works out the $1,500 per cubic meter, which is ridiculous. I bought three packs, but unless I can source vermiculite in bulk for lower cost I'll have to use around 5% rather than 35% vermiculite in my soil mix.

I'm building two 5' x 3' wood boxes for the vegetable garden, which will fit nicely into the available courtyard outside DS1's bedroom window. I happen to have a few nice 88x44cm granite slabs (benchtops that someone was throwing out when remodelling a kitchen) that will make a nice access path between the garden boxes. Each box has a volume of 1/3 cubic meter and will provide 24 square "plots" for planting a variety of DS1's favourite vegetables.

I also bought a timer tap and a simple sprinkler, so DS1 can just turn on the timer each morning before school to give the vegetable garden a good watering a few days a week. On the days when watering by hose isn't permitted he can keep the plants moist using his new watering can.

Tommorrow I'll cut and assemble the pine garden boxes and give them a coat of marine varnish spray. The boxes will be sitting on a layer of leaf mulch and be lined with a damp course (to make the wood box last a bit longer). Since the varnish takes 8 hours to dry we probably won't be able to fill them with soil and start planting seedlings and seeds until next weekend. We're starting with a selection of carrots, onions, brocolli, cauliflower, corn and chinese cabbage. I'll have to buy a few potatoes with lots of eyes at the supermarket and leave them in the sun to see if any sprout and can be planted.

This vegetable patch looks like it will end up costing a few hundred dollars altogether in materials (it could be built much cheaper using second hand lumber etc) and take several hours work putting it together. It should provide lots of fun for DS1 (and some educational value), but I'll be interested to see how much produce we get from this small area, and will track the quantities and calculate their value (based on the local supermarket prices).



I'll post some before and after shots of the couryard and assembled garden boxes, then some photos of whatever produce we get by springtime.

Copyright Enough Wealth 2008

Is water frugality worth the effort?

There are many places on earth where water is a precious, finite resource. Sydney isn't one of them. Yes, Sydney recently had an extended drought - one of the worst in a hundred years - but our overall water storage never dropped below about 35%. Although this seemed very alarming at the time (the State government signed contracts to build a large desalination plant just before the last election, which is now being building but will probably never really be needed), it's actually a pretty good figure for the lowest point in storage. After all, if the low point was never less than say, 60%, you'd obviously have too much storage capacity.



Which brings up the obvious solution to Sydney's variable rainfall - more storage capacity. Our main dam (Warragamba) was originally planned in 1845, but construction was deferred until the severe 1934-42 drought got things moving. The dam was built in 1948-60, and it's capacity was actually reduced late last century when a new, lower spillway was constructed to guard against a "1-in-100-year" FLOOD!

Since Sydney has adequate, but highly variable, rainfall, there were plans for a second large dam to supply Sydney. Unfortunately the previous State Premier was a firm friend of the anti-dam green lobby, and declared part of the new dam site a national park in order to prevent a second dam being built.

So, we're stuck with an expensive desalination plant that will only be able to provide relatively small quantities of very expensive potable water during a severe drought. It also needs to be kept running the rest of the time (using expensive and environmentally unfriendly fossil-fuel generated power) in order to remain in working order. If we had a second dam of similar size to Warragamba our overall water storage would not have dropped below about 63% at it's low point, and we'd now be sitting at 80% of maximum capacity. A side benefit would have been some hydro-electric power generation to feed into the grid during times of high rainfall, when storage went above 90%.

Aside from the desalination plant, the government's main solution to solving Sydney's water problem during droughts is for consumers to "conserve" water. However, aside from the propaganda and peer-pressure value of small fines for "banned" water usage (eg. watering the garden on the wrong day of the week), there is actually little or no pricing signal used to encourage water conservation. For example, out last water bill was for average daily usage of 879 kL (down from 931 last quarter, and 934 the same time last year). However, out of the total $213.70, only $96.74 was "usage charge" - the remainder was for the general water service and sewerage service fees.

Therefore, in the past year we have reduced our water consumption by almost 6%, yet this would only reduce the bill by 2.7% (if water price and fees remain constant). The water bill was accompanied by a leaflet showing average daily water use targets for families of different sizes. For our household the target is around 750 kL/day. (They don't mention what the actual average figures are, or how an older house is expected to meet a target that is based on a modern house that uses all the latest water-efficiency devices!). If we somehow managed to reduce our water consumption by almost 15% to meet this target, our water bill would only go down by $14.66 (or less than 18c per day), or 6.9%! In reality, they are about to raise the water service pricing (to pay for the desalination plant!), so even if we cut our usage to the target figure we'll probably be paying more for our water bill this time next year.

