The Finance Blogger


35% of Consumers Make this Money Mistake

November 21st, 2017 ernie Posted in Financial mistakes No Comments »

money mistakeHow many automatic payments are you making every month? If you don’t know you’re not the only one. Over 35% of consumers do not know how many automatic monthly payments they make each month.

These automatic payments are for subscriptions to magazines, membership services to gyms, automatic renewals for coffee shop memberships and more.

They often start associated with the service as a free trial. Many consumers forget to cancel it at the end of the free trial and they receive unexpected charges as a result. This is a pretty standard approach for many company’s who are trying to grow their business.

It turns out that generation X members are the most likely to have signed up for auto pay programs. Parents are more likely than none parents to be enrolled in such programs. Even people with higher education and income levels are more likely to be enrolled then those with lower incomes or education.

Why are people making these money mistakes?

We are all inundated with offers of two months or three months free on some service. All we have to do is sign up and provide a credit card. The company that we’re dealing with is hoping that we will forget that we signed up for in the first place.

By the time we notice this recurring monthly payment, at the very least one or two months have gone by. If we don’t check our accounts on a regular basis it could be six months or year before we notice. At 10 or $20 a month this can add up to two or $300 a year. That’s a lot of money in my book.

If we have several of these it would not be long before we’re spending $1000 a year and not even realizing that we’re getting these recurring services. In fact we may have forgotten all about them. With so many people falling into this trap it is no wonder that companies take this approach.

Take a few minutes right now and examine all of the transactions that have taken place in all of your accounts over the past three months. Follow up on any that you don’t recognize. If there are recurring charges being deducted from your account, check to make sure that this is something that you really want.

You could save yourself $1000 a year without any problem. You could have enough money to go on a three or four day trip!

For more financial money mistakes to avoid, click here.

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How Rich People Ruin their Financial Lives

February 21st, 2017 ernie Posted in Financial mistakes No Comments »

How Rich People Ruin their Financial LivesEven rich people, with huge financial cash flow’s can ruin their lives and not have enough money left over for retirement, let alone avoiding bankruptcy. With large incomes the assumption is that the money will continue to flow forever. The reality is that they often overspend, change jobs or worse yet lose their jobs. There also can be a downturn in the market affecting their cash flow if they derive their income from investments. We put together a list of areas about how rich people ruin their financial lives that we all should pay attention to including those who make six figures incomes.

How Rich People Ruin their Financial Lives

These are a list of the things that most people should do, but often do not, regardless of the level of income that you make.

Establish a budget and track spending – to help understand where your money is going and how it is being spent. Add some control on how you spend money.

Plan for social security – when your income drops or stops all together.

Develop a long-term investment plan and budget – with goals and targets. Add in stress tests to help decide what action you should take.

Assuming the big income will last forever – is usually a mistake, nothing lasts forever.

Not developing a tax strategy – will help minimize the amount of taxes you pay leaving more for you to spend

Wasting money on too many toys and bad investments – leaves little for savings and retirement.

Not increasing savings as income grows – helps to maintain your standard of living when the income stops or you retire.

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Financial Mistakes Millennials Should Think About

October 7th, 2016 ernie Posted in Financial mistakes No Comments »

Financial Mistakes Millennials Should Think AboutThere will soon be more millennials than there are baby boomers. We all know how big an impact that baby boomers had on the economy and life in general. With so many millennials involved in the market, looking for jobs, buying homes etc we thought we should look at the financial mistakes millennials should think about. After all when they reach baby boomer age, they should be enjoying life and living off their savings. So what are these mistakes that they should avoid. let’s look more closely.

Financial Mistakes Millennials Should Think About

Not Beginning to Save for retirement early enough – most people are not aware that if they saved 10% of a $30,000 salary beginning at age 25, they would have $625,000 saved by the time they are 65!. This assumes a 6% income level on the investments average. This is an amazing number and does not take into account raises and other savings that could be added. If you delay beginning to save by 10 years, the amount saved shrinks to $370,000.

Taking on debt that could be avoided – buying an expensive car, various toys, party lifestyle, a larger home than what you can afford all contributes to too much debt and to too much interest that must be paid. Money you will never see again, especially in retirement when you need it.

