Archive for the ‘finance’ Category

Helping the world through microlending

Monday, August 29th, 2011

Supernifty likes helping others out, especially those who really need it. Microlending is one way to do this.

Microlending involves lending a small amount – sometimes just a few dollars – to someone just to help get their business off the ground.

In developing countries, often this is all that is needed to get a viable business up and running. The recipient starts earning money, can pay back the loan, and can help bring their whole family out of poverty. Children can afford to go to school, get proper jobs, and the cycle of poverty is broken.

Kiva is a well-known microlender. One of Kiva’s founders gave a good explanation of how this works.

Interested? Well then, try it out.

You can lend as little as $25, and since the loan is (typically) repaid, you get to help someone out and improve our world a little – for next to nothing. Brilliant!

Visit Kiva to learn more.

Vancouver Olympics – Comic #4

Tuesday, March 2nd, 2010

Vancouver vs Wall Street - Supernifty Comic #4

Click to see the comic full size

Economics in a nutshell #1 – How interest rates really work

Thursday, November 8th, 2007

Economics is funLearn how to talk the talk on interest rates in just a few easy steps.

In Australia, interest rates have just been increased for the 6th time since the last election, this time during an election campaign. It seems that many people, including politicians, really have no idea what interest rates are all about. This nutshell guide simplifies the basic economic concepts.

What are interest rates?

An interest rate is a price for money. If you want to borrow some money, you pay a price for that privilege, and that’s called interest. If you deposit some money, the bank will pay you for the privilege of having your money, in the form of interest.

How are interest rates set?

In Australia, the Reserve Bank sets a base rate in the money market, which is a market where banks and other financial institutions borrow and lend money. This base rate determines what the banks and other institutions will need to charge their customers so that they can still make a profit. Hence the money market rate flows through to all the other interest rates, such as those for home loans and term deposits.

Why do interest rates change?

The reserve bank has a charter to keep inflation in the range of 2-3%. It uses interest rates to achieve this.

What is inflation?

Inflation is a measure of how quickly prices are rising.

Why should inflation be kept between 2-3%?

The theory goes that if inflation is too low, the economy can stagnate and result in high unemployment. If it is too high, investors lose confidence in the currency. A currency that is unstable means that people become reluctant to do trade, which damages the economy.

How do interest rates influence inflation?

As interest rates rise, it becomes more attractive to deposit your money rather than spend it. Also, borrowing money becomes less attractive. This pulls money out of the economy because more people start saving their money, and less money is borrowed for spending.

This means there is a reduced demand for goods and services, and less buyers, which makes it more difficult for sellers to put prices up.

Interest rates are a “blunt instrument”, so called because they affect everyone. If a specific sector is causing all the inflation, for instance house prices, it is impossible for the reserve bank to target only the housing sector. It has to hurt everyone.

Interest rates can only do so much. If people are awash with money thanks to tax cuts and pensioner bonuses, they are going to go spend it, a sure thing to push up inflation and inevitably interest rates.

This is where the government comes in.

Is the government to blame for rising interest rates?

Absolutely. There are many ways to keep inflation under control, interest rates being the most painful.

This government’s main strategy for inflation control has been wage growth control, via WorkChoices. Clearly, this hasn’t done the trick. This is because capacity constraints are the main thing pushing inflation in Australia.

For years, economists have been warning that we’ve not been spending enough on infrastructure and education, the stuff we need to increase the country’s capacity and keep up with demand. But the government insists on fuelling the fire by handing out tax cuts and other cash bonuses that we are sure to spend.

Really this government should be made to pay for ignoring what all the experts have been saying and continuing down the “media spin” path of making everything appear rosy. They’ve been presented with unbelievably benign conditions and the fact that Australia is not particularly well placed is a travesty.

Just keeping the budget in surplus doesn’t cut it. A deficit would be better if it was being spent on stuff that improves Australia’s productivity. In fact this whole focus on keeping a surplus is ridiculous. Try living your own life that way. Save up for that house. Or running a business that way. It will almost never work, and is rarely the optimal path.

Well. That’s it. Interest rates. I’ll bet you’re wanting to know even more about interest rates, possibly dedicating your life to learning everything there is to know.

Or you might be wondering if The Simpsons are on yet.

Making money in a nutshell – disclaimer

Tuesday, October 9th, 2007

Money gone wrongIt has been pointed out that someone may follow the advice in the nutshell series and lose all their money. This could lead to them blaming supernifty for their woes. So, before you invest your fortune in a jet-ski or a new blog site, please consider this disclaimer.

Supernifty is not a qualified financial expert. Any decisions you make are at your own risk. Before making any financial decision you should consider consulting a proper financial expert, rather than basing your financial strategy on what’s written in some blog.

