Managing your Personal Finances Wisely

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Book Review: Outliers by Malcolm Gladwell 0

Posted on November 18, 2009 by admin

An outlier is someone who demonstrates extraordinary performance. He is someone who we call extremely talented. However, how are outliers born?

In his book Outliers, Malcolm Gladwell takes a closer look at what makes people so successful, and why. In an entertaining and well written way, Outliers explains the relationships between hard work, ambition, passion, and pure luck, using many real-life examples, such as that of Bill Gates. All examples and theories described in the book are the result of extensive research.

For those readers, who want to obtain a greater understanding about what characterizes success, I would greatly recommend Outliers, by Malcolm Gladwell.

ISBN: 978-0-316-05628-1

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Book Review: Warren Buffett and the Interpretation of Financial Statements 0

Posted on November 18, 2009 by admin

Knowing how to read financial statements is the absolute key to analyzing the health and potential of corporations. Mary Buffett and David Clark have written this book to help readers find their way through the maze of financial statements.

According to Mary Buffett and David Clark in their book Warren Buffett and the interpretation of financial statements: The Search for the Company with a Durable Competitive Advantage, Warren Buffett’s main strategy was to invest in companys and corporations which are durable, expanding, or having the potential to do so. In order to be able to determine the performance of a company within its industry and the global marketplace, the ability to read, understand and analyze finacial statements and information is essential.
The book’s introduction starts with an overview of Warren Buffett’s strategies, and what made him the richest person in the world, after which the book continues to explain and break down the three basic elements of a financial statement:

  • the income statement
  • balance sheet
  • cash flow statement

Each chapter focuses on one specific piece of the above elements, the writing style of the book making it easy to read; you do not have to be a financial expert. Additionally, Mary Buffett and David Clark have included sufficient examples, to underline or explain the basic theory. In addition, the structure of the book and how the chapters are organized make it easy to use the book as future reference for looking up specific information.

ISBN-13: 978-1-4165-7318-0
ISBN-10: 1-4165-7318-0

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In the News: Credit Card Data Theft in Spain, and How to Deal With It 1

Posted on November 18, 2009 by admin

As I was watching the news this morning, I saw a report about a large number of credit cards, of which the data had been stolen in spain, and how this impacted many cardholer, who had made purchases in Spain. Being a specialist within the industry myself, I could not resist to write an further article on credit card data theft, and how you can deal with it as a credit card holder. This article is based on Visa and MasterCard issued credit cards only.

Each credit card transaction follows a strict procedure and a number of steps. As soon as a cardholder walks into a store, hotel, or car rental company, and wants to purchase an item or service, the credit card is usually swiped at the credit card terminal. The data on the credit card is read by the terminal, and then sent to the company’s bank, the so-called acquiring bank. The acquiring bank will receive the data, and the request for the transaction, and it will check with the issuing bank (the bank that issued the credit card, or the cardholder’s bank) whether there is enough credit availabe on that card, and whether the transaction is allowed. If the result is positive, the issuer will give the green light to the acquiring bank, which is passed on to the terminal in order to complete the transaction. Various methods exist today for completing a transaction, from the classic signature-based transactions to the more secure PIN & Chip.

In this particular case, fraudsters had stolen the credit card data directly from the acquiring bank, so there is nothing the cardholder could have done in order to prevent this from happening. Some credit card issuers have already started to block impacted cards. Nevertheless, there are a few things I believe each and every cardholder should be aware of in similair events.

Block your card immediately

If you are in Spain, or were in Spain recently, you may want to check with your issuing bank whether or not your credit card may have been impacted. If so, you should block your card immediately. Issuing banks are usually able to send replacement cards worldwide. Each issuer has a 24/7 hotline for such events, and you should call a service representative  in order to discuss with them the further proceedings.

Do not panic

I know it might sound weird, but many people do panic if they suspect credit card fraud, or if fraud had already occured; many people already start imagining losing thousands of Dollars at their own expense, even before anything has really happened. The first fact, however, is that once a credit card is blocked, the cardholder usually has no liability as to any losses occuring after having blocked the card. Secondly, if fraud occurs before the card has been blocked, the maximum liability to the cardholder is usually limited to a specific amount. Should this not be applicable in your case, perhaps you may want to think of changing your credit card issuer.

Transaction are regulated

What many people forget, is that the entire transaction process is regulated up to the smallest detail. These regulations describe the obligations and the rights of each party involved in the credit card transaction, from the cardholder to the merchant, from the issuer to the acquirer, and/or any other involved third party. If a fraudulent transaction occurs, regulations allow cardholders and issuers to initiate a dispute. A dispute is much like an investigation, in which the correctness of the entire transaction process is investigated. Should a party not have lived to its obligations, he may be required to stand in for the fraudulent transaction amount. In many cases, errors in the transaction process occur at the side of the merchant, which let fraudulent transactions go through. In this case, merchant will often be liable and need to stand in for the amount.

Tipps for merchants

If you are a merchant yourself, there are a number of things you can do in order to limit the number of fraudulent transactions:

  1. Always use a POS terminal if available, and swipe the card. If not available, make a real imprint of the card using an imprint device, not just a copy. Copies will often not be valid as proof in a dispute case, that the credit card was physically present.
  2. If a terminal is not available, always call your acquirer to verify the limit of the cardholder.
  3. Ask the cardholder for an ID, and check the details with that on the credit card. Are the name and date of birth identical? Has the card not yet expired? Does the name on the credit card correspond with the gender of the cardholder?
  4. Compare the cardnumber on the receipt with the imprinted cardnumber on the credit card. Are they identical?
  5. Verify the signature on the back of the credit card with the cardholder’s signature on the receipt. Are they identical?

