When Do You Consider Yourself To Be In Debt?

by Magical Penny on March 21, 2016

The average Brit doesn’t consider themselves ‘in debt’ until they owe £45,000, according to concerning new research.

This recent study into the financial behaviour of 2,000 adults, from this month (March 2016) by new speech radio station talkRADIO, shows the majority have a worrying lackadaisical approach to borrowing and owing money.

Four in 10 people polled admit they rely on their credit cards to see them through the whole month, and usually have a balance of at least £3,000 debt to pay, while a further third spend much of the month in their overdraft.

But it is only when the mountain of debt reaches above £45,000 that people start to panic, and realise that they need to take action to remedy their financial situation.

The research highlights that the days are long gone when an overdraft was for emergency borrowing only and a credit card was something we pulled out when there was no other option. Certainly increasing numbers are blogging about their journey out of debt, which can creep up through even perceived ‘normal’ spending.

Another research finding was the average person dips into their overdraft less than halfway through the month, with twelve per cent of respondents admitting they permanently live in their overdraft.

debt infographic march 2016

Source

Good and Bad Debt

When it comes to understanding what debts are ‘good’ and ‘bad’, a third of adults admit they are muddled. Council tax debt, tax debt and utilities companies chasing for payment are considered the very worst kind of debt to be in. But mortgages, student loans, finance options and bank loans are largely considered ‘good debts’ by many.

But debt, regardless of what type it is, can stop you from achieving your financial goals. Even ‘good’ debt, should be eliminated.

For more articles on Debt, read the Magical Penny Debt archive.

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3 Effective saving methods to help create financial security

by Magical Penny on March 18, 2016

three-fingersAccording to statistics, consumer spending increased to a record high during the fourth financial quarter of 2015, and this is usually a sign of strong economic growth.

Some experts have noted that this growth is being powered largely by higher levels of borrowing, however, which suggests that the economic rival in the UK may be based on short-term metrics. This may cause some concern, especially with several economic factors pointing to a global recession later in the year.

 This is where we must all take individual responsibility for our own financial future, as we look to reduce outgoings, save regularly and build a secure source of wealth.

With this in mind, here are three effective savings methods that can help us to achieve these goals: –

 1. Eliminate your Debt

 Debt is one of the main barriers to saving money, as we are continually forced to commit our capital to paying bills and reducing deficits. This can be debilitating, so eliminating debt is the first step towards building your savings and achieving some form of financial security. You must first calculate how much it takes to service your debt each month, before opening up lines of communication with creditors to create viable payment plans. This will enable you to gradually eradicate interest repayments and eat away at your debt, freeing up more of your income to invest into savings.

 

It is also worth reviewing an up-to-date credit report, as this may help you to identify credit agreements or debt liabilities that are inaccurately recorded. These can then be challenged and even removed where applicable.

 2. Set savings goals and identify the best accounts

Once you begin to save, you will need to set goals and identify the best vehicles for accruing interest. Establishing savings goals enables you to introduce discipline and create a viable fiscal plan, while choosing the right accounts ensures that you are able to access the best and most rewarding interest rates. From private investment to the new individual savings accounts and self-invested personal pension plans, you will need to compare the full range of the market if you are to make an informed choice to suit your goals and expectations.

 

 3. Speculate to Accumulate

 Over time, these methods will help you to build savings and accrue wealth. This opens up new savings opportunities too, so long as you are willing to speculate and spend money in order to reduce future costs. The procurement of solar panels is an excellent example, as while this represents something of an expense it typically repays your investment after five years and delivers a nominal profit thereafter. By investing in the reduction of your energy consumption and costs over time, you can reap rich rewards in the long-term.

 

 

 

 

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What Will the New Stamp Duty Changes Mean for Investors?

by Magical Penny on March 18, 2016

The Budget 2016 has now been and gone, but there are a number of big changes that will be coming in the next few months as a result. Stamp duty is being transformed for both residential and commercial property purchases. Let’s find out what that will mean for investors.

stamp duty change 2016How is Residential Stamp Duty Changing?

