Monday 23 May 2011

Cashflow 101 - a great game for the price

I've never been a great fan of Robert Kiyosaki, aside from some of the advice presented in "Rich Dad, Poor Dad" seeming a bit dubious, I find it a bit "rich" for someone who, by their own admission, was a serial-failure at business and investing until his late 40s, to claim to be an expert on investing and finance. (Especially as I'm not sure how well his "borrow heavily and invest in real estate" strategy has played out since the GFC and US real estate crash). However, when I saw a mint-condition set of the board game "Cashflow 101" being thrown out I was interested enough to check out the contents (everything present and correct - only a couple of the playing sheets had been filled in. Obviously the original owners of this game didn't play it more than once or twice).

After all, aside from "Monopoly" there aren't too many payable games that are related to investing and personal finance. And ever since I found out that my old copy of the PC game "Jones in the fast lane" wouldn't run on any of our current crop of home computers, I've been keeping an eye out for a suitable family game that might teach the kids something about personal finance and investing - and still be enjoyable to play.

We played our first game of "Cashflow 101" today - DS2 had been pestering me to play if since I brought the game home last week and he saw the cute mouse on the cover and the mice and cheese playing tokens and piles of play money. The game rules are quite involved once you get going - and every time for buy or sell investments you have to adjust a whole lot of figures on the playing sheets. But the boys enjoyed playing, and liked getting money every couple of turns when they landed on a "pay day" square. Their groans every time they landed on a "doo-dads" square and had to spend "hard-earned" cash on a stereo or a new set of tyres makes me think the game might even be a little-bit educational (aside from the copious amounts of mental arithmetic practice updating their "accounts" sheet each turn.

Some of the game-play features are understandably less than realistic (it would be too hard to vary the frequency of getting laid off work based on the "career" of each player - but having a teacher, an engineer and a lawyer all loosing the jobs with the same regularity didn't seem very realistic). The stock market trades also seem very biased towards highly speculative "trading" rather than a diversified, dividend producing share market portfolio. But the main gripes I have with the game playing it only once are a) it takes way longer to play than indicated - we spent around 5 hours playing it before giving up when the first player made it into the "fast lane", and b) some of the rules seem unclear eg. when you buy a house that has a positive cashflow, do you simply add the positive amount to your total cashflow? or do you add the positive cashflow and also have to deduct the 10% interest charged on the mortgage?

However, overall the game was quite a lot of fun to play, and provided there is some intelligent discussion of the investments and financial decisions being made (eg. don't invest in 6% CDs when you still have an outstanding credit card debt costing 10% per month!) it can also be an "educational" play activity for the kids to participate in with their parents. I wouldn't rush out to buy the game for $80 or so from, but for $0 it was a bargain.

For our next game I'll be sticking a set of the blank "financial statements" into clear sleeves so we can write the figures using white-board markers for easy updating.

ps. If you're tempted to pay good money for this game, I'd recommend looking into the e-version, as the manual updating of the financial statements is the most boring, error-prone and time-wasting "feature" of the game.

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Saturday 21 May 2011

The cost of Procrastination and Politeness

Last year my Aunt died unexpectedly, and my mother found out that under German inheritance law she needed to sign a form disclaiming her automatic right to half of her sister's estate, so it could all pass on to my Uncle. She was happy enough to do so, and my Uncle informed her (in a phone call) that he was going to leave "everything" to her, as he had no close blood relatives.

Then last month my Uncle died suddenly soon after returning from a holiday, and my parents had to travel to Germany to make his funeral arrangements, and check through his paperwork. It turned out that he must have never gotten around to writing his will. My mother had never reminded him to put his intentions down in writing (she probably didn't want to bring up this morbid topic during their occasional telephone conversations). So, my mother won't inherit any of his estate - instead it will remain in probate for three years in case any long lost cousin turns up, and then it will all go to "the state".

It seems rather sad that the end result of my Uncle not following up his telephone promise and actually writing down his intentions, and my mother's hesitancy to "follow up" and check that he eventually made out his will, means that his estate will not be distributed as he had intended. Fortunately there isn't a huge amount of money involved (the town-house is worth around $250,000 and there are three used cars, furniture etc. plus whatever he had in his bank account), and there would have been around 50% tax on any inheritance my mother had received, but it still would have been a nice lump sum for a self-funded retired couple in their late 70s to receive.

Goes to show the importance of not "putting off" important tasks that won't really require much effort to complete. And that even though it may be an uncomfortable topic to discuss with elderly relatives, it's important that any intentions regarding bequests are properly documented.

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Sunday 15 May 2011

New Phones arrived

Our two new Samsung B2710 phones arrived unexpectedly on Friday - fortunately DW was having a day off work to take DS1 to see his eczema specialist, so she was at home to sign for the delivery.