Another example of government red-tape and ineffective incentives is the "incentive" offered to install rain water tanks for use as "grey water" (ie. flushing toilets, watering gardens etc.). Although quite large amounts are paid out by the government for installing a new rainwater tank, it's only available if you buy a brand new tank and get it installed by a licensed plumber. This means that you still end up with an "out of pocket" cost for installing a rainwater tank, and will take many years to recoup the cost through any water savings. Since the tank water can't be connected to the normal water reticulation system (as it isn't considered "potable" and isn't treated - some houses have dead birds, possums etc. on their roofs - yuk!), I can't see why a plumber is needed to stick a tank between your roof down pipe and the garden hose. I may install a small (preferably used) tank in our front garden to provide water for DS1's new vegetable garden, but it won't be eligible for the government subsidy.

Copyright Enough Wealth 2008

Forex CFD Trading Update: April 2008

April continued my run of profitably months trading AUDUSD foreign exchange rate (the "Aussie"). I continued trading the minimum contract size (A$25,000) and using OCO (One-cancels-other) stop/limit pairs when I left a position open unattended (eg. while at work or overnight). Depending on volatility the stop-loss order would be priced 10-20 pips from my entry price, and the limit price (to take a profit) at least 30 pips from the entry price. The limit was set based on recent charting behaviour - resistance/support levels, previous retracements etc. Attended open positions were often much shorter opportunistic trades, where the price had dipped 10-15 pip below the trend line, and had started to retrace. Often a small profit of 5-10 pips (worth $12-$25) could be made in a few minutes. I think I overtraded a bit this month as the number of trades was higher than previous months, and the average profit per trade was very low. This month I'll try to only trade when there seems to be a clear opportunity, and also try to let my winning trades run a bit longer (probably need to cancel and reset my OCO orders when I'm approaching my limit).

I don't have figures on the win-loss ratio of trades as I sometimes open a second trade overlapping the previous position, so I have to manually sort through and pair up my trading history to determine the result of each trade pair. I did that for last financial year (up to 30 June), and I'll get the figures up to date before the end of this FY. Meanwhile I can get the overall profit(loss) and number of completed orders from the CMC Markets monthly account summary.



Copyright Enough Wealth 2008

Money info for UK readers

Anyone living in the UK reading this blog might be interested in visiting this interesting Money website. Aside from the usual information about the various Credit Cards on the market, it also has information regarding insurance and other money-related topics.

This site also offers a financial email newsletter and you can subscribe to the RSS feeds of one of its numerous financial blogs. The newsletter has some genuinely useful and interesting information, for example, there is an article about a high interest savings account available for people aged between16 and 20, offering an impressive 10% on savings (Alliance & Leicester's award winning Premier 21 account). Another article provides details of the ISA available from Barclays that is offering a tax-free 6.5% AER.

The main webpage is well laid out, and has a summary of "Latest Money News". There are links to the specialist sections on Credit Cards, Loans, Mortgages, Savings, Current Accounts, and Share Dealings. The insurance section covers car, home, travel and pet insurance and is well laid out. For example, the car insurance page lets you view and compare insurance offerings with the best discount, as well as special offers for woman, over-50s, young drivers, students, classic cars and performance cars.

The credit card page has listing of most popular cards, those that are offering 0% balance transfers, cash back/rewards, or cards available to people with bad credit, or for business use.

I quite like this site as apart from all the usual consumer financial product information, it is well organised and also provides some useful articles as well as news information.

Signing up for the email newsletter only requires an email address, and they state that they will NOT provide your details to any third party. The fact that they are registered with the Data Protection Act and provide a registration number is also reassuring. Once you've registered with your email address you can also download a free eBook of money saving tips. I signed up for the free eBook and got a message that the link would be emailed to me. The email hadn't arrived after five minutes, so I have yet to read through the eBook.

Copyright Enough Wealth 2008

What to buy the 8-year old that has everything?

DS1 turned 8 today, so we've been watching out for suitable gifts the past couple of months. I don't go too frugal when it comes to presents for the family, but I also don't want to waste money on expensive plastic toys that get broken or discarded after a few days. He already has plenty of "father-and-son" things from previous birthdays, so this year I concentrated on items he can enjoy by himself with minimal supervision or assistance.

