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Your parents’ income doesn’t determine yours – unless you’re ultra rich or extremely poor

<div class="theconversation-article-body"><em><a href="https://theconversation.com/profiles/catherine-de-fontenay-5631">Catherine de Fontenay</a>, <a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a></em></p> <p>Australia is among the strongest global performers in terms of income mobility between the generations, according to a new <a href="https://www.pc.gov.au/research/completed/fairly-equal-mobility">Productivity Commission report</a>.</p> <p>The country’s long-term economic growth has led to each generation earning more than the last, on average.</p> <p>Our report finds 67% of the so-called <a href="https://www.businessinsider.com/xennials-born-between-millennials-and-gen-x-2017-11">“Xennial”</a> generation – those born in 1976–1982, on the cusp of the Millennial/Gen X divide – earn more than their parents did at a similar age.</p> <p>This is particularly true of those born into poorer families.</p> <hr /> <p><iframe id="NsmB3" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/NsmB3/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <hr /> <p>When we look at where people rank in an income distribution, the picture is a little less rosy. While children with parents at the bottom or top of the income scale are more likely to remain there, almost 15% of people with parents in the lowest income decile, remain there while just 6% move to the top.</p> <p>And those living in poverty - who often include renters, people from migrant backgrounds who don’t speak English at home and single parents - face some of the biggest barriers to improving their economic lot.</p> <p><a href="https://www.pc.gov.au/research/completed/fairly-equal-mobility">Fairly Equal? Economic mobility in Australia</a>, released on Thursday, measures intergenerational income mobility by examining the relationship between a person’s income and the eventual income of their children.</p> <h2>Measuring inequality</h2> <p>Most countries anxiously monitor income distribution and economic mobility amid concerns inequality may be increasing.</p> <p>And countries with high inequality tend to have low mobility: the rungs of the social ladder are far apart making it difficult to move up to the next level.</p> <p>If mobility is low, the consequences are serious. Low mobility is discouraging, unproductive and unstable. If young people have little chance of achieving their aspirations, their wellbeing is affected.</p> <p><a href="https://ideas.repec.org/p/cor/louvco/2023026.html">Social unrest is more likely</a>. And the abilities of young people from less affluent backgrounds are under-used. The next tech entrepreneur Steve Jobs may never be discovered, and many other opportunities are lost.</p> <p>In Australia we are used to thinking of ourselves as having inequality and mobility somewhere between Scandinavia and the US; but that comparison is not as comforting as it used to be, if inequality and mobility are worsening in the US.</p> <p>Our report considers people’s income mobility over the course of their lives, and across generations. If income mobility is low, people will struggle to recover from initial disadvantage, and those born into privilege will be financially secure.</p> <p>First we look at whether people move in the income distribution; there is a surprising amount of movement. And we look for evidence people can access opportunities throughout life, after setbacks.</p> <h2>Recovering from setbacks</h2> <p>There is not much evidence of recovery after a person experiences a severe illness or a job loss, perhaps because the causal factors are still at work.</p> <p>More encouragingly, the income of women who experience separation <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0020/4815110/HILDA-User-Manual-Release-22.0.pdf">does increase</a>, eventually restoring the buying power of their household. This is in part due to well-targeted government support.</p> <p>For intergenerational mobility, we extended the dataset developed by <a href="https://www.aeaweb.org/articles?id=10.1257/jel.20211413">an analytical dataset</a> to measure the influence parents’ income had on the income their offspring were likely to earn.</p> <p>We found Australia’s intergenerational mobility is actually higher than the <a href="https://onlinelibrary.wiley.com/doi/10.1111/sjoe.12197">Scandinavian</a> countries, and second only to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3662560">Switzerland</a> among comparable studies.</p> <hr /> <p><iframe id="5DFB9" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/5DFB9/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <hr /> <p>In all countries studied there was some link between parents’ income mobility and that of children, because parents pass on tastes, ambitions and abilities.</p> <p>And there was greater correlation between the incomes of mothers and daughters, and fathers and sons than with parents of the opposite gender, perhaps because of role model effects.</p> <hr /> <p><iframe id="BJ4hD" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/BJ4hD/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <hr /> <p>While Australia’s strong income mobility between generations is remarkable, it’s concerning there is less mobility among those at the very bottom and top of the income distribution scale.</p> <p>The fact children born into the poorest families were more likely to remain in the lowest deciles, while those born into the top earning families tended to remain in the top deciles, suggests privilege is often passed on.</p> <p>People who grew up in frequently poor households were <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0009/3537441/HILDA-Statistical-report-2020.pdf">three time more likely</a> to be poor at age 26 to 32 than those who never experienced poverty.</p> <hr /> <p><iframe id="SxHBo" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/SxHBo/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <hr /> <p>And consistent with <a href="https://www.aihw.gov.au/getmedia/37c2c8b7-328c-41e1-bace-87ed7a551777/australias-welfare-chapter-2-summary-18sept2019.pdf.aspx">other studies</a> we found children whose family received government payments were twice as likely to receive support as adults, compared with those whose families received no help.</p> <h2>Movement in the middle</h2> <p>Taken together, these results suggest some segmentation of opportunities. In the middle of the income distribution, there are opportunities to get ahead, and individuals’ careers are not restricted by their families’ circumstances.</p> <p>At the bottom, things are a lot more “sticky”, and finding opportunities to permanently escape poverty is more difficult. Some of this boils down where people live, peers, school quality and local job options.</p> <p>Researchers <a href="https://www.aeaweb.org/articles?id=10.1257/jel.20211413">Deutscher and Mazumder</a> (2023) have shown regional economic conditions have a big impact on mobility, and we show remoteness limits movement out of poverty.</p> <p>Overall, the mobility picture is extremely good news for most Australians.</p> <p>But this should not blind us how difficult it is to move out of poverty, especially for those in remote areas. Identifying where mobility fails to deliver allows us to focus our policy response.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/234158/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em><a href="https://theconversation.com/profiles/catherine-de-fontenay-5631">Catherine de Fontenay</a>, Honorary Fellow, Department of Economics, <a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a></em></p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/your-parents-income-doesnt-determine-yours-unless-youre-ultra-rich-or-extremely-poor-234158">original article</a>.</em></p> </div>

Money & Banking

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Second marriage asset protection: What you need to know

<p>Of paramount importance for many people in a second marriage is how to protect their assets if their relationship breaks down, or in the event of their death. Although second marriages bring a level of complexity, there are a number of strategies that you can implement to ensure that your assets are protected. </p> <p>Let’s explore some of the options available to you and what you need to know to protect your assets.</p> <p><strong>Binding Financial Agreement</strong></p> <p>A Binding Financial Agreement, often referred to as a pre-nup, allows you and your spouse to put in place a legal agreement which outlines how your assets will be dealt with in the event that your relationship breaks down. Should you wish, it can also extend to the provision of financial support for either party. The intention is for each party to protect their own assets, and such agreements can be put in place prior to a marriage or during a marriage if both parties consent. </p> <p>Like any legal document, a Binding Financial Agreement needs to be well drafted to ensure that it encompasses all relevant information, and it is important that you seek the advice of a family lawyer to assist you with putting this important document in place.</p> <p><strong>Joint Assets v Individual Assets</strong></p> <p>The manner in which you hold your assets is of paramount importance. All joint assets pass to the surviving party. If you and your spouse own a property as joint proprietors upon your death this property will automatically pass to your spouse. By changing the manner in which you hold the property from joint proprietors to tenants in common allows you and your spouse to deal with your individual interest in the property in your respective Wills. </p> <p>Additionally, you need to be mindful of any bank accounts or other investments that you hold jointly with your spouse as these are not individual assets that you can make provision for and will pass to your spouse upon your death.</p> <p><strong>Your Will</strong></p> <p>It is imperative that you put a Will in place that is reflective of your current circumstances and adequately provides for both your spouse and your children from a previous relationship in the manner that you desire. For many parents in second marriages with children from a previous relationship, protecting their children’s inheritance is of paramount importance. </p> <p>Discretionary Testamentary Trusts which are created in accordance with the provisions of your Will, can make provision for your spouse during their lifetime, whilst also ensuring that most of your assets go to your children. </p> <p>If you are the sole registered proprietor of your residence in which you and your spouse reside you may make provision in your Will providing a life interest in your residence to your spouse subject to some conditions being adhered to. This will allow your spouse to reside in your residence for the duration of their life then subsequent to their death the property may then pass to your children. </p> <p>Dying without a valid Will in place deems that you died intestate, and your assets will be distributed in accordance with a government formula and may not end up with the people who you would like to receive them. Your spouse would be entitled to a share of your assets, however this may not have been your intention, or the share that they would receive may be significantly more than you would like them to receive. </p> <p>It is therefore crucial that you take the time to put a well drafted Will in place so that your assets pass to those who you would like to receive them upon your death.</p> <p><strong>Mutual Wills Agreement</strong></p> <p>A Mutual Wills Agreement is a separate document to your Will and essentially is an agreement between you and your spouse that both of you will not change your Will without the consent of the your spouse or their legal personal representative upon their death.  </p> <p>This document is intended to prevent the remaining spouse from altering their Will and disinheriting step-children or making other adverse changes to their Will.</p> <p><strong>The Right People in Key Roles</strong></p> <p>The roles of executor of your Will and your attorney in respect to your Power of Attorney documents are important roles and it is paramount that you appoint trusted people to undertake these roles as essentially you are handing control of your assets to those who assume these roles. </p> <p>Your attorney is entrusted to look after your finances and provide the best care for you in the event that you become incapacitated so you need to choose wisely.</p> <p><strong>Communication is Crucial</strong></p> <p>It is important that there is transparency for you and your family. By having important conversations with your spouse and children you can openly discuss your intentions and expectations so that all parties are relevantly informed and fully understand what your wishes are and what you have put in place. </p> <p>In order to evaluate the best options for you it is important that you obtain the appropriate professional advice to determine which is the best strategy for your own individual circumstances so that the relevant documents are put in place which offer you the best asset protection possible.</p> <p><em><strong>Melisa Sloan is principal of Madison Sloan Lawyers and author of Big Moments: Expert Advice for Conquering those moments that define us. www.melisasloan.com.au</strong></em></p> <p><em>Image credits: Shutterstock </em></p>

Money & Banking

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How much do you need to know about how your spouse spends money? Maybe less than you think