With interest rates at an all-time low, investing in residential property has been extremely popular over the last few years, but could the repercussions of the Summer Budget hamper this?

As of April 1st 2016, all purchases of buy-to-let or second homes in England or Wales will incur a stamp duty charge that is 3% higher than before. This will mean that the average buy-to-let property costing £184,000 will now have a £6,700 stamp duty charge, up more than £5,000 from the £1,189 that would have been charged previously.

Investors will now also have to pass checks usually taken by a typical mortgage applicant, proving that the rental income will be more than the monthly buy-to-let mortgage repayment amount and that they can afford to purchase the property.

The new stamp duty charges will apply to all property purchases, unless a landlord owns more than 15 properties. This will mean much higher purchasing costs for investors, which may result in some investing elsewhere.

However, if you are still considering investing in residential property, you should also know that mortgage interest reliefs are being cut and the wear and tear tax will be replaced by a new system in 2017. Plus, as of February 1st 2016, landlords can now run ‘Right to Rent’ checks on all possible tenants.

The Treasury has also confirmed that when it comes time for landlords to sell their buy-to-let properties, the initial purchase costs can be offset against capital gains tax (CGT), making the process much more affordable in the long run.

How is Commercial Property Stamp Duty Altering?

In the Budget 2016 held on the 16th March, there were big changes announced for commercial property investors too.

There will be a big tax cut for small firms and commercial property investors. The commercial stamp duty process will be reformed so that it works in a similar way to the recent residential brackets system. Commercial stamp duty will be charged on the value above the nearest tax band, so the following rates will be charged:

Under £150,000 – 0%

£150,001 to £250,000 – 2%

Above £250,000 – 5%

“These reforms raise £500m a year. And while 9 per cent will pay more; over 90 per cent will see their tax bills cut or stay the same.” Said George Osborne, Chancellor of the Exchequer.

“So, if you buy a pub in the Midlands worth, say, £270,000, you would today pay over £8,000 in stamp duty. From tomorrow you will pay just £3,000.

“It’s a big tax cut for small firms. All in a Budget that backs small business.”

What Will This Mean for Financial Investors?

With higher residential stamp duty rates and lower charges on commercial purchases there is likely to be some movement towards investment in business premises rather than traditional buy-to-lets.

However, for those who prefer to still purchase residential property, the increased charges are likely to be reflected in rental costs, with monthly fees charged from tenants most likely increasing considerably to recoup initial costs. How large the impact of the budget will be is yet to be seen, so watch this space.

Pure Commercial Finance is an independent financial brokers firm which specialises in commercial finance. So, if the Budget 2016 announcement has encouraged you to invest in commercial property, call Pure Commercial Finance on 02920 676727  to learn more today.

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Buying Your First Property Stress-Free

by Magical Penny on March 17, 2016

Buying your first property is said to be more difficult than ever; a lack of properties to choose from, high prices and stiff competition are all factors that can leave you with a real headache. There are, however, steps that you can take that will make the experience a happy and memorable one.

house mortgage UKDeposit Dilemmas  

It is paramount to have all of your financial concerns worked out before you do anything else. Start by addressing the issue of a deposit, if you’re lucky enough to have been able to save a significant deposit, then count your blessings, if not then consider your options. It may be the case that a family member or close friend can lend you the money for a deposit at a really low interest rate or interest free. This is a great option, but make sure both parties are very clear when it comes to the terms, write them down and stick to them to avoid future conflict. Securing a deposit by taking out a bank loan or by using a credit card, should be considered carefully as both are subject to charges and having to do this may indicate that you should wait a while and save some money or downsize your expectations.

