"101 Ways to get out of DEBT AND ON THE ROAD TO WEALTH"

by Ashley Ormond - published April 2009 (Wrightbooks, an imprint of John Wiley & Sons).

####### Available from April 2009 - in all bookstores ####

1. Did You Know?

§ For the past 17 years leading up to the 2009 recession Australia had the best performing economy in the western world, handing us a golden opportunity to get into financial shape - but we blew it. Rather than using this period of steady economic growth, low interest rates, low inflation and low unemployment to get our houses in order, we went on a debt-fuelled spending binge instead.

§ Australians and New Zealanders are great spenders and borrowers but lousy savers and investors. After 17 years of economic boom, the only countries with worse household savings rates than Australia and New Zealand are Greece and Estonia

§ The level of household debts (relative to disposable income) is even higher in Australia than in the US and UK where the 2008-9 credit crisis hit hardest, and our debts have been growing at a faster rate than any other country.

§ Almost all of the so-called ‘innovations’ in lending over the past 20 years have been designed get more people to buy stuff they can’t afford, get them into more debt, and keep them in debt for longer

§ Australia’s so-called ‘superannuation revolution’ has been more than wiped out by the ‘household debt explosion’ – over the past 20 years our total household debts have grown faster and is now larger than our total superannuation fund balances, so we’ve actually gone backwards in net terms

§ If you have $5,000 owing on a credit card with an interest rate of 20%, and you make no more purchases or cash advances on the card ever again - If you make just the minimum payment each month (which for most cards is 2% of the balance or $10, whichever is greater), it will take you an incredible 798 months or 66½ years to pay it off in full

§ If you increase your repayments by just $1 per day on a typical 25 year $300,000 mortgage, you can:

o save $15,000 in interest, and

o pay it off nearly a year sooner

§ If you have a typical 25 year $300,000 mortgage at 7%, and you increased repayments by just 3% each year (in line with inflation and average wages growth each year) you can:

o save a massive $107,000 in interest and

o pay off the mortgage 8½ years sooner.

§ If you have a 25 year $300,000 mortgage currently at 7%, If the rate reduces by 0.5%, but you keep your repayments at old level, this will:

o save you more than $65,000 in interest, and

o pay off the whole loan 31 months sooner.

§ A home mortgage is not ‘good debt’ in most cases, because the property (including the land & improvements) will not increase in value by more than the mortgage interest rate - so don’t be tempted to load up on mortgage debt because you think it is ‘good debt’

§ Most small businesses fail in the first few years – not because of poor products or services, and not because they are not profitable – it’s because of poor management of cash-flow and debt. There are several things every small business can do quickly to solve this problem

§ If you consolidate high interest rate debts like personal loans and credit cards into your low interest rate mortgage, it can end up paying more than 3 times as much in interest

This are just a few of the dozens of examples from the book.

2. Quick summary:

This is the ultimate handbook for anybody who wants to get out of debt and stay out of debt. It contains dozens of worked examples, charts, tables, ready-reckoners, tips and hints to help you control, minimise and eliminate debts. Almost anybody can use these proven and practical methods – starting today.

All the main types of household loans are covered – including mortgages, personal loans, car loans credit cards, store loans, lines of credit – and it also includes comprehensive coverage of investment loans and small business debts, since more than 2 million Australians own investment properties or operate small businesses.

It is packed with inside knowledge gained from the author’s experience as a lender, an investor and in business.

Inside you’ll learn:

§ How to save a fortune in interest

§ How to get out of debt years sooner

§ How to beat the lenders at their own game

§ How to sort out which debts to attack first

§ What to do if you get behind in your repayments

§ How to find out if lenders are ripping you off

§ How to find the best lending deals for your needs

Ashley Ormond started his career as a lender - lending to consumers, small businesses, major corporations and everything in between, and spent many years as a senior executive in major Australian and international banking groups. He has also consulted to mortgage brokers and originators, and advises businesses on raising capital.

As a successful investor in properties, shares and businesses for over 20 years, he has bought numerous investments, and has used – and paid off – many different types of loans from a variety of lenders. This book is his personal handbook for managing, controlling and using debt to build wealth.

3. Book Table of Contents:

Part I: The household debt explosion 1

Part II: First things First     11
    1 How far in the red are you? 13
    2 Compare debts to income 14
    3 Work out your total loan repayment bill 16
    4 Get the facts on all your loans 17
    5 Check your interest rates 19
    6 Add up all those extra fees and charges 20
    7 Sort your debts 21
    8 Prioritise your debts 25
    9 Check your credit rating 26
    10 Make up a calendar and set targets 27