<p><em><a href="https://theconversation.com/profiles/scott-rick-1534612">Scott Rick</a>, <a href="https://theconversation.com/institutions/university-of-michigan-1290">University of Michigan</a></em></p> <p>Love is in the air, and wedding season is upon us.</p> <p>Like many elder millennials, I grew up watching sitcoms in the 1980s and ‘90s. Whenever those series needed a ratings boost, they would feature a wedding. Those special episodes taught me that weddings usually involve young lovebirds: think Elvin and Sondra from “The Cosby Show,” Cory and Topanga from “Boy Meets World,” or David and Darlene from “Roseanne.”</p> <p>But those were different times. People are getting married later in life than they used to: In the United States, <a href="https://www.census.gov/content/dam/Census/library/visualizations/time-series/demo/families-and-households/ms-2.pdf">the median age of newlyweds</a> has grown to 28 for women and 30 for men.</p> <p>This trend means that many Americans now enter marriage after being self-reliant for several years, including managing their own money. Will they be eager to change that once they get married? Don’t count on it. A 2017 <a href="https://bettermoneyhabits.bankofamerica.com/content/dam/bmh/pdf/ar6vnln9-boa-bmh-millennial-report-winter-2018-final2.pdf">Bank of America survey</a> suggests that millennial married couples are around 15 percentage points more likely than their predecessors to keep their finances separate.</p> <p>This is not necessarily a good development. As a behavioral scientist <a href="https://michiganross.umich.edu/faculty-research/faculty/scott-rick">who studies money and relationships</a>, I find that joint accounts <a href="https://doi.org/10.1093/jcr/ucad020">can bring partners closer</a>.</p> <p>There are some risks, however. Joint accounts create transparency, and intuitively, transparency feels like a good thing in relationships. But I argue that some privacy is important even for highly committed couples – <a href="https://us.macmillan.com/books/9781250280077/tightwadsandspendthrifts">and money is no exception</a>.</p> <h2>The newlywed game</h2> <p>Behavioral scientists <a href="https://kelley.iu.edu/faculty-research/faculty-directory/profile.html?id=jgolson">Jenny Olson</a>, <a href="https://som.yale.edu/faculty-research/faculty-directory/deborah-small">Deb Small</a>, <a href="https://www.kellogg.northwestern.edu/faculty/directory/finkel_eli.aspx">Eli Finkel</a> and I recently conducted <a href="https://academic.oup.com/jcr/article-abstract/50/4/704/7077142">an experiment with engaged and newlywed couples</a>. Each of the pairs had entirely separate accounts, but they were undecided about how they wanted to manage their money moving forward.</p> <p>We randomly assigned each of the 230 couples to one of three groups. One group kept their money in separate accounts; one merged their cash into a joint account and stopped using separate accounts; and one managed their money however they liked.</p> <p>We followed couples for two years, periodically asking them to complete surveys assessing their relationship dynamics and satisfaction. Our relationship quality measure included items such as “I cannot imagine another person making me as happy as my partner does” and “Within the last three months, I shouted or yelled at my partner.”</p> <p>Among the couples who could do whatever they wanted, most kept things separate. They and the couples assigned to keep separate accounts experienced a steady decline in relationship quality over time.</p> <p>This is a fairly typical pattern. For instance, in <a href="https://academic.oup.com/sf/article-abstract/79/4/1313/2234046">a large study that tracked U.S. couples’ marital happiness for 17 years</a>, <a href="https://www.unk.edu/academics/social-work/faculty_staff/van_laningham.php">sociologist Jody Van Laningham</a> and colleagues found that “marital happiness either declines continuously or flattens after a long period of decline.”</p> <p>Declines during the first two years of marriage are particularly important. Social scientist <a href="https://liberalarts.utexas.edu/prc/faculty/hustontl">Ted Huston</a> and colleagues call those first two years <a href="https://doi.org/10.1037/0022-3514.80.2.237">the “connubial crucible</a>.” They find that relationship dynamics that develop during that crucial period can foreshadow relationship quality for many years to come.</p> <p>Couples in our study who were prompted to take the plunge into a joint account, however, maintained their initial level of relationship satisfaction over the course of the two-year experiment.</p> <h2>Tit-for-tat</h2> <p>Our survey results suggest that, by turning “my money” and “your money” into “our money,” a joint account can help to reduce scorekeeping within a relationship. For example, we found that couples with joint accounts were more likely to agree with statements such as “When one person does something for the other, the other should not owe the giver anything.”</p> <p>Relationships usually don’t start with a scorekeeping orientation. In the 1980s and ‘90s, psychologist <a href="https://psychology.yale.edu/people/margaret-clark">Margaret Clark</a> and colleagues conducted experiments where partners had the option of keeping track of each other’s contributions to a shared task. <a href="https://clarkrelationshiplab.yale.edu/sites/default/files/files/Resource%20allocation%20in%20intimate%20relationships.pdf">They observed</a> that intimate relationships often begin with a “communal” orientation, where partners help one another without keeping careful track of who’s doing what.</p> <p>Eventually, however, they take on more of an “exchange” orientation – where inputs are tracked and timely reciprocity is expected. Couples that manage to stave off a tit-for-tat mindset <a href="https://doi.org/10.1177/0956797610373882">tend to be happier</a>.</p> <h2>Too much of a good thing?</h2> <p>The data from our experiment with young couples clearly suggests that using only a joint account is better than using only separate accounts. However, I argue in my new book, “<a href="https://us.macmillan.com/books/9781250280077/">Tightwads and Spendthrifts</a>,” that just a joint account is probably not optimal.</p> <p>When partners use only a joint account, they get an up-close-and-personal view of how the other person is spending money. This kind of transparency is <a href="https://www.businessinsider.com/money-habits-successful-married-couples-avoid-2016-11">normally viewed</a> as a good thing.</p> <p>Some commentators argue that a healthy marriage should have no secrets whatsoever. For example, Willard Harley, Jr., a clinical psychologist who primarily writes for Christian audiences, argues that you should “reveal to your spouse <a href="https://www.marriagebuilders.com/the-policy-of-radical-honesty.htm">as much information about yourself as you know</a>: your thoughts, feelings, habits, likes, dislikes, personal history, daily activities, and plans for the future.”</p> <p>In addition, if your goal is to minimize optional spending, <a href="https://doi.org/10.1002/jcpy.1083">research suggests</a> that the transparency that comes with a joint account can be helpful. We spend less when someone is looking over our shoulder.</p> <p>Still, there are reasons to believe that <a href="https://doi.org/10.1177/0265407500172005">complete transparency can be harmful for couples</a>.</p> <p>Many people have become convinced that if they could just stop buying lattes and avocado toast, they could invest that money and become rich. Unfortunately, the underlying math is highly dubious, as journalist Helaine Olen points out in <a href="https://www.penguinrandomhouse.com/books/308568/pound-foolish-by-helaine-olen/">her book “Pound Foolish</a>.” Still, many people view small indulgences as their primary obstacle to wealth. Complete transparency around these financially inconsequential “treats” <a href="https://slate.com/business/2021/09/partner-hates-retail-therapy-money-advice.html">can lead to unnecessary arguments</a>.</p> <p>Also, spouses may have different passions that their partner does not fully understand. Expenses that seem perfectly reasonable to another hobbyist may seem outrageous <a href="https://academic.oup.com/jcr/article-abstract/19/2/256/1929895">to someone without the proper context</a> – another source of <a href="https://www.sciencedirect.com/science/article/abs/pii/S2352250X21000750">avoidable disagreements</a>.</p> <h2>'Translucent,’ not transparent</h2> <p>I propose that many couples may benefit from a combination of joint and separate accounts.</p> <p>A joint account is essential for ensuring that both partners have immediate and equal access to “our money.” Ideally, all income would be direct-deposited into the joint account, which would help to blur the gap between partners’ earnings. Conspicuous income differences <a href="https://doi.org/10.1086/432228">can jeopardize relationship quality</a>.</p> <p>Separate accounts attached to the joint account can allow some privacy for individual purchases and help partners maintain a sense of autonomy and individuality. Each person gets to spend some of “our money” without their partner looking over their shoulder. Spouses would have a high-level understanding of how much their partner is spending per week or per month, but avoid the occasionally irritating details.</p> <p>This kind of partial financial transparency – <a href="https://us.macmillan.com/books/9781250280077/tightwadsandspendthrifts">what I call “financial translucency</a>” – could help couples strike the right balance between financial and psychological well-being.</p> <p>Of course, this approach requires a lot of trust. If the relationship is already on thin ice, complete financial transparency may be necessary. However, if the relationship is generally in the “good, but could be even better” category, I would argue that financial translucency is worth considering.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/230070/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><em><a href="https://theconversation.com/profiles/scott-rick-1534612">Scott Rick</a>, Associate Professor of Marketing, <a href="https://theconversation.com/institutions/university-of-michigan-1290">University of Michigan</a></em></p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/how-much-do-you-need-to-know-about-how-your-spouse-spends-money-maybe-less-than-you-think-230070">original article</a>.</em></p>

Money & Banking

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Been scammed? Here's how to financially recover

<p>Many people feel shame and embarrassment after realising they have been scammed. But you shouldn’t. You did nothing wrong; you are the victim of a crime. </p> <p>Not only are such feelings bad for your mental wellbeing, but they also often stop people reporting the scam or taking action to avoid further losses. </p> <p>Remember too that you’re not alone: victims reported more than 601,000 scams to the ACCC in 2023, together losing a staggering $2.74 billion. People of all ages, professions, and backgrounds have been affected. </p> <p>As hard as it may be, try to leave emotion aside and approach this like any other money matter – logically and methodically. Doing so will help you act faster and more decisively, which is crucial to your financial recovery. </p> <p>The following checklist will help you through this process:</p> <ul> <li><strong>Step 1 – Try to recoup your stolen money</strong></li> </ul> <p>Report the scam immediately. Contact your bank or card provider to stop the transaction being processed. Notify the company or marketplace where it occurred – they may have options to reverse the payment or for you to claim compensation for fraud. </p> <p>Also inform the ACCC’s Scamwatch and police if relevant, which may aid in tracking down the scammer and will help them alert the wider public on what to look out for. </p> <p>Unfortunately, the money is likely gone for good, but prompt action may just help you get some or all of it back. </p> <ul> <li><strong>Step 2 – Secure your accounts from further thefts</strong></li> </ul> <p>Once scammers have found a way to steal money, they often go back to try for more. Don’t let them! </p> <p>Freeze or cancel affected debit and credit cards, accounts etc. Change and strengthen all your passwords. Set up two-factor authentication if you haven’t already. Remove any suspicious applications on electronic devices. </p> <p>Double check the registrations of any business, adviser or tradesperson before engaging their services. Regularly check your superannuation, investments etc. to monitor for any inconsistencies.</p> <ul> <li><strong>Step 3 – Safeguard your cash flow</strong></li> </ul> <p>Don’t multiplying your losses by racking up new debts to cover the stolen money. That means limiting the use of credit cards, payday lenders and Buy Now, Pay Later schemes. Consider paying with cash instead to help you stick to a budget.</p> <p>If you have lost everything, register with Centrelink for income support. You may also be able to apply for hardship provisions with your bank, phone and energy providers and other essential services.</p> <ul> <li><strong>Step 4 – Get reputable advice</strong></li> </ul> <p>Legal advice may be able to get you out of bogus contracts, like loans or phone plans, and help you in the event your personal information has been stolen (which can be used in various ways to steal money). If you can’t afford a lawyer, there are free alternatives such as Legal Aid or Community Legal Centres. Specialist services such as the Women’s Legal Service may offer support where partner coercion or domestic abuse is involved.</p> <p>Accounting and financial advice may also help you navigate assistance options and longer term recovery efforts.</p> <ul> <li><strong>Step 5 – Rebuild your finances</strong></li> </ul> <p>Your ability to rebuild your finances after a scam will depend on a range of factors, including how much was lost plus your age and circumstances.</p> <p>You could seek to increase your earnings and/or cut your spending by tweaking your household budget, delaying retirement, or temporarily taking a second job to boost your income. </p> <p>Another option is to make your remaining finances work harder than before, such as adjusting your investment strategies (e.g. changing your risk weightings or selling assets) including within your superannuation or accessing equity in your home.</p> <p>If you’re a self-funded retiree, you may now qualify for a part or full pension if your scam losses push your total assets below the means test threshold.</p> <p>Ultimately, the most important things when dealing with the fallout from a scam is to look after yourself and protect what you have left.</p> <p>Scammers have already taken off with your dollars. Don’t let them steal your sense too!</p> <p><em><strong>Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women. Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at <a href="http://www.onyourowntwofeet.com.au/">www.onyourowntwofeet.com.au</a></strong></em></p> <p><em><strong>Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.</strong></em></p> <p><em>Image </em><em>credits: Shutterstock </em></p>

Money & Banking

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What you need to know about protecting your children’s inheritance

