Are the banks really open for business?

Our Banks are telling us that they’re lending again, and that they are reaching their lending targets – nearly!

But we keep hearing stories of agreed facilities being withdrwan, or only being renewed at huge extra costs. And of continuting difficulties for people trying to move house, or buy their first property.

On top of that the banks are still not paying decent rates of interest on many of their accounts and millions of us haver money floating about in accounts paying no interest at all.

We own many of the banks, or so we’re constantly being told. Should we not expect better of them?

What’s your experience of our Banks.

Are they lending eonugh money, and quickly enough? And if not how do you think we should get them to increase their lending?

Tell us what you think.

My house, my home?

Some sections of the press are still full of dire warnings of 25% drops in property prices in parts of the UK this year or while others give us the the good news that prices will stabilise, and may even start to rise during 2012

We’ve decided not to get involved in that argument right now.

That might sound like a bit of a cop-out, and in a way it is. But that is only because there is another point that is sometimes missed out in this ongoing debate about the future of property values. Whether prices rise or fall, and whether you make money or lose money, you need a roof over your head. And if more of us thought about that rather than how much money we were going to make out of the buying and selling of our houses, then perhaps the many answers that the pundits are giving to the question over the future of property prices will be less relevant.

Your house can either be somewhere to live, in which case it’s your home, or it can be for investment, in which case it can provide an income or some cash when you sell it.

It can’t be both!

If you continue to live in it it’s your home not an investment and if you don’t live in it because it’s rented, or because you sell it to realise the capital you have tied up in it, then it might be ‘your house’ but it certainly won’t be your home!

I know, this is becoming a circular argument. But it is an important one. Huge rises in property prices over the last couple of decades have meant that more and more of us are taking this ‘property can’t fail’ line to justifying not having a good mix of investments, or more importantly as an excuse for not making proper arrangements for retirement as in “I don’t need a pension, I’ll just sell my house when I retire.”

Property has been king for years now, and returns from property have outstripped those from most other assets, although detailed analysis will show that timing could have a major impact on your profit.

Now I happen to think that property can be effectively used as part of a well structured plan for retirement. But it generally only works if it’s a second or third property purchased specifically for rental with no requirement for you to have to live in it yourself.  The ease with which mortgage money could be obtained up until a couple of years ago flooded the market with amateur landlords who thought there were quick bucks to be made from buying and selling flats up and down the country.

There is still money to be made from the property market if you’re looking to but for rental, but generally only as part of a longer term strategy, and generally still only if you are borrowing to help fund a purchase, and effectively using someone else’s rental to build up your capital.

For those of us with one property that we live in, we should start to enjoy it as such, rather than worrying about how we can ‘maximise our profit’ when we sell!

Moneysucks Monthly Challenge is underway

Zoe Nisbet starts her monthly challenge today. For a whole month she is going to keep a note of everything she spends, and at the end of the month we’ll have a chat about what lessons she has learned about the way she uses her money.

Zoe will be blogging regularly during the month to keep us updated on her progress.

Here is what she says so far:

“So the challenge begins today. I have my little notebook ready where I will record everything I spend. I am excited about this exercise as money is something I tend not to think about. I seldom check my bank balance during the month I guess because I am scared to do so. If I think I have spent a lot of money I will just be careful for the next few weeks until my pay has gone in. I am hoping this challenge will shed light on how much I actually spend during a month placing me in a position to make informed decisions in the future about my money.

A few of my friends have decided to do the challenge with me.

Mary-Louise (ML) who works next to me has decided to do this monthly challenge. She says “I have never really kept much of a tab on my spending. If you asked me how much I spend in a month I would really have no idea!! So I think it’ll be really interesting to find out how much I am spending and on what! At the moment, I’m trying to work my way out of a fairly substantial overdraft and so it would be great to get some tips on how I can be more careful with my spending. It’s the first morning and I’ve already spent £71.50 so I’m doing well!”

Let us know if you want to join in!

Moneysucks Monthly Challenge

Fergus Muirhead visited Pulse FM Radio station in East Renfrewshire to help the team from St Luke’s High School with their Money for Life challenge (read more about the challenge here and their Pounds, Pence and Common Sense campaign.

After the programme he got talking to Zoe Nisbet, who is running the project on behalf of East Renfrewshire Council.

