Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

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>

Legal

Placeholder Content Image

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>

Body

Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

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

Placeholder Content Image

"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>

Money & Banking

Placeholder Content Image

‘Girl math’ may not be smart financial advice, but it could help women feel more empowered with money

<div class="theconversation-article-body"><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>If you’ve ever calculated cost per wear to justify the price of an expensive dress, or felt like you’ve made a profit after returning an ill-fitting pair of jeans, you might be an expert in <a href="https://www.standard.co.uk/news/world/girl-maths-tiktok-trend-its-basically-free-b1100504.html">“girl math”</a>. With videos about the topic going viral on social media, girl math might seem like a silly (<a href="https://www.glamourmagazine.co.uk/article/girl-math-womens-spending-taken-seriously">or even sexist</a>) trend, but it actually tells us a lot about the relationship between gender, money and emotions.</p> <p>Girl math introduces a spend classification system: purchases below a certain value, or made in cash, don’t “count”. Psychologically, this makes low-value spending feel safe and emphasises the importance of the long-term value derived from more expensive items. For example, girl math tells us that buying an expensive dress is only “worth it” if you can wear it to multiple events.</p> <p>This approach has similarities to <a href="https://www.investopedia.com/terms/m/modernportfoliotheory.asp">portfolio theory</a> – a method of choosing investments to maximise expected returns and minimise risk. By evaluating how each purchase contributes to the shopping portfolio, girl math shoppers essentially become shopping portfolio managers.</p> <h2>Money and emotions</h2> <p>People of all genders, rich or poor, feel anxious when dealing with their personal finances. Many people in the UK do not understand pensions or saving enough to <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/articles/pensionparticipationatrecordhighbutcontributionsclusteratminimumlevels/2018-05-04">afford their retirement</a>. Without motivation to learn, people avoid dealing with money altogether. One way to find this motivation, as girl math shows, is by having an emotional and tangible connection to our finances.</p> <p>On the surface, it may seem that women are being ridiculed and encouraged to overspend by using girl math. From a different perspective, it hints at something critical: for a person to really care about something as seemingly abstract as personal finance, they need to feel that they can relate to it.</p> <p>Thinking about money in terms of the value of purchases can help create an <a href="https://www.thetimes.co.uk/article/every-time-i-use-my-card-my-phone-buzzes-and-that-stops-me-shopping-ps0fjx6nj">emotional relationship</a> to finance, making it something people want to look after.</p> <figure><iframe src="https://www.youtube.com/embed/GPzA7B6dcxc?wmode=transparent&amp;start=0" width="440" height="260" frameborder="0" allowfullscreen="allowfullscreen"></iframe></figure> <h2>The girl math we need</h2> <p>Women are a consumer force to be reckoned with, controlling <a href="https://www.forbes.com/sites/bridgetbrennan/2015/01/21/top-10-things-everyone-should-know-about-women-consumers/#7679f9d6a8b4">up to 80%</a> of consumer spending globally. The girl math trend is a demonstration of women’s mastery at applying portfolio theory to their shopping, making them investment powerhouses whose potential is overlooked by the financial services industry.</p> <p><a href="https://www.theguardian.com/world/2019/oct/28/women-paid-less-than-men-over-careers-gender-pay-gap-report">Women are disadvantaged</a> when it comes to money and finance. Women in the UK earn on average £260,000 less than men during their careers and the retirement income of men is twice as high as women’s.</p> <p>As I’ve found in <a href="https://www.routledge.com/Gender-and-Finance-Addressing-Inequality-in-the-Financial-Services-Industry/Baeckstrom/p/book/9781032055572">my research</a> on gender and finance, women have lower financial self-efficacy (belief in their own abilities) compared to men. This is not helped by women feeling patronised when seeking financial advice.</p> <p>Because the world of finance was created by men for men, its language and culture are <a href="https://www.routledge.com/Gender-and-Finance-Addressing-Inequality-in-the-Financial-Services-Industry/Baeckstrom/p/book/9781032055572">intrinsically male</a>. Only in the mid-1970s did women in the UK gain the legal right to open a bank account without a male signature and it was not until 1980 that they could apply for credit independently. With the law now more (<a href="https://www.worldbank.org/en/news/press-release/2023/03/02/pace-of-reform-toward-equal-rights-for-women-falls-to-20-year-low">but not fully</a>) gender equal, the financial services industry has failed to connect with women.</p> <p>Studies show that 49% of women are <a href="https://www.ellevest.com/magazine/disrupt-money/ellevest-financial-wellness-survey">anxious about their finances</a>. However they have not bought into patronising offers and <a href="https://www.fa-mag.com/news/gender-roles-block-female-financial-experience--ubs-says-73531.html">mansplaining by financial advisers</a>. This outdated approach suggests that it is women, rather than the malfunctioning financial system, <a href="https://www.theguardian.com/commentisfree/2020/sep/16/women-are-not-financially-illiterate-they-need-more-than-condescending-advice">who need fixing</a>.</p> <p>Women continue to feel that they do not belong to or are able to trust the world of finance. And why would women trust an industry with a <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2019">gender pay gap</a> of up to 59% and a severe lack of women in senior positions?</p> <p>Girl math on its own isn’t necessarily good financial advice, but if it helps even a handful of women feel more empowered to manage and understand their finances, it should not be dismissed.</p> <p><!-- 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/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/girl-math-may-not-be-smart-financial-advice-but-it-could-help-women-feel-more-empowered-with-money-211780">original article</a>.</em></p> </div>

