Spend and Save In Balance – And my Spending Confession | Sponsored Video

by Magical Penny on December 16, 2013

Often when it comes to saving, it can be hard to add meaning to what you’re saving for.

If you have a spending goal that you’re saving towards then it can help, but once you spend the money when you’ve reached your goal you’re back to square one…no savings.

So of course you need to have different savings accounts for different goals – short, medium and long term. 

The key is keeping these separate and not allowing yourself to ‘borrow’ for one account to fund another.

One of my favourite ways to spend money in my ‘short-term’ savings account is on plane tickets. Flying, for me at least, is a magical experience and I enjoy every second of it.

In 2012 I flew over 20 times and admit that plane tickets were where most of my money went last year!

As flying is so exciting to me, I loved hearing about the new Royal Brunei’s 787 Dreamliner from London Heathrow.

Earlier this month on Monday 2nd December 2013, Royal Brunei Airlines (RB), Brunei’s national carrier, launched a Betterfly service from London Heathrow as they officially commence the first London, Dubai, Brunei route on RB’s new Boeing 787 Dreamliner, powered by Rolls Royce Trent 1000 engines.

They are the first airline to offer a Dreamliner service from London to Dubai and on to Brunei. The addition of five modern Dreamliners to the fleet and an intention to be the first airline to offer a 100% Dreamliner service on long haul is a testament to their ambition to offer a truly personal and award winning service to all passengers.

Fares on Royal Brunei Airlines from London Heathrow start from £360 to Dubai, £695 to Brunei and £710 to Melbourne.

For me, a flight on the new Dreamliners is just the kind of thing that makes saving for the short, medium and long-term worthwhile!

What are you saving for?

Sponsored by Royal Brunei

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Can a Car be an Investment?

by Magical Penny on November 25, 2013

Wealthy entrepreneurs and rock stars often amass large collections of cars which are the envy of ordinary car lovers. Usually the collections come about due to the collector’s enthusiasm and the obvious status conveyed by an expensive vehicle, but is it possible for cars to be an investment for an owner?

Traditionally cars are not seen as investment assets due to the fact that they depreciate, and so some consider them to be money pits like yachts.

Cars come with a host of other expenses, from fuel and important breakdown cover – for which I personally recommend the AA (http://www.theaa.com/breakdown-cover/) – to mandatory car insurance to protect you from the cost of accidents on the road.”

However car prices have been fluctuating and some believe that there are ways in which both classic and modern cars can be a good use of your cash.

For investment purposes, cars will always be inherently unreliable.

They have a one off value, in that they don’t pay shares or dividends like a business investment, and this one off return will be at the mercy of market factors. So if they are to be viewed as an investment it should be in the same category as art or wine, and included in a wider portfolio for diversification purposes.
For classic cars, the HAGI Index tracks the sales of 50 collectable models and can give guidance on investment opportunities. However predicting sales values of classic cars is by no means an exact science. Factors such as the quality of restoration, previous ownership (for example if it was owned by a famous person) and also just fashion and taste can make prices vary wildly between similar models. For example, as older generations who drove and fell in love with a particular make or model pass away, that model can become less valuable.

 

Limited edition cars or sole surviving models can obviously be more collectible and prized than others.

What should be remembered about the classic car trade market though is that it is a world of car lovers, who buy items for their nostalgic value or their beauty. Luckily, in times of economic trouble nostalgia generally becomes big business, so selling a classic car can be a way to make money during a recession.

Additionally, investment markets for assets such as wine have enjoyed something of a boom in China. If the classic car market receives the same interest then collectors could find themselves with some valuable assets to sell.

The most important thing to remember though is that the classic car market is unpredictable and fashion plays a large part in dictating cost.

Most collectors and traders recommend you embark on buying classics out of love and a genuine interest in the vehicles, and then financial gains will be an additional benefit. So if you have always had an interest in classic cars speak to some dealers, check out the HAGI Index and remember that quality is better than quantity. Going to auctions and fairs will help you get an idea of what’s selling and what the prices are like, as well as the type and quality of profitable cars.
When it comes to modern cars conventional wisdom suggests that you will always sell the vehicle for less than you paid for it. In years gone by this would pretty much always be true, but due to price and demand increases and inflation some people are now asking near enough what they paid when selling on their car, and in some cases more.