Zoe agreed to take part in this month’s Money Challenge. She, and hopefully a few of her friends, are going to keep a note of everything they spend for a whole month, starting on Monday 20th February. You can read their updates here as they go along and Fergus will be back on Pulse FM after the month is over to find out what they have learned about their spending.

It promises to be a fascinating and fun way of helping to make sure that they are dealing sensibly with their money, but already they are worried about who is going to have to admit to the biggest ‘silly spend’ of the month. Watch this space for details!

Let us know if you want to take part in your own monthly money challenge by leaving a message at the bottom ot this page.

Money For Life Challenge

A team of eager pupils from St.Lukes High School in Barrhead have been successful in reaching the first stage of the ‘Money for Life Challenge UK’, impressing the judges with their fun and educational way to teach money management. The Money for Life Challenge is run by Scotland’s Colleges, it is a competition that helps you to run your own original money management projects, to help benefit the local community. To find out more visit http://www.moneyforlifechallenge.org.uk/

http://www.moneyforlifechallenge.org.uk/

The team from St Lukes naming their project ‘Pounds, Pence and Common Sense’ and are aiming to inform senior pupils about to make the transition onto university of how best to manage their money at this time. They will be doing this by producing four, one hour long radio shows on Pulse 98.4. To date three radio shows have been successfully broadcasted and through different guest speakers a range of topics have been covered. The shows have featured UWS financial advisor, young scot and Fergus Muirhead. The last show of the series on Thursday 23rd January will have students or recent graduates on sharing their money stories with the team.

Some of the team have agreed to take part in a challenge that Fergus Muirhead set us. We will be recording what we spend for one month. Weekly blogs will be appearing on his site and we will conduct another radio show when the challenge is over to hear all about it!

Pupils will be in with a chance of winning a place in the UK grand final, however the competition is very fierce so we need all the support we can get. We will keep you updated as you can vote for our project once we have completed our last radio show. In the meantime please like our facebook page: http://www.facebook.com/pages/Pounds-Pence-and-Common-Sense/238464162890688

Are we fooling oursleves with interest-only loans?

Over the last ten years or so more and more of us have been switching our home loans to interest-only, where all we do is service the loan every month by paying interest. In some respects we’re renting the property since we are not repaying the money we borrowed to ‘buy’ it and we are effectively gambling on the fact that increasing capital values will give us a bit of equity when we come to sell. And of course the upside in the short term is that our monthly home loan bills are smaller. At a time when money is tight generally this can be a great help.

The facility to repay a mortgage on an interest-only basis has helped tens of thousands get their feet on the first rung of the housing ladder where otherwise it would have been too expensive to do so – and allowed others to trade up during the boom years. Not that this is always a good thing with hindsight since there is no question that this in part fuelled the ridiculous rise in house prices we have seen over the last couple of decades.

Now a new report from the Intermediary Mortgage Lenders Association suggests that this method of repaying a loan – or not repaying the loan as the case may be – could become obsolete if new Financial Services Authority rules are implemented.

The FSA is concerned that people who take on interest-only mortgages are in effect taking on larger mortgages then they can realistically afford to repay and that extra checks on affordability at the point or purchase will make sure that new borrowers will only take on debt that is repayable. Critics of these new rules argue that they will make it more difficult for lenders to justify arranging new loans on an interest-only basis and that by default we will all end up with repayment mortgages going forward – increasing our monthly outgoings but ensuring that we repay our debt as we go along.

The important thing to remember if you are arranging your mortgage on an interest-only basis, or indeed have already done so, is that at some point you will need to convert it to repayment, meaning that your mortgage payment period is likely to be much longer than you originally considered – unless you are able to cope with a big jump in monthly payments when you switch to repayment.

It could be, of course, that you are happy to continue with an interest-only loan because you can show that you have some money coming to you to repay your loan at some point in the future – from other savings or from an inheritance, or perhaps from the sale of an interest you have in a company you run. If that is the case then even if the new rules do come into force it is likely that lenders will continue to offer interest only mortgages in these circumstances

Would you credit it?

Research from MoneySupermarket has shown that over one in six people missed a payment for at least one bill in the last 12 months, potentially putting their credit profiles at risk.