Money & Banking

Placeholder Content Image

Loyalty programs may limit competition, and they could be pushing prices up for everyone

<p><em><a href="https://theconversation.com/profiles/alexandru-nichifor-1342216">Alexandru Nichifor</a>, <a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a> and <a href="https://theconversation.com/profiles/scott-duke-kominers-1494057">Scott Duke Kominers</a>, <a href="https://theconversation.com/institutions/harvard-university-1306">Harvard University</a></em></p> <p>Loyalty programs enable firms to offer significantly lower prices to some of their customers. You’d think this would encourage strong competition.</p> <p>But that isn’t always what actually happens. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4377561">New research</a> shows that paradoxically, by changing the way companies target customers, loyalty programs can sometimes reduce price competition. The research also points to solutions.</p> <h2>A win-win proposition?</h2> <p>Joining a loyalty program is supposed to be a win-win. You – the customer – get to enjoy perks and discounts, while the company gains useful commercial insights and builds brand allegiance.</p> <p>For example, a hotel chain loyalty program might reward travellers for frequent stays, with points redeemable for future bookings, upgrades or other benefits. The hotel chain, in turn, records and analyses how you spend money and encourages you to stay with them again.</p> <p>Such programs are commonplace across many industries – appearing everywhere from travel and accommodation to supermarket or petrol retailing. But they are increasingly coming under scrutiny.</p> <p>In 2019, the Australian Competition and Consumer Commission (ACCC) <a href="https://www.accc.gov.au/about-us/publications/customer-loyalty-schemes-final-report">cautioned</a> consumers about the sheer volume of personal data collected when participating in a loyalty program, and what companies can do with it.</p> <p>Hidden costs – such as having to pay a redemption fee on rewards or losing benefits when points expire – are another way these schemes can harm consumers.</p> <p>But a larger question – how loyalty programs impact consumers overall – remains difficult to settle, because their effect on competitiveness is unclear. As the ACCC’s <a href="https://www.accc.gov.au/about-us/publications/customer-loyalty-schemes-final-report">final report</a> notes, on the one hand: "Loyalty schemes can have pro-competitive effects and intensify competition between rivals leading to competing loyalty discounts and lower prices for consumers."</p> <p>But on the other hand: "Loyalty schemes can also reduce the flexibility of consumers’ buying patterns and responsiveness to competing offers, which may reduce competition."</p> <h2>How a two-speed price system can hurt everyone</h2> <p>A new economic theory research <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4377561">working paper</a>, coauthored by one of us (Kominers), suggests that on competitive grounds alone, loyalty programs can sometimes harm <em>all</em> consumers – both ordinary shoppers and the program’s own members.</p> <p>It’s easy to see how the ordinary shopper can be worse off. Since a firm’s loyalty program enables it to offer discounted prices to its members, the firm can raise the base prices it offers to everyone else. Those not participating in the program pay more than they otherwise would have, and the firm can respond by saying “join our program!” instead of having to lower its price.</p> <p>But sometimes, even the program’s own members can end up worse off.</p> <p>When a given customer’s loyalty status is not visible to a firm’s competitors – as is the case in many loyalty programs today – it’s hard for those competitors to identify them and entice them to switch.</p> <p>The main way to compete for those customers becomes to lower the base price for everyone, but this means missing out on the high base margins achieved through the existence of your own loyalty program – remember, having a loyalty program means you can charge non-members more.</p> <p>It’s often more profitable for firms to just maintain high base prices. This, in turn, reduces overall price competition for loyal customers, so firms can raise prices for them, too.</p> <h2>What’s the solution?</h2> <p>Despite these effects on competition, loyalty programs still offer benefits for consumers and an opportunity for brands to form closer relationships with them.</p> <p>So, how do we preserve these benefits while enabling price competition? The research suggests an answer: making a customer’s loyalty status verifiable, transparent and portable across firms. This would make it possible for firms to tailor offers for their competitors’ loyal customers.</p> <p>This is already happening in the market for retail electricity. While there aren’t loyalty programs there per se, a consumer’s energy consumption profile, which could be used by a competitor to calibrate a personalised offer, is known only to their current electricity supplier.</p> <p>To address this, in 2015, the Victorian government launched a <a href="https://compare.energy.vic.gov.au">program</a> encouraging households to compare energy offers. This process involved first revealing a customer’s energy consumption profile to the market, and then asking retailers to compete via personalised offers.</p> <p>By opening information that might have otherwise been hidden to the broader market, this approach enabled firms to compete for each other’s top customers, in a way that could be emulated for loyalty programs.</p> <p>Such systems in the private sector could build upon “<a href="https://thepointsguy.com/guide/airline-status-matches-challenges/">status match</a>” policies at airlines. These allow direct transfer of loyalty status, but currently rely on a lengthy, individual-level verification process.</p> <p>For example, a design paradigm known as “<a href="https://hbr.org/2022/05/what-is-web3">Web3</a>” – where customer transactions and loyalty statuses are recorded on public, shared blockchain ledgers – offers a way to make loyalty transparent across the market.</p> <p>This would enable an enhanced, decentralised version of status match: a firm could use blockchain records to verifiably identify who its competitors’ loyal customers are, and directly incentivise them to switch.</p> <p>Both startups and established firms have experimented with building such systems.</p> <h2>What next?</h2> <p>New academic research helps us model and better understand when loyalty programs could be weakening supply side competition and undermining consumer welfare.</p> <p>A neat universal solution may prove elusive. But targeted government or industry interventions – centred on increasing the transparency of a customer’s loyalty status and letting them move it between firms – could help level the playing field between firms and consumers.<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/220669/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><a href="https://theconversation.com/profiles/alexandru-nichifor-1342216"><em>Alexandru Nichifor</em></a><em>, Associate Professor, Faculty of Business and Economics, University of Melbourne, <a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a> and <a href="https://theconversation.com/profiles/scott-duke-kominers-1494057">Scott Duke Kominers</a>, Sarofim-Rock Professor of Business Administration, <a href="https://theconversation.com/institutions/harvard-university-1306">Harvard University</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/loyalty-programs-may-limit-competition-and-they-could-be-pushing-prices-up-for-everyone-220669">original article</a>.</em></p>