In particular, cars with good mpg have enjoyed a boom, so the Toyota Prius, Ford Focus and Honda Civics of the world have been in demand and sellers have been able to get strong prices.

Buying a car purely for profit like this is almost certainly a fruitless strategy – however if you want to think about the long term prospects of a vehicle then looking at such trends could increase the likelihood of making a good return.

Another good strategy for optimising the sales price of a vehicle is to buy it after it has depreciated significantly in price (known as the “sweet spot”) and then sell it on before it needs maintenance. This takes a certain amount of research and knowledge, and the ability to negotiate prices, but if you know your cars it is the best way to get a good deal and maximise your return on a vehicle.

 

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5 Awesome Money Saving Tips

by Magical Penny on November 8, 2013

There are so many simple money saving (and earning) tips floating around the internet. You definitely would have heard things like ‘turn off the TV at the switch’ and ‘check the taps and showers don’t leak’ for example. But there’s always some that you might not have come across or thought about….here are a list of some money saving and earning tips that you can do from home, and you might even have fun doing them!

 

Tip 1: Sign up for a Frequent Flyer rewards program

This one works better if you’re in America or Australia were  frequent flyer programs are more generous, but it’s worth looking around for frequent flyer programs out there offering great rewards for everyday spending.  Spend enough at one chain and you’ve earned yourself free flights or other rewards.

If you haven’t got enough frequent flyer points saved for a holiday, remember you can always save money on holidays by going camping. Camping can be a rewarding experience that you can easily enjoy with your friends and family.

Tip 2: Get an awesome piggy bank

We’ve all had plenty of loose change floating around in our wallets, pockets and cars. Lighten the load by putting your spare change into an awesome looking piggy bank. If you get yourself a hip looking bank, you’re more likely to enjoy paying attention to it. Once it’s full, take it down to your local bank to convert your small change into useful money. Deposit enough money and you can even earn a little extra interest on your savings.

Tip 3: Hunt around your house for treasure

You likely have lots of books, DVDs and games lying around in your house. While they were fun at the time, you might not care for them anymore. Why not trade them in or sell them on to generate some extra cash to pay off debt or top up your savings account?

 

Tip 4: Use coupons as often as you can

Save printed coupons or vouchers from your local stores in a bowl or box near the front door. Make it a habit to check for coupons before going out. There are plenty of online coupon sites too such as Ebates that offer L.L. Bean coupons and other coupons for online and local stores. Check for coupons and discounts before making any purchase online or locally. Coupons can save you loads of money as long as you remember to use them.

Tip 5: Exercise with friends outdoors rather than at the Gym

Gym memberships can be expensive with long contracts that often have hidden fees and costs. Save money by doing your workout at home or in your local park. If the exercises you would normally do in the gym require equipment, research other exercises that target the same muscle groups that you can perform without them. If it’s the spin class you enjoy, get yourself a bicycle. It’s a short term spend that will save you money in the long run. Riding outdoors is a great way to see new places in your neighbourhood and is more enjoyable than stationary bikes.

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How to Know When to Take Your Business Abroad

by Magical Penny on November 4, 2013

Many companies will make the decision after a few years that it is time to venture into international markets, whereas some choose to dive straight in.

Many smaller companies do not build an export plan into their original strategy and so when it does come up, the subject is more of an afterthought. It is really important that companies don’t make the leap into foreign territory without having done the research and preparation needed.

Before you make this huge decision, read the tips provided by 4x Currency below to work out whether your company is ready to venture overseas:

 1.     Have You Got a Plan?

Before you even begin to pitch for overseas business, you need to make sure you have a plan with a strategy in place for all eventual outcomes, both positive and negative. If your attempt to export does not work, you need to have a plan to turn it around, and if you do really well, you need to know how to deal with a sudden increase in demands.