He'd received a small digital camera from my parents last Christmas, and had a lot of fun taking pictures at the zoo and other family outings. Unfortunately he'd dropped it one too many times, so it now has the bad habit of erasing all the photos from memory at random intervals. I spotted a more up-market digital camera (5 megapixel, 3x optical zoom, LCD screen, SD-card memory) on sale at Aldi recently, so we decided to buy it for his birthday as a "shared" birthday gift from his parents and grandparents. $159 split between four adults seemed quite reasonable. DW and I will make sure we handle the transport of this new camera, and just hand it to DS1 when he wants to take a photo!

He also likes gardening, although our previous attempt to grow some carrots in our rather poor garden soil wasn't a success. Last weekend I pulled out a couple of straggly plants from the flower bed in the alcove outside his bedroom window, and moved the edging to create a small vegetable patch (2.8m x 1.7m). I ordered a cubic meter of 'vegetable soil' (50% mushroom compost, 50% sand, soil, cow manure and ash) from the local garden centre ($77 delivered) which was delivered onto our driveway this morning for his birthday. I enjoyed telling him he was getting a pile of dirt for his birthday ;)

While searching for information about what vegetables are best suited for a child try cultivating, I came across the interesting site squarefootgardening.com which provides information on grid-based, raised-bed gardens which looks promising. The main benefit of this system is that is doesn't require any digging to try to "improve" your existing soil, and has been used for school gardening projects with great success. In order to mimic the special "Mel's Mix" (1/3 compost, 1/3 peat, 1/3 vermiculite) for this type of garden I'll need to add some bags of peat and vermiculite to the "vegetable soil" - a project for this weekend. I'll also need to finish preparing the vegetable patch by clearing the remaining grass, putting down a layer of leaf mulch, and using some boards to create a couple of 6'x4' garden boxes with an access path down the centre.

My parents have bought a small "greenhouse" for propagating cuttings and seedlings, and will be getting him some small gardening tools. I'll be shopping for seed packets with him next weekend. With any luck we may end up getting fresh, organic vegetables from DS1's garden later this year. As an added incentive I may get DS1 to weigh out his "produce" and I'll pay him the going rate for his vegetables (based on current supermarket prices). The SFG website also mentions selling organic produce as a hobby business, so he may add this sideline to his busking "business".



Copyright Enough Wealth 2008

I bought a new briefcase

I purchased a nice leather briefcase for work a couple of years ago, but unfortunately the combination lock had the bad habit of going into the "reset combination" mode if the catch was knocked as it slide around the car boot during the daily 45-minute commute to work. After spending a fruitless half-hour trying to guess what the new combination had become, I resorted to forcing the lock open. This worked for one lock, but when the same thing happened to the remaining lock I ended up with a briefcase that doesn't latch shut. Time to buy a new briefcase.

I looked around at what was available in the stores, but most cases for $100 or less were simple back-pack or satchel style bag. I wanted a real briefcase for my work papers, and decided that an aluminium briefcase would also enable me to carry my new Dell laptop around in style. It would also be useful for taking my laptop on holiday to Europe with me later in the year.

In the end I chose the Dicota AluSlight case that is designed to hold a 15.4" laptop, accessories and some work papers etc. A quick online search found prices were mainly around $139-$159+PP for this item, but one site (bargain.net.au) had it advertised for $118.80+PP. I ordered it online and was able to pay via PayPal.

I was a bit surprised that the PayPal receipt eventually showed the amount in USD rather than AUD, but with the Aussie dollar at almost US$0.95 it's still cheaper than the other advertised prices. I tried phoning the online store to complain about the unclear pricing, but got a voicemail service and gave up. I'm now just hoping that the product is actually delivered! I have the Paypal receipt, but I have no idea what the procedure is for seeking a refund from Paypal if goods aren't delivered. The bargain.net.au voicemail service makes me doubt I'll have much luck chasing up this order if it doesn't arrive in the promised 3-5 days. And the USD pricing makes be suspect that they may not be trading within the jurisdiction of the NSW Department of Fair Trading...

Anyhow, fingers crossed that my shiny new briefcase arrives in one piece in the next couple of days.



Copyright Enough Wealth 2008

How I gave my personal financial risk management plan a check-up

A personal financial risk management plan is an important tool to help assure that I've adequate protection in place to look after myself and my family in the event that my assets or earning ability are impaired. Most people never develop a plan for managing financial risks, but it's actually not too difficult or time consuming to put a basic plan into place. Without a plan, you might:

• be over-insured in some areas and under insured in others.
  