Money & Banking

Placeholder Content Image

Why a one-cent stamp is set to sell for millions

<p>An extremely rare stamp that was once bought for a measly one cent is set to sell for millions of dollars, breaking records at a US auction house. </p> <p>While to the untrained eye, the blue stamp seems like any old stamp, the 1868 one-cent Z-grill is actually the rarest stamp in America due to its unique history and rarity. </p> <p>On June 14th, the one-cent Z-grill will be put up for sale by Robert A. Siegel Auction Galleries, marking the first time the rare stamp has been on auction since 1998. </p> <p>Experts from the New York auction house say it could fetch $6 million to $7.5 million (AUD), which would make it the single most expensive US stamp ever sold.</p> <p>The reason for the extraordinary price comes down to the fact that out of the two known Z-grill stamp copies, the one up for auction is the only copy available for private purchase by collectors, while other historic copy is held at the New York Public Library.</p> <p>The Z-grill is unique due to its signature embossed paper, which was introduced to the US postal service after the Civil War to prevent stamps from being reused. </p> <p>Since 2005, the coveted stamp has belonged to billionaire investor and “bond king” Bill Gross.</p> <p>“It’s considered the trophy of collecting United States stamps,” said Charles Shreve, who has managed and built Gross’ extensive stamp collection for years and serves as director of international auctions at Robert A. Siegel Auction Galleries.</p> <p>“There’s only one. If you want to brag, that’s the stamp.”</p> <p>Mr Gross' entire collection is estimated to be worth $22.6 million to $30 million AUD. The top 100 stamps from the collection will be auctioned off on June 14th, while the remaining stamps will be sold on June 15th.</p> <p>“There’s multiple stamps that’ll bring $500,000 or $750,000 (USD) but the (one-cent) Z-grill is the star of the show,” Shreve said.</p> <p>“I just know some people who are lusting for it, and we want to try to get as many people interested in it as possible.”</p> <p><em>Image credits: Robert A. Siegel Auction Galleries</em></p>

