Sunday, June 26, 2011

Debt - is it bad?

Debt - what is it?
The word, 'debt' carries carries with it a negative connotation, particularly after the GFC where debt is one of the main factors in it. From, it stands for: "something that is owed or that one is bound to pay to or perform for another".

Debt uses and is it bad?
Yes and no. This is because if debt is used correctly it can actually be a good thing, just as with credit cards (see credit vs debit cards) where you would 'loan' money from the bank to make your purchases of goods and/or services. And no, if you use it incorrectly and spent over your means (or if you venture doesn't go well or as well as expected...)

There are many reasons for taking out this loan, and this could include:
  • Convenience - easier to borrow then to find money elsewhere
  • Improve cashflow - you may prefer to borrow money so that you can use your currect liquid assets (e.g. cash, term deposits, etc.) for something else.
  • The need for money to start a business venture - a person may take out a loan to start a business that they may not have had finances to start themselves.
  • No money to start with - Cashflow might be tight and there may be no money at the moment to start a venture. For example, you may be awaiting payment from salaries, sales, etc.
Debt as the facititator/ enabler:
So these are some of the reasons someone may apply for a loan (and now have a debt), but generally you'd want to do so if you want to engage in activities that you may or may not have been able to undertake otherwise. So debt itself is not bad, as it can often act as an enabler, however, one has to realise that debt is essentially 'borrowing money from the future to pay for today'*. So sometimes borrowing money and investing and/or using it in a certain way may result outcomes which may be positive or negative, however, one has to remember that the debt borrowed will eventually need to be paid back - with interest. So it is hoped that whatever the debt (loan) is taken up for, that it results in the tangible and intangible benefits that it is intended to bring about.

For example, an individual may require a loan to purchase a car, as a car is needed as the individual needs the car for work. In time, the individual pays off the loan (and its interest) with their earnings, but as they were able to get this loan they were able to buy the car for work. Without the car they weren't able to they wouldn't be able to work. Thus, the loan (debt) has acted as an enabled/ facilitator for this situation allowing the individual to purchase the car for work, otherwise the individual may not have been able to work.

As you can see wise usage can enable and facilitate initiatives that may not have been initiated if the financial outlay was not there. I'm sure there are other situations where money can see seen to be available elsewhere but maybe it is tied up in assets, shares or other asset classes, or not there at all. So being able to assess and determine if taking up debt is acceptable and appropriate to one's situation is important. This includes looking at the possible risks that may arise and managing these, and as situations can vary and be difficult, seeking professional or outside help may not be a bad option as well.

Essentially taking up debt is not neccessarily as bad as it may seem, if used wisely it can lead to positive outcomes. It's important to remember that eventually debts (loans) need to be paid off, and with most things in life there are always risks, so knowing what they are and managing them is always important. I hope this offers you a different insight into debt, but always remember to consider your situation with care and be sure to ask for help or confirmation to ensure that you understand what you are doing as well as any consequences it may have.

*'Borrowing money from the future to pay for today'- I often call it this as you are in essence borrowing the $1000 you may have in the future and using the $1000 today for your venture, with the added interest on it of course. Sometimes this borrowing pays off, other times it doesn't and that's something important to remember.

Credit report

Ever wondered what your credit was like? Well, as I only realised recently you can check it for free. Although as far as I know this method only applies for Australians.

Here are the steps to order your free credit check, basically you will need to:

  1. Visit
  2. Click on "Credit Check
  3. Make sure you select "Standard", as although it takes approximately 10 days to process, you'll get it free. Alternatively, if you are in a hurry then you can opt for the fasttrack option (which cost is about 30 dollars incl GST at the moment to apply for). This is more applying for credit reports for job applications, etc.
  4. Fill in your details as required and submit.
  5. Wait the 10 businesss days for your credit report to be received via snail mail or via email (whichever you have chosen). The 10 business day wait doesn't apply to those who paid for their report - it should be one business day in that case.
  6. Receive your credit report via snail mail (home postal address) or via your email address.
Veda Advantage (MyCreditFile) is also another place where you can request a credit report for free (and paid express version at $36.95 incl GST if you need it). Although with the free version you'll need to send a snail mail or fax documents and details to them.

If curiously is not a main motivator for you then these are a few other reasons why you might want to check out your credit report (listed on the FAQ page of the Dun and Bradstreet website). 