With many consumers expected to apply for a personal loan or credit card this year, the research found that around three million people had missed a credit card bill in the last year. It also suggested that council tax is another bill regularly unpaid, as 1.9 million people missed a council tax payment. Mobile phones, personal loans, broadband, Sky and gas and electricity bills were also high up on the list as payments most missed.

The Scots and Welsh were the biggest culprits for missing a bill payment with 22 per cent neglecting their finances, while people in the East Midlands were the least likely to miss a payment, with almost 9 out of 10 not missing a payment on any major bill within the last 12 months.

These missed payments can have a dramatic effect on your credit rating but can also lead to the loss of promotional rates on the card, which can be a costly mistake, as Kevin Mountford, from MoneySupermarket, points out. “Missing your first payment on a 12 month 0% credit card deal would cost an additional £300 in interest over the 12 months if you moved on to an average credit card rate of 17.29 per cent. Therefore, prioritising your monthly obligations and setting up a direct debit for the most vital bills is a must for those who tend to forget to pay on their deadline.

“Missing a payment could also have a knock-on effect for future applications such as credit cards and mortgages. Those applying for a credit card need to prove they can make regular and stable payments and any black marks against a credit profile would hinder chances of being approved. For those who have missed payments affecting their credit file, MoneySupermarket has a SmartSearch credit profiling tool which matches applicants with the most suitable products based on their individual credit score, but does so without leaving a footprint on the applicant’s file.”

Repayments on credit cards and other financial transactions such as mortgages and use of overdraft facilities are all recorded on your credit file. The majority of household bills and government related fines and payments aren’t recorded but contract mobile phone payments are, so it can be very easy to get caught out by not paying bills on certain products, especially if you are not aware of the consequences of your actions.

If you are worried about what might be on your credit profile then you can very easily check it by getting in touch with www.equifax.co.uk or www.experian.co.uk. It’s a useful exercise ahead of any credit application you are going to make.

Rachel Hair’s 1st Money diary – Revisited

For those of you who missed the introduction to the series of Money Diaries for Musicians, here’s an opportunity to read the first one again, wirtten after Rachel had spent some time touring with her trio in Belgium.

Welcome to the first ‘episode’ of Rachel’s Diary. What follows below is Rachel’s account of a recent trip to Belgium with some tax questions that it raised for her. We have then answered these questions for Rachel but in a way that we hope will benefit all musicians who have an uncomfortable relationship with HMRC (otherwise known as The Revenue!). Find out more about Rachel and her music at www.rachelhair.com or http://tinyurl.com/6fzw5uu

I was over in Belgium last week with the Rachel Hair Trio playing a set as part of the “Gaelic Crossroads” concert in Lommel, near the Dutch Border. What a trip….we were so well looked after and the gig was almost a sell-out.
We received a good fee for the trip on top of all our expenses (flights, accommodation, transfers) being covered so financially, as well as musically, the trip was a great success.
As usual we, or rather I on behalf of the trio, got paid in Euros, having invoiced my agent who then in turn invoiced the promoter with his fee on top of ours (how much we pay our agent may be the subject of a future piece!)
Since I am the financial brains of the organisation (difficult to believe I know) it’s normally me who gets paid and then I pay the other pair, normally emailing them an official “receipt” (if that’s the right term) to confirm that I’ve paid them for the stated gigs. If work is done in the UK I normally pay them by BACS from my own account, but more often than not if we work outside the UK we get paid in cash, so I pay them cash.
Right now the euro is very strong against the pound so we really appreciate getting paid in Euros. The race is then on between the three of us to try and find the best buy-back exchange rate. Once I’ve exchanged the Euros I keep the bureau de change receipt stating what the exchange rate was so I can add my fee in pounds into my accounts.
When travelling we ate while at the airport on the return journey in Brussels, and I kept the receipt for this having paid in Euros. When putting it into my accounts I normally would take the final exchange rate that I got for changing my fee when back in the UK and work out what I spent in pounds, putting that amount into my account.
However on occasions I’ve used my credit card and then looked at my bank statement for what their exchange rate was and put that in, when paying my card.

So here are my questions from last week:

Is it okay to work with exchange rates at the time we get back or should I look for rates on a specific date, or historically?