<p>For many people, ensuring that their children’s inheritance is protected is of paramount importance to them. There are a number of strategies that you can put in place to achieve this objective, you just need to determine which one bests suits you and your family’s circumstances.</p> <p><strong>Put a Will in place</strong></p> <p>By putting a Will in place, you get to decide who your assets go to, allowing you to make provision in your Will for them to pass to your children upon your death. If you do not have a Will in place then it is up to the government where your assets get paid and this may mean that your assets do not pass to your children, or do not pass to them in the manner that you desire. Play it safe and ensure things go the way you want them by taking the time to put a Will in place.</p> <p><strong>Testamentary trust </strong></p> <p>Let me introduce you to Testamentary Trusts.  These amazing vehicles allow you to transfer your wealth to your children in the most asset protective and tax effective way possible. With an increasing number of marriages crumbling and divorce rates soaring, the last thing you want is your hard earned wealth passing to your child’s estranged partner in the event of one of your child’s marriage breakdown. By making provision in your Will leaving your children’s inheritance in a Testamentary Trust it protects their inheritance from any divorce or family law risks if your child’s relationship breaks down.</p> <p>Additionally, you may have a child who works in a high-risk occupation – a doctor, financial advisor or perhaps carrying on the role of a director. Alternatively, your child may be an entrepreneur, taking risks in their own business operations.  </p> <p>If something adverse happened to your child whilst they were undertaking these roles and they were sued, they could be personally liable for them for any actions brought upon them by the aggrieved party.</p> <p>Creditors and other associated parties could only seek recourse to moneys owed by your child from them in their own personal capacity. If your child had received their inheritance in their own name, and hence the assets were now individual assets, the creditors and other associated parties would have recourse in recovering funds owed to them by your child.</p> <p>However, if your child’s inheritance was paid to a Testamentary Trust for their benefit at the time of your death then these assets would be held on trust for them and are not personal assets, hence the creditors and other associated parties would not have recourse in respect to these assets.</p> <p><strong>Blended marriages</strong></p> <p>If you have children from a previous marriage, it’s imperative that you obtain the appropriate legal advice  in respect to how to protect your assets for your children. There are a number of options that you can put in place including a Binding Financial Agreement and a Mutual Wills Agreement. </p> <p>There are also strategies that you can put in place which ensure that your assets pass to your children upon your death. Options are also available where you may wish for your partner to receive some benefit of some of your assets during your lifetime with all assets passing to your children upon your partner’s death.</p> <p><strong>Choose the right executor </strong></p> <p>If you have young children, it will be your executor who looks after your children’s inheritance until your children reach the age that you have stipulated in your Will that you would like them to receive your assets.</p> <p>It is therefore imperative that you have the best person possible to undertake this role as you are effectively giving them the keys to everything that you own and control. That’s big. You need to appoint someone that you trust implicitly to undertake this role. You need to appoint your most trusted ally. </p> <p>Your executor also needs to be financial savvy or receptive to obtaining the appropriate financial advice to enable them to look after and grow your children’s inheritance.</p> <p>It is important that you seek the appropriate advice so that you can put the best strategies in place that protect your children’s inheritance in the best manner possible. There are a number of ways that you can protect your children’s inheritance, you just need to find the best one that works for you and your children.</p> <p><strong><em>Melisa Sloan, author of Big Moments, expert advice for conquering those moments that define us, is a lawyer, industry leader, author and board director who loves helping people put in place beautiful legacies. For more information visit www.melisasloan.com.au</em></strong></p> <p><em>Image credits: Shutterstock </em></p>

Money & Banking

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Michael Jackson's staggering debt revealed

<p>Michael Jackson was reportedly drowning in massive debt at the time of his death in 2009. </p> <p>According to newly released court documents, the late King of Pop owed more than $500 million ($747.05 million AUD) to more than 65 creditors just before he passed.</p> <p>Jackson had “more than half a dozen lawsuits pending worldwide” and more than “65 creditors’ claims were filed in the estate spawning additional lawsuits, of which several resulted in litigation,” the documents state. </p> <p>According to the documents, that were filed in a Los Angeles court on June 21st, the executors of Jackson's will were able to “renegotiate and restructure financing arrangements,” including a lucrative deal with Sony over rights he had to music publishing for several artists, at “substantially reduced interest rates” to avoid further losses and rectify the debts.</p> <p>The $750 million ($1.120 billion AUD) agreement allowed Sony to acquire Sony/ATV, which held the rights to almost 3 million famous songs from artists including John Lennon and Paul McCartney, David Bowie and Taylor Swift.</p> <p>Despite settling the major agreement with the record label, the Jackson estate still reportedly owes a significant amount of money as “there remain challenging business, tax and legal issues that the executers and their counsel continue to deal with.”</p> <p>The filing reportedly also notes a pending final decision on a victory in a 2021 court battle with the IRS.</p> <p>Jackson’s three children, Prince, 27, Paris, 26, and Bigi Jackson, 22 — who are the beneficiaries of his estate — have been blocked from receiving money from their trust until the IRS dispute has been settled.</p> <p>A spokesperson for the estate clarified, “The estate has a very cooperative relationship with Michael’s children and whenever they need anything, the estate works with them to ensure that they are very well taken care of, just as Michael would have wanted.”</p> <p>The <em>Los Angeles Times</em> previously reported that Michael accrued so much debt largely in part because of his excessive spending habits, which were aired during his 2003 interview with Martin Bashir that laid bare his extravagant spending. </p> <p><em>Image credits: Mousse/ABACA/Shutterstock Editorial </em></p>

Money & Banking

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What are financial years – and why are they different from calendar years?

<p><em><a href="https://theconversation.com/profiles/michaela-rankin-1544784">Michaela Rankin</a>, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a></em></p> <p>Yesterday was July 1, the first day of the new financial year in Australia.</p> <p>Also called fiscal years, financial years are often abbreviated in print. The one that’s just begun in Australia – July 1 2024 to June 30 2025 – will typically be denoted by FY24/25 or FY25.</p> <p>As the name suggests, financial years are used for financial reporting, tax and budgeting purposes. Whether you are preparing an individual tax return or financial statements for a business, it is important to understand the difference between financial and calendar years.</p> <p>Both have 365 days. But the calendar year, based on the <a href="https://www.timeanddate.com/calendar/gregorian-calendar.html">Gregorian calendar</a>, runs from New Years’ Day on January 1 through to December 31.</p> <p>Australian financial years on the other hand run from July 1 of one year to June 30 the next.</p> <p>But this July to June financial year <a href="https://web.archive.org/web/20200430054150/https:/www.cia.gov/library/publications/the-world-factbook/fields/228.html">does not apply</a> in all countries. Many align their financial year with the calendar year, but others have further variations still.</p> <p>So why are they different, and what does that mean for businesses operating across borders?</p> <h2>Different around the world</h2> <p>In contrast to our own, the United Kingdom’s financial year starts on April 6 each year and runs to April 5 the next.</p> <p>The English and Irish New Year traditionally fell on March 25, when taxes and other accounts were due. But in the 18th century, the British empire switched from the Roman Julian calendar to the Gregorian calendar, and had to <a href="https://www.bowesbrooks.co.uk/why-does-the-tax-year-start-on-6th-april/">adjust the start date</a> to avoid losing tax revenue.</p> <p>India’s fiscal year runs from April 1 until March 31, for a <a href="https://www.idfcfirstbank.com/finfirst-blogs/finance/reasons-why-the-financial-year-starts-from-april">number of reasons</a>. Historically a country that was heavily focused on agriculture, this timeframe aligned with the crop cycle and allowed the government to develop financial plans for the sector.</p> <p>The British empire also influenced the April reporting schedule in India, as prior to independence many financial policies were based on the British system.</p> <h2>Government budgets play a role</h2> <p>In the United States, fiscal years once ran from July 1 to June 30, like Australia’s do now. But in 1974 this was <a href="https://www.federaltimes.com/management/budget/2022/09/20/why-the-us-federal-fiscal-year-2023-starts-in-october/">changed</a> to instead span October 1 to September 30, giving Congress more time to agree on a budget each year.</p> <p>In the US, however, companies can also <a href="https://www.business.com/articles/how-to-decide-on-fiscal-year/">choose their own</a> fiscal years. Some choose a calendar year, but others elect dates that better align with their business cycle.</p> <p>Walmart’s, for example, ends on January 31 each year to reflect its typically strong financial performance over the holiday period at the end of the year.</p> <p>In Australia, the financial year matches government reporting cycles.</p> <p>Unlike the northern hemisphere, our parliamentarians typically take holidays over summer in December and January, which makes meeting over November and December to approve government budgets difficult.</p> <p>The federal budget is issued in May for the following financial year, giving parliament time to consider it before the new fiscal year begins.</p> <h2>Comparing (and taxing) performance</h2> <p>Regardless of the time period over which a financial year operates, its primary purpose is to provide a standardised time frame for financial reporting.</p> <p>Financial years allow income and expenses to be tracked and compared over the same timeframe each year. This allows investors to compare business performance across consistent periods. They are also used to determine the collection of personal income tax.</p> <p>Our government uses this information to calculate the amount of tax it will collect through the Australian Taxation Office each year.</p> <p>Businesses with operations spanning multiple countries may have to contend with fiscal years that do not align. Where this is the case, they may need to choose one financial year for the whole company, typically that used by the parent company.</p> <p>Keeping track of the financial year is helpful for individuals, in knowing when tax returns need to be prepared (and when to expect end-of-financial-year sales).</p> <p>It is also important for businesses to consider the financial year in making budgeting, business and tax planning decisions. <img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/233655/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><a href="https://theconversation.com/profiles/michaela-rankin-1544784"><em>Michaela Rankin</em></a><em>, Professor and Head, Department of Accounting, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a></em></p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/what-are-financial-years-and-why-are-they-different-from-calendar-years-233655">original article</a>.</em></p>

Money & Banking

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How to buy a home: 7 tips for negotiating like a pro