Thankyou. And don’t forget, it’s only money.

Making Money in a nutshell #2 – saving

Tuesday, October 2nd, 2007

moneyYou may have heard that saving money is the way to wealth. Especially those more conscientious readers (who apparently, are less likely to get Alzheimers, lucky you!). We’ve all heard it, the power of compound interest, blah blah blah. In Australia, we are encouraged to do this by ploughing all our spare money into superannuation.

Keep in mind that saving money has a big downside. You can’t spend it. Food, booze, a massive TV and an outside spa are all things you can’t buy if you save your pennies. Let’s analyse this save for wealth plan.

The idea of saving is that at some point you’ll have enough cash to not have to work. Assume then that all your saved cash will replace your existing work income. Throwing in a few more assumptions:

  • Income of $80000. This can be anything. It doesn’t affect any calculations.
  • An investment return after inflation of 10%. This is very generous.
  • An interest rate return equal to inflation. OK, so it is usually 1 or 2% above this but this will be offset by the other more generous assumptions.
  • You manage to save 10% of your income. Superannuation is currently 9% so this too is generous.

So, under this scenario you need to save $800,000, so you can get your $80,000 a year as a 10% return on investment. Put away 10% of your income each year and guess how long it will take you to reach this figure?

100 years.

OK, so maybe those assumptions are out. It might only take 50 years. 50 years! That’s practically a life time after you take out the essential growing up and school. If you start seriously working around 20, then you’ll be 70 before you can declare, “I’ve hit the jackpot!”. That is, if it “only” takes 50 years. Great.

Conclusion: don’t bother saving. Spend up now. What is the point of finally having enough cash, when you are about to cark it? Old and senile and unable to take advantage of your wealth, attained during your youth. Your youth which you wasted working and saving!

A cynical viewpoint would see the whole saving and superannuation strategy as one designed to keep the youth busy and occupied with a goal that can only be realised once they have lost the energy and will to force change. But that may be a bit too conspiracy.

There is a saying that we spend our youth attaining wealth, and then our wealth regaining our youth. Here’s a short-cut: spend the cash now.

Suggestion: raid those savings and buy yourself a jet-ski. Check out the other articles on this blog for money making tips.


Making money in a nutshell, part 1 – blogging

Friday, September 21st, 2007

moneyWho wants to be rich? Yeah, sounds pretty good. The life of luxury, sipping cocktails on a beach somewhere in the Caribbean. Or, flying your own private jet around the world, pushing solid gold soccer balls out the window while laughing hysterically. OK, so that last one may not be everyone’s exact fantasy, but who hasn’t dreamt of smoking a cigar made entirely from hundred dollar bills?

Well, if you want untold riches*, all you have to do is read this series of blog articles and you can’t possibly fail.

This inaugural segment is about making money on the internet, specifically, from blogging. That’s right, make money from blogging. Has this been done? Well, even if it has, you should too.
OK so here’s what you need to do:

  1. Start a blog. There are oodles of places to do this for nothing. blogspot is one.
  2. Set up some advertising. Google Ads is one option, but there are others. People are pretty creative with this one, for instance, promoting products in their blog in order to score freebies. Research might help on this if you really want to buy a jet with your blog income.
  3. Start writing articles. On the internet, content is king. Apparently.
  4. Rake in the cash.

That sounds so easy, why isn’t everyone doing it? Well, there’s the thing. Turns out lots of people like spouting off. Your blog needs to attract visitors. How to do this?

  • Tell all your friends to visit your blog. You need a lot of friends for this method to earn you a Ferrari.
  • Trick people into visiting your site. Being sneaky often pays off. For instance, recently, a teen got kicked out of home for underage drinking. But her parents made a deal. If she could find 1 million people that drank underage and still turned out normal, she could stay. She put this on her myspace site and attracted many visitors. This is the kind of scam that will bring home the bacon.
  • Write about stuff you are interested in. A lot of people try this. You may as well buy a lottery ticket while you’re at it. Who else could possibly be interested in the same thing as you? Most likely, this is not the path to inconceivable wealth.
  • Write about stuff you think other people are interested in. In other words, sell out. What are other people interested in? Making money. Exactimundo. Also, people like porn and celebrity gossip. I have already taken the idea of writing about making money, so I would recommend you make your blog about either porn or celebrity gossip. Or both – celebrity porn.

OK, so now you know one of the big secrets of untold wealth. When you hit the big time, please remember your old pal, supernifty, that set you on the path to glory.

* Don’t assume that ‘untold riches’ refers to material wealth. It may simply refer to the satisfaction one feels in the soul after a hard day’s labour with little more than your tired bones to show for it.