• be unaware of the risks to which you are exposed.
  
• be insuring risks that are more emotional than financial in nature.

I spent about 30 minutes using a free, online tool from the university of Illinois to sketch out a rough financial risk management plan.

The tool helps you to:

• identify those events which pose a financial risk to you or your family.
  
• learn the four basic methods of managing risk.
  
• determine which methods you are currently using to manage your risks.
  
• identify gaps in your current risk management strategies.
  

The first step of the tool asks you to rate (on a scale of 1-4) a list of typical financial risks in terms of financial severity (ignoring any insurance you already have to mitigate the impact) and probability/frequency of the event happening. In my case the first step produced a simple graphical grouping showing which risks need to be addressed (the high impact/high probability ones), those that may be worth addressing (high impact but low probability), those where the risk can be absorbed more economically than insured against (low impact and high frequency risks), and those that can be ignored (low impact, and unlikely events).



This risk matrix will vary depending on your personal situation. The website gives the example of the risk of death - low probability but high impact for a young breadwinner with a dependant family, compared to high probability but fairly low financial impact for a 90-year-old with no dependants.

The next step looks at the various ways you can choose to handle risks. The website uses the example of an event (totalling your car) to illustrate the four general approaches to handle the risk:

1. Bear the risk: You drop the collision insurance on your ten year old car. You continue to drive it regularly.

2. Transfer the risk: You buy collision insurance on your car so that the insurance company bears the risk of having to replace or repair your car.

3. Reduce or control the risk: You wear seat belts, which would reduce your injury in the event of an accident, and you do not speed, which reduces the likelihood of an accident.

4. Remove the risk: You sell the car and use public transportation.

The website provides nine simple examples of risk handling decisions for you to check that you understand the four approaches.

Step three then goes on to help you identify which of the four approaches you are currently using to handle your financial risks. It then explains how the different techniques for handling risks will be appropriate depending on the probability and degree of financial severity, and puts this into the same sort of matrix that you previously developed for your risk assessment:



The website tool then goes on to tabulate the most appropriate methods for handling each of your risks, based on the way you rated them on financial severity and probability. "You may be surprised by some of the recommendations. For example, you may have believed that everyone needs life insurance. But if your death would have a low financial impact or if the probability of your death is high, you will see that techniques other than transferring (insuring) are recommended. Under this framework, only someone whose death would pose a financial hardship (such as someone who has dependent children) and for whom death is unlikely should insure his or her life. Others should be using different techniques, such as setting aside enough money to pay for your burial (bearing the risk) and seeking ways to reduce the size of the financial risk, such as structuring your estate so that a family business won't have to be sold to pay estate taxes."

Hopefully, this tool will provide a useful check-up of your existing financial risk management plan.

Copyright Enough Wealth 2008

Falling knives, dead cats bouncing, and buying opportunities

Nearly all bubbles eventually burst (there are some apparent exceptions, such as the growth in per capita income since the industrial revolution), and conversely, most crashes eventually recover. So, although the plunge in home prices in the US appears to still have a long way to go (the plot of the Standard & Poor's/Case Schiller index of house prices shown below has yet to show any hint of an inflection point - the rate of decline slowing rather than accelerating), there will, inevitably, come a point at which the 'correction' in prices has been overdone and bargains are to be had. So, if you're an aspiring home-owner, it may be time to look at available home loans in preparation of making the plunge once house prices stabilize at more affordable levels.



Meanwhile, those with a home mortgage might take the opportunity for mortgage refinance
at a lower rate. A home has, and always will be, a long term investment. The transaction costs of real estate make it an unsuitable asset class for short-term trading (despite what "flippers" may have thought during the boom years). Therefore, there's little chance of getting out of real estate during a down-turn and buying back in at lower prices. Instead, the best most home owners can hope for is to ride out the storm, and make sure they minimise costs by pursuing avenures for home refinance while interests rates are relatively low.

Refinance.com has a website that provides information on mortgage refinancing specific to each state, provides a list of the currently available 15- and 30-year fixed rate loans, as well as ARMS with reset periods of 1- ,3- or 5-years. It's interesting to see that the 1-year ARM is currently higher than the 15-year fixed rate loan, and only slightly less than a 30-year fixed rate loan. The site has a few tools to assist in comparing refinancing options. For example, there is a refinancing calculator that provides monthly payments, total payments, and total interest paid when you enter values for loan amount, interest rate and term of a loan.