<p><em><a href="https://theconversation.com/profiles/park-thaichon-175182">Park Thaichon</a>, <a href="https://theconversation.com/institutions/university-of-southern-queensland-1069">University of Southern Queensland</a></em></p> <p>The main purpose of negotiation is to find a mutually acceptable solution for buyers and sellers. Good negotiations greatly improve relationships between buyers, sellers and agents. They also help avoid future problems and conflicts.</p> <p>Negotiating skills become even more important for home buyers in a “seller’s market”, where demand from buyers exceeds supply from sellers. That’s <a href="https://propertyupdate.com.au/australian-property-market-predictions/">currently the case</a> in all Australian capital cities and major regional cities such as Gold Coast, Sunshine Coast and others.</p> <p>Many home buyers mistakenly believe negotiation only occurs during the signing of the sale contract. However, it involves distinct stages: <em>pre-negotiation</em> and <em>during negotiation</em>.</p> <p>So how can people maximise their chances of successfully negotiating a purchase in a seller’s market? I offer the following tips.</p> <h2>Be someone the seller’s agent wants to do business with</h2> <p>Buyers often communicate solely with the seller’s agent, rather than directly with the seller. It’s crucial to ensure the agent views the buyer positively. Ultimately, it’s the agent who presents offers to the seller for their decision.</p> <p>It’s important, then, to understand what might motivate the seller’s agent to choose your offer. The key performance indicator for the agent often revolves around closing a property sale at a reasonable price within a certain time.</p> <p>This means price is a crucial factor. However, other factors can influence the seller’s agent and seller.</p> <p>For example, having pre-approved finance can increase the agent’s confidence in the buyer. If the buyer appears serious, can make quick decisions and makes a good impression, the agent may be more motivated to push for them, even if their offer is slightly lower than others without pre-approved finance.</p> <h2>Be a big fish (for the seller’s agent)</h2> <p>The next strategy is to give the seller’s agent extra incentive to favour you and your offer. <a href="https://www.emerald.com/insight/content/doi/10.1108/MIP-09-2019-0489/full/html">Our research</a> in customer behaviour suggests businesses value customers who make frequent purchases or engage them for long-term services.</p> <p>For example, the agent would be pleased to learn that the buyer might be interested in buying another property in the near future or in using their rental service for the new property. You have an advantage if you can position yourself as someone who could provide them with extra business.</p> <h2>Point to competing options</h2> <p>In a positive manner, let the seller’s agent know you are considering two or three properties, and this specific property is among those you are inclined to make an offer on.</p> <p>In certain situations, it may stimulate competitive pricing when multiple properties of similar quality are available in the same area. Make it clear to the agent you will choose the property that offers you the best overall value.</p> <p>While this strategy might not necessarily lower the price in a seller’s market, it can prompt the agent to have a fuller discussion with you.</p> <h2>Think beyond price</h2> <p>The next set of tips focuses on the <em>during negotiation</em> stages. It can be challenging for buyers to negotiate a lower price in a market with low supply and high demand. You might have to “think outside the price box”.</p> <p>Buyers often have a specific price range or fixed budget in mind when they start discussions with a seller. However, other factors besides price can influence a property’s overall value.</p> <p>So if a seller won’t adjust the price, consider negotiating for other concessions that could reduce your expenses.</p> <p>These may include:</p> <p><strong>Settlement period</strong></p> <p>Consider the expenses associated with the settlement period. A shorter settlement period could enable buyers to move into the property sooner and save on rent. For example, if a buyer is paying $600 per week in rent, an early settlement could save them around $2,400 per month.</p> <p><strong>Insurance costs after contract signing</strong></p> <p>In many states, buyers’ <a href="https://www.finder.com.au/home-insurance/home-insurance-cost">home insurance cover</a> is required to begin from the date of contract signing. It’s reasonable for buyers to include a special condition requesting the seller to bear the insurance costs until settlement. On average, home insurance may amount to about $140 per month.</p> <p><strong>Cleaning expenses</strong></p> <p>Consider negotiating a condition stipulating that the seller must ensure the property is professionally cleaned by settlement. Failure to do so could result in a $500 adjustment in the buyer’s favour at settlement.</p> <p>In some states, like Queensland, sellers are not obligated to deliver a clean property. Based on typical end-of-lease cleaning charges, internal cleaning of a four-bedroom property could cost <a href="https://firstcallhomeservices.com.au/service-menu/bond-exit-end-lease-cleaning/">$455 to $590</a>.</p> <p><strong>Building and pest inspection costs</strong></p> <p>Buyers should always include a 14-day pre-purchase inspection clause for <a href="https://www.topdogpestcontrol.com.au/building-pest-inspections-gold-coast/">building and pest inspections</a> in their offer. Although they may cost $300 to $600, these inspections provide a clear report that could lead to negotiations after contract signing if they find any issues with the property.</p> <h2>Be careful with your first offer</h2> <p>Don’t present the first offer in writing. It can be challenging to negotiate down the price once it has been written in an offer document.</p> <p>Instead, the buyer should begin by testing the expected price of the property. As well as obtaining property reports from multiple banks, the buyer could talk with the seller’s agent in person about a price range that would be agreeable to the seller.</p> <p>You could include phrases like “a price that will make the seller happy” or “a price that will make the seller accept the offer”. While the agent might not provide a specific price, this talk can provide a guideline for the buyer. All properties up for auction or private sale should have an expected price set, which may or may not be discussed with potential buyers.</p> <p>It’s also advisable to consult a solicitor before submitting an offer or signing a contract. They can offer valuable suggestions to smooth the purchase process and identify any issues.</p> <h2>Use the power of 900</h2> <p>Buyers often submit offers with round numbers, such as $700,000 or $750,000. In a competitive seller’s market, aim to submit an offer with a number that stands out from the rest, yet remains within your budget.</p> <p>An example of such a number is $900. For instance, comparing $700,000 to $700,900, the extra $900 makes the offer feel closer to $710,000.</p> <h2>Write a personalised letter</h2> <p>It’s true the most important point of selling a house for many sellers is price. But they are human and have emotions. Finishing a purchasing offer with a personal letter to the seller can make a difference.</p> <p>Often that $3,000 to $20,000 could be a lot of money for a buyer, but it may not be as much for someone selling a house for $700,000 or $1,000,000. Write the letter to express your feelings about the property in a way that makes it clear you will care for it. Most people selling their home would prefer to have someone look after it well.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/226237/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><em><a href="https://theconversation.com/profiles/park-thaichon-175182">Park Thaichon</a>, Associate Professor of Marketing, <a href="https://theconversation.com/institutions/university-of-southern-queensland-1069">University of Southern Queensland</a></em></p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/how-to-buy-a-home-7-tips-for-negotiating-like-a-pro-226237">original article</a>.</em></p>

Money & Banking

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What you should know before you start chasing bargains at the EOFY sales

<div class="theconversation-article-body"><em><a href="https://theconversation.com/profiles/park-thaichon-175182">Park Thaichon</a>, <a href="https://theconversation.com/institutions/university-of-southern-queensland-1069">University of Southern Queensland</a></em></p> <p>What cost-of-living crisis? Millions of Australians are expected to spend <a href="https://www.roymorgan.com/findings/9592-ara-roy-morgan-media-release-eofy-mid-year-sales-2024">A$10.1 billion</a> during the end of financial year (EOFY) sales.</p> <p>Many products, from cars and holiday packages to clothing and white goods will be available at marked down prices over the next few weeks.</p> <p>Clothing and accessories will attract the biggest spend, followed by electronics and technology, household items and decorations and then appliances and white goods.</p> <p>To put the estimated $10.1 billion EOFY spend in perspective, in 2023 Australians spent <a href="https://ecommerce-report.auspost.com.au/">$361 billion on retail goods</a>, with $63.6 billion of that spent online.</p> <p>With such high spending, consumers need to make informed decisions to maximise their savings and avoid pitfalls.</p> <h2>Buyer beware</h2> <p>It is important to understand the return and exchange policies of the different retail stores.</p> <p>Most retailers allow shoppers who change their mind up to 30 days to return and receive a refund or exchange the product. Some may have shorter return periods or may not accept returns on sale items.</p> <p>These items are sometimes referred to as final sales, non-refundable purchases, last-chance deals, no-return sales and clearance items. This means if a customer bought something on sale and later doesn’t want it, they can’t return or exchange it.</p> <p>Some retailers have specific conditions about where items can be returned. For example, in Melbourne <a href="https://www.davidjones.com/return-options">David Jones</a> requires boutique brands to be returned to specific branch locations. For example, items purchased instore from Chanel can only be returned at Elizabeth Street and Bourke Street Mall branches.</p> <p>Other conditions might include <a href="https://www.myer.com.au/content/returns-exchanges">no refunds/no exchanges</a> on large electrical items, furniture or mattresses unless faulty or damaged. Or retailers may only offer instore credit or charge a <a href="https://www.davidjones.com/return-options">25% restocking fee</a> when a customer cancels an order for a large or bulky item.</p> <p>Many retailers, such as streetwear brand <a href="https://www.culturekings.com.au/pages/shipping-returns">Culture Kings</a>, also require a payment if the return process involves shipping.</p> <p>As well as these conditions, retailers require any returned items to be in their original condition and sometimes, their original packaging. Being aware of these policies can help customers make more informed decisions and avoid being stuck with items they don’t want.</p> <h2>What to buy and where to get it</h2> <p>Certain items, such as off-season clothing, electronics and furniture are often discounted during EOFY sales, making it a good time to get them at reduced cost.</p> <p>However, some items, like the latest Playstation or newest smart phone, may not be as heavily discounted and might be better bought at other times of the year.</p> <p>Shoppers should also avoid buying items they are unlikely to use or consume before they expire including perishable goods like food, cosmetics and vitamins.</p> <hr /> <p><iframe id="dnC1Y" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/dnC1Y/" width="100%" height="400px" frameborder="0"></iframe></p> <hr /> <p>It’s also important to consider the value of the item and whether the discount offered during sales justifies the purchase, especially for big-ticket items that may require significant storage space or maintenance.</p> <p>Customers should also consider where to buy their items. Online retailers often have competitive prices and a wide selection, but some customers may prefer to see the item before they purchase instore.</p> <p><a href="https://journals.sagepub.com/doi/full/10.1177/14413582231167664">Multi-channel shopping</a> is a combination of both instore and online shopping. It gives customers the flexibility to choose how and where they want to browse and purchase.</p> <p>For example, some customers prefer to touch, feel and try a product instore but then make the purchase online for convenience, taking advantage of any free shipping offers and online discount.</p> <h2>Pressure tactics</h2> <p>It is important to be wary any deceptive tactics to persuade you to buy unwanted products.</p> <p>For example, some stores might use misleading advertising or pressure tactics to convince customers to make purchases with the feeling of fear of missing out (FOMO).</p> <p><a href="https://onlinelibrary.wiley.com/doi/full/10.1111/ijcs.12649?casa_token=271MN72XdP8AAAAA%3AfhYF_2yUJtM7KGv5jvFdXn5UsXQLkMcIM_F6hffYa30QaSdRivjf2mhFX-cr5C7ttCuLl1-e2OFYXBA">Our research found</a> FOMO played a role in panic buying.</p> <p>During the EOFY sales, businesses may try to create a sense of urgency by claiming that items are selling out quickly or prices will increase soon.</p> <p>For example, online sites might state a product is “low in stock”, “151 items have been sold today” or “25 people are watching this item”.</p> <p>By being aware these tactics are intended to lock them into buying, customers can take their time to consider purchases carefully and avoid being swayed into buying things they do not really want or need.</p> <p>Ultimately, the best approach for customers is to plan ahead, research prices and shop around to find the best deals for their needs.</p> <h2>Why we have EOFY sales</h2> <p>The original purpose of the EOFY is to mark the end of a 12-month accounting period for businesses and individuals. EOFY sales help businesses clear out last year’s stock and make way for new.</p> <p>Moving stock also helps to improve the bottom line by converting unsold goods into revenue.</p> <p>If consumers are savvy, they can find ways to make savings while also putting money back into the economy.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/232568/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><a href="https://theconversation.com/profiles/park-thaichon-175182"><em>Park Thaichon</em></a><em>, Associate Professor of Marketing, <a href="https://theconversation.com/institutions/university-of-southern-queensland-1069">University of Southern Queensland</a></em></p> <p><em>Image credits: Shutterstock</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/what-you-should-know-before-you-start-chasing-bargains-at-the-eofy-sales-232568">original article</a>.</em></p> </div>

Money & Banking

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The hidden risks of buy now, pay later: What shoppers need to know

