By Amanda Morrall
See previous Five Fold Friday's here.
1) Savings and spending
Following my sheepish mea culpa this week, I was besieged with helpful advice and recipes to reign in the budget. Like dieting, I tend to think radical money makeovers are doomed. Unless you enjoy suffering, deprivation is just a set up for failure.
Given my Buddhist leanings, I am a firm believer in the Middle Path. As such, I am undertaking moderate adjustments and taking stock of the simple savings that I have already achieved. One of them is rubbish reduction. I'm a strange bird, things like rubbish weigh on my conscience. Admittedly not a significant savings coup but since taking my free composting course I've cut my waste by more than half. Surely that counts for something?
Also, to my great delight, the summer-time attention lavished upon the citrus in the backyard has paid off in spades. I am overrun with mandarin and limes, another healthy windfall for my budget. Environmental reciprocity is an underrated economic exchange.
2) Credit and Debt
Banks are very good at nickel and diming customers in addition to creaming them with high interest where possible. While most people fixate on the headline interest rate, there's a slew of other fees to watch for. I consulted with our interest rate watcher Suhaimi, who summarised for me, his top tips to minimise the gouging.
Here they are:
1) Set your objective
Don't blindly get a card without first setting your credit card objective. Why do you need it and what are you spending patterns. Honesty is the best approach.
2) Card selection
Understand credit cards for all their features: interest rates, fees, schedule, minimum payments, due date, other fees balance transfer rewards.
Choose the right card to suit your personal spending pattern and don't be suckered in by points. To get a $20 reward, some cards require $2,600 in spending. If it's blender you're after, you're probably better off just spending the $100 outright rather than caving into consumerism.
3) Repayment
Pay all, (not the minimum amount) and pay on time. Enough said.
4) Spending
Spend within your allocated credit limit to avoid over limits fee. Some providers charge more than others, so read the fine-print in full to avoid getting stung with more money than necessary.
Cash advances. They're a killer. They usually trigger a higher interest rate than normal particularly if you're overseas.
5) Cards management - seven step programme.
Shop around for the best card; rates and fees
Choose on-line statements and avoid the $5 paper fee that most cards charge.
Stick to one card. Joint credit card accounts rarely have a happy ending.
Avoid the teller. There's a five-fold mark up for human interfacing.
Keep your card physically secured and park it in the freezer when you go to the fair.
Don't spend for tomorrow. Any debt you accrue should be based on your current income and your ability to service it.
3) Real Estate
All trees are sacred?
Is there anything more contentious between neighbours than trespasses involving trees with no regard for borders and unsanctioned hedge trimming? I think not.
I've seen it sour many a good relationship over the years. I still remember the shock and horror of watching a neighbour, who for no apparent reason other than to wield control over a noisy power tool, mowed down a spectacularly healthy tree on his front yard. That was in clear-cutting British Columbia, where wanna-be lumberjacks without a license are a menace to society.
I was relieved to find that kind of thing doesn't take place in New Zealand. Instead, you have officious bureaucrats accusing well meaning citizens of tree blasphemy for innocuous trimming of dead trees.
For better or worse, tree rules are being pruned. Under little known changes to the Resource Management Act, blanket protection for trees will be stripped bare in 2012. (There are a few legal challenges still in front of the courts from opposing parties).
From January 1, local authorities will no longer be allowed to have any type of tree protection rule for trees on private land. In effect, this means that most trees can be removed without consent. My understanding is there are three exceptions: for trees that are scheduled; those located on parks or reserves; and those subject to conditions of a previous consents.
To read more on this issue in anticipation of power-saw happy neighbhours : read this position paper by the Tree Council.
4) Death & Tax
Financial serendipity is sublime. The discovery of five bucks in a hidden pocket or jacket pulled from the back of the closet still brings me to a place of childlike wonder.
So you can imagine the feeling of being reconnected with an overlooked account in the order of $300,000. It's not a sum I'd forget about easily but apparently financial amnesia is an epidemic in New Zealand.
As I wrote yesterday, Inland Revenue is in possession of a whopping NZ$55 million in unclaimed money. Not to be confused with overlooked tax refunds, this is money derived from forgotten savings funds, wages and insurance policies etc.
For those who missed it, here's the link to IRD's A-Z list of unclaimed money with names and amounts.
On that front, there's millions more in unclaimed tax refunds begging for collection. Tax agents have done a roaring business tapping these funds and clipping their ticket along the way. With IRD's on-line services, it's not a tough job and can be done in minutes.
The danger of the DIY approach is inadvertently flagging IRD to any potential money owing. Quick tax return sharks use it as a selling point for their services. They claim that any bad news they discover on your behalf, can be more easily swept under the carpet. IRD officials beg to differ.
5) Books and Film
As one of the misguided lefties that author Joseph Heath aims to set straight in Filthy Lucre, this book is a lesson in humility as much as it is an education in economics.
As Heath writes in his introduction: “Pretty much everything that the average person thinks he or she knows about the economy is wrong.’’
