Tag Archives: money

Money-Making, Money-Saving

Financial PlanterNow that the New Year is upon us, and the excesses of the festive season are fading into memories, it is a good time to make some financial plans for the next 12 months (or so). In this first article of 2010, I thought it might be a good idea to give a few financial tips, to improve your personal wealth to some degree. It is worth my saying, from the outset, that I think this year will again be a difficult one for many, but some money making and saving ideas should be of use to most of us.

Firstly, don’t let financial institutions get away with anything: they make quite enough money as it is. If you carry a balance on your credit card(s), try looking at switching to a card that has a 0% interest period for as long as possible. Pay as much as you can afford off the account each month, as outside interest-free periods, it is an expensive way to borrow. Review your account at the end of the incentive period. If you pay off your balance every month, you might consider taking one of the ‘cash-back’ cards that pay you back a percentage of everything you spend, each month.

Saving money for the future is an eminently sensible thing to do, but for anyone who has any form of borrowing (certainly any borrowing at an interest rate of, say, 4% or more) the objective should be to repay as much as possible. It is almost inconceivable that there are people stashing away money, on which they are earning 1% to 2% a year, yet paying anything from 15% to 30% on credit or store card balances, yet thousands are! Whilst maintaining minimum payments where applicable, pay as much as you can off the debt with the highest interest rate, until it is cleared, then move on to the next.

Check the cost of your utilities, if you can, with a cost comparison website. If you have a mobile phone, internet access or home telephone, check with your provider at the end of each contract period, to see if you are on the best tariff. If you wish, consider switching providers to get a better deal. If you have a bank account for which you pay a monthly fee, check what ‘extras’ you get for your fee. Then make sure you do not duplicate any of these benefits. (I recently found that I had been paying for both mobile phone, and travel insurance, when both were covered as part of my current account package!).

I am generally a fan of regularly checking the cost of insurance, but it is fair to say that having a good ‘track record’ with an insurer can prove very useful, in the event of a claim. The cheapest is not always the best. The value is what is important. On the subject of insurance, it is a good time to check the cost of your life cover. It is cheaper than it has been for a quarter of a century, yet on average, insurers pay out some 50% more in claims, than they collect in premiums: surely a sign that such premiums will be reviewed, given these difficult times, and an increase could be on the cards. I have reviewed several cases of late, and reduced clients’ costs by a reasonable margin. If you have family or business commitments to protect, and have no cover, then now is a good time to buy.

As regards medium to long-term saving, I am reasonably positive about 2010, but would still advocate spreading investments by way of monthly saving schemes, if you have concerns about the markets.

I wish you all a happy, healthy and financially fitter New Year!

David Foot

Any Change?

Any changeIn my last article, I promised a more detailed comment on the Budget changes to the tax treatment of pensions, but it seems that these changes are not yet ‘cast in stone’. There have been some alterations since the Budget, as I last wrote, and we may not have seen the end of these. Briefly, the changes only affect those earning in excess of £150,000 and are applicable until 5th April 2011 when further restrictions on pension contribution tax relief will be put in place. If you are fortunate enough to be in this position, then the important parts are: all regular contributions (monthly or quarterly) in existence before the 6th of April 2009 will continue to receive full tax relief, as will those pension investors that have made irregular contributions – who will benefit from full tax relief on the lesser of the average of three years ‘infrequent’ contributions or £30,000. The changes do not apply to those members of occupational ‘defined benefit’ (final salary) pension schemes, only ‘money purchase’ arrangements. Confused? You should see the unabridged version! It is not inconceivable that there may be other alterations to pension tax relief – which still remains a valuable benefit for many – so watch this space.

Meanwhile, economic indicators continue to be conflicting: signs of increased mortgage lending, another small increase in a major house price index, Bank of England Base Rate held at 0.5% tempered with increasing unemployment and house repossessions. It appears that the recent rally in the UK stock market has reached somewhat of a plateau; a situation that I feel may well be the case for the remainder of the year. Volatility will probably be a feature of world markets for some while to come, a good thing for some people, and doubtless a great deal of money can be made by relatively few ‘day traders’ brokers and ‘market makers’. Most of us, however, will not benefit to any great degree from this situation for many months. Markets do seem to be reasonable value, not as was available a few months ago, but I feel that in a few year’s time, 2009 will be looked upon as a ‘bargain basement’ year for the share markets.

A quick few lines about the mortgage market: little by little, it seems that the Government actions of the last few months are starting to have some effect. There are signs of lenders increasing the number of schemes that are available and the percentage of purchase price that they will lend, and decreasing their profit margins. (Not that they are historically cheap though, some margins are more than five times what they were a few years ago, however, volumes are very low). But whilst there are no ‘green shoots’ wherever you look, there seem to be buds here and there, on the ‘brown sticks’. The mini heat-wave probably helped a bit, but roll-on the financial summer!

David Foot

Trying to Look on the Bright Side

Portfolio“Here we are again, happy as can be. . . ”, as my dear old Dad used to sing, when we were setting off on our summer holidays. Well, you could be excused for thinking that happy days are here again, if you read the right papers, or listen to the right radio stations: the ‘Footsie’ is up by something approaching a thousand points since my last column, mortgage approvals up by 19% in February and 16% in March and the Nationwide’s house price index actually rose in March! Years of experience have taught me to not to get too carried away, when things are starting to go well. In fact, I am less optimistic about the short-term future of the UK stock market, than I was when writing my piece for the February/March issue, when I said “when things are looking bleak, it is usually a good time to invest”. Not that I am pessimistic about markets, I still feel that many stocks and bonds are undervalued, but just not as cheap as they were. Many other economic factors are still negative, and there is a lot of bad news that needs to work its way through the system. Unemployment will go up, and house repossessions with it, and they will not be the only ‘bitter pills’ that will have to be swallowed. But ever the long-term optimist, I continue to believe that – barring earth shattering events, this year will be a positive one for stock markets.

The much predicted rally in bond markets doesn’t seem to have manifested itself yet, but more industry luminaries seem to be ‘putting their money where their mouths are’ and investing in quality bonds and bond funds. With some funds offering running yields of 10 – 15% the potential for some capital appreciation (with income reinvested) seems to far outweigh the potential risks. While I am on the subject of risk, yesterday, I met up with the manager of one of my favourite ‘protected growth’ funds. He was updating me on the roll-out of a higher risk, multi-asset fund (also designed and run by him) but I had to congratulate him on the success of his low-risk fund. It was designed to provide 100% capital protection; yet the units in the fund are up by over 6% since the launch in December 2008, a very creditable performance indeed.

Now just a brief few words on the recent Budget. The major impact is on the taxation, and pension tax-relief of those who earn in excess of £100,000 a year. A lucky few, most will think, who have probably already assessed the impact of the new rules. In the absence of any more notable events in the meantime, I shall give a summary of the most important budget proposals in the next issue. Until then, make the best of these ‘interesting times’.

David Foot