<div class="theconversation-article-body"><em><a href="https://theconversation.com/profiles/vivek-astvansh-1318943">Vivek Astvansh</a>, <a href="https://theconversation.com/institutions/mcgill-university-827">McGill University</a> and <a href="https://theconversation.com/profiles/chandan-kumar-behera-1479139">Chandan Kumar Behera</a>, <a href="https://theconversation.com/institutions/indian-institute-of-management-lucknow-6023">Indian Institute of Management Lucknow</a> </em><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" src="https://narrations.ad-auris.com/widget/the-conversation-canada/the-hidden-risks-of-buy-now-pay-later-what-shoppers-need-to-know" width="100%" height="400"></iframe></p> <p><a href="https://www.canada.ca/en/financial-consumer-agency/services/loans/buy-now-pay-later.html">Buy now, pay later</a> is a relatively new form of financial technology that allows consumers to purchase an item immediately and repay the balance at a later time in instalments.</p> <p>Unlike applying for a credit card, buy now, pay later <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4591446">doesn’t require a credit check</a>. Instead, <a href="https://doi.org/10.1108/EJM-11-2021-0923">these programs use algorithms</a> to perform <a href="https://www.investopedia.com/terms/s/soft-inquiry.asp">“soft” credit checks</a> to determine <a href="https://theconversation.com/if-it-looks-like-debt-lets-treat-it-like-debt-buy-now-pay-later-schemes-need-firmer-regulation-in-nz-211820">a shopper’s eligibility</a>.</p> <p>This means buy now, pay later loans target <a href="https://www.theguardian.com/money/2022/jan/27/buy-now-pay-later-schemes-entice-consumers-spend-more">low-income, tech-savvy</a> <a href="https://www.cnbc.com/2022/10/27/gen-z-and-millennials-prefer-buy-now-pay-later-services.html">millennials and Gen Z shoppers</a> in an effort to <a href="https://libertystreeteconomics.newyorkfed.org/2023/09/who-uses-buy-now-pay-later/">supposedly improve financial inclusion</a> for these groups.</p> <p>However, the newness of buy now, pay later programs means existing <a href="https://doi.org/10.1111/acfi.13100">consumer credit laws don’t cover it</a>. This lack of regulation puts shoppers at financial risk of accumulating higher levels of debt.</p> <h2>Credit cards versus buy now, pay later</h2> <p>There are three key differences between credit cards and buy now, pay later loans. First, while buy now, pay later loans are a line of credit like credit cards are, <a href="https://www.cnbc.com/2022/05/04/klarna-to-report-buy-now-pay-later-data-to-uk-credit-bureaus.html">they don’t impact credit reports</a>. Because of this, shoppers might be less cautious when using buy now, pay later services.</p> <p>Credit cards typically have annual interest rates ranging from <a href="https://www.bankrate.com/finance/credit-cards/what-is-credit-card-apr/#credit-card-apr-vs-credit-card-interest">15 to 26 per cent</a>. While most buy now, pay later loans have no interest, longer term loans have <a href="https://www.cbsnews.com/news/buy-now-pay-later-loans-interest-rate-fees-tips-what-to-know/">annual interest rates of about 37 per cent</a>.</p> <p>Shoppers are <a href="https://hbswk.hbs.edu/item/buy-now-pay-later-how-retails-hot-feature-hurts-lower-income-shoppers">at risk of overusing buy now, pay later programs</a> and accumulating more debt than they can manage. In addition, formal lenders, such as banks, currently have no way of knowing what buy now, pay later debt a person is carrying. The lender, therefore, likely incurs more risk than they are aware of.</p> <p>Second, credit cards typically provide <a href="https://doi.org/10.1080/1369118X.2022.2161830">an interest-free period</a>, after which <a href="https://doi.org/10.1177/03128962211032448">borrowers must pay interest</a>. In contrast, buy now, pay later users typically don’t have interest fees, but can incur <a href="https://doi.org/10.1108/IJBM-07-2022-0324">late fees for missed or late payments</a>.</p> <p>Falling behind on payment terms <a href="https://www.forbes.com/sites/andriacheng/2020/12/16/why-retailers-are-embracing-buy-now-pay-later-service-this-holiday-season/">can result in charges</a> that exceed <a href="https://stateline.org/2022/02/02/regulators-scrutinize-buy-now-pay-later-plans/">typical credit card interest rates</a>, causing more harm than interest payments. Low-income buy now, pay later users are <a href="https://hbswk.hbs.edu/item/buy-now-pay-later-how-retails-hot-feature-hurts-lower-income-shoppers">particularly vulnerable</a> to <a href="https://www.consumerfinance.gov/data-research/research-reports/consumer-use-of-buy-now-pay-later-insights-from-the-cfpb-making-ends-meet-survey/">using overdrafts to cover their buy now, pay later payments</a>.</p> <p>Third, people typically have just a few credit cards, making it easier to keep track of payments. Buy now, pay later users, on the other hand, usually engage with multiple buy now, pay later lenders through retailers. As a result, it’s difficult for them to keep track of all the buy now, pay later lenders and retailers they made purchases from.</p> <h2>What are the Canadian governments doing?</h2> <p>Canada classifies buy now, pay later as an unsecured instalment loan, which means lenders are subject to laws at the federal and provincial levels.</p> <p>Under federal law, there is an <a href="https://www.sec.gov/Archives/edgar/data/1711291/000171129122000011/curo-20211231.htm">annual interest rate cap of 60 per cent</a>. Provincial laws require buy now, pay later lenders to disclose the cost of credit and extend consumer protection rights to buy now, pay later shoppers.</p> <p>At the provincial level, <a href="https://www.canada.ca/en/financial-consumer-agency/services/loans/buy-now-pay-later.html">specific laws come into play</a>. Manitoba, Alberta, Québec, and Ontario have passed laws that require lenders to be licensed before they offer these products and be subject to regulatory oversight.</p> <p>These laws regulate high-cost credit products that have annual rates of 32 per cent or higher. This means buy now, pay later services <em>should</em> fall under this category. However, I found no evidence of buy now, pay later lenders being licensed in Canada. This means either lenders are not aware they fall under these laws, or no one is enforcing them.</p> <p>This ambiguity over whether or not buy now, pay later lenders are subject to regulatory oversight could be a hindrance for banks like the <a href="https://financialpost.com/fp-finance/fintech/why-higher-interest-rates-threaten-the-buy-now-pay-later-bubble">Bank of Nova Scotia and the Canadian Imperial Bank of Commerce</a>, as it deters them from entering the buy now, pay later market despite its profitability.</p> <h2>Questions to ask before using buy now, pay later</h2> <p>Before signing up for a buy now, pay later loan, shoppers should consider the following six questions.</p> <p><strong>1. Payment structure.</strong> How much of the invoice amount needs to be paid upfront? The norm is typically 25 per cent. What is the number of remaining instalments? The answer to this is usually four. Lastly, what is the frequency of instalments? The norm is biweekly.</p> <p><strong>2. Sensitive information.</strong> Does the lender require you to provide information about your chequing account? This is sensitive information to give away and puts you at risk of data breaches. Most buy now, pay later lenders withdraw instalment amounts from chequing accounts or debit cards, potentially exposing shoppers to greater risks than credit cards.</p> <p><strong>3. Interest charges</strong> Does the buy now, pay later lender charge interest on instalment payments? The norm is no.</p> <p><strong>4. Late fees</strong> How much is the late fee, when does it apply and what is the maximum amount of the late fee? Typically, late fees don’t exceed $8 or one-quarter of the invoice amount. Late fees usually kick in if your scheduled payment remains unpaid after 10 days.</p> <p><strong>5. Data responsibility.</strong> Who is responsible for your data? Whether it’s the retailer, the buy now, pay later lender or a company whose cloud storage the provider may be using, you should know. In general, the buy now, pay later lender holds this responsibility.</p> <p><strong>6. Licensing.</strong> Is the buy now, pay later lender licensed to sell the loan? Usually, the <a href="https://dfpi.ca.gov/wp-content/uploads/sites/337/2020/03/afterpay-settlement.pdf">answer to this question is no</a>.</p> <h2>Buy now, pay later regulation</h2> <p>Two sets of laws and regulations should be implemented to address some of these issues. The first set of regulations focuses on how buy now, pay later lenders interact with consumers. These lenders should clearly communicate <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4359956">all terms and conditions of their loans</a>, including late charges, interest charges and payment schedules, on their platforms to ensure shoppers are fully informed of their financial obligations.</p> <p>The Financial Conduct Authority in the United Kingdom recently issued guidelines allowing buy now, pay later lenders to <a href="https://www.ft.com/content/ca428bc8-65c3-49ed-8ba6-0d6f206098aa">terminate, suspend or restrict access to shopper accounts</a> for any reason without notice. Effective September 2024, New Zealand will require buy now, pay later lenders to <a href="https://theconversation.com/if-it-looks-like-debt-lets-treat-it-like-debt-buy-now-pay-later-schemes-need-firmer-regulation-in-nz-211820">check a shopper’s credit</a> before providing them a buy now, pay later loan.</p> <p>The second set of regulations defines the scope and boundaries of buy now, pay later lenders. On Dec. 9, 2022, California became the first American state to <a href="https://dfpi.ca.gov/2022/12/09/buy-now-pay-later-protect-yourself-before-you-check-out/">classify buy now, pay later as a loan</a>. Such classifications allowed California regulators to <a href="https://stateline.org/2022/02/02/regulators-scrutinize-buy-now-pay-later-plans/">question lenders about their transparency in disclosing the terms of their offerings</a>.</p> <p>The hope is that these laws and regulations will facilitate microlending and not impede the existence of buy now, pay later services, but rather make it safer and more secure for both lenders and users.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/215421/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><a href="https://theconversation.com/profiles/vivek-astvansh-1318943"><em>Vivek Astvansh</em></a><em>, Associate Professor of Quantitative Marketing and Analytics, <a href="https://theconversation.com/institutions/mcgill-university-827">McGill University</a> and <a href="https://theconversation.com/profiles/chandan-kumar-behera-1479139">Chandan Kumar Behera</a>, PhD Student in Marketing, <a href="https://theconversation.com/institutions/indian-institute-of-management-lucknow-6023">Indian Institute of Management Lucknow</a></em></p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-hidden-risks-of-buy-now-pay-later-what-shoppers-need-to-know-215421">original article</a>.</em></p> </div>

Money & Banking

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Donald Trump facing jail after guilty verdict

<p>Former US president Donald Trump is facing the possibility of jail time after being found guilty on all 34 counts of a hush money trial in New York. </p> <p>Trump was found to be unanimously guilty by the jury on Thursday afternoon, making him the first former US President with a criminal conviction.</p> <p>In the New York courtroom, he was accused of 34 counts of fraud by falsifying business records to cover up payments of $200,000 ($US130,000) to adult star Stormy Daniels.</p> <p>It was reported that Mr Trump wanted to buy her silence about an alleged extramarital sexual encounter which was in danger of becoming public knowledge in the run up to the 2016 US Presidential election.</p> <p>While paying hush money to cover up a potentially damning story isn't illegal, Trump's falsifying of business records to bury the payments is a criminal offence in the state of New York. </p> <p>Mr Trump, 77, denied a sexual encounter with Ms Daniels took place and denied all the charges.</p> <p>After the guilty verdict was handed down, Trump spoke to reporters outside the courtroom, saying the trial was “rigged” and a “disgrace”.</p> <p>“This was a rigged trial by a conflicted judge who is corrupt,” he said.</p> <p>“The real verdict is going to be November 5 by the people and they know what happened here and everybody knows what happened here.”</p> <p>He insisted “we didn’t do anything wrong”.</p> <p>“I’m a very innocent man and it’s OK, I’m fighting for our country, I’m fighting for our Constitution,” he said.</p> <p>A sentencing hearing has been set for July 11th, just four days before the Republican National Convention, when the party will officially nominate him for President ahead of the election in November.</p> <p>He faces a minimum of probation and a maximum of up to four years in prison.</p> <p><span id="docs-internal-guid-46607c99-7fff-4305-1a14-3fd4a2e9d2b3"><em>Image credits: Justin Lane/UPI/Shutterstock Editorial</em></span></p>

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New study reveals people who do this daily make more money over their lifetimes