 Mortgage Magic

Finding a suitable mortgage is the next logical step to take. The good news is that there are lots of great deals to be found for first time buyers, companies like Saffron Building Society specialise in helping first time buyers, they require as little as a 5% deposit and have competitive interest rates. Making sure you get a great mortgage deal and don’t overstretch yourself in terms of borrowing is crucial to buying your first home stress-free.

More Money

Bear in mind, when calculating your finances, that there are several other costs you’ll need to pay, solicitors fees and the like all need to be factored in to the equation.

 houseRealistic Research

Once you have your finances in order, the exciting part of the process can begin, you have to go out and find a home. This should be an enjoyable experience and so be realistic to ensure it doesn’t stress you out. Do your research, look in areas that you like and that are practical for you, but not in areas you are unlikely to be able to afford. Only consider properties that meet your basic requirements, such as size, access to transport links, parking, proximity to amenities and remember that your first home is just that, your first home, and it’s unlikely to be your “dream home”.  

 Home Sweet Home

Once you have found a property you like, it’s time to “make an offer”. Most prospective buyers will offer under the listed asking price and wait for a response and this will be accepted, rejected or a counter-offer will be made. Most people don’t get the first home they make an offer on, so don’t worry if you don’t. Remain calm and carry on regardless, but do make sure that you stay realistic about your expectations. The last thing you want is to end up in a situation where you lose out time and time again.

 

Taking a realistic, sensible and positive approach to buying your first home can see you completing the process in a matter of months and having suffered very little or indeed no stress. Good luck!

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Craziest Tax Deductions That Worked

by Magical Penny on March 16, 2016

 

If you are self-employed, or even if you are not but have made investment gains or have other income, you need to complete a tax return each year.

tax paid 201415I have needed to do a tax return for the last few years due to income derived from this very site and a few other online ventures. I also do quite a lot of paid singing work in addition to my day job as a paraplanner in a financial planning business. Completing my tax return each year has been relatively simple but keeping track of expenses for the purpose of documenting them on a tax return takes some time.

You can claim for many different things as a business expense, but not everything qualifies. In America, tax returns are more prevalent than here in the UK and this info-graphic details some rather wacky business expenses that actually worked and were accepted!

Have a read and I guarantee some of them will make you smile!

the-craziest-tax-deductions-that-worked-infographic

Credit: allfinancetax.com

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 10 Golden Rules For CFD Trading

by Magical Penny on March 4, 2016

BuyingEverybody believes that they understand the golden rules of CFD trading, but most beginner traders still make numerous mistakes and only few go on to become successful in their trading careers.

I have a friend who has been CFD trading recently on an app on his phone and he (and you) might find these rules helpful if you’re wanting to trade profitably.

 

The following are the 10 golden rules for CFD trading

 

1. Letting profits run and cutting losses

Most traders blow their CFD trading accounts by simply failing to adhere to this rule than probably any other reason. Clinging to losing trades for too long while cashing in on the profitable ones too fast results in a small number of catastrophic losses and a series of small wins.

 2. Using logic rather than emotion

Traders that base trading decisions on emotions might make the occasional big win but the reality is that they seldom will ever be profitable consistently. This is why it is important to have trading rules and sticking to them at all costs.

 3. Limiting exposure to just one trade

Traders that bet 50 percent or more of their CFD trading capital on a single trade are no longer traders but are now gamblers. You must never risk more than 2 percent of your available capital on a single trade no matter how ‘sure’ it seems.

4. Combining fundamental analysis with technical analysis

Traders that employ a combination of technical and fundamental analysis stand greater chance at becoming successful than those that employ just one of these methods. A good rule to apply is using fundamental analysis for ‘triggering’ the trade and technical analysis for the actual entry.

5. Timing is crucial

Even when you are right about the long-term direction of the market, an early entry can result in significant losses. Waiting for a ‘trigger’ along with at least one confirmation signal ensures that this never happens all too often.