I was initially informed by Three the week before (via an SMS) that my order for a pair of new Samsung B2710s to replace our old phones had been cancelled as it was out of stock, then I was told the next day (when I called customer service) that this model "might" be restocked and our order was actually "on hold" unless I chose to cancel it or change to a different model, and I should check for an update the next day. When I phoned again a week ago I was then told that the Samsung B2710 was going to be restocked but that I'd have to phone again in two weeks to check on availability... only to have the new phones delivered a week later!

I installed my old SIM card in one of the new Samsung B2710s on Friday (and gave my old Sony Ericsson G502 to DS1 to use with his new $1/mo TPG SIM) and have a favourable first impression. The handset is only a few mm large than our old phone, but seems a lot more "chunky" due to the larger keypad and rubberised casing which I like (but DW isn't too keen on). It weighs about the same as the old phone, which DW likes.

A test of the GPS outside on Friday night gave an accurate report of our Latitude and Longitude and didn't take long to get a fix, so that feature will come in handy when bush walking or setting up my telescope on field trips. The built-in LED torch is actually bright enough to be useful when camping, but I may have to make a red plastic cover so I can also use it when doing astronomy. As I haven't got a data plan on my current $14/mo phone plan I haven't tried using Google maps yet. I might subscribe to the Three casual data plan - it doesn't cost anything to add it to my plan, but casual data use costs a hefty $2/MB! I might be OK for checking the occasional map while walking around town - I don't need it for in-car use as I have a car GPS.

Walking around town on Saturday I started playing around with the phones pedometer app, and it actually was very accurate in recording my steps and might be a useful addition to my diet and exercise program.

The auto-lock feature for the keypad works well (stopping unintended key presses making accidental phone calls to "000" - which the old Sony Ericsson tended to make, even when its keypad was in "locked" mode) although it would be nice to be able to increase the amount of inactive time before the auto-lock feature kicks in. So far I can turn this feature on and off, but haven't worked out how to change the default time delay of around 5 seconds.

The built-in ring tones provided a sufficient range of choices (although I might try to find a Dr Who theme tune if I get very bored one day), and the alarm sound at maximum volume was sufficient to wake me up from the next room without any problem.

One feature that seems to be missing is report of the battery charge. I was used to having a short-cut key press setup to display the % charge remaining, but the new phone only seems to provide battery charge information very approximately via the 5-bar battery icon showing on the phones display.

A quick test of the camera function provided a reasonable snapshot of the stained glass window in the QVB, adequate results for a 2MP phone camera. It will be a handy standby for capturing unexpected family "moments", but for planned photography a phone camera is unlikely to ever replace my digital SLR and bad full of lenses no matter how many MP it has,

I might buy one of the 16MB "mini-SD" cards that this model can accommodate. That way I can make use of the voice dictation app for recoding study notes for my MAstron coursework, and also use the phone as a replacement for an MP3 player.

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Friday 6 May 2011

Time to upgrade our mobile phones

The two-year contract period on our Three mobile phone account ended last month, which is perfect timing because DWs phone was no longer able to charge her battery (due to some orange juice from DS1 sipper cup leaking in her handbag). So, we had to keep swapping batteries between our two Sony Ericsson G502 phones in order to keep both batteries charged up. It was a real hassle because every time the batteries were swapped over we had to reset the date and time on our phones, otherwise our alarms wouldn't go off at the correct times.

The old phone:

So, I decided to upgrade both our phones, but stick with the same shared-spend $14/mo each plan. Most of the available upgrade models are iPhones or similar touch phones, but at $5-$20/mo extra over 24 months for each phone I don't want to spend $120-$480 just to have something "cool" for making my phone calls (if I want to take photos I use my digital SLR camera, and for apps and internet I use my laptop, not a phone). These phones are also a larger form factor than I really want - the old "candy bar" style phone fits nicely into the side pocket of my "man purse" or jacket pocket. I considered a $0/mo upgrade to a Nokia phone very similar to the old Sony Ericssons, but in the end decided to splurge $2/mo each on upgrading to a pair a Samsung B2710s. These phones are similar to our old phones, but have the added benefit of being quite tough. They are waterproof rated to a depth of 1m for 30 mins, and drop rated to survive a fall from 2m. It was quite fun watching some "reviews" of this model on YouTube - basically people just had a ball showing that this model will still work OK after leaving the phone in a fish tank for half-an-hour, stirring hot chocolate with it, dropping it 2m off a fire escape, being driven over them by a snow mobile, or being chucked into a cement mixer for a while! Admittedly they didn't survive being shot with a rifle or being driven over with the metal tread ribs of a snow-groomer ;)

They also have a couple of features that may actually be useful in a mobile phone designed for users who sometimes take their phone hiking or skiing - the ubiquitous GPS and google maps, a built-in altimeter, pedometer, reasonable strength flashlight (not sure how quickly using that would drain the battery), and a digital compass. The lanyard hole also looks like this phone can be hung around you neck without destroying the eyelet the first time the phone gets caught on something.

I ordered the phone upgrades on Tuesday but then got an SMS two days later from the Three warehouse saying the order had been cancelled because this model was now out of stock. Several phone calls to the upgrade line over several days eventually confirmed that this model was going to be restocked, but that we'll have to wait for 2-3 weeks for the new phones to be delivered. Better late than never I suppose.