Believing that Investing is complicated – investment analysts and advisers try to make it sound complicated. Of course you need them to help you figure out how to invest. By investing in dividend paying stocks that routinely increase their dividends year over year you can do well and keep it simple.

Paying too much for financial help – By following the above, you can also avoid paying too many trading fees based on recommended changes from financial advisers.  Also mutual funds with high fees should be avoided.

Not monitoring your progress – Most of all set an investment strategy that makes sense for your risk tolerance level. Implement the strategy and then monitor on a regular basis. Make changes only after solid investigation if it makes good long term sense. Invest diversely and avoid chasing get rick quick schemes.

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How To Gamble Responsibly and Not Lose Your Savings

April 7th, 2016 ernie Posted in Financial mistakes No Comments »

How To Gamble Responsibly and Not Lose Your SavingsWe have all heard the stories. Someone could not stop gambling, lost their savings, the car, their house and then their families! It is a bad situation for anyone caught up in this situation. You cannot depend on the casinos to help you. If anything they will encourage you more and more to gamble.  You need to figure out how to gamble responsibly and not lose your savings yourself. They provide comps of all kinds from free meals, free drinks, free hotel rooms and even free air tickets to bring you to the city where you can gamble all of your money. There are ways to control your gambling, but it does take a lot of control. If you cannot control yourself in the casino, you should really stay away and get yourself barred from going to the casinos. There some things you can do control your gambling.

How To Gamble Responsibly and Not Lose Your Savings

The following list is just that a list. There might be one item on the list that will help you. Find what works for you and stick with it. Again if you cannot control yourself at the casino, then do not go. Stay away from the casino Here is the list:

  • Set a budget and stick to it
  • Leave your bank card at home
  • Set your daily withdrawal limit to less than $500
  • Go to the casino once a week or even longer between visits
  • Treat it as entertainment
  • Do not drink at the casino, your will power will be stronger
  • Ask a friend to come with you and listen to them
  • Use slot cards and monitor your play, stop if it is getting out of hand
  • Ask for help from a friend
  • Have the casino block you from entering

If you know of additional ways to control your gambling, leave us a comment. We will publish the good ones. We want to help our readers.

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Bad Money Habits and Getting Rich

December 21st, 2015 ernie Posted in Financial mistakes No Comments »

Bad Money Habits and Getting RichHave you ever wondered why someone you know seems to have a lot more money than you? Do your bad money habits and getting rich counter act against each other? You make about the same amount of money and you have raised the same number of kids etc. They always seem to have cash available to go out to dinner or to go on trips. Yet you are struggling to make ends meet and pay the bills. There is a potential reason for this difference. It comes down to bad money habits.There are lots of bad money habits that we all have. But there are a few big ticket items that might be the cause or are getting in the way of your wealth health.

Bad Money Habits and Getting Rich

Update your Savings Rate – Always save for a rainy day and in particular your retirement. As your income goes up so should your savings rate, since your expectations are also going up at the same time. Many consumers only save when they have extra cash or keep their savings rate the same throughout their lives leaving a big hole in their retirement plan.

Buying too Much House – leads to higher costs in terms of taxes, utilities, maintenance and repairs. Yes it will likely increase in value and you will be able to sell and downsize at some point. Do the math? Are you placing your savings or retirement at risk? Strike a balance between savings rate and affordability when it comes to buying a home.

Missing Tax Benefits – This can be cash in the bank, but consumers miss all kinds of tax benefits both at work as well as on their personal tax reports. Hire an accountant at least once to determine if you can decrease your tax paid and take advantage of the benefits offered by your employer or the government.

Conservative Investing – placing your money in GIC’s is very safe and very conservative. With today’s interest rates, you are actually losing money when you invest in a GIC. Between inflation and taxes, you are not making enough money to cover these two expenses.

Shopping on Impulse – buying something you do not need on impulse is just plain expensive and eats up cash. All of this money can be placed in retirement savings to provide you with a quality of life that will be the envy of many people in retirement.

