The Australian’s Michael Bennet has highlighted concerns being felt in some quarters about the rising number of high LVR (loan-to-value ratio) interest-only loans being written by the big banks.
New data released by the Australian Prudential Regulation Authority (APRA) showed that over 30% of loan approvals for the June quarter were high LVR. Such loans are considered higher risk because they are for more than 80% of the home’s value.
Many businesses have dozens of financial reports that can be overwhelming for the owners to decipher. Financial expert Anthony Keane suggested that business owners can simplify their financial reports by focusing on the three most important reports: the cash flow, aged debtors, and profit and loss statements.
Cash Flow Statement
The cash flow statement answers one of the most fundamental questions for business owners: whether their business has enough money to pay its bills. Understanding the cash flow statement enables the owners to check for cash flow challenges, conserve cash flow or arrange financing if necessary.
The Reserve Bank has cut the cash rate to a historic low of 2.5%. This has led to some speculation about whether it is a good time to lock in a fixed-rate mortgage.
According to commentator Penny Pryor, doing so means one is betting against the banks and anyone considering a fixed loan should understand the benefits for their personal situation.
A recent survey has revealed that retirees are less optimistic than before. The survey, conducted by ME Back, indicated that most households were feeling slightly more optimistic about their finances. The only exception was the retiree group.
The survey showed a drop of 5% in the ‘financial comfort’ category for retirees over the past six months. The retirees stated that they were feeling more worried about their income stability, investments and living standards.
Creating a budget is often easy to do, the difficult part is following it. Fortunately, there are ways to create a realistic and workable budget and follow it successfully.
It can be easy to forget the ‘fun’ component in a budget, but a realistic budget includes an entertainment and leisure component.
Credit cards can be a convenient way to make purchases but they can be costly if they are not used with care.
Fees and Interest
Credit cards often attract a foreign transaction or currency conversion fee when used overseas. Interest rates are another factor to be careful with. If the entire amount is not paid off by the interest-free period, the outstanding amount will attract an interest payment, which can be more than 20% a year.
Living in debt can lead to high interest payments and possibly even insolvency. Symptoms of excessive debt include making only the minimum payments and maxing out credit cards.
Those with excessive debt are often those who make only the minimum payments on their credit cards. Paying only the minimum amount can mean that it takes decades for the cardholder to pay off their credit card debt, instead of months or a couple of years.
Research has demonstrated a link between financial resolve and a variant of a gene associated with self-control. However, studies have also shown that nurture can trump nature when it comes to smart money management.
Here are a few methods to help you become better with your money:
Using basic rules or mantras to guide financial and spending decisions can lead to better outcomes in personal finances. Developing a heuristic process creates a rule and makes a person more conscious of their decisions. For example, basic mantras such as ‘I never shop on impulse’ can guide an individual to better spending decisions.
It has never been easy to get a business off the ground and the current economic climate has only made things more difficult for young entrepreneurs.
But there are options out there if you are looking to finance a business project. The following are a some ways to go about financing your start-up:
The first person you should to for help is yourself. If you believe in the venture, you should put your money where your mouth is. You may be taking more of a risk but you will be getting more of the reward than if you have to start splitting the equity.
Borrowing money against the equity in your home, using personal credit cards and taking out personal loans is another solution that doesn’t require you dividing the equity of your business.
Your family and friends are all potential investors.
If you do not mind dividing the equity of your business, you can always bring someone on board who is business savvy but instead of paying them a salary, offer them a stake in the business.
A lot of people get nervous when discussing debt and that’s not such a bad thing for most consumers and businesses. Debt isn’t a toy for enjoying life’s pleasures; it’s a tool for building financial capacity and growing business operations. Here are some tips for using debt to help develop financial prospects.