6. Never add to losing positions

Good traders learn the distinction between trending and range-bound markets. Without this skill they would make the fatal mistake of adding to their losing positions due to the mistaken expectation that price will turn around. A good tool to use here is trend lines.

7. Understanding Risk vs Reward

Every trader needs to understand the trade-off between risk and reward. Never enter a trade whereby the potential risk is greater than the potential reward.

8. Trading with money you cannot afford to lose

Most people mistakenly believe that CFD trading or trading with other financial instruments online is a quick and easy way to earn money. Therefore, they use money intended for other important projects such as paying for their mortgage and eventually lose it all. Never trade with money you cannot afford to lose.

 9. Wise Use Of Stop Losses

Trading without a stop loss is the quickest way to a fast and total wipeout. Setting stop losses too tight can lead to the slow but eventual wipeout. Use stop losses that give the market enough room to ‘breathe.’

 10. Admitting personal weaknesses

The psychological makeup is perhaps the single most important difference between a winning trader and a losing one. A winning trader understands that he or she must never give in to weaknesses such as fear and greed. To address this problem, you need to plan you trade, trade your plan, and practice strict money management.

Conclusion

The 10 golden rules for CFD trading are vital if you ever wish to become a successful trader. Start implementing these rules and you will increase your odds of being successful.

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How Can Invoice Discounting Aid Your Business Processes?

by Magical Penny on February 26, 2016

Important or urgentInvoice discounting has a reputation of being for businesses that are facing cash flow problems. As well as being a perfect solution to slow-paying customers and shortage of capital, it is also a legitimate way to finance the growth of your business. Here we’ve explored the ways that invoice discounting could help your business if used in the right way.

What is Invoice Discounting?

Invoice discounting gives you immediate access to the cash you’re owed in your invoices. It means that you will no longer have to wait 30+ days for the customer to pay you, and your customers will never know about it. Businesses like Touch Financial will help find you such a service as well as providing information on a range of other types of invoice finance too, but how can such services aid your business?

Cash Injection

Up to 90% of your unpaid invoice can be turned into cash almost instantly, which you can use as an injection of capital into any area of your business. It gives you confidence that you’ll receive the cash at a certain time, which not only helps you out from a cash flow perspective, but it means that you can plan the way that you’ll use it too.

Speedy Payments to your Suppliers

Because you’ll have the money owed instantly, it means that you can pay anything you owe too. This means that your reputation for paying promptly will improve within your supplier network. You will have more people and companies wanting to work with you, and your business will grow exponentially.

It will also give you both the time and the power to negotiate better deals with your suppliers, and/or take advantage of new business opportunities, thus improving your profit margins.

Managing Your Sales Ledger

This form of finance means that you’ll never outgrow your available cash, which means that there is no need to worry about spending more than you have. It is a line of credit that will automatically increase as your sales increase, with no need to renegotiate like you would have to with a bank overdraft.

Unlike invoice factoring, with invoice discounting, you have complete control of the sales ledger, so your customers don’t have to know that you’re using it.

Overall, the main benefit of invoice discounting is that it allows instant access to your earned money instantly. This allows you to keep your cash flowing in and out of your business without any potential hold up to business procedures.

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Save £1300 more per year on food with these tips

by Magical Penny on February 24, 2016

shopping tips for supermarketsHave ever walked out of a supermarket with some GREAT DEALS but by the time you got home you’ve realised that you’ve spent way more than you had intended? You thought you were saving money but instead your budget is completely blown?

A new study has confirmed what many of us, already know: Supermarkets are the experts at getting us to spend more money than we intend to!

In the study, it was found that special offers make us spend £1300 more per year. That’s 21% more than we intend to!

The research comes from the Money Advice Service, which found more than three quarters of shoppers (76%) regularly spend more on food than they planned because of all the special offers presented to them in-store, leaving the supermarket having spent an extra £11.14 on average.