Part III: Mortgages    29
    11 Do the numbers 31
    12 Increase your mortgage repayments 34
    13 Make one-off extra payments 37
    14 Use pay rises to increase your loan repayments 41
    15 Shorten the life of the loan 43
    16 Use your income patterns to pay off sooner 45
    17 Pay fortnightly instead of monthly 47
    18 Shop around for a lower rate 48
    19 When rates fall keep the repayments fl at 51
    20 Don’t keep switching loans 53
    21 When refinancing, stick with your existing lender if you can 55
    22 Always choose principal-and-interest loans over interest-only loans 56
    23 Stick to floating mortgages 58
    24 Avoid redraw mortgages 60
    25 Be careful of offset accounts 62
    26 Don’t use line-of-credit mortgages 64
    27 Be aware that honeymoon rates often turn into nightmares 66
    28 Avoid capitalising loans 68
    29 Upgrade your sub-prime loan 71
    30 Consolidate at your peril! 72
    31 Don’t pay for features you don’t need 75
    32 Take into account all fees 77
    33 All fees are negotiable 79
    34 Don’t count on your partner’s income to borrow more 80
    35 Mortgage brokers — spot the double-take 82
    36 Check that you are getting the correct rate changes 84

    37 Let a tenant pay the mortgage 85
    38 Consider long-term house-sitting 86
    39 Plan a mortgage-burning party in advance 88
    40 Pay off the mortgage before investing 89
    41 Don’t bank on your superannuation fund to pay off the mortgage 93
    42 Let grown-up kids pay part of your mortgage 94
    43 Consider mortgage contributions instead of presents 95
    44 Downsize — smaller house, smaller mortgage 96
    45 Trade up houses, but trade down debt 98
    46 Try the payout two-step 101
    47 Avoid complex mortgage-reduction schemes 102
    48 If you have to sell, stay in control 103

Part IV: Credit cards    105
    49 Find out how much you spend on credit cards 107
    50 Choose the right card for your needs 108
    51 Credit card surfing 108
    52 Never use cash advances 109
    53 Cut up your store cards 110
    54 Never pay just the minimum amount 111
    55 Keep payments fl at 113
    56 Use direct debits 114
    57 Check every item on statements 115
    58 Once you’ve paid it off, cut it up 116
    59 Consider changing to charge cards 117
    60 If you have a charge card, don’t take up the credit option 118
    61 Reduce your credit limits 119
    62 Do leave home without it! 120

Part V: Car loans, personal loans, boat loans, store loans   123
    63 Renegotiate, don’t refinance 125
    64 Always pay a cash deposit 126
    65 Never buy new 128
    66 Don’t self-insure 130
    67 Don’t use store loans 131
    68 If you fall into arrears, tell your lender as soon as possible 132
    69 Get the credit bureau to limit more lending 134
    70 Celebrate each win 135

Part VI: Investment Loans    137
    71 Use principal-and-interest loans for investment properties 139
    72 Avoid fixed-rate loans for rental properties 140
    73 Avoid lines of credit for investment properties 141
    74 Use your tax refund 142
    75 Don’t use deposit bonds 143
    76 Don’t borrow for the holiday house 145
    77 Borrow in the same currency as the income 146
    78 Beware the margin on share loans 149
    79 Use dividends to pay off principal on share loans 151

Part VII: Small Business Debts    153
    80 Get your personal finances sorted before starting a business 155
    81 Keep business finances separate 156
    82 Use your business plan 156
    83 Don’t make capital purchases using the overdraft 157

    84 Don’t extend lease terms too long 158
    85 Avoid high-lease residuals 160
    86 When buying a business, do your research 161
    87 Don’t borrow to buy a franchise 163
    88 Be careful of line-of-credit mortgages for business 164
    89 Use supplier terms and customer terms sensibly 165
    90 Sell your debtors 167
    91 Maximise depreciation 168
    92 Never pay full price for business equipment 170
    93 Business succession to reduce debt 171

Part VIII: Avoiding and minimising debt    173
    94 Maintain an emergency cash fund 175
    95 Use separate accounts for savings goals 176
    96 No deposit, no mortgage 177
    97 Renters, get a 10 to 15 per cent discount on your first home 179
    98 Don’t borrow to put money into superannuation 181
    99 Avoid tax-based schemes 182
    100 Be careful if guaranteeing other people’s debts 183
    101 Beware the lender who says you can afford a loan 101

Part IX: The final pay-off 189

Part X: Where to go for help 191

Index 195

4. Some Reviews of the book:

"Personal debt is the devil for people trying to build wealth.
In this very practical book Ashley Ormond shows us many
ways to beat the devil and get on the road to riches."
—Pam Walkley, Editor-in-chief, Money magazine, and columnist, Australian Women's Weekly

"Debt can be a great servant, but a bad master. In this book
Ashley will show you simple ways to take control of your
debts, and make debt a tool you can use and not something
to fear."
—Noel Whittaker, Best-selling author and finance columnist, The Sydney Morning Herald and The Melbourne Age

"Australians have been living beyond their means on a diet
of cheap debt for too long. This is a must-read book for all
those who want to get out of debt and back in control of
their finances."
—Chris Cuffe, former CEO, Colonial First State, Australia's largest fund management group

"Many Australians live beyond their means and take on
too much debt. Ashley Ormond’s book is by far the best
account yet available on understanding the details of
debt, the problems that arise when debt becomes excessive
and how we can manage and reduce debt to achieve
better financial security and happiness for ourselves and
our families."
—Dr Don Stammer, Economist and journalist, The Australian and BRW Magazine

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