<p>You’ve heard that regular exercise can help you live richly. Frequent movement, even in short bursts throughout the day, has been linked to lower all-cause mortality rates and reduced risk of heart disease, type-2 diabetes and other age-related conditions, helping you age healthfully and stay independent.</p> <p>Now, new research suggests frequent exercise might help you live well in another meaningful way; in terms of income. In a recent study published in the journal Clinical Orthopaedics and Related Research, doctors from the National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMS), which is part of the National Institute of Health (NIH), investigated whether individuals who stayed active would earn more money as a result of their active lifestyle.</p> <p>The researchers’ findings revealed that staying active not only resulted in higher present earnings, but also predicted increased future income throughout one’s life. In essence, the science was clear: Getting more exercise could make you wealthier.</p> <h2>How exercise predicted future earnings</h2> <p>The researchers set out to explore three key correlations: How mobility affected income, how mobility influenced income over time, and whether exercise could help people maintain their mobility as they aged.</p> <p>The team analysed data from the US-federally-supported Health and Retirement Study (HRS), the largest study tracking changes over time in Americans aged 50 and above. This comprehensive study takes into account various life aspects, including work, socio-economic status, health, psychology and family matters, as individuals age.</p> <p>To assess the impact of current mobility on income, the researchers examined data from over 19,000 respondents to determine how well they could perform simple tasks, such as walking several blocks, climbing multiple flights of stairs, or moving around a room. Each person received a numerical score, with 5 indicating full mobility and 0 indicating difficulties with these tasks.</p> <h2>What earnings over time revealed</h2> <p>The researchers found that for each decrease in the mobility category, individuals lost out on an average of US$3000 in annual income compared to their peers. Those who were active were also significantly more likely to remain working for longer than the other group. It appeared that engaging in exercise enabled individuals to maintain mobility and engage in professional life for a longer period of time than those who were less active.</p> <p>Looking at earnings over time revealed even more substantial benefits for those who remained active throughout their lives. Active individuals showed an overall income level that was US$6500 higher, along with higher rates of employment.</p> <p>For the third part of the study, it’s not surprising that those who engaged in exercise continued to maintain their mobility after the age of 55 and had higher employment rates. Even exercising just one day a week showed improvements in mobility outcomes.</p> <h2>Moving more benefits more than just health</h2> <p>While this study doesn’t definitively prove that leading a healthy lifestyle directly leads to higher earnings, it strongly suggests that staying healthy and mobile brings benefits beyond just lower levels of disease (which is a type of wealth in and of itself). NIAMS Director Lindsey A. Criswell, M.D., M.P.H., underscores this point: “We have long understood that greater mobility is an important indicator of good health … The notion that mobility can have economic rewards further extends the evidence for the benefits of exercise and maintaining an active lifestyle.”</p> <p>If this science inspires you to make a healthy lifestyle change, speak with a licensed healthcare provider to determine the right exercise programme for you.</p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article originally appeared on <a href="https://www.readersdigest.co.nz/food-home-garden/money/new-study-reveals-people-who-do-this-daily-make-more-money-over-their-lifetimes" target="_blank" rel="noopener">Reader's Digest</a>.</em> </p>

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David Beckham's incredible offer for 'stealing' couple's wedding venue

<p>David Beckham has reportedly made a huge offer to a couple in a bid to steal the venue from them. </p> <p>The couple had booked the luxury resort Gleneagles in Scotland, UK for their dream wedding, but the football legend - who has reportedly been busy hunting for the perfect location to celebrate his 50th birthday - also wanted to book the venue to mark the milestone birthday. </p> <p>According to <em><a href="https://www.mirror.co.uk/3am/celebrity-news/david-beckham-steals-couples-wedding-32864115" target="_blank" rel="noopener">The Mirror</a>,</em> Beckham has apparently convinced the couple to move their wedding date and venue by helping them pay off their wedding and a few other special offers. </p> <p>A “friend of a friend” took to X, to share the claim this week. </p> <p>“A friend of a friend is getting married at Gleneagles next year but David Beckham wants the date for his 50th, so to get the friend to move it so he can have the hotel, Gleneagles are paying for their new wedding date, honeymoon AND paying off their mortgage … the power of Becks," user Ollienarrator wrote in a tweet. </p> <p>Fans of Beckham praised the football legend for being so generous. </p> <p>“OMG!!!! That’s absolutely wild! Ah but so worth it,” wrote one person. </p> <p>“What a wedding present!” added another, to which the original poster responded:  “I bet Beckham won’t have to pay either! But yeah, mortgage paid off will do!” </p> <p><em>The Mirror</em> reported that they have contacted Beckham's representatives for a comment. </p> <p><em>Image: Ryan Browne/ Shutterstock Editorial</em></p> <p> </p>

Money & Banking

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Where did money come from?

<p><a href="https://theconversation.com/profiles/steven-hail-1302961">Steve<em>n Hail</em></a><em>, <a href="https://www.torrens.edu.au/">Torrens University Australia</a></em></p> <p>For the most part, economists continue to believe a story of money told to generations of students by a series of textbooks over the past 150 years.</p> <p>This story asks us to imagine a pre-monetary barter economy, where people bought goods and services by trading them for other goods and services.</p> <p>Eventually a suitable commodity – perhaps gold or silver – emerged as both an acceptable means of exchange for conducting trade and a convenient unit of account for expressing value.</p> <p>Later, coins were issued – eventually to be monopolised by governments – and later still paper money, credit, and banking systems.</p> <p>The problem with this story is that there is no historical evidence to support it. As was <a href="https://www.jstor.org/stable/2802221?seq=1#page_scan_tab_contents">noted</a> by prominent anthropologist Caroline Humphreys:</p> <blockquote> <p>No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money … all available ethnography suggests that there has never been such a thing.</p> </blockquote> <p>So where did money come from exactly? One difficulty we face is that writing about money – what gives it value, and how monetary systems work – is not something young economists are generally encouraged to do.</p> <p>As a consequence, among the best articles ever written about money are two now more than 100 years old by British economist Alfred Mitchell-Innes, entitled “<a href="https://www.community-exchange.org/docs/what%20is%20money.htm">What is Money</a>?” and “<a href="https://cooperative-individualism.org/innes-a-mitchell_credit-theory-of-money-1914-dec-jan.pdf">The Credit Theory of Money</a>”.</p> <p>These papers, until recently almost completely ignored by the economics profession, tell a different story, rejecting the idea that money evolved naturally from barter.</p> <p>We can now be confident this version is closer to the truth. And it has big implications for how we think about the role of governments within monetary systems, and what gives money value. Acknowledging the true story of money would force a paradigm shift among economists – no wonder a lot of them don’t want to think about it.</p> <h2>Actually, early governments invented money</h2> <p>The truth is that money predates markets. <a href="https://youtu.be/7cLDFjTt4Bs?si=fDTafcZD_u1S23kD">Governments invented money</a> – it did not emerge independently from pre-existing barter systems.</p> <p>Market economies simply could not develop until money existed. For much of history, the currency tokens people regarded as money had little or no intrinsic value, taking the form of clay tablets, hazelwood tally sticks, base metals, shells or paper.</p> <p>The earliest forms of what Keynes called “modern money” – to distinguish it from gift tokens used for ceremonial purposes in communal groups – go back to the origins of taxation, accounting, and even literacy and numeracy. These early currencies were units of account used to assess the tributes that had to be paid to early governmental institutions in the Middle East.</p> <p>The word shekel is still used as a currency unit, but dates to ancient Babylon and the emergence of money itself, over 5,000 years ago.</p> <p>The idea that the need to pay taxes is what creates a demand for a currency was well understood by colonial governments. They knew how to introduce their currencies into countries they had invaded. To force locals to supply labour or goods to the government, they imposed a tax liability – often, a hut tax. This tax could only be paid using the currency of the colony.</p> <p>Locals had to either work for the colonial government or supply goods to others who did, else they wouldn’t have the specific currency needed to pay taxes. This created a demand for the colonial power’s currency, which the government could then spend.</p> <p>If such a government spent more overall than it withdrew in taxation – running a budget deficit – the community could add the remaining currency to its savings. Taxation and the legal system created a demand for the government’s money and provided the impetus for the development of a monetary economy.</p> <p>Even today, it’s the tax system that drives the monetary system. Demand for a government’s money is guaranteed because people need it to pay federal taxes.</p> <h2>But banks create money too</h2> <p>Actual physical cash makes up a tiny proportion of the money in circulation. Most of what we regard as money is held in our bank deposits, effectively a bunch of numbers on a ledger. Most of these bank deposits are created by banks when they make loans to us, and this is not government money at all – it is private money, created by the banks themselves.</p> <p>When a bank makes a loan to you, that loan becomes an <em>asset</em> for the bank, because you have to pay it back with interest. But at the same time, the loan appears as a deposit of funds in your account, which is a <em>liability</em> for the bank. Technically, you both owe each other.</p> <p>On paper, this means there’s now money in the system that wasn’t there before. The bank hasn’t actually lent you someone else’s money, the loan deposited in your account represents the bank’s IOU to you.</p> <p>Both the loan and the deposit are created by the bank, using nothing more than a computer keyboard. The bank has promised to use its holdings of government money to make payments on your behalf, including tax payments to the government, or to provide you with government money in the form of physical cash.</p> <p>As economist Hyman Minsky once said, “anyone can create money – the problem lies in getting it accepted”.</p> <p>Obviously, private banks don’t issue government currency. The Commonwealth government and its agent, the Reserve Bank of Australia, sit at the top of our own monetary system.</p> <p>Government-issued currency will always have value because it’s the unit of account needed to assess and pay our taxes. How much value the currency holds depends on how much the economy produces, how difficult it is to obtain the currency and on how much tax we have to pay.</p> <p>Here is some food for thought. If we accept that money and markets did not emerge naturally but had to be created by governmental institutions and legal systems, this means that there is no such thing as a genuinely free market, no such thing as a natural rate of unemployment, and no such thing as a natural distribution of income and wealth.</p> <p>The theory that money emerged naturally in the private sector encourages people to believe that free markets are natural systems in which governments only interfere. But in truth, early governments invented the very institutions of money and markets, and the regulatory frameworks that determined how those markets work and in whose interests.</p> <p>Exchange economies have always depended on systems of law and they always will. The more pertinent question concerns who writes those laws – and in whose interests those regulations are applied.</p> <hr /> <p><em>Correction: This article has been amended to reflect that a loan deposit represents a bank’s IOU to the customer, not to a bank’s other customers, as originally reported.</em><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/229481/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <hr /> <p><a href="https://theconversation.com/profiles/steven-hail-1302961"><em>Steven Hail</em></a><em>, Associate Professor, <a href="https://www.torrens.edu.au/">Torrens University Australia</a></em></p> <p><em>Image credits: Shutterstock</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/where-did-money-come-from-229481">original article</a>.</em></p>

Money & Banking

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Woman shares fury after unknowingly paying for her engagement ring