Paying too Many Bank Fees – actually fees of any kind that are repetitive and expensive suck your cash flow away. Evaluate all of your utility costs, your bank fees and any area that your spending money on. Take action to reduce those fees to a minimum.

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7 Lies Investors Tell Themselves

November 21st, 2015 ernie Posted in Financial mistakes 1 Comment »

7 Lies Investors Tell ThemselvesWe all tell ourselves lies from time to time and sometimes we even believe our own lies. This can be a problem, especially if money is involved. We out together a list of 7 Lies Investors Tell Themselves to help us all, the writer included manage our financial affairs and avoid losses. Even Warren Buffet has his own list which we have read and included with our own interpretation.  If your going to be successful financially, it is important to really examine your decisions and your beliefs. Otherwise you may be believing your own lies and paying a high price for your decisions with reduced stock valuations and even losses in the market as it fluctuates.

7 Lies Investors Tell Themselves

Beat the Market – it is very difficult to beat the market, many experts have tried and usually failed although on the odd occasion they do. As an average investor, chances are the best you can do is either be a long term investor and not worry about the ups and downs. Or you can sell when you have made money and buy back in when the market is down. It can always go higher and it can go lower, but at least you made money!

Stock Picks Made Money – Chances are you were just lucky. No one really can predict the short term fluctuations of stocks. Long term there is more of a chance, but not short term. Pick high quality stocks with good balance sheets that pay regular increasing dividends and watch them grow over time.

Bond Prices Fall – Fed’s Caused it is a nice excuse, but really it is the competitive currency wars that are ongoing all of the time which push rates in one direction or another. As interest rates change around the world, so do currencies and so do Bond rates. Yes in the short term the Fed may have an impact, but overall it really depends on the corporate results, the competition from other countries and what they do with their currencies.

Portfolio Has Grown – has your portfolio grown because of deposits? because of dividends or both? The real return on your investments depends on the capital appreciation which sometimes can be negative, the deposits you make and what you do with the dividends and interest your investments generate. They all contribute to portfolio growth.

More Lies Investors Tell Themselves

It is only a Paper Loss – my favorite is the paper loss or even the paper profit. Nothing is final until you sell.. The real question is what do you do when an investment is down. Do you sell and trigger the loss, do you hold and hope for the best? Both are viable solutions. A paper loss really means nothing until you take action.

Bought it for Diversification – Diversification is a good thing, but each investment must be well thought out and have positive investment attributes on its own. Just don’t buy to increase diversification by itself. You could lose a bundle.

Timing the Market – Get out before the correction whenever it is. You will almost always be wrong. Get out when you have made a profit or if the investments are good quality investments with income, hang in there for the long term. Timing the markets, particularly when they are volatile is an impossible task.

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Big Threats to your Financial Well Being

August 7th, 2015 ernie Posted in Financial mistakes 1 Comment »

Big Threats to your Financial Well BeingSlow erosion caused by high fund expenses can reduce your retirement pension significantly. Most people never even realize that their income in retirement could be much higher. There are other big threats to your financial well being. For example, this writer is particularly vexed about an annual fee that I pay to my investment adviser for managing my retirement savings. His company is paid this fee regardless of how they do. It is not performance related at all. The amount is only $125 a year which does not sound like a lot, however over 10 years it is $1,250 plus interest. Over 30 years it is 3 times this amount or $3,750 plus interest and the interest actually ends up higher than the amount I pay the company. If I could invest $125 a year at 5% for 30 years I would have $8,304!! This is just one example of how fees can add up over time and become a threat to your financial well being. Read on for more examples.

Big Threats to your Financial Well Being

Hefty advisory fees – whether it is trading fees or a so-called advisory fee, they will add up over time. If you do a lot of trades as a result of advice from your adviser, you are going to pay much more than the $125 we discussed earlier. Some consumers will do a lot of trades every month and these fees just shave money off your financial retirement health. Another area is the fees that mutual funds charge every year in addition to either front end fees or rear ended fees. In both cases consumers pay these fees when they make a purchase of a fund. In addition any trades that completed in the fund, and there are lots, generate trading fees which are deduced before any dividends or distributions are paid. Did you ever notice that the fund managers always get paid regardless of whether the fund does well or not?

