Starting With Nothing

In today’s world of ’spending on credit’, many people can find themselves at a point where they have so much debt and such large interest repayments, that they can’t even imagine a way out. With credit card interest rates the way they are, its very easy to be paying hundreds of dollars a month on interest alone!

Now some of you may have heard of credit card balance transfers as a way to help with this, or in particular the offers that come with these transfers. A balance transfer is the mechanism by which you can move the amount owing on one credit card to another. The offers that come with these are generally such things as a very low interest rate on the balanced moved, for a period of time (usually 6 or 12 months). As such, if you have a very large balance on your credit card you can move this from a large interest rate on one card (for example 25%) to a low interest rate on another, something on the order of 5%, or even 0% on some offers!

Now these offers are really a great idea for someone who is trying to reduce the amount of debt that they have, as while paying off the same amount each month more of it is going to the actual debt than was before (because less interest has to be payed!). However, you must be careful when doing this as there are some very common pitfalls which must be watched out for!

(See these after the jump)

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By now you’ve more than likely heard about the global financial crisis. It’s been on the television, in the newspapers, and just about everywhere else. 

For a lot of people the reasons behind it are obvious, however there are a lot of people out there who don’t know exactly what its all about. In the end a lot of these people don’t really need to know why it happened, however if your reading this then you should know. You should know because financial literacy and being aware of the events in the market is important for everyone.

Recently i was pointed to a great flash video which explains with diagrams and simple terminology the basics of what caused the credit crisis which has led to the current market situation.

So watch and learn (and enjoy!)

(Well the good and the bad anyway )

Ask yourself what your definition of income is.

Your right now probably thinking of going to work every day, receiving that paycheck, and going to work (again!) the next day.

This is certainly one type of income, however its not the only way! There are multiple types of income, and as someone looking to gain wealth in your life, you should definitely be familiar with them.

Active Income

This is the income described above, and in most cases this will be your main source of income at the moment. It involves you working (hard) for money. Each month, you get money deposited in your bank account, for turning up to work each day.

This may seem perfectly acceptable to you. And in reality this is what most people do. The problem is that it costs you a lot more than you think, in time. Time is your most valuable asset, and you should be spending as much of it as possible doing what you want to do. Just think, if your working a 9 – 5 job at the moment, that’s around %22 of your entire life spent at work! That may not seem like a lot, but if your getting 10 hours of sleep per night, it’s around %40 of your waking hours spent at work!

Surely there has to be a better way?

Passive Income

Well if you can start making passive income, your certainly well on the way to reclaiming some of your life. Would’t it be nice if you could open a bank account, and have $500 appear in it every month, without you having to do anything for it?

Well that’s exactly what passive income is. It is a regular income, without regular effort.

So why don’t we all do this! Money problems solved yes?

Unfortunately no. Passive income is definitely where we would all like to be, and it is a much smarter form of income than a salary (active income). However it is a bit harder to come by. Passive income mainly occurs after some amount of ‘active’ work has been put in to set it up. For a purely money based example, you could put a million dollars in a high interest bank account, and get $70,000 a year to live off for the rest of your life. The problem of course is finding the million dollars to start with.

That’s not to say that passive incomes on a smaller scale aren’t possible. There are opportunities everywhere for those of you have a bit of an entrepreneur inside of you. And even for those of you who don’t want the risk, just put as much as you can from your active income into a passive income generating source (such as a savings account, or blue chip stocks on the sharemarket). You’ll be surprised how fast your money can grow when you don’t spend it right away!

Check back soon, i’ll be talking more about passive income and passive income opportunities in the future

Have you ever wondered if there is ever a light at the end of the tunnel? With all this talk of debt removal, budgeting and the prospect of very small initial returns, it crosses everyones mind.

A great way to put your mind at ease is to step back and take a look at the bigger picture once in a while. Brian Lee over at GeniusTypes.com has a great article detailing a roadmap from debt to financial freedom.

It details (with some great diagrams!) an easy to understand long term guide to your income (both active and passive), as well as showing the most important part of your life, your time.

Have a look how to change your life from 80% work to 5% work and check it out here.

No matter how much money you may or may not have, you should always make sure your money is working for you. We will deal with many different investments and income techniques over the future, but what about when you have spare money lying around? Where should you keep it?