Money & Banking

Placeholder Content Image

Restaurant sparks outrage for "ridiculous" fee

<p>As inflation rates continue to rise it is not surprising that restaurants are charging extra fees, but one disgruntled customer was particularly shocked to see this "ridiculous" fee on their bill. </p> <p>The customer, who dined at restaurant and cocktail bar in Georgia, USA shamed the restaurant for charging their customers a $20 fee for “live band entertainment”.</p> <p>They shared their complaints on Reddit with a copy of their receipt and an unexpected fee at the bottom which read: “Two Live Band Entertainment Fee — $20”.</p> <p>Most people in the comments were equally annoyed and called the fee "ridiculous". </p> <p>“This is one of those leave money on the table, hand the waiter a tip and leave, sorry but if I didn’t order it, I’m not paying for it,” one wrote. </p> <p>“Great way to not have repeat customers,” said another.</p> <p>“This will backfire for them, just be honest and upfront," a third added. </p> <p>Other commenters were less sympathetic and did not understand why the customer was complaining when it looked like they could afford it. </p> <p>“When you’re paying seven dollars for a bottle of water, you really don’t get to complain about ‘unexpected costs.’ You knew what you signed up for," one commenter wrote. </p> <p>“Imagine a live band getting paid, huh,” another added. </p> <p>“They’re buying $7 bottles of water, they can probably afford it,” added a third.</p> <p><em>Image: Getty/ Reddit</em></p>

Money & Banking

Placeholder Content Image

12 super simple ways to save some cash

<p>Saving money is a lot easier said than done. Whether you’ve got a holiday you’re thinking about taking, or you just want to make day to day life a little less stressful, there is a range of strategies you can employ to put a couple of dimes together. Here are 12 tips to cut costs:</p> <p>1. Don't buy luxury, sometimes the budget brands are just as good and save you heaps.</p> <p>2. Read the junk mail and compare offers because you can get a better deal where you didn't think you could.</p> <p>3. Cut unnecessary expenses and reduce, if possible, the necessary expenses as well.</p> <p>4. Buy used goods, it's cheaper and you can haggle.</p> <p>5. See if you can switch power companies. I'm aware of several people who are saving $250 a year.</p> <p>6. Borrow books and movies from the library or movie store - it's free or low cost compared to buying new and it's fast.</p> <p>7. Barter with family and friends, it's free and everyone wins.</p> <p>8. Take advantage of specials, sales and deals including buying in bulk, it can save you more than you realise.</p> <p>9. Walk, bike or car pool or use other public transport, it's good for the environment and saves you money.</p> <p>10. Shop around for the best deal, it might be better elsewhere.</p> <p>11. Follow insurance company advice: Don't smoke, do have alarms and do get multi policies - it protects you and saves cash.</p> <p>12. Have a savings account with all the savings from this and don't touch it, you will be amazed at what you have saved in a short time.</p> <p><em>Written by John Murphy. Republished with permission of <a href="http://www.stuff.co.nz/" target="_blank" rel="noopener"><strong><span style="text-decoration: underline;">Stuff.co.nz</span></strong></a>.</em></p> <p><em>Image credits: Getty Images </em></p>

Money & Banking

Placeholder Content Image

What ‘psychological warfare’ tactics do scammers use, and how can you protect yourself?