2.     Are You Financially Able?

You will need to have reserve funds ready if you plan to export, as there are many different costs to take into consideration. International clients may expect credit for longer than your domestic clients, and there will be administration costs and transportation fees too. To make this a success, it is a good idea to have loans accessible so that you make a heavy investment early on and don’t run out of money.

3.     Do You Have Your Target Market?

Don’t even think about pitching until you have clearly identified your target market. Exporting will never work if you go in with the plan to target anyone and everyone in the hope that something will work. Do some research on the markets that you are interested in, and make sure you think about all the other factors that will hit you in that area such as local business protocol, local taxes and of course, entry requirement.

4.     Do Your Management Agree?

Before making any sort of decisions, it is really important that your company’s whole management team back the plan and are fully on board. The likelihood is that there will be bumps along the way, but with a group of people backing your decision and helping out, you will be in a much stronger position.

5.     What’s Your Price?

Instead of planning to transfer your domestic prices, think about how much your target customers will be able to afford. If you are going to be exporting your service or product to developing countries, then they will not be able to afford to pay the same prices as richer countries and you may need to drop your prices.

6.     Is Your Product Required?

The last thing you want to do is enter a market that is already completely saturated with your product. Make sure that there is a genuine demand for your service or product in the area you are targeting and that the customer base you are going to be selling to will have a reason to buy it.

7.     Can You Service Overseas Clients?

You are going to need to have the technical skills required to for overseas selling, alongside the appropriate customer service levels and aftersales support. If you cannot provide these in a foreign country, then you are going to find yourself stuck very quickly. With staff that have the skillsets to meet all this necessary criteria, your business should go relatively smoothly.

8.     Is Your IP Protected?

You need to make sure that all your international property and most of all your trade mark and branding is protected in the countries you want to do business in. If they aren’t, then any other local business can register your trademark and you will have to start from scratch with a full rebrand.

9.     Do You Know The Law?

Believe it or not, your service or product could actually be illegal in some countries. Some governments will help out and protect foreign companies, but some will completely discriminate against them with the use of tariffs and red tape. Make sure you know that your business will be positively received in the market you are planning on targeting.

Summary

If you can answer “yes” to all these questions, and feel confident in those answers, then chances are that you and your company are ready to go abroad. You don’t need to be a global player to do business globally these days, you just need to make sure you know what you are doing and how you are going to do it.

Preparation is so important and doing all your research before you make a plan will mean that you have everything you need by the time to get round to making the jump.

 

 

 

 

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Do Women Wear the Financial Trousers in UK Households?

by Magical Penny on October 13, 2013

 

My life has changed quite a lot since I started Magical Penny.

When I started writing about money I was single, in my early twenties, and only had to think about myself (and my future self!).

These days I’m now living with my girlfriend in York and far from just thinking about myself, I need to consider my girlfriend in all my decisions, particularly monetary ones.

So when I came across new research about the dynamics of money management for couples in the UK I was certainly intrigued.

The research revealed that women wear the financial trousers in UK households – although men, naturally, disagree!

The study, funded by Go-Compare showed that over two thirds (68%) of men said they look after the finances in their homes – but 63% of women said they did too.

When it comes to managing finances, only 19% of men said they looked after the finances with their partner, compared to a quarter (25%) of women.

Women are more money aware in UK households according to the study, as 44% said they knew how much cash was in bank accounts and how much was owed on credit cards, compared to just over a third (36%) of men.

And it seems that despite having a close eye on household cash flow, women are the spenders too, with just over a third (34%) of women admitting that they spent the most in their relationship, compared to under a quarter (24%) of men who said that they were the bigger spenders.

It also seems that women don’t trust the men in their lives when it comes to money. Just over one fifth (21%) of the women surveyed confessed to opening their partner’s credit card bill and bank account statement all the time. Men are more trusting; with only one in ten (10%) saying they do the same.

In fact, just under two thirds (63%) of men said they had never opened their partner’s bank statement or credit card bill, while less than half (48%) of women could say the same.

It’s not surprising, then, that while 69% of men thought that opening someone else’s bills shows that they don’t trust their partner, only 49% of women agreed.

 

Money is often the cause of arguments in relationships, so transparency of finances is the best way to go (even if it can difficult and scary to share). 