Copyright Enough Wealth 2008

Australian budget predictions

The Australian annual federal budget is due out on 13 May, and some "leaks" of the less popular announcements have started to trickle out. The tax cuts promised by both parties prior to last year's election look likely to be introduced without any changes. There had been talk of replacing straight tax rate changes with making government superannuation contributions (with an option to "opt-out" for those that want/need the extra cash in hand), but it appears that this won't happen. Perhaps the previously announced tax cut "intentions" for future years will be re framed as planned increases in superannuation funding. When the previous Labor government introduced compulsory superannuation the intention had been to ramp up towards 15% of salary, rather than the current 9%.

I'm guessing that there will be some extra funding for retirement savings - perhaps an increase in the government co-contribution. Last year the Liberal government made a "one off" doubling of the co-contribution (from $1,500 to $3,000, for those people who made a $1,000 undeducted contribution and had taxable income below the $28,000 threshold). Perhaps the maximum co-contribution amount will be raised to $3,000 and the threshold increased (from around $58,000). It would be nice if they also made the threshold calculation easier to understand (and printed it on your tax assessment notice).

The pre-budget leaks have mainly been regarding "means testing" of some government handouts. For example, the $5,000 "baby bonus" and the "family tax benefit (B)" will probably no longer be paid out where the family income is too high (a figure of $250,000 was mentioned). We wouldn't be affected by such a high cut-off threshold, but I'm not too impressed by the idea.

Although there's no need to provide government handouts to high-income individuals (or families), the cost of gathering and compiling the data required to means test ALL payments, just to eliminate a tiny fraction of the total number or recipients is often not cost-effective. In the worst-case it could end up like the family tax benefit (A) situation, where a family has to estimate it's assessable income (which is different to both total income and taxable income) for the next financial year, and is then penalised if the estimate proves to be inaccurate and they've been paid too much during the year.

There have already been announcements regarding increases in tax on alcohol and tobacco, and it will be interesting to see what current "middle class welfare" programs are cut in order to meet the government's target of a 1.5% of GDP surplus.

There will probably be some funding announcements relating to climate change initiatives - probably wind, solar, and tidal energy generating research and commercialisation funds (they need another catchy "future fund" hollow log to store future surpluses). Of course there's no chance of any funding or support for nuclear power generation in Australia from a Labor government.

Although Labor had railed against "bracket creep" while in opposition, they are now down-playing the idea of using future budget surpluses to reduce income tax rates. They have also gone very quiet about automatically indexing tax thresholds.

There will be more federal funding for education, such as the "one computer per student" program. The effectiveness of this will depend, as always, on how willing and able the state governments are to pay for the required infrastructure, support and training that such federal initiatives create.

Copyright Enough Wealth 2008

Retirement fund co-contribution arrived

DW had made a $1,000 "undeducted" contribution into her BT superannuation account last financial year, so she was eligible to receive a $1,500 "government co-contribution" from the ATO. The tax office wrote last month stating that they couldn't pay the contribution into her old BT account (because she had closed it and rolled her retirement savings over into our new SMSF in July) and asked for details of a complying fund which would accept the payment.

I sent in the details of her SMSF account and a cheque arrived via the E-SuperFund administrator yesterday. I was relieved to see that there were no problems accepting the payment -- apparently not all SMSF Trust deeds cater for recent changes such as the co-contribution, TRPs and so on.

I deposited the cheque into our SMSF bank account at lunchtime on Friday. Hopefully our employer's superannuation contributions owed from last month will also turn up next week and I'll be able to transfer the cash into our Vanguard HighGrowth account.

I also made an undeducted contribution into my Superannuation fund last FY (not the full $1,000 since my taxable income was too high to qualify for the maximum $1,500 co-contribution). I should be entitled to some amount of co-contribution, but I haven't seen it turn up in my BT Superannuation account as yet.

Copyright Enough Wealth 2008

Blog Performance Update: April 2008

I blog for fun, but as with most games it's more enjoyable to keep playing if you 'keep score'. In the case of blogging the simplest performance indicators are visitor stats and revenue figures. In case anyone is interested, I've listed the latest monthly figures for April (despite having written in January that I'd only do this annually, I can't resist tabulating the data, so I might as well post it). Previous values [from January] are noted where relevant:

READERSHIP:

----------------------------------APR-------JAN
Google Pagerank...................2.........0
Technorati Authority..............82........114
Feedburner Subscribers............85........70
Alexa Rank........................340,266...993,197

Sitemeter monthly visitors........5,352.....9,289
Quantcast visitors................2,341.....4,048
Quantcast Ranking.................717,143...404,259
Comments left on blog.............23........22
Number of Posts...................23........27

Overall the number of visits was down compared to January as I haven't been making as much effort submitting posts to the social networking sites (Digg, Mixx, StumbleUpon). Also, I'd submitted all the best posts from the 2006/7 during January which generated a few large spikes in traffic.