The new phone (it actually looks more old-fashioned  than our old Sony Ericsson model)

After unlocking my old Sony Ericsson from Three I bought a $1/mo "pay-as-you-go" SIM from TPG so I can give my "hand-me-down" mobile phone to DS1 to use when he travels to and from high school next year. The local call costs are reasonable (10c flag fall and 10c/min) for occasional use by DS1, and the upfront cost of $40 (an exorbitant $20 "SIM charge" and a $20 "deposit" to put the account into credit) wasn't too high. I've paid the initial $40 cost, and DS1 has agreed to pay me the $1/mo plan fee plus any $20 "top-up" charges that will be automatically billed whenever the TPG account balance drops below $5. As insurance against excessive charges I edited the plan settings online so his phone can't make or take international calls or SMS messages. I could also change the setting to disable outgoing domestic calls, but for the moment I'll trust DS1 to use the phone responsibly. It would have been nice if the settings could be varied by time-of-day, in which case I would have disabled making calls during school hours.

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Another Labor budget coming to 'redistribute' my wealth

The annual Federal budget for Australia will be announced next week. As usual some of the "nasties" are being leaked beforehand. One that will directly affect me is the proposed reduction in the "discount" applied to up-front payments of university HECS fees. As I always pay my fees in full up-front I usually pay only 80% of the "list price" for my courses. The discount is apparently going to be reduced to only 10% by the Labor government, since its believed that only "rich" students can afford to pay their HECS up-front and benefit from the discount.

At only 10% reduction for paying up-front its hardly worth it. I may as well let the HECS debt accumulate and use the money to pay off some of my other debts that are being charged 8%, 10% or more interest. HECS liabilities only increase by the CPI each year (around 3%), so its a relatively cheap loan.

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Net Worth Update: April 2011

Hardly any change in my net worth over the past month, with the small (-0.27%) decline in the estimated price of our real estate this month being offset by a slight rise in the stock market that boosted my geared stock market investments by a similar amount. But things aren't looking too rosy for the rest of 2011 - Australian property prices are slowly declining across the board, interest rates aren't dropping (and may rise if inflation takes off), and the economy is growing at below trend rates. So I can't see our property portfolio rising above the current valuation during the next financial year, and a 5%-10% drop is quite possible (hopefully not the larger drop some people have been expecting since the GFC). The Australian stock market also doesn't look very positive at the moment, so my share investments and superannuation account aren't likely to contribute much to my net worth in the short term.

As some of my 'capital guaranteed' hedge fund investments mature over the coming years I'll use the proceeds to reduce my margin and investment loans - it makes no sense to borrow to invest when interest rates are close to 10% pa and total investment returns are much less than this. Meanwhile I'll continue to save $25K pa via salary sacrifice and SGL contributions into superannuation, and any spare cashflow will be used to pay off some of our non-deductible home loan.

Assets___________$ Amount______$ Diff_____% Diff
Stocks_*__________$16,665______$2,775______n/a %
Retirement_______$375,280________$621_____0.17 %
Properties_______$970,496_____-$2,667____-0.27 %

Debts____________$ Amount_____$ Diff_____% Diff
Home Mortgage(s)_$360,399______-$503_____-0.14 %

Net Worth______$1,002,042______$1,232_____0.12 %
* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

My version of net worth calculation only includes major assets (including my home equity) and debts. Cars, boats etc. and household goods are not included. Monthly credit card balances are also not included as I pay my credit cards off in full each month. I also pay the uni HECS fees for my Master of Astronomy course as I go, so I don't have any outstanding uni HECS debt. I haven't allowed for any capital gains tax liability that would be incurred if I sold off our investment property, shares etc.

Note: some readers have asked why I include our home as part of our property portfolio, and therefore include it as part of our net worth. The simple answer is that technically "net worth" should include all assets - all debts, so leaving out the value of our home (and the outstanding mortgage balance) would be misleading. A slightly more complicated answer is that excluding the value of our house (because we have to live somewhere, so its not really a saleable asset) would make it hard to compare "home owner" net worth with all those people who are renters. If you excluded the home value, but still included the outstanding mortgage amount as debt it would be even more misleading. Finally, in my own case I'm supposedly going to inherit a house and farm in the country from my parents, so when I retire I probably could sell off the family home and not have to use the net proceeds to buy another property... If you want to exclude any equity in the family home from your calculations you are no longer calculating "net worth" but another commonly quoted figure sometimes called "net investible assets". Another complication is that in some countries (like Australia) most people have a "superannuation account" with a known current value which, but some people have a "defined benefit" account which will have a particular value once retirement age is reached, but might currently have a much lower "vested" value (for example, if they change employers before reaching retirement age). In other countries (eg. USA) the present value of social security seems to be a bit of a moveable feast, as it will be received as a pension rather than a lump sum, and the amount received may be affected by other factors (eg. wealth and other income when retired?).

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