Even those who try to work out if something really is a good deal often find it hard to calculate, with the value of a single item versus an item in a multipack causing them to fall into a maths trap.

The study asked more than 2,000 consumers to select the best value options when presented with four sets of offers commonly found in the supermarket. Only 2% correctly identified the best deals in all four cases.

The results also showed differences between the genders. Women tend to go for snacks such as chocolate or sweets (60% vs 51% of men) and baked goods (43% vs 35%) — whereas men are more likely to buy meat (26% vs 21% of women), alcohol (27% vs 17%) and ready meals (24% vs 19%).

How To Keep Your Food Budget Under Control

Don’t shop when tired

Shopping when tired and bored will also result in the average shopper buying three additional items – spending up to £14.53 extra each time.

Make a shopping list

Preparation is the best way to guard against overspending. Those who always make a shopping list are three times less likely to overspend than those who don’t, spending close to £200 less on groceries over the year. Of those who make a shopping list or work out the meals they’re going to make before they go to the supermarket, most (61%) say it makes them feel more in control of their money.

Check Like With Like

When it comes to checking prices, look at the price per unit or compare the prices of similar weight products to make sure you are getting value for money.

Don’t shop with your kids if possible

‘Pester power’ can add to your bill. 26% admitted to giving into their children and buying £15.50 worth of items each time they hit the shops to keep the children happy.

Don’t shop with an empty stomach

After special offers, close to six in 10 (59%) shoppers say shopping on an empty stomach makes them spend more.

 

John Penberthy-Smith, Customer Director for the Money Advice Service comments:

“The problem is that quite often we see a special offer at the supermarket and we don’t want to miss out – so we throw it into our trolley without really thinking about whether it is a good deal or whether we actually need it.  “Often deals can be difficult to understand and compare with other prices. Then there’s waste – even if the offers are cheaper, bigger packets or 50% extra are not always good value for money if we end up chucking most of it away. The best thing to do if you want to save cash is to write a shopping list and try to stick to it. You can also try shopping when you’ve just eaten and you’re not tired. Just remember, buying own brands and being savvy when it comes to tempting ‘offers’ will save you money in the long run.”

 

 

For more money saving tips to help you shop smarter visit the Money Advice Service website.

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From Financial Struggle To Thriving – Play to Win

by Magical Penny on February 24, 2016

footballThe distance between financial struggle to financial thriving can be short or long, depending on your circumstances, skill-level and persistence. But wherever you are today, the most important thing is making a promise to yourself that you will continue moving forward one day at a time. If you’re reading this and money is so tight that you’re worried you won’t last until your next pay day, one idea is to consider registration loans using your car as collateral on a loan. Using your car reduces the risk for the lender allowing them to provide a lower interest rate than might otherwise be available for the loan.

If you’re doing a little better with your money and don’t need to use your car’s title to get a loan but still wish to improve your circumstances it might help to think about your financial situation like it’s a competitive sport such as football.

Personally, I’ve never been much of a fan of watching football but I still know the best teams don’t rely simply on a good offense or good defence. They need both. Certainly, some teams manage to dominate the game by focusing their efforts on a strong offensive strategy, but in almost all teams there must be a basic level of defence to ensure that the game is won.

It’s the same with your money. 

People with less money can save interest on debt by looking into secured loans, like the car example above. They also need to play a strong offensive game to try to raise their income level. That said, a great income is no substitute for having a strong defensive money strategy. You need to recognise your money needs all the help it can get to protect it from the many threats to growing wealth.

Even if you are or have been doing well financially, i.e. you are the star striker in your financial life you may need help taking your money-game to the next level. You need to put in a place a financial plan to map out a way to reach your  goals in the best way possible. Talking with a professional financial planner can be particularly helpful as they understand the rulebook and can save their clients from getting the red and yellow cards of excessive tax and penalties.