Investment-related tax bills – triggering income tax as a result of selling an investment can rob you of thousands of dollars. Manage your trades in such a way to minimize taxes. Sometimes selling a stock at a loss to minimize tax might just be the best answer. You need to do the math for your situation.

Failing to buy life, health and disability insurance – not having insurance to cover you when you get sick or disabled, or not having life insurance to cover your debts can be the single largest threat to your family and to yourself.

Holding a badly diversified investment portfolio – all of your eggs in one basket is not the best approach. If that mutual fund or stock goes down, you will need to work for a long time to recover. Just consider those people who were invested in GM when it went bankrupt. They lost everything.

Wagering on one or two heavily mortgaged rental properties – same issue as above. Diversity is key to a good investment strategy. Risking everything on one or two properties can really jeopardize your retirement if they go south or you lose your job.

Betting big on stocks when you don’t really have the stomach for it – can you sleep at night? All stocks will go up and down, some will pay dividends. Can you handle the volatility or should you stick with blue chip bonds, GIC’s etc?

 

 

 

 

 

 

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Millennials Afraid of the Stock Market

April 14th, 2015 ernie Posted in Financial mistakes No Comments »

Millennials Afraid of the Stock MarketMany millennials are afraid of the stock market and for good reason. With the downturns in 2000 and 2008, they may not want to place their savings in the stock market. They also are Leary of the housing market with many losing their homes and having to seek cheaper accommodation.  Now that the job environment is improving and the economy is getting stronger millennials and retirees are saving money again for their retirement, but where do they place these funds so that they can maximize their income during retirement years? Unfortunately, millenials afraid of the stock market are placing their savings in cash and low-interest savings vehicles where their money is relatively safe, but will earn very little income.

Millennials Afraid of the Stock Market – Compare

The worst case is to place your savings in a bank account where you are lucky to get 1% and that is stretching it for many savings accounts. Many are much lower and in some European countries you have to pay the bank to keep your money! Let’s assume you have $10,000 and earn 1% a year. That’s only $100 income a year and if you have to pay taxes on that income you might only end up with $70!

If you place your money in a diversified conservative mutual fund, you might get as much as 3% after the mutual fund company takes their fees and that is in a good year. On average the gain plus income is around 2% or $200 a year in income before taxes.

The stock market averages better and if you invest in blue chip dividend paying stocks that pay 3% to 4% a year, with the opportunity for the dividends to be increased each year, you stand the chance of gaining on the market while still collecting income. Sure the stocks will go down and up, ie.e  volatility, but if you invest well, your investments will keep place with inflation and be there for you when you retire.

Millennials Afraid of the Stock Market who invest in GIC’s and savings accounts will lose out on these gains and only really have what they are able to save. They will not be able to participate in the growth in the markets. For more financial mistakes to avoid, click here.

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Biggest Financial Mistakes

January 21st, 2015 ernie Posted in Financial mistakes No Comments »

Biggest Financial MistakesThere are lots of theory’s about how to manage your finances and prepare for retirement.  Meeting goals that you may have or just living the kind of life that you wish to have. Various experts have written about mistakes people make in this regard. We have assembled the five biggest financial mistakes that many consumers make on a daily and annual basis.  Take the time to think things through. Avoid following the heard like a bunch of lemmings over the cliff . If you focus and avoid these mistakes you run a good chance that your financial affairs will turn out better than they would have otherwise.

Biggest Financial Mistakes

  • Timing the market,
  • Trading too often
  • Reacting to the market
  • Making emotional decisions
  • Working with the wrong adviser

More Detail

Timing the market so that you sell high and buy low is much more difficult than it sounds. So much so that many people lose thousands of dollars because they cannot actually time the market. The stock market has averaged 7% year over year for the past 40 years, however there have been some pretty wide swings during that time with losses and gains. Investing in blue chip stocks that are here to stay is better than trying to time the market.

Trading too often can rack up huge trading fees and one wonders if these fees eat all or most of your profit. Don’t forget there is a fee for buying as well as selling, so your profit needs to cover this cost before you actually make any money.