<p><em><a href="https://theconversation.com/profiles/mike-johnstone-106590">Mike Johnstone</a>, <a href="https://theconversation.com/institutions/edith-cowan-university-720">Edith Cowan University</a> and <a href="https://theconversation.com/profiles/georgia-psaroulis-1513050">Georgia Psaroulis</a>, <a href="https://theconversation.com/institutions/edith-cowan-university-720">Edith Cowan University</a></em></p> <p>Not a day goes by without a headline <a href="https://www.vice.com/en/article/qjvaym/people-share-worst-scam-stories">about a victim being scammed</a> and losing money. We are constantly warned about new scams and staying safe from cybercriminals. Scamwatch has <a href="https://www.scamwatch.gov.au/research-and-resources/tools-resources/online-resources/spot-the-scam-signs">no shortage of resources</a>, too.</p> <p>So why are people still getting scammed, and sometimes spectacularly so?</p> <p>Scammers use sophisticated psychological techniques. They exploit our deepest human vulnerabilities and bypass rational thought to tap into our emotional responses.</p> <p>This “<a href="https://www.thecut.com/article/amazon-scam-call-ftc-arrest-warrants.html">psychological warfare</a>” coerces victims into making impulsive decisions. Sometimes scammers spread their methods around many potential victims to see who is vulnerable. Other times, criminals focus on a specific person.</p> <p>Let’s unpack some of these psychological techniques, and how you can defend against them.</p> <h2>1. Random phone calls</h2> <p>Scammers start with small requests to establish a sense of commitment. After agreeing to these minor requests, we are more likely to comply with larger demands, driven by a desire to act consistently.</p> <p>The call won’t come from a number in your contacts or one you recognise, but the scammer may pretend to be someone you’ve engaged to work on your house, or perhaps one of your children using a friend’s phone to call you.</p> <p>If it is a scammer, maybe keeping you on the phone for a long time gives them an opportunity to find out things about you or people you know. They can use this info either immediately or at a later date.</p> <h2>2. Creating a sense of urgency</h2> <p>Scammers fabricate scenarios that require immediate action, like claiming a bank account is at risk of closure or an offer is about to expire. This tactic aims to prevent victims from assessing the situation logically or seeking advice, pressuring them into rushed decisions.</p> <p>The scammer creates an artificial situation in which you are frightened into doing something you wouldn’t ordinarily do. Scam calls <a href="https://theconversation.com/we-have-filed-a-case-under-your-name-beware-of-tax-scams-theyll-be-everywhere-this-eofy-162171">alleging to be from the Australian Tax Office</a> (ATO) are a great example. You have a debt to pay (apparently) and things will go badly if you don’t pay <em>right now</em>.</p> <p>Scammers play on your emotions to provoke reactions that cloud judgement. They may threaten legal trouble to instil fear, promise high investment returns to exploit greed, or share fabricated distressing stories to elicit sympathy and financial assistance.</p> <h2>3. Building rapport with casual talk</h2> <p>Through extended conversation, scammers build a psychological commitment to their scheme. No one gets very far by just demanding your password, but it’s natural to be friendly with people who are friendly towards us.</p> <p>After staying on the line for long periods of time, the victim also becomes cognitively fatigued. This not only makes the victim more open to suggestions, but also isolates them from friends or family who might recognise and counteract the scam.</p> <h2>4. Help me to help you</h2> <p>In this case, the scammer creates a situation where they help you to solve a real or imaginary problem (that they actually created). They work their “IT magic” and the problem goes away.