Moneywise24 Personal Finance

This morning, as I was drinking my coffee and waking up slowly, I watched a report about a new type of scam which involves unauthorized bank transfers. Although the report mainly applies to the German banking system, this could also apply to other countries where law permits it.

Basically, fraudsters will generate a random bank account number, and they will try to transfer 1 cent to that account number. If the transfer bounces, it means that the account number is non-existent. However, if the transfer is accepted, fraudsters will know that the bank account exists. Next, fraudsters will fill in a bank transfer form manually (internet would not work, since fraudsters would need additional login details), pretending to be the bank account owner of the person, they had previously transfered 1 cent to.

In Germany, the trick would work, since banks are not obliged to check the validity of a transaction. Therefore, it is possible for transactions with invalid signatures or names to go through.

There is not much a bank account holder can do in order to prevent this type of scam. However, each and every account holder should check his/her bank account credits and debits regularly. If an unauthorized charge has taken place, the account holder can dispute the transfer, and chargeback the amount. At least in Germany, it is the bank’s responsibility to prove that the transfer was valid.

There are still so many flaws in the law, or a lack of specific control mechanisms, which make such fraudulent actions possible. If the bank would compare the name, account number, and signature of the account holder, this would significantly minimize the chance of such fraudulent cases.

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The economic times we live in put many individuals under pressure; the recession, unemployment, more competition. But also inflation, and rising prices in general make the need to save more money where possible essential. Yet many people are literally throwing away their money, by using their homes or living environments very inefficiently.

There are, however, some very small things you can do in order to save money. In most cases, these may require a small investment at first, but they will be paid back quite soon considering the savings. Let’s get started.

Energy efficient lamps

Regular light bulbs may be cheap to buy, but they are also very inefficient. The majority of its energy is transformed into heat, and only a fraction is actually used to produce light. Additionally, a regular light bulb will need replacement after approximately 1,000 hours of operation.

Energy efficient lamps may be a bit more expensive, but they use 70%-85% less energy than regular light bulbs, and they last much longer, depending on the quality and manufacturer. Energy efficient lamps may be a bit more expensive to buy, but they use less energy and last longer, thus in the long run they will pay out. Especially with increasing energy prices, this is a potential which lures in each and every home.

Door and window sealings

Especially older apartments and homes have the problem, that the doors and windows are not sealed properly, or not up to standard. The result is that in winter warm air escapes and cold air comes in, whereas in summer the cold air from the air conditioning is not kept within the home properly. Depending on your situation, many gaps in doors and windows can be easily closed using cheap materials, which you can buy at any hardware store. Simply ask the hardware store specialist for advice and the best possible solution.

Blocked radiators

In order for a home to stay warm and cozy, the warm air it produces needs to flow freely throughout the home. However, many people block their radiators with closets or couches, causing the hot air to get caught. The result is usually, that the rooms stay cooler, and the radiator needs to work more. This drives the price up. Therefore, it is a wise decision to keep your radiator or heater free where possible.

Avoid taking baths

Many people love taking bath, or the jacuzzi. However, the water consumption is also very high. One short shower would more than suffice for your daily needs, and keeping taking a bath to a minimum can help save you real cash on the long run.

If you don’t use it, turn it off!

Probably the most important thing: if you don’t use something, turn it off. This means, don’t let the water running while you are brushing your teeth, don’t let the lights on in a room while you’re not there, don’t let the television run while you are not watching, don’t turn up the heating or air conditioner while you are not at home. It requires quite some discipline in order to do this consequently, but in terms of money it will surely pay out.

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Without doubt, since the world’s first credit card, issued by Diners Club, credit cards have become an integral part of our lives. Some people swear to have only one credit card, whereas others are committed to having different credit cards for different purposes and needs. Nevertheless, using credit cards unwisely can potentially lead to great money losses, increasing debt, reduced credit rating, up to complete insolvency.

Credit cards exist with many different features and terms and conditions, but they have one thing in common: they will usually cost money in one way or the other. Either credit cards come at an annual fee, or you will pay charges or interest on monthly installments, ATM withdrawal fees, or foreign exchange fees when abroad. For this reason, credit cards should be handled with great care, always aiming at holding a grip on one’s own personal finance.

The best way to manage credit cards is to simply have only one credit card. Credit cards are a necessary feature in many situations, such as when renting a car or conducting online purchases. However, when you have only one credit card at your disposal, it is much easier to overlook the associated expenses. Firstly, many banking institutions issue credit cards free of charge, usually provided specific conditions are met. You will need to do some research, but on the long run this might save you some cash annually; why pay for an annual fee for a credit card if you might not even use it during a given year? Additionally, the terms and conditions may vary greatly for each issuer. This includes ATM withdrawal fees, foreign exchange fees, or fees when you lost your credit card or when it becomes stolen.

One of the biggest dangers of credit cards is the temptation to spend more on items, and to pay back the money using installments. Banks will usually always ask some form of late payment fees, for which yearly interest rates are far from moderate. On average, people will spend 25% more money on items bought with a credit card than they would have otherwise when using regular cash. Additionally, since the money is not immediately debited from the bank account, individuals tend to lose their reality for the spent money. At the latest next month, when the bill arrives, people see the real consequence of their spending. This causes a new problem: due to the mindless spending, people may need to pay items with a credit card again, since otherwise they would not have the required money on their bank accounts.