REVENUE:

----------------------------------APR-------MAR
AdSense...........................$14.27....$15.76
Adsdaq............................$_4.33....$_2.18
JumboAffiliates...................$_0.00....$_0.00
AmazonAffiliates..................$_0.00....$_0.00
ClickBoothAffiliates..............$_0.00....$_0.00
PayPerPlay........................$_0.07....$_0.05
LinkWorth.........................$_0.08....$_0.00
TOTAL.............................$18.75....$17.99

I've only listed semi-passive income (depends on getting visitors, but no direct action required). I haven't listed income from sponsored posts of paid adverts as these tend to be either "one off" payments, or require me to write copy to earn the fee.

Most of the amounts listed are "pending" payments which will only be paid out (via Cheque or Paypal) if I reach a required threshold (often $25 or $50) AND the company that owes me money stays in business ;)

Generally speaking, Pay-per-impression no longer seems to exist, Pay-per-click generates some revenue but requires large traffic volumes (and the rates are dropping), and Pay-per-Action isn't generating any income (some readers click on the Ads, but apparently aren't buying anything. I try to only list Affiliate Ads for products that seem genuine and *might* interest readers of this blog, but I don't expect to generate many sales).

Sponsored posts can generate reasonable income in relation to the amount of work required, but there are limited opportunities that are relevant and I find interesting enough to write about.

Copyright Enough Wealth 2008

Review of Clickbooth publisher experience

I signed up as a publisher for the Clickbooth Advertising Network at http://www.clickbooth.com the other night, and found the experience quite simple. The registration process takes several screens to get through, and involved a few novel, and some quirky, features compared to other affiliate program joining processes.

The first screen/step required the usual name, address, email and password information.

Second Step was the authentication stage, which I hadn't come across before. It required entering a phone number to receive a validation PIN. I'm not quite sure why this is required, the process was fast and simple. I just specified my country as Australia and entered my mobile phone number. As my phone ran out of charge during the incoming phone call (a few seconds after I'd entered the phone number online), the 15 second message went to my voicemail. Retrieving the PIN number and entering it online got me past the authentication stage without any hassle. One gold star for ease of use.

Step 3 was the entering of my website info. This stage was fairly standard, but the category selection list was very limited and skewed towards particular advertiser niches. There wasn't any financial planning or investing category, and the Financial categories listed weren't really relevant to me (Cash Advance, Credit & Credit Improvement, Debt, Mortgage) so I ended up choosing the generic 'Education' category.

A final niggling problem was the the registration form wouldn't accept http://enoughwealth.com as my URL, so I had to enter http://www.enoughwealth.com (which doesn't actually work due to some quirk of my Dotster domain name registration and redirection of the URL to my Blogger account hosting).

Once the registration details had all been completed, a notice popped up that the approval process would take up to 72 hours........

Two days later......

I got an email notifying me that my application had been approved, so I logged in the the Clickbooth.com site to browse for possible affiliate content. I decided to trial the VistaPrint ad, which I've added to my RH margin. There were several different 'creative' designs to choose from, so it was easy to find one that fitted the space I had in mind.

One additional step will be required if I earn enough to get a payment - a W8 form (for non-US affiliates).

I'll report on any earning from participation in the Clickbooth CPA Network / Affiliate Network in future monthly blog income posts.

Copyright Enough Wealth 2008

Net Worth Update: April 2008

April showed gains in all areas of my portfolio and I ended the month up (2.67%) for the month, to $1,072,448:

Property valuations +$.6,249 (+0.74%) to +$849,227
Mortgage loans..... -$....20 (-0.01%) to -$366,520
Retirement accounts +$.8,066 (+2.73%) to +$303,850
Stocks & other..... +$13,505 (+4.96%) to +$285,891

My monthly retirement contribution from April (around $4,200) isn't showing in this month's figures as the employer contribution hasn't appeared in my SMSF bank account yet.

For those that are interested in household net worth figures:

Enoughwealth....... +$1,072,448
DW................. +$..540,104
DS1................ +$...43,755
DS2................ +$....7,133
TOTAL Household NW. +$1,663,439

Copyright Enough Wealth 2008