</p> <p>Later, they ask you for something you wouldn’t normally do, and you do it because of the “social debt”: they helped you first.</p> <p>For example, a hacker might attack a corporate network, causing it to slow down. Then they call you, pretending to be from your organisation, perhaps as a recent hire not yet on the company’s contact list. They “help” you by turning off the attack, leaving you suitably grateful.</p> <p>Perhaps a week later, they call again and ask for sensitive information, such as the CEO’s password. You <em>know</em> company policy is to not divulge it, but the scammer will ask if you remember them (of course you do) and come up with an excuse for why they really need this password.</p> <p>The balance of the social debt says you will help them.</p> <h2>5. Appealing to authority</h2> <p>By posing as line managers, officials from government agencies, banks, or other authoritative bodies, scammers exploit our natural tendency to obey authority.</p> <p>Such scams operate at varying levels of sophistication. The simple version: your manager messages you with an <em>urgent</em> request to purchase some gift cards and send through their numbers.</p> <p>The complex version: your manager calls and asks to urgently transfer a large sum of money to an account you don’t recognise. You do this because <a href="https://www.wsj.com/articles/fraudsters-use-ai-to-mimic-ceos-voice-in-unusual-cybercrime-case-11567157402">it sounds exactly</a> like your manager on the phone – but the scammer <a href="https://www.forbes.com/sites/thomasbrewster/2021/10/14/huge-bank-fraud-uses-deep-fake-voice-tech-to-steal-millions/?sh=1329b80e7559">is using a voice deepfake</a>. In a recent major case in Hong Kong, such a scam even involved a <a href="https://edition.cnn.com/2024/02/04/asia/deepfake-cfo-scam-hong-kong-intl-hnk/index.html">deepfake video call</a>.</p> <p>This is deeply challenging because artificial intelligence tools, such as Microsoft’s VALL-E, can create <a href="https://arstechnica.com/information-technology/2023/01/microsofts-new-ai-can-simulate-anyones-voice-with-3-seconds-of-audio/">a voice deepfake</a> using just three seconds of sampled audio from a real person.</p> <h2>How can you defend against a scam?</h2> <p>First and foremost, <strong>verify identity</strong>. Find another way to contact the person to verify who they are. For example, you can call a generic number for the business and ask to be connected.</p> <p>In the face of rampant voice deepfakes, it can be helpful to <strong>agree on a “safe word” with your family members</strong>. If they call from an unrecognised number and you don’t hear the safe word just hang up.</p> <p>Watch out for <strong>pressure tactics</strong>. If the conversation is moving too fast, remember that someone else’s problem is not yours to solve. Stop and run the problem past a colleague or family member for a sanity check. A legitimate business will have no problem with you doing this.</p> <p>Lastly, if you are not sure about even the slightest detail, the simplest thing is to hang up or not respond. If you really owe a tax debt, the ATO will write to you.<!-- 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/223959/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/mike-johnstone-106590"><em>Mike Johnstone</em></a><em>, Security Researcher, Associate Professor in Resilient Systems, <a href="https://theconversation.com/institutions/edith-cowan-university-720">Edith Cowan University</a> and <a href="https://theconversation.com/profiles/georgia-psaroulis-1513050">Georgia Psaroulis</a>, Postdoctoral research fellow, <a href="https://theconversation.com/institutions/edith-cowan-university-720">Edith Cowan 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-psychological-warfare-tactics-do-scammers-use-and-how-can-you-protect-yourself-223959">original article</a>.</em></p>