This spending pattern may result in a mean and vicious circle, causing people to slide into debt even deeper. In such an event, it is not uncommon, that people start applying for additional credit cards in order to create an imaginary spending freedom; the realization that unpaid debt is accumulated is suppressed, and people start living off debt in stead of equity.

Credit cards can offer some necessary freedom, but they can also be quite dangerous for those with poor personal finance capabilities. Therefore:

• Commit yourself to owning only one personal credit card, and stick to it. Do you research as to the pricing and terms and conditions, in order to pay the least possible fees.
• Track all your credit card expenses. Credit cards tempt to mindless spending, but the money will be debited in one way or the other.
• Always pay your bills online. Paying late or using installments creates additional, unnecessary interest, making it harder to pay off debt. In the end, you purchased an item or service, so you will need to pay for it.
• When you are about to purchase an item with a credit card, think about your motivations. If using the credit card is the only possible way to pay for the service (think about car rental services or online shopping), then go ahead. But if your sole motivation is because you do not have the necessary cash to purchase the item otherwise, what makes you think that you will have the financial means next month? Or the month after that?
• Think about your motivation about shopping general. Do you shop because you truly need specific items, or do you shop because it makes you happy and feel good? In the latter, it may be well possible that you are simply burning your cash on items you do not really need. In this case, you may think about thinking over your motivations to go shopping, or in extreme cases think about counseling.

This article is also available on The Man Experience.

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I stumbled upon an article the other day, unfortunately I only quickly browsed the site and completely failed to write down the URL. Nevertheless, the article was an interesting one; it described how a woman from Latin America paid back her 25,000 USD loan within a couple of years, by taking on two jobs, letting her children live with her parents, and moving into a 100 USD per month apartment.

Although when I read the article, I felt great empathy and respect for the woman paying off a huge debt within such a short time, I felt somewhat confused when I started thinking it over. The article implied, that the woman had achieved something amazing, which she did in a sense. But:

• I live in Western Europe, it is impossible for me to find a place which would cost me only 100 USD per month.
• If I had children, would I really give them to live with my parents for as long as a couple of years?
• Would my parents approve of me giving them my kids to take care of?
• What is the use of paying off a debt, if it means living in absolute poverty for a few years?

Especially the last bullet point, whether I would sacrifice my life in order to pay off debt quickly, set me to think. Yes, living on the verge of poverty would let me pay off my debts much sooner. However, at the same time my life would come at a full stop; I would not be able to develop myself in any sense, since I would not have the financial means.

Usually, it is recommended (and many banks and land lords apply this rule also) to spend about one-third of one’s net income on rent or mortgage; in the more expensive metropoles, it could also be as much as half of one’s net income. This does not mean, that exepenses can not be reduced. Many people spend only 25% of 20% of their net salary on rent, meaning they are theoretically spending less than average on rent. The money that is saved could be spent on paying off the debt in addition to what is spent on paying off debt already. This way, debt can be repaid more quickly while a certain living standard is maintained.

I am big fan of finding the right balance between living standards, personal development, income and expenses. Sure, some people simply do not have this choice. But sometimes, people do have a choice and still they opt for the hard way. In many cases, this applies to income the same way; people choose a job or a profession which will reduce their social lives to virtually zero, yet offering them a great salary with a company car and bonuses. Five years later, some get a burn out… was it really worth it?

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At present, countless individuals are feeling the stress of handling their overwhelming debt burden. Consequently, they are resorting to debt consolidation companies to help them deal with their debts and regain financial control. Unluckily, many of them ask for exorbitant fees and give assurances that they are not able to fulfill. Prior to making a commitment to a debt consolidation company, you have to do some homework and think about your options. It can ultimately help you save a considerable amount of money.

 Warning Signals Regarding Debt Consolidation Services

 There are particular red flags by which you can realize that a debt consolidation company you’re thinking about is too good to be true.

 Assurance that you would get a debt consolidation loan: Majority of genuine debt consolidation companies would not assure that you would receive a debt consolidation loan before checking your credit history and completing an application. You should be leery about these types of assurances.

 Asking for personal details over the telephone: Look out for companies that request for personal details like social security numbers, credit card numbers or bank account numbers – particularly if you have not been accepted for a debt consolidation program or loan.

 How the ad has been put forward: On many occasions, scam companies claiming to provide consolidation services are noticed in classifieds instead of as common display advertisements. In addition, be cautious about inexpensively generated advertisements on local ratio and cable stations. On certain occasions, you need to call costly numbers to obtain a consultation.

 Documents supplied through a special courier or an overnight service: On many occasions, con artists use these forms of deliveries instead of the postal service. This is due to the reason it is a federal crime to perform fraud with the mailing system of the United States. If an agency delivers the documents in this fashion – not utilizing the postal services, then it is a warning signal.

 Company is requesting for an advance payment prior to issuing the loan: This is a significant warning signal. Though various lenders ask for a nominal application fee (normally between $35 and $50) to compensate for administrative costs and the expenses of a credit check, advance payment can never be a part of their programs. If you are told to make a huge upfront payment, you must be wary and stay away from such a company.

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