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.

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.

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.

New Year, New Rules

So that’s it over for another year and all you have to remind you of Christmas 2011 is a hangover, a few extra pounds round the middle and a few pounds missing from your wallet – oh and perhaps a credit card bill that you expect to drop through the letterbox any day now.

Christmas is the biggest spending frenzy of the year and there is an opportunity now that it is over to reflect on your finances for the coming year. New Year resolutions come and go and most of us promise to make better use of our money in the year that is in front of us – as well as promising to make more time for ourselves and lose a bit of weight and exercise more and stop smoking and not drink as much and spend more time with the kids and learn another language and…..

Make this year the year you resolve to be efficient with your money – and resolve to keep that resolution! Make it the year you stop wasting money – and that’s not the same as stopping spending by the way!

By not wasting money you need to make sure that you are paying as little as possible to borrow money, paying as little as you can for the bills you need to pay every month, and making as much as possible from the money that you have invested. Oh, and doing it all tax efficiently into the bargain.

So to start you off here are five things that you can do this year to make sure that your money is well looked after in this New Year. Let’s start with the one that sounds easiest but is likely to be the most difficult.   

 

1. Plan! 

 

Managing your money effectively doesn’t just ‘happen’. You need to have some sort of a plan. What is it that you want to do with your money and your life, and when do you want to do it?  The new house or car or retirement at 50 won’t just appear and the mortgage won’t pay itself every month.

You need to plan for them.

The starting point is to sit down and work out what you’re trying to do, and when. There are no right or wrong answers to this one, and everyone will have different priorities. You might not even know all of the answers yet, it would be surprising if you did. But you need to ask the questions.

We’ll be looking at this area in a lot more detail as the year goes on but for now start the process. Start to think about what it is you want and when you want it.

 

The plan is not a one-off action, but will evolve over time. You won’t sit down one day for half an hour and say “That’s it then, that’s my financial future sorted, thank goodness I won’t have to think about that again for a while!”

There are things that you can do that will make a difference immediately:

 

2. Ditch the expensive debt! 

 

Make 2012 the year that you get sensible with your credit cards. Credit cards are great when used properly – and remember that as well as offering a sensible way to pay they can also offer protection if something goes wrong with the goods or services you are buying.

 Look for a credit card with 0% interest. Once that interest free period ends try to switch any balance to another card that offers the same. Remember that the money you owe the credit card company is the total balance on your account, not the amount you pay them every month so if you are going to use a credit card pay it off as quickly as you can.

 

3. Work out a sensible budget! 

 

Work out how much you need to spend every month on essentials and stick to that budget. For the next month keep an accurate note of everything you spend. Be honest! This is the starting point for your budget. Make sure you include the monthly cost of things that you pay annually like house or car insurance.

Most us get into trouble because we’re faced with unexpected expenses and don’t have any savings. Try to save a little every month – you can only do this once you’ve started the budget above – and keep it in a separate account so that if something turns up that you need to spend money on in a hurry you won’t have to borrow.

 

 

4. Check out your mortgage rat!e

 

If you have had your mortgage for a while it will be worth looking around to see if there is a better rate available. Lots of lenders will pay your costs for you if you move your mortgage to them. Start off by asking your existing lender if they have any other deals as this may be an easier option than moving to a completely different lender. Remember to check to terms of any new deal. There’s no point saving a bit of money now only to find that you’re tied in and can’t move if your circumstances change.

 

5. Bank on the best account!

 

Lots of current accounts pay very little, and many pay no, interest on your savings. Any cash that you have left at the end of the month should be moved to a savings account with a higher rate of interest. And on the subject of savings rates make sure you look around for the best rate you can find for your money. Inflation is creeping up again and you need to have your money in an account that is paying a rate of interest better than the rate of inflation to make sure you are not losing out.

 

 

Where there’s a Will……

Austin Lafferty is one of Scotland’s best-known and most experienced Solicitors. He is Vice-President of the Law Society of Scotland and has his own practice in Glasgow, www.austinlafferty.com He has commented on all aspects of the law on TV and in several newspaper columns over the years and here he explains, in his own inimitable style, the importance of making a will.

“My favourite film of all time – It’s A Wonderful Life. As well as being a tear-jerker par excellence, and a modern reworking of Dickens’s A Christmas Carol, it provides a barrelful of metaphors for life.

Take the scene where George Bailey (I refuse to do a summation of the plot. If you haven’t seen it then do so immediately) goes to old man Potter to borrow money, and tries to use his small life assurance policy as collateral. It has an equity value of 1,500 dollars, but if he dies , 20,000 dollars. Potter, delighted to see his nemesis so close to devastation, gloats “ hey George, why, you’re worth more dead than alive!”