Money & Banking

Placeholder Content Image

Five tips for developing and managing your budget – even in tough economic times

<p><em><a href="https://theconversation.com/profiles/oluwabunmi-adejumo-1370664">Oluwabunmi Adejumo</a>, <a href="https://theconversation.com/institutions/obafemi-awolowo-university-2843">Obafemi Awolowo University</a></em></p> <p>There’s nothing quite like a new year to prompt us to take stock of our lives, our health, our goals – and our finances. Many people will start a new year by contemplating how best to budget, plan and save. This is always a good set of aims, but it’s especially important in the inflation-prone and unpredictable economies we’re seeing <a href="https://www.statista.com/statistics/268225/countries-with-the-highest-inflation-rate/">all over Africa and the world</a>.</p> <p>Budgeting is especially key. It is the most effective method to <a href="https://www.thebalancemoney.com/how-to-make-a-budget-1289587">monitor income and expenditure</a>. <a href="https://www.uslendingcompany.com/blog/key-differences-in-writing-a-household-budget-vs-a-personal-budget/">Personal budgets</a> can help you to monitor your resources in pursuit of larger financial goals. Budgeting also offers <a href="https://www.acrwebsite.org/volumes/v46/acr_vol46_2411998.pdf">more opportunities</a> to save money, reduce your debts and live a comfortable life. It can even <a href="https://prucomm.ac.uk/assets/uploads/blog/2013/04/Personal-Budgets-review-of-evidence_FINAL-REPORT.pdf">improve your mental health</a>.</p> <p>But where should you start? What questions do you need to answer in creating a budget? Here are some tips that I’ve learned – not just as an economist, but as a research cost analyst and someone who keeps a budget too.</p> <h2>1. Understand the broader economic conditions</h2> <p>It is imperative that individuals keep themselves aware and up-to-date on the realities of their country’s economic landscape. You don’t have to be a professional economist, but keep an eye on new developments like free business registration, small business development funds and printing of new money notes. What is the current exchange rate? What’s the political landscape and what international factors, like the price of crude oil, are at play? You should also watch the inflation rate and have a sense of unemployment trends.</p> <p>This economic awareness will prepare you to draft your own budget and you’ll have a sense of when external factors mean it’s time to revisit your plans.</p> <h2>2. Review your income sources</h2> <p>The ability to earn income is critical to sustaining livelihoods. Having a definite source of income is the bedrock of budgeting.</p> <p>Some important questions you should ask about your income – and how you might budget with it – include:</p> <ul> <li>What is my current income?</li> <li>What do I use my income for?</li> <li>Am I able to save, given my current income?</li> <li>What proportion of my income do I save and what proportion do I spend?</li> <li>Do I have the capacity to earn more than this?</li> <li>How can I improve my income?</li> </ul> <p>Your answers can help you to identify gaps or untapped potential. Those with irregular or unpredictable income should factor in the element of time-gap in their income, for effective budgeting. Time gap is when they are not earning income. And everyone should make allowance in their budgets for uncertainties like health issues, social engagements, inflation, unemployment, recession and price shocks.</p> <h2>3. Appraise your expenses</h2> <p>Expenses can be broadly categorised into “variable” and “fixed”.</p> <p>Fixed expenses recur within a short period: housing, food, transport, medical costs, electricity, utilities, toiletries and clothing. Variable expenses are more long-term and irregular, such as investment in property or interest-yielding assets, and the purchase of machinery.</p> <p>The main essence of revising our expenses is to analyse and possibly improve our spending habits. In reviewing our expenses, we can consider issues such as:</p> <ul> <li>What is the proportion of consumption-savings ratio from my income? This is how much do I spend compared to how much I save.</li> <li>What are my regular expenses?</li> <li>What are my fixed, capital or investment expenses?</li> <li>What are my extraordinary expenses that need modification?</li> <li>Have there been emergency or extraordinary expenses?</li> </ul> <p>A careful response to the issues raised above offers an occasion to re-evaluate the pattern and direction of our expenses. For instance, overspending, unplanned or extraordinary expenses can be identified. This can lead to an optimal, efficient reallocation of available resources.</p> <h2>4. Stabilise your finances through savings</h2> <p>Savings have been <a href="https://klinglercpa.com/bedrock-principles-for-saving-money/">described</a> as a financial stabiliser, given their potential to cater for urgent needs and create opportunities for investments.</p> <p>Of course, savings have more value when they grow faster than the rate of inflation. Inflation erodes the value of savings. For instance, an amount of 300,000 naira (US$676) saved to purchase an autorickshaw today may be impossible in two months’ time with an inflation rate of 10% when the tricycle price rises to 330,000 naira (US$744). The reverse is the case when there is deflation.</p> <p>Therefore, it is advisable to improve the value of savings through investments in interest-yielding assets such as stocks, shares, bonds, microfinance and production.</p> <p>That’s not to say it’s always easy to save. Many income earners spend as they go, not seeing savings as part of their budgets. Harsh economic realities can also make it difficult – sometimes seemingly impossible – to save. But it’s not impossible: savings can be made in small amounts, through a daily, weekly or monthly contribution to collections, cooperative schemes or microfinance affiliations. For instance, a point of sale business in Nigeria can permit a daily contribution of 500 naira (US$1.13) over 25 work days, giving an average saving of 12,500 naira (US$28.18) per month.</p> <p>The Point-of-Sale business started in Nigeria in 2013 when the Central Bank of Nigeria introduced the agent banking system. A POS agent operates and processes transactions through a POS service provider. Providers of such services include banks, microfinance banks and fintech companies.</p> <h2>5. Run a flexible budget</h2> <p>Once your budget is created, remember that it’s not set in stone. It should be flexible if anything changes in your life. For instance, an amount saved to buy a car can be invested in a promising venture buying shares through public offerings or private placements in multinational organisations like Nestle or Unilever.</p> <p>Also, health emergencies or career advancement programmes can require taking some money out of our savings.</p> <p>In all, budgeting should be flexible enough to incorporate exigencies, especially when catering for the current situation will culminate into a greater good.<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/195590/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><em><a href="https://theconversation.com/profiles/oluwabunmi-adejumo-1370664">Oluwabunmi Adejumo</a>, Lecturer/Researcher, <a href="https://theconversation.com/institutions/obafemi-awolowo-university-2843">Obafemi Awolowo University</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/five-tips-for-developing-and-managing-your-budget-even-in-tough-economic-times-195590">original article</a>.</em></p>

Money & Banking