After reading the book, I don’t doubt that is true. But as a journalist, not an economist, I’m in no position to critique the merits of his arguments. I’m no expert. Then again neither is Heath.
The author is a reformed left-winger with a lingering contempt but respect for capitalism. He teaches philosophy at the University of Toronto, in Canada. In economics he is a self-taught.
In his book —aimed at a general audience — Heath ambitiously sets out to debunk six economic fallacies of the right and six economic fallacies of the left.
Judge for yourself which side wins out but in my humblest of opinions it's the middle path where our economic salvation lies.
See Heath in this video below:
5 Comments
Our apols for the techno glitch that stopped comments showing. Fixed now.
Here's a comment from Walter Kunz.
I hate capitalism – who doesn’t ?
Yes, reading articles provided with link below and one has really think hard about capitalism. It is time the western world is thinking of different models and start implementing forms to work urgently along ethic/ moral and environmental sustainable guidelines.
Getting your tax refund back.
AFTER THEY HAVE TAKEN IT FIRST????!!!!.....of course. A simple view from the other land of milked and hone-y. Whiskey & Gunpowder — The Daily Missive of Laissez Faire BooksGary Gibson, Baltimore, Maryland…
Why exactly do we find taxes…so taxing?
Forgive the horrible pun, patient reader, but we just couldn’t help ourselves today. Neither could we stop ourselves from pressing the attack on taxes this week. Our blood is up!
We’re tired of the masochistic manner in which people take their tax medicine. Having their money taken from them hurts, they admit, but they believe they’re doing it for some ill-defined “greater good”.
So to round out the week, let’s take a look at one more missive to disabuse that notion again.
Fred Buzzeo explains why taxes are a force for destruction of all that is good. Read on below…
Whiskey & Gunpowder
By Fred Buzzeo
April 29, 2011
Oyster Bay, New York, U.S.A.
To Tax Is to Destroy.
The Power to Tax Destroys Freedom.
In order to have an effect, laws must be enforced. The enforcement mechanism is the bureaucracy. Without a bureaucratic system of enforcers, laws would be just a collection of restrictive words on fancy parchment. This is why President Jackson said of another case during the Marshall court, “John Marshall has made his decision. Now let him enforce it.” This was a reference to the obvious fact that the chief justice did not have an army of bureaucratic enforcers to put his words into action.
For the sake of clarity, I do not advocate the abolition of all laws. However, we must define legitimate laws as those that prohibit an act that is in itself bad. An example of this type of law is one that prohibits the infliction of bodily injury on another. Those laws that make an otherwise innocent activity unlawful are simply political in nature. They are what the philosopher Thrasymachus, best known as a character in Plato’s Republic, labeled “the advantage of the stronger.”
In order to enforce the “advantage of the stronger,” an increasingly larger bureaucracy is needed. And in order to fund this bureaucratic watchdog, money is needed. Without money, there would be no bureaucracy and there would be no army of legislative staff members writing truckloads of laws aimed at limiting your “inalienable rights.”
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The money to feed this bureaucratic Goliath comes from your taxes! Since the inception of the income tax, government intrusion into our lives has grown by leaps and bounds. According to the Tax Policy Center, 57 percent of federal tax revenue comes from individual and corporate income taxes. An additional 36 percent is appropriated through the payroll tax. Since 1950, the individual income tax has been the largest growth area of federal-government tax revenue.
According to the US Census Bureau, there are 2.8 million civilian employees working for the federal government and paid for with your taxes. The state governments employ an additional 5.3 million civilians. These employees are dispersed throughout countless agencies, bureaus, and divisions.
I was once briefly associated with a local politician who constantly reminded his constituents that he had authored over 120 pieces of legislation. He thought that this was a big accomplishment on his part and a reason he should be elected to higher office. However, I was confused as to whether he was running for an elective office in New York or for a seat on the Soviet Politburo!
In any event, without the confiscatory tax system, all of these laws and regulations that limit your freedom would not be possible. We would see a return to the days when the American government was small, the free-enterprise system was strong, and the visions of the Founding Fathers were still present in the body politic.
Quite simply, if one is taxed, he has less money either to invest or to spend. The higher the tax rate, the more money is taken from those individuals who can invest and create economic opportunity for themselves and for others.
An accumulation of capital is essential to increase the productive capacity of a nation. Therefore, it is important to understand the true meaning of savings. When money is deposited in a bank, it is usually lent out to someone else. The money is then used either to invest in business expansion or to purchase the products produced by business — cars, televisions, boats, etc. An accumulation of wealth is essential for a prosperous economy.
Cuba does not allow an accumulation of wealth. It was recently reported in the press that the Cuban leadership will now allow limited monetary payment to employees. However, the Communist administration will still not allow anyone (except themselves, of course) to accumulate wealth. Is there any doubt as to why there is no capital formation and viable industry on that island?
