Our financial guru Cat is once again with us this month. Cat has the ability to help with all those things to do with money, savings, home loans and all the kinds of things most of us wish we were more interested in or knew more about but just don't have the time to look into or quite frankly hate the thought of.
So if you have a question for Cat, go to
Finance Matters ForumHi Cat,
I received a letter from the bank the other day inviting me to take on an extra $2,200 on my credit card. (Meaning this extra money would be available to me if I wanted it.) I was a bit uncertain what to do and wondered what the catch was. Can you give me any suggestions as to whether this would be a good thing to sign up for or not? I am usually pretty fastidious and pay back my card fairly well.
Thanks Cat,
Susan B.
Banks often make offers of higher credit limits. The reason they do this is to hope you'll take up the offer - and spend the extra money. Unfortunately, human nature is that if you suddenly have $2,000 available rather than $500 for example, even though you might not need it, if you see something you like you'll be more inclined to purchase it because the $ is available straight away. Where people get into trouble is when they get into a habit of regularly using the higher limit, and hence paying the bank higher fees, higher interest, and generally getting themselves into greater levels of debt.
If you think you can be "well behaved" and not blow out on the card and repay it regularly, you may wish to utilise it. However, as you make a point of repaying things in full, the higher limit may not be necessary for your particular needs. Personally, I prefer to err on the side of caution - if the limit isn't there to use, you won't spend it.
Dear Cat,
How much money do I need to have before I can invest in shares? Do you think shares or property is better in the long term?
Thank you,
Rosalie W.
Shares can be purchased in packages of any number, however usually the minimum is about $1,000 to $2,000. Purchasing only one or two shares is fraught with danger however, as you are exposing yourself to the risks of that particular company rather than the share market as a whole. For example, if you had shares in only one company, you take the risk of that particular company "going bad". If you held One Tel shares for example, you would have immediately lost 100% of your investment. Brokers generally recommend a portfolio of 10 - 20 shares to reduce the total risk of your investment - so based on a $2,000 average holding that would mean a minimum investment of $20,000. Cost is another factor - there's no point paying high brokerage fees for a small investment.
An alternative is to invest into a diversified managed fund, providing you with a large range of investments, in shares, property, international shares, fixed interest and cash. By investing this way, you only need a small amount to start, (usually $1,000) and have a large range of investments straight away.
The best advice is to get advice - a financial planner will evaluate your needs and look at the most appropriate option for your goals, providing you with the best spread of investments, with the added value of their expertise.
Remember: If you have a question you'd like to ask of our financial consultant and guru Cat, go to
Finance Matters Forum
Cat is a representative of Winchcombe Carson Financial Planning.