Do I need to make a note in my accounts of exchange rates each time we change money, or is the receipt enough evidence?

Should I be putting a note of the Euros I got paid as well in notes to my accounts?

What happens if we are investigated and HMRC discover that we have been paid different amounts for the same gig because we all got different exchange rates when we changed money?

Moneysucks? spoke to Graham Faulkner, tax partner at Chartered Accountant Abercrombie Gemmell and asked him for his take on Rachel’s issues. We agreed, first of all, that Rachel has done a good job in the way she deals with the other members of her trio. Too often we hear of musicians who get paid for work and pass out cash to the others involved without any paperwork changing hands .This leads to confusion and can cause issues with HMRC since, if we take the situation Rachel described above, in the absence of receipts showing that Rachel has paid the other members of her band then HMRC could think that all of the money paid to Rachel by her agent was her income, and tax it accordingly.
Graham thinks that the most important thing for Rachel to do in her dealings with the revenue is to create a clear paper-trail for them to understand. “In Rachel’s circumstances, the key consideration will be to keep sufficient records to tie in the actual exchange rate when preparing her tax return. I would have thought that simply retaining the paperwork from the Bureau de Change would be sufficient. At this level, I would not overcomplicate matters by worrying about notes in your accounts regarding the rates.”
In terms of the exchange rate differing day to day, Graham reckons this is not really a problem as long as Rachel’s paperwork confirms the amount she received but says that help is available on this issue. “HM Revenue & Customs publish monthly lists of the official exchange rates for use in preparing tax returns, and these can be found at http://www.hmrc.gov.uk/exrate.”
Graham is not too worried about any variation in amounts paid to different members of Rachel’s trio. “Similarly, it is less important to marry up exchange rates between the band members, provided that the amounts are being returned to HMRC in accordance with the actual amounts received on exchanging the Euros on your return to the UK.”
So all in all it looks as though Rachel has grasped the basics of this issue and if she takes Graham’s advice on board her tax return should be easier to complete next year.
Graham does raise one other important issue that is relevant to musicians, and others, working abroad. “One consideration that should not be overlooked is the potential taxability of these earnings in the relevant European jurisdiction. Strictly, I would expect you to be liable to Belgian tax in relation to your activities there.”
This raises the spectre of the ‘double taxation agreement’ and the need to understand where tax is due to be paid when you work overseas. We’ll come back and look at this one in more detail next time!

Do you know where your money is?

Right, here we go. No long lists of New Year resolutions for 2012. Just one simple message that will help you no end with your money this year.

Get involved!

Don’t let everything happen passively. It’s your money and you need to take control of it all and it starts by taking an interest:

What rate am I paying on my mortgage?

Can I find a better rate?

Is my house insurance competitive?

Should I take back that faulty TV that I just put up with because I don’t really understand my rights?

Are my tax payments up-to-date?

What income will my pension give me and when?

Could I borrow more cheaply than I am at present?

How much am I spending every week? And why?

Can I afford that new car I really want?

I could go on but you get the picture by now. Make 2012 the year you start to take an interest in your money and to make it work a bit harder for you.

That’s all.

The tax clock is loudly ticking

The end of January tax deadline is looming again and self-assessment taxpayers now only have a couple of weeks to return tax forms to HMRC – or face a £100 fine.

As well as filing a return by the end of this month, any tax due for tax year ended 5^th April 2011 needs to be paid along with the first half of this year’s potential tax bill. Failure to make payment of tax that is due by this date will result in interest being charged on the amount due.

Around nine million taxpayers submit a tax return every year and two thirds of these returns are now filed on-line. Many of us leave the filing of our return to the last minute and this caused around one million people to have to pay a fine last year.

If you are new to on-line returns then you need to register first of all and you can do this at www.hmrc.gov.uk. When you have registered you will receive an activation code through the post and this allows you to go on-line and file your return. Given the state of the postal service at the moment due to the weather time is now at a premium and if you have still to register you need to do it now!

If you still prefer the old fashioned method then HMRC need to have received your return by 31^st January.  You can take your return to a tax office up to that date if you don’t trust the postal service but in a neat little twist HMRC won’t issue you with a receipt to prove you delivered it on time if you hand deliver, leaving yourself open to the possibility of a fine.

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