Reacting to the market in a panic mode or in a bull market can also cost thousands of dollars if you sell low and end up buying high. Anyone who sold in 2008, locked in all of their losses and if they stayed out of the market they also missed an over 100% gain in the value of stocks since. Invest wisely, diversely, blue chip and dividend paying stocks and you will have a better chance of weathering any storm.

Making emotional decisions can be equally bad. Talk to an adviser, a family member or someone you trust before making any financial decision. Emotional decisions without facts usually leads to bad decisions.

Working with the wrong adviser who is focused on trading is going to cost you money. An adviser who is pushing the latest mutual fund because they will receive back end commissions does not always have your best interests in mind. Personally evaluate all recommendations and make your own evaluation before proceeding.

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Pockets of financial risk

January 14th, 2015 ernie Posted in Financial mistakes No Comments »

Pockets of financial riskThere are lots of risk areas in today’s market outlook. The bull market has been running for a long time and is due for a correction. The markets are volatile with regular corrections of 5% or more and many people are getting nervous about something major happening.  Oil prices are way up and then way down. We just got through the housing bubble! What is the next bubble that we need to worry about? There are pockets of financial risk for every investor and it remains to be alert to protect yourself from these volatile swings.

Minimize Pockets of Financial Risk

One of the best ways to manage pockets of financial risk is to follow the standard investing rules:

  • Invest in high quality dividend paying stocks.
  • Better yet if they have a record of regularly increasing their dividends!
  • Invest diversely across market sectors and
  • Stay away from speculative stocks and bonds.
  • Re-balance once or twice a year
  • Focus on income without getting involved in high risk bonds or stocks.

High yield bonds – are usually high yield because they are high risk. While the yield can be attractive, the risk can also be very high. Can you afford to lose a major part of your investment or the total investment? They are sometimes classed as junk bonds. Low risk government bonds and corporate bonds from high quality companies have much less risk and pay a lower yield as a result.

Small cap stocks – from smaller companies can swing widely and unless you have the stomach for these wide swings, you may not want to get involved in these types of stocks. Yields might be higher when you include potential growth, but then the losses can be large if the industry is unkind to them.

Slow and steady and investing – while not exciting, perhaps even boring, will deliver on average far better results with far less risk provided that you follow the rules mentioned above.

Systematic investing – is another way of managing risk, a regular investment in stocks for example that captures both the down turns and the upturns will deliver excellent results. You will buy both high and low with the average cost working out to your favor over the long term.

Borrowing solutions – such as a line of credit is much cheaper than using a credit card for example at 20% or higher. A line of credit that is tied to the equity in your home can be as low as 4% or even lower.

Assess your personal set of pockets of risks and take the necessary actions to manage each risk area to avoid a catastrophic impact in the future.

For more posts about financial mistakes we all make from time to time, click here.

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Avoid These Money Mistakes

October 7th, 2014 ernie Posted in Financial mistakes No Comments »

Avoid These Money MistakesAvoiding money mistakes, whether we are in our teens, twenties or approaching middle age, we all feel that we will live for ever, we will remain healthy and retirement is something to think about many years down the road.  This type of attitude is very common and it really does not sink in that we may have made a mistake until we are in our mid to late fifties and suddenly are faced with retirement either forced, intentional or for health reasons. It is at this time when we realize that we may have made a number of mistakes with our finances, and it is questionable whether we have enough time to recover and live comfortably in retirement.

We collected six money mistakes that many people make and wish they had avoided. Take a look and see if any of these fit your current situation. maybe it is not too late to do something about it and ensure that your retirement is actually the way that you had always dreamed.

Six Money Mistakes to Avoid

Saving Later  – the advantage of compound interest and savings can be really powerful if you begin early in your twenties, but almost worthless if you start in your fifties. By the time you hit fifty you pretty much need to save everything you will need for retirement.

Spending Before Saving – always set aside money for emergencies, for retirement and for routine repairs on cars and homes. Only after you have set these monies aside, should you consider spending on the toys that we all love to get.