<p dir="ltr">A new wife has shared her fury after she discovered her husband had been paying off her engagement ring from their joint bank account. </p> <p dir="ltr">The 28-year-old woman was overjoyed when her partner proposed to her with an $8,000 two-carat lab diamond ring, which he bought on a payment plan because he “didn’t have the funds available” when he bought it. </p> <p dir="ltr">The couple got married just three months later at the courthouse after they realised they could not afford a big, fancy wedding. </p> <p dir="ltr">After their big day, the new wife was shocked and annoyed when she discovered she had “unintentionally partially paid for two instalments”, which now makes her a “part owner of the ring”.</p> <p dir="ltr">“I found out after we married and merged our finances that he has been withdrawing funds from our joint account — we make roughly the same — to finance this ring,” the furious woman shared in a Reddit thread.</p> <p dir="ltr">“We have been having some arguments lately and he feels that the ring is a wedding expense and it’s only fair that I contribute towards it too, and that as a woman of this day I shouldn’t hesitate to be an equal partner.”</p> <p dir="ltr">She took particular issue with her husband for making her pay her share on what was supposed to be a gift from him.</p> <p dir="ltr">“I was just taken aback and honestly put off by the fact he is making me pay for a gift he gave to me. You don’t make the recipient of a gift pay for the damn gift,” she said.</p> <p dir="ltr">The woman said if she had known her husband was going to make her pay for the ring, she wouldn’t have agreed to “buy it”.</p> <p dir="ltr">“Mutual consent is essential when a couple is deciding to invest in an asset. Owning a house or a car jointly requires two ‘yeses’ and I wouldn’t certainly have said yes to jointly owning a ring he was supposed to give to me as a gift,” she explained.</p> <p dir="ltr">Although the woman admitted that she had asked her partner for a “nice” ring before he proposed, saying that she “deserved a quality piece symbolising our love”, she said she wished her partner talked to her about the big expense before signing her up for payments. </p> <p dir="ltr">“My then-fiancé knew about the expectation I had of him and was upfront about things from the get go,” she explained.</p> <p dir="ltr">“He could’ve discussed things with me and we could’ve seen if we were truly compatible like that. What I didn’t know was that he was plotting to ‘get even’ with me by taking out a payment plan and using our funds to finance it.”</p> <p dir="ltr">“I don’t mind splurging for him, but this whole situation has left a very bad taste in my mouth.”</p> <p dir="ltr">Now she’s demanding her husband return her engagement ring to the jewellery store because she refuses to pay for it.</p> <p dir="ltr">The Reddit post has racked up thousands of comments, with some people jumping to the woman’s defence. </p> <p dir="ltr">One person wrote, “I’d be livid if I found out I was diamond poor instead of house poor.”</p> <p dir="ltr">However, not everyone thought the wife’s actions were justified, with one person writing, “You’re married, there is no ‘my money’ and ‘his money’. Money he spends towards the debt for the ring is money that can’t be spent on other things for your lives together. You wanted an expensive ring, they aren’t free”.</p> <p dir="ltr"><em>Image credits: Shutterstock</em></p>

Money & Banking

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Becoming a landlord while still renting? ‘Rentvesting’ promises a foot on the property ladder, but watch your step

<p><em><a href="https://theconversation.com/profiles/james-graham-1264059">James Graham</a>, <a href="https://theconversation.com/institutions/university-of-sydney-841">University of Sydney</a></em></p> <p>As home ownership moves further out of reach for many Australians, “rentvesting” is being touted as a lifesaver.</p> <p>Rentvesting is the practice of renting one property to live in yourself, while simultaneously purchasing an investment property somewhere cheaper and leasing it out.</p> <p>Ideally, “rentvestors” get to enjoy the capital gains on an investment property while living where they actually want to live, allowing them to cash in and upsize to their dream home later.</p> <p>It might seem like a savvy way to game the property market. But what are the risks of such an investment strategy? And how might broad adoption of this behaviour affect housing affordability in Australia?</p> <h2>A rising tide lifts all boats differently</h2> <p>The aim of the rentvesting game is to buy cheap property now, ride the expected capital gains, and move into a more desirable home down the track. The hope is that by climbing the first rung of the property ladder early, the whole thing won’t be pulled up out of reach.</p> <p>The first problem with this strategy, however, is that capital gains on housing are not always and everywhere equal.</p> <p>Generally, the cheapest properties available to rentvestors will be houses in the regions or apartments in the city. But both regional housing and apartment properties <a href="https://www.abc.net.au/news/2024-02-20/house-apartment-price-gap-widens-record-high-property-market/103484076">tend to appreciate more slowly</a> than the inner-city houses rentvestors might hope to live in one day. They might get a foot on the property ladder, but the rungs themselves are slowly drifting apart.</p> <p>Would-be rentvestors should also be aware that investments by “out-of-town” buyers tend to generate <a href="https://academic.oup.com/rfs/article-abstract/29/2/486/1902789">much lower returns</a> – both capital gains and rental yields – than investments by locals. Out-of-towners don’t know the local market trends, don’t know which neighbourhoods to avoid, and aren’t able to monitor their investments as effectively from afar.</p> <p>Avoiding the regions by investing in city apartments presents its own difficulties. Large, unexpected maintenance bills and poor strata management are <a href="https://www.abc.net.au/news/2024-03-21/a-world-of-hidden-charges:-strata-company-insiders/103617944">common complaints</a>.</p> <h2>Different costs lead to different returns</h2> <p>Perhaps the potential rentvestor should invest in something more straightforward instead, like stocks. After all, the return on equities in Australia has <a href="https://academic.oup.com/qje/article/134/3/1225/5435538">outperformed housing</a> in recent decades.</p> <p>However, it is much easier to borrow to invest in property than it is to borrow to invest in the stock market. And leverage is the investor’s secret weapon. For example, if house prices were to appreciate at 10% per year, then using a mortgage and a A$100,000 deposit on a $1 million property would earn you a 100% return on equity before costs.</p> <p>But while both investors and homeowners would earn that same basic return, their costs could be very different. For starters, property investors face capital gains tax on the proceeds of property sales, <a href="https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/eligibility-for-main-residence-exemption">unlike those selling their primary residence</a>. Banks also typically charge <a href="https://www.rba.gov.au/chart-pack/interest-rates.html">higher interest rates</a> on mortgages to investors than to homeowners.</p> <p>At times, the Australian Prudential Regulation Authority has also imposed caps on bank lending against investment properties, making it more difficult to find mortgage financing in the first place.</p> <p>Highly leveraged properties require mortgage insurance, too. Investors may need to take out larger insurance policies against the properties themselves, reflecting the higher risks associated with investment properties. Then, you also have to throw in property management fees, council rates, strata management fees and regular and unexpected maintenance costs.</p> <h2>Negative gearing offers little benefit</h2> <p>What about negative gearing? Property investors that generate losses on their property can deduct these costs against the tax bill on their other income.</p> <p>But negative gearing disproportionately benefits high-income earners with large tax bills. The <a href="https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/personal-income-australia/latest-release">median Australian individual income</a> is around $55,00, which generates a tax bill of about $8,000 – not a lot from which investment property losses can be deducted.</p> <p>The bigger picture is that while negative gearing helps defray the regular costs of managing a property, it doesn’t do anything to change expected capital gains.</p> <p>At the end of the spreadsheet tally, an investment property could end up earning rentvestors significantly less than they could have gained by simply buying their first home.</p> <h2>Effects on housing affordability</h2> <p>Rentvesting is new enough that its prevalence and influence awaits formal academic study. But economists might speculate about its implications for the housing market more broadly.</p> <p>The simplest analysis suggests that a rentvestor occupies one rental property while supplying an additional rental property to the market. If, instead, they had bought a home, they would vacate a rental property while removing another property from the market. In this case, even rentvesting en masse would have zero net effect on the housing market.</p> <p>But a more nuanced perspective might consider where rentvestors are renting and where they are investing. Perhaps they are most likely to rent properties in the already-crowded inner city, but purchase investment properties in regional areas where other first home buyers would like to live.</p> <p>This would increase demand for rentals in the city and reduce the supply of owner-occupier properties in the regions, worsening the affordability of both.</p> <p>Of course, if these rentvestors all eventually move up the property ladder – selling in the region and purchasing in the city – this effect would be reversed. From that longer-term perspective, rentvestors would ultimately have little effect.</p> <h2>We still need more houses</h2> <p>Rentvesting is not a panacea for Australia’s housing market woes. Potential investors should weigh the benefits of property investment against its substantial costs and risks. Additionally, they need to carefully consider the obvious alternative: simply buying their first home up-front.</p> <p>We have good reason to be wary of yet another get-rich-quick scheme involving the housing market. But initial considerations suggest that for the market overall, rentvestor behaviour is no worse than someone simply buying their first home, which we would otherwise encourage.</p> <p>Rather than criticising those seeking a way though our housing market morass, we might instead redouble our efforts to increase the supply of housing.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/229116/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><em><a href="https://theconversation.com/profiles/james-graham-1264059">James Graham</a>, Lecturer in Economics, <a href="https://theconversation.com/institutions/university-of-sydney-841">University of Sydney</a></em></p> <p><em>Image credits: Getty Images </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/becoming-a-landlord-while-still-renting-rentvesting-promises-a-foot-on-the-property-ladder-but-watch-your-step-229116">original article</a>.</em></p>

Money & Banking

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Battling to make ends meet? Financial planning expert offers 5 tips on how to build your budget

<p><em><a href="https://theconversation.com/profiles/bomikazi-zeka-680577">Bomikazi Zeka</a>, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a></em></p> <p>Every day seems to bring new headlines about rising costs. <a href="https://www.news24.com/news24/africa/news/nigerias-big-unions-call-indefinite-strike-over-fuel-prices-and-the-cost-of-living-20230926">In Nigeria</a>, unions are threatening to strike amid soaring fuel prices; the country’s inflation rate <a href="https://www.cbn.gov.ng/rates/inflrates.asp">hit 25%</a> in August. The amount it costs to fill a food basket in South Africa <a href="https://pmbejd.org.za/wp-content/uploads/2023/09/PMBEJD_Key-Data_September-2023_27092023.pdf">keeps climbing</a>. Ghanaians <a href="https://www.reuters.com/world/africa/multi-day-protests-over-economic-crisis-grip-ghanas-capital-2023-09-23/">took to the streets</a> of Accra in late September to protest about the cost of living.</p> <p>A <a href="https://www2.deloitte.com/us/en/insights/industry/retail-distribution/consumer-behavior-trends-state-of-the-consumer-tracker.html">recent study by the audit and consulting firm Deloitte</a> found that 75% of South Africans were concerned that the prices for everyday purchases would continue to increase, while 80% of consumers across all income groups expected the prices of groceries, household utilities and fuel to rise.</p> <p>This stark reality means budgeting may be more necessary than ever.</p> <p>If you don’t know how to create a budget, then you shouldn’t feel bad – most adults aren’t taught how to create one. And most people don’t budget, because they see it as restrictive or unsustainable. But it need not be: once you appreciate that a budget can work for you, it can be a financially empowering exercise. It’s a cornerstone of financial planning because it ensures you are living within your means and helps you remain in financial control.</p> <p>As a financial planning academic, I focus in <a href="https://researchprofiles.canberra.edu.au/en/persons/bomikazi-zeka/publications/">my research</a> on improving financial wellbeing and promoting savings behaviours through interventions such as budgeting. Here are five guidelines for creating a budget.</p> <h2>1. Apps vs spreadsheet</h2> <p>A good place to start is to choose the format of how you’re going to budget. There are several <a href="https://www.sanlamreality.co.za/wealth-sense/setting-up-a-family-budget-that-works/">online templates</a> and apps you can use for budgeting. For instance, <a href="https://www.22seven.com/">22Seven</a> has gained popularity in South Africa due to its compatibility with several financial institutions, including the country’s big five banks. Similarly, <a href="https://www.the-star.co.ke/business/kenya/2021-01-25-budgeting-using-mint-app/">Mint</a> is a popular budgeting tool that is used in Kenya and Nigeria.</p> <p>If you prefer to put pen to paper, some online templates come with <a href="https://www.wonga.co.za/blog/free-budget-template">free printable budgets</a>. Creating your own <a href="https://create.microsoft.com/en-us/learn/articles/how-to-make-excel-budget">Excel spreadsheet</a> is an equally good approach.</p> <p>What matters most is using a tool that you can commit to.</p> <h2>2. Itemising your income and expenses</h2> <p>A budget essentially shows how much you’re spending in relation to how much you’re earning. So once you have selected your budgeting tool, you need to fill in your income and itemise how much you’re spending on each expense in a month. A budget can be considered a cashflow statement because it allows you to track money coming in (income) and money going out (expenses).</p> <p>If you are living within your means, your budget should indicate a surplus – more cash inflows than cash outflows. So budgeting provides an accurate account of your short-term financial position.</p> <h2>3. A realistic account of expenses</h2> <p>When you look at your financial statements, fill your expenses into your budget honestly and accurately. Don’t cheat! Since everyone’s financial situation is different, your budget will also be unique.</p> <p>Even though there is no one-size-fits-all approach to budgeting, it should still consider all of your expenses (both regular and intermittent). A general rule of thumb is that if it’s deducted from your account then you should treat it as an expense. This includes payments for housing, medical insurance, fuel, dining out, credit card repayments and even bank fees.</p> <h2>4. Save first, spend later</h2> <p>Now you’ve seen how much you’re spending. Either it’s too much – and you can plan where to cut back – or you have savings at the end of the month.</p> <p>When compiling your budget it’s important to demarcate how much will be in the form of savings. What’s more important is getting into the habit of saving before you spend instead of saving after spending. If you spend first then you’ve deprived yourself of the opportunity to save for a rainy day.</p> <p>Furthermore, <a href="https://eprints.hud.ac.uk/id/eprint/10231/1/Microsoft_Word_-_submitted_version_3rd_June_201.pdf">research</a> has shown that getting into the habit of saving has a transgenerational effect: it can be considered a cultural value that is passed on from one generation to another. So think of saving as paying yourself first. Once you have done so, you won’t feel guilty for treating yourself because you’ve already done the financially responsible thing by putting your savings aside.</p> <h2>5. Considering assets and liabilities</h2> <p>Once you’ve become comfortable with consistently budgeting, you can take it up a notch by including your assets (everything you own with an economic value) and liabilities (everything you owe) to determine your overall financial position.</p> <p>You can get a clearer picture of your overall financial wellbeing by compiling a list of all your assets, for example your savings and <a href="https://www.investopedia.com/terms/h/home_equity.asp">home equity</a>, in relation to liabilities (such as bank loans). Knowing your long-term financial position can indicate how financially resilient or vulnerable you are. In the event of a financial emergency, you will know which resources you can draw upon to meet an unexpected expense.</p> <p>By creating a budget (and sticking to it), you can protect yourself and your household from financial shocks. Consider the alternative. Imagine you haven’t budgeted and set savings aside. If a financial emergency were to arise, your next best bet would be to borrow the funds you need. You’d have to come up with a plan to repay what you’d borrowed while also building your savings.</p> <h2>A healthy habit</h2> <p>Getting into the habit of budgeting isn’t easy, especially if you haven’t done it before or you’re intimidated by the process. But, as the expression goes, “a journey of a thousand miles begins with a single step”. Think of budgeting as taking a small but important step towards reclaiming control over your finances and improving your financial well-being.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/214861/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><em><a href="https://theconversation.com/profiles/bomikazi-zeka-680577">Bomikazi Zeka</a>, Assistant Professor in Finance and Financial Planning, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a></em></p> <p><em>Image credits: Getty Images </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/battling-to-make-ends-meet-financial-planning-expert-offers-5-tips-on-how-to-build-your-budget-214861">original article</a>.</em></p>