Some say a good offence is the best defence, but this is only true up to a point especially for more affluent soon-to-be retirees. This stage of life is when developing a strong defence is particularly important to ensure money is not lost to the tax man in various guises, from capital gains and breached income tax thresholds, to local authority care fee demands and eventually to inheritance tax at the end of life’s 90 minutes.

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The Death of Cash: Why the Next Generation Will Never Touch Physical Money

by Magical Penny on February 19, 2016

Using credit cardsThe writing is on the wall for the concept of physical cash. Sure, it may have served us well for the past several centuries but in a digital age, cash is becoming obsolete at such a rapid pace that the only way our children’s children will ever get to see coins and notes will be in a museum.

At least, that’s likely to be the case if Apple CEO Tim Cook is to be believed. Speaking this past November at Trinity College in Dublin, Steve Jobs’ successor boldly predicted the death of cash, telling students ‘your kids will not know what money is.’Of course, we could always dismiss Cook’s claims as merely marketing propaganda; he was, after all, speaking to Trinity students to promote the launch of Apple Pay, the contactless payment system serving as an alternative to paper and sterling in over 250,000 shops and counting.

To do so however, would be to ignore the fact that there are many others out there without Cook’s agenda who backup his statement. In an August 2015 survey carried out by Lloyds Bank, 39% of those questioned believed that they would not need cash at all in a decade’s time. For Lloyds and their fellow retail banks, this kind of news could come as something of a tough pill to swallow. Surely the death of cash would also spell the death of high street banking branches where the majority of activity still revolves around processing and managing cash transactions.

Spending and saving moneyIf Lloyds and their ilk were far from on the ball, it could well do, certainly, but something tells us that isn’t going to be the case. That something? This, from Lloyd’s Bank Head of Personal Current Accounts, Claire Garrod: “People are increasingly expecting to use new technologies to make payments rather than rely on cash. The benefits of these new developments are gradually being understood and embraced by banks and their customers, to make payments more convenient without compromising security.” (link)

Ms. Garrod’s statement, taken from the press release which accompanied the publication of the Lloyd’s August 2015 survey, is perhaps typical of the current mindset of many of our banks: it’s time to evolve.

To evolve successfully in a climate where the worlds of finance and technology are rapidly merging, outfits like Lloyds, Barclays and their competitors should now be channelling their efforts into joining forces with the big name players in the FinTech sector. One of the most talked-about industries of the last several years, so-called FinTech Unicorns (startups valued at more than $1 billion), have attracted some serious investment as of late as they continue to find innovative new ways to help every day consumers manage their finances. Investment specialists estimate that this kind of high level funding is only going to increase over the coming 12-18 months, ultimately putting new ventures like credit processing firm WePay alongside successful financial tech veterans like financial software specialists Misys and posing what – on the surface at least – seems like a serious threat to banks.

 

Over in the United States for example, global investment bank Goldman Sachs recently predicted that further FinTech innovation would “steal” around $4.7 trillion from the coffers of retail banking, not that financial technology and the banking industry need necessarily approach the continued evolution of both sectors as a case of “Us vs. Them.”

 

Indeed, whether the untimely demise of money really is nigh, or whether it will still exist in some reduced form, the move to contactless payment systems like Apple Pay represents not the end, but the beginning of a new way that both sectors can ultimately achieve their primary purpose: serving customers. And that brings us back to our earlier question: Will the move towards greater innovation in financial technology ultimately render retail bank branches obsolete?

 

autumn statementNot necessarily.

 

As Nic Merriman – CTO of Financial Services at Avanade UK – predicted in an article for Media Planet, branches are still likely to be around albeit in a much different role from the days of housing and processing cash transactions. Instead, Merriman suggests that the branch of the future will deliver services primarily through smart devices, with “customers given access to information and services they can interact with on the go.” In other words, whilst Tim Cook’s bold predictions may yet come to fruition over the next ten years, we wouldn’t start dusting off those funeral suits to mourn the demise of the modern bank any time soon.

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