In the United States, a supposedly capitalist nation, wealth is taxed at all levels. For example, if you sell a piece of real estate for more money than you bought it for, the gain from the transaction is taxed. This is so even though the gain was due to your foresight and entrepreneurship. The taxman is a silent partner with a participation in your profits, even though those profits were the result of your business sense. The same scenario exists if your gains were the result of profits made in stocks, bonds, or commodities.
If you are a wealthy person, beware. The estate tax will destroy what you have created through your hard work and diligence. Unless you have spent a small fortune on financial planners, accountants, and tax attorneys, the fruits of your labor may be enjoyed by the government instead of by your heirs. Even when family members are active participants in making a business successful, there is no guarantee that they will not be supplanted by the government through a confiscatory system of taxation.
One of the main reasons that many small business establishments have difficulties is because of the regulations and tax burdens imposed upon them. A small business is subject not only to income taxes but also to a host of others taxes and requirements. These include the payroll tax, workmen’s compensation insurance, and a list of fines aimed at fattening the government coffers. If small business fails, the economy will stumble because small business is a major engine of employment growth.
Parenthetically, we should not fall prey to the class warfare that is so often employed by the taxman. Discussing politics, an electrician who once worked for me stated, “I have no problems with rich people. I need to make a living. I never benefited by being hired by a guy who didn’t have the money to pay me.” This is an important point that should be kept in mind by all those looking for a job.
Beginning with Joseph Stalin, Soviet leaders engaged in centralized, nationwide efforts toward rapid economic growth. At first, these so called five-year plans emphasized heavy industry. By 1970, the focus had shifted to the production of consumer goods.
In fact, Paul Samuelson was so impressed with Soviet industrial production that he believed it would surpass that of the United States, even in light of undeniable facts to the contrary published in his own textbooks. He referred to unregulated capitalism as “a fragile flower bound to commit self-suicide.” Though I must admit that I am perplexed as to how a flower commits suicide, I am even more perplexed as to how deregulation causes “capitalist suicide.”
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Nevertheless, the Soviet Union collapsed under the weight of its centralized economy. The reason for this is that planned economies are inefficient. Central planners cannot properly gauge the sentiments of consumers.
The tax system in the United States produces the same inefficiencies as did the planned economy of the former Soviet Union. When a tax is imposed, money is taken away from individuals and spent by government. And, as the Soviet example has proven, government is an inefficient producer of goods. The reason for this is simple: central planners do not have the mechanism to determine what consumers want.
When government planners produce, they do so based upon political directives. Obamacare is a perfect example of this. Although highly unpopular with the American public, healthcare reform has been pushed through Congress simply to achieve the administration’s political goal. Unless repealed, it will result in the misallocation of resources and higher healthcare costs for all.
Central planning does not work because the central force behind economic decision-making is the individual. Rothbard explains, “Only individuals have ends and can act to attain them. There are no such things as ends of or actions by ‘groups,’ ‘collectives’ or ‘states,’ which do not take place as actions by various specific individuals.”
Therefore only an individual can determine what products should be produced. The actions of producers must focus on the needs and desires of the individual expressing his utility in the marketplace. The producer needs to get it right because his capital is at risk.
Money given to a bureaucrat to spend is inefficient because there is no at-risk capital. If a mistake is made, the project is simply terminated or more money is thrown at it until it achieves a politically favorable outcome. However, as in the Soviet case, no economy can sustain this structure for very long.
Free-market capitalism has given the consumer more goods and services than any other economic system ever employed. It is the only system in which the consumer is king. If an entrepreneur does not gauge the desires of consumers correctly, he will not be in business for long. This is not the case with the central planner. From this stems the inefficiency of taxation.
There are many other ways in which the power to tax destroys. Nevertheless, the point has been made. Taxes are an unproductive waste of resources.
The current administration is wrestling with a trillion-dollar-plus budget deficit. This deficit was created by a massive government intervention into the economy — one supposedly aimed at creating jobs.
But what has this intervention accomplished? Not much. Unemployment is still high, commodity prices are skyrocketing, and credit is still tight. Obviously, the Keynesian-induced tinkering with fiscal and monetary policy has once again fallen short of success.
Does the administration acknowledge this undisputable fact? Obviously not, since it is attempting to push through Congress another massive tax hike! Ironically, the president is trying to justify his tax increase by stating that the deficit is a “major job killer.” He seems to have gotten the connection between budget deficits and slow job growth. Is it possible that he picked up a copy of Economics in One Lesson and actually read it?
Regards,
Fred Buzzeo
My addition on the trees..........
Councils taxed you heavily to stop you selectively pruning the trees that were yours in the first place.
Around here we had mayhem due to those trees in the past weeks gale.
"Credit growth stalled last month across the board, according to Reserve Bank figures out yesterday". harold
Jez Bolly...you'll have to slash again...better still instead of charging banks peanuts for overnight cash...pay them to take it....come on Bolly....fair go mate....we all know it's bullshit so just do it...call it your 'Toilet Paper Policy'.......and if that don't work...drop money from a chopper like your uncle Ben said....
I though that this is what you have wanted NZers to do, repay debt.
There are the links
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107…
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