Money & Banking

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If you have money anxiety, knowing your financial attachment style can help

<p><em><a href="https://theconversation.com/profiles/ylva-baeckstrom-1463175">Ylva Baeckstrom</a>, <a href="https://theconversation.com/institutions/kings-college-london-1196">King's College London</a></em></p> <p>The number of people struggling with money in Britain is at a <a href="https://www.theguardian.com/money/2024/mar/18/record-numbers-of-uk-people-in-debt-warns-charity">record high</a>. Financial charities say that people are contacting them for help with debt, paying bills and insolvency. The campaign group Debt Justice found in a <a href="https://debtjustice.org.uk/wp-content/uploads/2024/03/WalnutOmnibus-Debt-Justice-Policy-Development-Weighted.xlsx">survey</a> that 29% of 18- to 24-year-olds and 25% of 25- to 34-year-olds had missed three or more bill payments in the last six months.</p> <p>A majority (65%) of people don’t think they can survive on their savings for three months without <a href="https://www.money.co.uk/savings-accounts/savings-statistics">borrowing money</a>. Statistics from the UK’s financial markets regulator show that more than one-third of UK adults have less than £1,000 in savings. And a survey by Money.co.uk found that 30% of Brits aged 25-64 do not save at all <a href="https://www.pensionsage.com/pa/Nearly-one-third-of-Brits-are-not-saving-for-retirement.php">for retirement</a>.</p> <p>With figures like that, is it any wonder that 75% of people in the UK feel <a href="https://www.mentalhealth.org.uk/about-us/news/financial-strain-driving-uks-anxiety#:%7E:text=Almost%20three%2Dquarters%20of%20the,cited%20job%20insecurity%20or%20unemployment">anxious about money</a>?</p> <p>The current state of the economy is particularly scary for young people. Unless you were born with a trust fund (not most people), you are likely part of the first generation to be financially worse off than <a href="https://edition.cnn.com/2020/01/11/politics/millennials-income-stalled-upward-mobility-us/index.html">your parents</a>. Retirement seems like an impossibility, and you’re unlikely to own your own home. Eighty percent of people in their early 20s worry about <a href="https://www.youngminds.org.uk/parent/parents-a-z-mental-health-guide/money-and-mental-health/#Thelinksbetweenmoneyandmentalhealth">not earning enough</a>.</p> <p>It is important to start planning for your financial future early in your career, but you may find it overwhelming. The good news is, there are ways to overcome this.</p> <h2>Finding your financial attachment style</h2> <p>As a psychotherapist and finance researcher, I work with people to help them to increase their financial confidence and find the motivation to start planning. This often starts with understanding what influences their relationship with money.</p> <p><a href="https://www.cambridge.org/core/journals/behavioral-and-brain-sciences/article/bowlbyainsworth-attachment-theory/6D35C7A344107195D97FD7ADAE06C807">Attachment theory</a> is a psychological concept introduced in the late 1950s. Your attachment style – which can be, for example, secure, anxious or avoidant – explains how you approach creating emotionally intimate relationships with other people. Some people feel secure building relationships, while others are extremely anxious. Some avoid close relationships altogether.</p> <p>Attachment style can also apply to your finances. If you feel confident and safe when it comes to money, you are secure in your relationship to saving and spending. But if the thought of opening an ISA or filling out a tax return, let alone planning for retirement, fills you with dread and panic, you may be anxiously attached. And if you if you push money worries to the back of your mind, you are likely avoidant.</p> <p>Attachment theorists and psychotherapists like me think that attachment styles are shaped by childhood experiences – for example, how well you were looked after by your parents or carers, and how safe and loved you felt.</p> <p>The way money was handled in your family growing up is likely to have set the blueprint for your <a href="https://www.sciencedaily.com/releases/2020/02/200225114410.htm">financial attachment style</a>. Outside influences like education or work experiences may shape this too.</p> <p>Although financial education is part of the <a href="https://maps.org.uk/en/work-with-us/financial-education-in-schools">school curriculum</a> in the UK, 76% of children leave school without sufficient <a href="https://maps.org.uk/en/media-centre/press-releases/2024/hundreds-of-thousands-leaving-school-without-money-skills#:%7E:text=In%20its%20poll%20of%201%2C012,knowledge%20they%20need%20for%20adulthood">financial knowledge</a> to manage their lives. Similarly, financial services like banks have done a poor job helping people establish secure financial relationships. Complex and <a href="https://www.pwmnet.com/private-view-blog-time-for-the-financial-industry-to-jettison-the-jargon">off-putting language</a> has placed a barrier between those who know about money and those who need to learn.</p> <p>If you feel unable to keep up with financial terms, or that you don’t understand money, this is likely to hurt your confidence in your financial planning abilities and fuel a more avoidant attachment style.</p> <p>Identifying your attachment style can help you nurture a better relationship with money. You will be able to understand and predict how and why you react to finances in certain ways. And, it can provide confidence by reminding you that money struggles are not necessarily your fault.</p> <h2>Getting over financial anxiety</h2> <p>Some of the recent financial trends spreading on social media may give an insight into your attachment style. Are you <a href="https://www.cnbc.com/select/what-is-loud-budgeting-trend-can-it-work/">“loud budgeting”</a> (being vocal about why you aren’t spending money)? This could be a sign of financial confidence and that you have secure financial attachment. Or are you “doom spending” (spending money you don’t have instead of creating a <a href="https://www.theguardian.com/lifeandstyle/2024/jan/31/are-you-loud-budgeting-or-doom-spending-finance-according-to-gen-z">nest egg</a> for the future)? You may be avoidant.</p> <p>Healthy relationships with <a href="https://www.nhs.uk/every-mind-matters/lifes-challenges/maintaining-healthy-relationships-and-mental-wellbeing/#:%7E:text=People%20with%20healthy%2C%20positive%20and,such%20as%20stress%20and%20anxiety">people</a> and <a href="https://www.nhs.uk/every-mind-matters/lifes-challenges/money-worries-mental-health/#:%7E:text=Our%20mental%20health%20might%20be,earning%20enough%20or%20currently%20unemployed">money</a> are both critical for our survival and mental health. As an adult, you have the power to improve these relationships. But because attachment patterns were formed early on, they are difficult to change. Therapy and other support can help you adopt healthier habits, as can increasing your financial knowledge.</p> <p>If you want to change your relationship with money, you should try to be mindful of what may be influencing you. While financial advice on social media may be useful and help young people feel more empowered to <a href="https://www.forbes.com/advisor/investing/financial-advisor/adults-financial-advice-social-media/">talk about money</a>, it can also <a href="https://www.mcleanhospital.org/essential/it-or-not-social-medias-affecting-your-mental-health">increase anxiety further</a> and be <a href="https://theconversation.com/if-you-get-your-financial-advice-on-social-media-watch-out-for-misinformation-222196">full of misinformation</a>. A good place to start for accurate and helpful information is the government’s <a href="https://www.moneyhelper.org.uk/en">Money Helper website</a>.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/225243/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><em><a href="https://theconversation.com/profiles/ylva-baeckstrom-1463175">Ylva Baeckstrom</a>, Senior Lecturer in Finance, <a href="https://theconversation.com/institutions/kings-college-london-1196">King's College London</a></em></p> <p><em>Image credits: Getty Images </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/if-you-have-money-anxiety-knowing-your-financial-attachment-style-can-help-225243">original article</a>.</em></p>

Money & Banking

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"There's no way": Man receives $52 billion tax bill

<p>An American man has been left confused after receiving a letter from the government claiming he owed $52 billion in unpaid taxes. </p> <p>Barry Tangert got two letters in the mail from the state of Pennsylvania, opening the first to find a refund check from the federal government for over $900.</p> <p>His joy was short-lived though as he opened the second letter to find the income billing notice from the Pennsylvania Department of Revenue claiming that he owed a jaw-dropping $52,950,744,735.28 ($34,576,826,561.47 AUD).</p> <p>“I knew it was an obvious blunder. I don’t even make over $100,000 a year, so there’s no way I could owe anywhere near that,” Barry Tangert told local outlet <em>News 8</em>.</p> <p>The total sum was so large it didn’t even fit on a single line on the document.</p> <p>Tangert immediately knew it was a mistake, with the astonishing number being more than triple the $11 billion America’s richest man Elon Musk says he owed the government in 2022.</p> <p>How the error made it all the way to his doorstep is still a mystery to Tangert.</p> <p>“I don’t know if it was a computer glitch in the transmission or if it was an input error from my tax preparer,” Tangert said, noting that his tax preparer filed an amendment after noticing an error on his 2022 return.</p> <p>He reached out to the Pennsylvania Department of Revenue’s customer service line, which also provided little help to the baffled man.</p> <p>“The first thing he said was, ‘You had a good year.’ And I said, ‘I wish,’” Tangert said.</p> <p>Fortunately, the state department has since resolved the issue, which it chalked up to wrong numbers simply being put into the system.</p> <p><em>Image credits: WGAL News 8</em></p> <p><em> </em></p>

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