Why should I obtain a copy of my Credit Report?
Understanding your credit profile is a critical first step when applying for credit.By checking your report you can ensure that lenders are getting a balanced, complete view of your financial health. In addition:
  • find out how you and your credit history is being portrayed to prospective credit providers
  • verify the information contained within your report to ensure accurate disclosure
  • be notified when your credit report is updated and understand how this may affect your credit rating
  • protect yourself from identity fraud and be alerted to any potential fraudulent activity occurring in your name
  • have the opportunity to add comments to your file with regard to investigation of your credit information

But what I find great about the credit report is that it also gives you information as to who is accessing your credit report, when and if you have any summons, backrupties, defaults, judgements, directorships on your record which can be interesting to observe even if you know you're always doing things right (e.g. paying bills on time, etc.). Knowing that it shouldn't cost you anything except the time to fill in an online application, I think it's handy and always good to make sure things are in order - as you can try fit any errors that might have come about. Anyways, I hope you what you do end up receiving is what you're expecting should be there and enjoy reading your very own credit report! :)

Wednesday, June 22, 2011

Back from Vietnam

Greetings all, I'm finally back and blogging again in Melbourne now. It's been a truly eventful and interesting journey in Vietnam, but I'm truly glad to be back home. They say there's no place like home, and for me, that's how I feel about my home :)

Being away I have never realised how many things I have taken for granted. Sure, I have traveled interstate and abroad before but this was by far the longest and most revealing of them all. Yet it is those that can make you realise what you truly and truly don't need (wants vs needs).

Saigon (aka Ho Chi Minh City)
One of the most important outcomes from my trip have been to learn much about my history and heritage, visiting my family and extended relatives, many of which I have never seen, met or even spoken to in my life... In particular were relatives that were descendents of my great-great-ancestors, who felt so much as strangers as they did as people I should or could have known, and maybe I would have if had been brought up in Vietnam. Particularly as it seems traditional, as an annual event (Chup ma), to catch up with relatives of your family tree, although the extent and number of relatives you would meet varies per family name, and as you would may realise, with the family name 'Tran' it isn't practical to meet all distant relatives in the same place - perhaps with a stadium or such, but one has to be realistic about doing this annually and what may be achieved in doing so!

Saigon (aka Ho Chi Minh City)
So it was explained to me that we were meeting one branch, and so I was able to explore parts of my grandfather's home and the surrounding neighbourhood and get a general idea of what he may have been like and how he may have lived. My branch (one branch) includes:
  • myself;
  • my father;
  • his father (my grandfather - ong noi);
  • his father's father (my great-grandfather - ong co); and
  • his father's father (my great-great grandfather - ong tang). 
This is my direct ancestors in this one branch, however, the one branch also includes the siblings and their descendents. One branch generally represents four levels up from me (although this number of levels I assume varies from family to family and without photographic memories of the past, may reflect only the practical way of remembering them).  At this gathering I was able to meet about 50-60 odd relatives and distant relatives from this branch.

On another day, I met three branches of the family tree and this second gathering was the meeting of two other branches just like mine, although given the large number and extent of relatives attending the gathering, I have been told they meet tri-annually, so I have been very fornutate in the timing of my trip, to be able meet not only meet those relatives from my direct branch, but those from the two other branches as well. There were about 250-260 odd relatives and distant relatives from this branch who attended this gathering. To think that this is only three branches makes me think about how many other branches there may be out there, and of the other family names and their branches...

During my trip I also met my grandmother for the first time, where she cried, as I had been one of her last grandchildren she had yet to meet. After meeting her I felt that I now have an idea of what she was like my father's mother and my father would have been like as a child. I had also learnt some interesting facts about some habits and thoughts that I he had, and those that may have inherited from him, along with those from his siblings and other close relatives.

I am now finally able to feel assured that I have not missed that opportunity to meet not only my grandmother and had also been able to visit the graves of those that have past and finally visit Vietnam, so I feel that I now know my heritage. I now have a rough idea of what it was like for them to live there, of who they were and how they lived. I hope that I will be able to learn from any mistakes that they have made, and understand how to live my own life to fullest. I can now share my insights and stories with those around me.

Me on Mount Son Tra (aka Monkey Mountain), Da Nang, Vietnam
It's been interesting learning and exploring that it was like to live there and imagining what it is like to live with my family and distant relatives, while at the same time trying different cuisine and drinking tasty drinks such as sugarcane juice everyday! One day I may return and visit again, although when that is, only time will tell... ;)