Buying Expensive Items on Credit – credit card interest rates begin at 18% with some as high as 35%. Payday loans are much higher than even these ridiculous rates. Buy on credit only if you can repay the amount charged to your card on the statement due date or end up erasing any savings you might have received by buying them on sale.

Not Reviewing Health Insurance Coverage

Is one of the most expensive items in your budget next to food and shelter and yet many people do not pay attention to what the cost of the premiums are vs. the benefits they receive. not having health insurance can be just as expensive if not worse.

Ignoring Interest Rates – shaving a half a percent off your mortgage or car loan can make a huge difference in the overall cost. In some cases thousands of dollars on a mortgage for example. Ask your lender for a better percent on a loan. Ask him to show you just what the difference will be if you are able to reduce the interest rate.

Paying Too Much in Bank Fees – banks are extremely profitable and one of the reasons is the bank fees that we all pay. Once a year take a look at your bank fees to see if you can do better. Every dollar in your pocket is better than in theirs. Reducing your bank fees by $10 a month means $120 a year in savings. Who would not want that?

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Biggest financial Mistakes – No Emergency Savings

July 31st, 2013 ernie Posted in Financial mistakes No Comments »

Biggest financial Mistakes No Emergency Savings as a financial mistake ranks up there as one of the most important issues that many people seem to ignore. |The biggest financial mistakes that people make can jeopardize their quality of life for many years. This mistake can cause a world of hurt for both you and your family including losing your home, your possessions and even putting you out on the street. Most people are over confident and believe it will never happen to them and then it does. We cannot predict when, but we are pretty sure that a financial  emergency will occur sometime in your life time. Saving for an emergency is a financial security blanket that will give you the time to deal with the issue that is causing the problem in the first place and ensure that you can refocus on finding a job etc.

Biggest financial Mistakes  – Job Loss

If you are living pay check to pay check and counting on your job to continue unabated, this is probably a bad assumption. Most people change jobs at least 5 or 6 times in their lives and sometimes they do this by choice while in others they are either laid off, fired or the company goes bankrupt. This is the most critical time when you need to have an emergency savings to get you  through the time with no income. Don’t count on your company, they are loyal to the bottom line only and will lay you off in a second if they need to.

Health Issues

Not everyone has health benefits and sometimes you cannot work while you are sick or you need medical costs to be covered. This is a critical time for when you need to have an emergency fund set up. An emergency fund will pay for some of the medical bills or just put food on the table while you recover from whatever medical situation you are dealing with.

Emergencies

A new roof, repairs to the car, replace appliances and many more small emergencies that crop up from time to time. These are the things that emergency funds are needed for. The important thing is to have a fund and then once you use it, top it up again so that the money is there when you will need it again. Some people would rather protect their emergency fund at all costs.

They avoid entering into debt or buying items they would like to have just to ensure that their emergency fund stays intact. This is financial survival and it impacts your life and that of your family.

Rest assured that emergencies will always come along and life can be a whole lot easier if you have the funds to deal with this emergency. For more financial mistakes that we all make from time to time, click here.

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Lending to Family Members

November 9th, 2011 Debt Posted in Financial mistakes No Comments »

Lending to Family MembersOur last post dealt with private loans and private mortgages which also includes lending to family members.  However we thought we would do a specific post about lending to family members. This is often were disagreements occur due to poor documentation and misunderstandings around the personal loan. They can sometimes can affect relationships for many years. If family members do not communicate and work to solve the problems in a constructive manner, they may lose a great deal of money.

Lending to Family Members

They may be small loans or they may be larger loans and mortgages. Regardless of what they are there is always room for misinterpretation which causes conflict.

If you really do not want to be lending money to family members, then don’t but offer to help them get a loan from a bank. You have to remember that it is not just a loan they want, but favorable terms as well that they are after. Low or nil interest charges, forgiven loans perhaps, low payments and looking the other way if they miss a payment. A bank will not provide them with this kind of leeway, so if you are concerned about any of these issues or just do not want to be in the business of lending money, then don’t.  Help them get a loan, but do not co-sign for the loan or you could end up paying the loan off yourself if your family member walks away from the loan.
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