A lot of people fall into the trap of keeping spare money in a transaction account in between investments. Unfortunately transactions accounts are just that, accounts for transactions! They facilitate you moving money around, but do little to increase your wealth.

The problem lies in the fact that most transaction accounts offer very small interest rates (or not interest at all!). Take these examples of common transaction accounts here in Australia.

• Commonwealth Bank Streamline Account – 0.01% (for less than $50,000)
• ANZ Access Advantage Account – 0.00% (for less than $50,000)
• Bankwest Complete Account – 0.01% (for all amounts)

So while the bank is turning your money into profits, your getting nothing!

There is however, a relatively easy fix. Most banks these days offer higher interest savings accounts which you can move you money into. These accounts are generally a bit less flexible in terms of transaction arrangements, but they do reward savings with higher rates of interest. For example, the banks detailed above all have savings accounts.

• Commonwealth Bank NetBank Saver – 6.25%
• ANZ Progress Saver – 4.51%
• Bankwest Instant Saver – 4.75%

There are many different products out there, and they are all for different needs. For example, some will give high interest rates only if you make no withdrawals for the month, while others will give you the same rate of interest no matter how many transactions you make. Have a look around and see whats right for you.

So remember, keep as much of your money working for you at all times. While 6 or 7% might not sound like a lot compared with other investments, its much better to have your money working for you with the magic of compound interest rather than it sitting in an account doing nothing (and actually losing value if you take into account inflation!).

Thats right, unfortunately the first part of creating wealth is removing debt. In the short term it isnt a lot of fun, but in the long term it will get you miles ahead.

I, not so long ago, had a $6000 no-repayment loan (being a university student) that i had sitting over me. It didn’t require me to make any repayments until 3 years after i took the loan out. After about one and half years, i started working full time, and was making a fairly large salary. Did i pay this loan off in the next 3-4 months like i should have? (and could have fairly easily) No, because it was an ‘invisible debt’ to me, and as such i went about spending my money on other more trivial things (TV’s, Stereo’s etc).

In the end i did pay this off at around the two and a half year mark, by which time i had repaid something around $8-9000 dollars. The fact is, if i was a little more self controlled i could have saved myself a lot of money over the previous year in interest!

Sometimes debt can seem unending, however the best way to get back in the black is to set aside a monthly amount to repay. Don’t leave this until the end of the month, after all your expenses, when you say “what do i now have left to reduce my debt with?”. When this happens, the amount you put away is variable, and also generally smaller. Set yourself an amount at the start of the month, and then work out your monthly budget with what you have left. It may mean you miss out on buying that new TV this month, however you’ll be much happier when your out of debt months sooner!

For example, say you have a debt of $5000 at an interest rate of 9% (somewhere in between personal loan and home loan rates here in Australia).

• If you repay $100 a month it will take you 5 years and 3 months to pay off the loan (paying $1230 in interest).
• If you repay $200 a month it will take you 2 years and 4 months to pay off the loan (paying $512 in interest).
• If you repay $300 a month it will take you just 1 and a half years to pay off the loan, paying only $318 in interest!

See how much that little extra can dramatically reduce the time you are in debt. And just think, the quicker you get out of debt, the quicker you can make some money for yourself (and think about that monthly repayment that, instead of going to your loan, is going straight into your bank account!).

So think about your situation, and work out how long its currently taking you to pay off your debts. Also have a look and see how fast you could pay them off, it might be quicker than you think!

So what is this, you may ask.

Well i, like many others, like money. Its great stuff.. you can buy things with it, and it generally helps to have some in life. Lots of people look to the internet to make some money, and there are many ways to do it. There are also many scams and traps that people can fall into.

I was looking into a particular way of making a bit of income, using blogs to generate advertising revenue. However i lacked one thing, the spark. The idea that sets in motion a great blog, with fans rushing to hear what i have to say. I had looked for hours.. site after site.. but they couldn’t help me with the one thing i required, that idea.

Then it hit me. There’s no-one talking about people like me out there. No-one really talking to the people who have the time, the people who are eager to do somthing, but would like some guidance. So why not me?

So i plan for this to be a blog about how to make money, yes. Don’t expect promises of thousands and thousands of dollars within weeks because, well frankly thats unrealistic. I would like this to be as down to earth as possible, to tell the truth about whats possible. And on the way, i would like to tell the story about myself. Because as of today i’m starting with nothing (well close to it).

So enjoy!