And so are most of us. If you have a job with a pension, or some life assurance, or a mortgage backed by a whole life policy, or, as I sometimes joke with clients , if you win the lottery and die from the shock, then your ledger balance at time of death is thoroughly in the black. Indeed even if you just have a house and savings and some other financial assets, then once you pass away, those assets must be dealt with, and will realise a substantial payday for someone.

And there’s the rub (Dickens, Frank Capra and now Shakespeare, this is a very literary blog, by the way). Who gets your loot when you go? With no will, you leave it to the law of intestacy – and to chance. I am a Scottish solicitor and am familiar with our scheme of division on intestacy. A spouse will get most – even if separated but not divorced. Kids will almost always get less, and even then, they have to share equally with each other even if one has been marked absent for years and another has looked after you to the end. Worst of all – if there are no relatives, not even alcoholic uncles or undeserving cousins, your estate goes to the state. Yes, the government gets it all if you don’t declare an intention to leave to family, friends or even charities.

Speaking of charities, that leads into another aspect of will-making. As you know , they talk about death and taxes. The two go together in the most unholy of alliances. If you breach the inheritance tax threshold ( £325,000 per person, double for a couple) then 40% of the remainder of the estate is cut away by the Revenue. Unless you take professional advice about IHT planning AND make a will, then you might as well send the government a cheque just now and cut out the middle man.

If people don’t think carefully about wills, they don’t think AT ALL about tax liability. Tax is not something that happens to other people, I come back to where I started, most of us are worth more dead than alive. When I sit down with clients and tot up their possessions , it is astounding ( to them) to find that they are blissfully unaware that they are or may very well be in the IHT zone at the time of their death.

My advice is simple. Make a will. There’s no other way”

You can’t control your money without a budget.

One of the most common comments that you hear people making about budgeting, and the one thing that puts people off the idea of ever doing one, is that it is about not spending money!

But that is simply not true.

A budget, at its simplest level, is about knowing how you spend money. And knowledge, as they say, is power especially when it comes to dealing with your money

At the risk of teaching your granny to suck eggs this page is pretty basic. But I make no apologies for that because it is often the basics that trip us up! I was talking recently with a bunch of Solicitors (if that is the collective term) and we discovered that one had three gym memberships and another spent a three figure sum every month on coffee from a well known coffee shop! Now the super-fit solicitor with three gyms was well impressed that she could cancel two memberships, stay fit and have more money to spend every month but the other, while surprised the figure was so high, was quite comfortable with his caffeine intake because he reckoned he earned enough to justify the expense!

The interesting thing here was that before I spoke to them they didn’t know about the multiple gym memberships or the expensive coffee habit. If fact they didn’t know an awful lot about how they spent their money every month – and in that they’re no different from the rest of us.

So before we start to look at how to put a budget together there is some work to do. And this is probably one of the single most important exercises you will ever carry out in connection with your money. And I’m not overstating its importance by saying that.

You need to keep an absolutely accurate note of everything you spend for a period of at least a week but preferably a month! The coffee on the way to work in the morning and the newspaper or magazine to read on the train and the sandwich and mars bar at lunchtime and the gin and tonic on the way home and the DVD you rent when you get home. Everything!

And be honest with yourself. You’re not doing this for me or your bank manager or your boss or your partner. And you’re not doing it because you are trying to figure out what bits you are going to have to cut out. You are doing it because the starting point in putting together a sensible budget is to understand how you spend money.

The big stuff is easy – your mortgage and car loan and council tax all come out of your bank every month and you can quickly add them all up and work out how much they total.

It’s the daily money that gets lost. And that’s what you need to get a handle on before we can pull it all together in a sensible format.

And remember this exercise is to help you spend, not stop you spending!

 

 

My House is my Pension

If I had a penny for every time I have heard someone saying that in the last ten years I’d have a lot of pennies!  The trouble is it’s just not true.

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, so it could be a sort of pension.

But it can’t be both!

If you continue to live in it it’s your home not your pension 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 making proper arrangements for retirement.

Property has been king, 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 or, if the slowdown in the market continues, your loss.

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.

It undoubtedly worked for some but for most of us our ‘house’ should be somewhere to live. Our ‘pension’ on the other hand should be part of a well thought out plan that includes thinking about when we want to give up work and how much money we’ll need to have to live on at that time! It may well include a property or two but it’s also likely to include some other assets and investments all neatly tied up to make it a bit tax efficient as well!