In order to get in-depth advice, you should definitely contact your issuing or acquring bank. They are able to tell you more about their fees, things to watch out for, and how they deal with credit card fraud; this might differ from bank to bank.

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Should You Go for Price or Quality? 0

Posted on November 15, 2009 by admin

I wanted to write this short post as a reaction to a phenomenon I saw yesterday at a discount store: hundreds of people were running around in a discount store, which sold many items at extremely low prices. People were virtually falling over each other, just in order to get the cheapest item available. I got curious, and went in.

As soon as I saw the type of products being sold, I was seriously wondering: what is the benefit of buying a low-priced product, if you can throw it away after a month or two? I know, personal finance encourages to cut down expenses where possible, but does it make sense to buy 12 low-qulity items for 7 USD durig  year, or only one high-quality item for 25 USD, which will probably hold for more than a year.

Up to which extent does the low price of an item compensate for its quality? Think about it next time when you go shopping.

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How to Build a Network 0

Posted on November 15, 2009 by admin

If there is one thing I learned during childhood and my teens, it is how important good friends are.  Then, during education and throughout my career, I learned in addition to that how important a good network is; not only in respect to the many social contacts, but also to opportunities which may arise through the network, for example a job posting at the company you always wanted to work for. Many job postings nowadays are not even publicly advertised, as they are being filled through existing networks of friends, co-workers, ex co-workers, family, etc.

If there is one thing I did not learn during childhood, it’s how be a great networker; I had to acquire all the skills during my adulthood. Nevertheless, from what I have learned I believe everyone can be a great networker, no matter wheter they have experience or not, whether it involves a personal network or a professional network.

I have written below five basic considerations, which are the result from my own experience. You do not have to follow these, and as I mentioned these are some really basic considerations, something to keep in the back of your head when meeting new people; real professional networkin goes far beyond these five steps.

1. Be open to meeting new people

When I did not know anything about networking, I was quite sceptical when meeting new people. I tended to keep my distance, awaiting to get some more insights about their motivations. I felt much more comfortable in my old group of friends and acquiantances than I did when meeting new people. When I did meet new people, it was usually via the friends and family and friends I already have, and usually I tended to think of them as their friends, not mine.

When I went abroad for my studies, I recognized how important it is to be open to meeting new people, since I didn’t know anybody in the new, big city. I started to open up, and escape my old habits. While I was doing that, I started to notice how closed other people often are when it comes to meeting new people and building personal relationships.

The best way for me to start being more open was to engage into small talk with just about anyone: the waitress at the bar, the people at university, my co-workers at work, and sometimes even some complete strangers in the bus. This has literally replaced my old habits with a set of new habits, being an open personality, enjoying to meet new people with the most different backgrounds and stories. Often the conversation just stays as it is, but sometimes personal contact details are exchanged.

2. Focus on the relationship, not the outcome

For many people, networking does not have the best possible image; it has the image of meeting people for the purpose of wanting favours from them. Although I have met quite some ‘networkers’, who do exactly that, their networking attempts will usually result in a very superficial network with little meaning.

A very powerfull mindset is to focus on the relationship, rather than the outcome. With building relationships, I mean being in regular contact with that person, and really focus on getting to know each other. Depending on the type of contact, you may want to go for a drink or meet up regularly if you are working on a more personal network, or you might keep a bit more distance if you are building a network with customers, business partners, or generally work-related. Nevertheless, the relationship will need to be worked on from the moment of meeting that person, and the right mindset focuses on intensifying that relationship continuously.

Focusing on the relationship does not mean you can not ask or give favours; it simply means that this is not where you want the focus to be; people might sense that there is something strange about the situation of meeting you.

3. Networking is an imbalance of giving and taking

Family members, friends, and members of a network do favours for each other. That’s what they are for, and that is what makes the connection with another person special. Once a relationship exists, it is perfectly normal to ask someone for a favour, or for someone coming to you for a favour.

Some people I know keep a journal of all favours they had given or received… I am not a big favour of that. To me, it does not matter that I have done two favours to someone and have not received anything back. In my opinion, there is always  fine imbalance between giving and taking. I am always prepared to give, as long as the imbalance does not become too big. People, who are only our for a profit, have lost nothing in my network.

I have to note, that a favour does not always have to occur free of charge. A friend of mine, for example, is a lawyer. Once I had asked him to look into a topic for me, that he is specialized in. Of course I paid him, although he did give me a small discount; in the end he is putting time and effort in my request, and I honestly believe that it should be rewarded in one way or the other.

4. Be present

With being present, I basically mean that people notice you, and are invited to chat with you. It does not matter whether I am at a party, a networking event or a party, I try to show presence as much as I can. For example, I might talk with one person for 20 minutes, and agree with him we should stay in touch for an after-work drink some time… then I go to another place or room, and initiate a conversation with other people. I do not want to jump from one conversation to the other as if it were speed dating, but also do I not want to clinge to the known and comfortable.

5. Self-Marketing

When I just started with networking, I needed at least a few minutes to explain someone what I do for a living, and what I had done in the past… and I wasn’t doing it effectively either. I recognized, that self-marketing was extremely important when building a network, if I wanted others to really get to know me and my strengths within a short period of time. Because else why should someone within my network offer me a job if that person does not know my strengths and what I am all about? This is an important point to think about: how can I communicate what I do and my strenghts in the shortest possible time?

Networking truly covers much more that only the few points mentioned above, but these few steps have helped me tremendously.

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