Do you have a money-mate?

Who do you talk to about your money when things are getting tight? Do you put all of the red letters and bank and credit card statements into a big pile at the bottom of a drawer and hope that they go away at the end of the month? Or do you have a heart-to-heart with your money-mate and tell them everything that’s eating away at you about the interest rate you’re paying on your mortgage or the fact that your pension is not going to give you enough to live on even if you work until you’re 90!

In a fascinating survey from the Money Advice Centre it looks as though around 75% of us feel happier with life in general when all of our money issues are running smoothly. That’s hardly surprising you would say, since money is such an important part of all of our lives. The surprising statistic for us was that only 19% of us have someone that we can talk to about our money.

The aim of the survey was to find out how we feel about a range of issues, including money, and to kick-start a campaign aimed at encouraging people to be more open about their money and how they handle money matters.

We’ve always said here at Moneysucks? that the most important thing you can do to help you manage your money is to ensure that you control it rather than letting it control you. So what is it that stops us sharing our money worries, since most of us agree that if our money is running smoothly then our life will run smoothly?

The survey concluded, and we agree, that if you are able to talk to family, friends and work colleagues about money issues then this will make you more comfortable about the way you handle your money, and this in turn will make your life happier generally, then the less often money issues are likely to eat away at you.

So who do you talk to about the way you handle your money, and do you feel that life in general is easier when you know what you’re

Can I have it now please?

A recent survey has shown that 20% of our adult children are asking their parents for their inheritance now, rather than when their mum and dad depart this mortal coil.
Financial pressures are mounting and according to the research, carried out by Skipton, nearly 20% of under 35s have received £50,000 from their parents, with 10% benefitting to the tune of more than £100,000.

So what do you think? If you are a parent are you prepared to compromise your lifestyle today to help your kids deal with the fact that they can’t get a mortgage or pay off their student debt? Or is it presumptuous in the extreme of your kids to be looking for this money now and, in fact, do you think their lucky to be getting anything at all when you die because, after all, you started with nothing

And children? Do you think your parents have a duty to help you out if you’re struggling since they brought you into this world? Should they adjust their coat according to their cloth so that you can pay off your debt and buy a house?

And anyway, they might save some tax if they give you the money now!

Let us know what you think!

Paying Regular Bills From Irregular Income – Some Thoughts.

In Rachel’s last diary blog she talked of the difficulties in budgeting to pay her bills from an income that comes and goes. We asked Nicola Jackson, Chair of the Glasgow Branch of the Institute of Financial Planning, and a Chartered Financial Planner, to comment on Rachel’s issues.

I think that Rachel has made an excellent start when it comes to thinking about her budgeting and is most definitely heading in the right direction. Trying to cope with regular payments out when payments in are irregular is not easy!

If I was advising Rachel I would suggest she breaks her main expenditure down into two categories as follows:

Fixed and Personal Expenditure

Those payments which come out of her bank account each month and which have to be paid in order for Rachel to live her life. She has rightly started to do this by looking at her mortgage, bills, petrol etc. but I would also ensure she has added food and basic socialising into this budget. If she doesn’t take this into account then she is always going to be behind and susceptible to borrowing or overspending so I think that this Fixed Expenditure Budget list needs careful and honest consideration. She needs to ensure that whatever she has left over in the months where income is higher are not squandered and are available to plug the gaps for the months when income has reduced. This involves accurate budgeting as described in the article
here

Music Development

This would be any costs associated with growing her business. She has rightly started to forecast this and this is her next budget in order of priority. She needs to spend this money to speculate to increase her income but I would also suggest she looks into ways in which she could subsidise these costs, perhaps with grants or joint ventures. I appreciate that this might compromise her output so if she doesn’t want to do this then she needs to work out how much teaching, for example, she needs to do to cover her Fixed Expenditure Budget and then her Music Development Budget.

Of course this then raises the issue of time and Rachel needs to leave herself enough ‘time’ to do the development work she needs whilst earning the money from teaching and gigging to provide for her two main priority budgets.

It is important that Rachel sets herself time related goals. She needs to have achieved ‘x’ by a certain point in time. This will then help her focus on budgeting to a time frame. This will in turn enable her to signpost her own development and progress in writing her new album and ensuring that funds she has made allowances for in her budget are not exhausted by her project drifting. I would have a visible wall planner where she works and plot her signposts onto this so that she can always keep track of where she is against schedule and budget.

This should help Rachel focus on those important items she wants to achieve.

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