I’ve still got a lot to learn about keeping a relationship positive and fun but hopefully these research findings will be good food for thought and might lead to discussions around money and better joint money management in your relationship.

 

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Some Sound Advice for Those Moving Home

by Magical Penny on October 2, 2013

There are few things more stressful, choresome, potentially complicated and yet nonetheless exciting then moving home. Since our homes are places we typically spend most of our time, making sure the right choices and moves are made is obviously exceptionally important. Here are some bits of advice for those moving home.

While Packing

The magnitude of packing when moving home is often underestimated. Due to its straightforwardness, packing is expected to be quick and simple. However, it is only when moving home that one realises how much possessions they actually have, while you will naturally own a number of possessions that will require special attention and care when moving home.

The last thing you should want when moving home is for your new home to be overloaded with possessions. This will only serve to create clutter within your home and also make settling in more of a chore. Use this opportunity to sort out your possessions and get rid of anything that you do not really need. Meanwhile, clothes you no longer wear can be given to charity.

 

Moving Belongings

When hiring a van to move belongings in, you should consider whether it might be either too small or too big. If it is too small then you might have problems fitting many things inside it, consequently leading to plenty of trips back and forth moving possessions. On the other hand, if it is too big then you may encounter problems parking the vehicle near to either of the homes, which is inconvenient for obvious reasons.

It’s usually more expensive to book vans on the weekends, and so if you can, it might be more cost-effective to move on weekdays.

Alternatively you can hire a removal company to deal with the packing and moving of your possessions. Your options when it comes to using professionals to help you move are usually quite flexible. For example, you can choose to have it all done by professionals, or do the packing yourself before hiring professionals to simply move your things. You can even do half of the moving yourself and leave the rest to the removal company, if you wish to save a bit of money.

A removal company should be hired at least a fortnight in advance of the move date, in order for you to ensure everything is arranged in time. Only use removal companies that are members of the British Association of Removers, since these are officially licensed and reliably professional. Rates are typically competitive throughout the removal company market and so you should get a number of quotes before committing to one company, in order to get the cheapest deal.

If you’re renting out the place you’re looking to move into, check to see if your landlord or landlady deals with the management of the property himself or herself, or if they use property management companies such as Rentify.

Those that use professional property rental companies are likely to be more efficient in matters regarding the maintenance of your new home.

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The Cost of Life is Rising

by Magical Penny on September 22, 2013

When I first started working in early adulthood I made it a focus to limit my spending.

I was terrified of  the hedonic treadmill that would race me to financial ruin. I didn’t want to spend money on things that would make me happy in the short term because I knew it wouldn’t last. We humans have a tendency to remain at a relatively stable level of happiness regardless of our fortunes, and purchases, so I didn’t see the point of spending money on things that would only make me happy for a little while. I ended up feeling guilty when I did spend money because I felt it would be better spent by the future self rather than my current self.

But my scarcity mindset of saving as much as I could did not last: Not when I could see how many opportunities there were to increase my earnings and spend money and still be able to save large amounts for my future. I could have it all, and for a while I did.

Until I didn’t.

Alas, the future is more uncertain and more expensive than you may think. It will always be a balancing act between spending needs and wants, and generating income that makes life possible. And this balancing act can quickly become unbalanaed as circumstances and opportunities change around you.

I’ve been living through a period of particularly changeable circumstances right now, so coming across this new UK “Cost of Life” info-graphic was enlightening.

The data behind the info-graphic predicts the cost of life will rise by 64% in the next 20 years!

(click the picture for more)

Based on the UK’s average inflation rate of 2.5%, British nationals can expect their biggest purchases (and the cost of raising children!) to increase by nearly two thirds within the next 20 years.

The interactive info-graphic reports some surprising and perhaps shocking projections; including the average cost of going through university which is set to increase from £88,700 to £145,000. Other major investments are also highlighted, such as the estimated average cost of raising a child to the age of 21; set to increase from £222,000 to over £364,000.

Are you saving enough for what life might throw at you?

By opening up a savings account and putting aside a little each month, the British public will be better prepared for rising costs and prices. Whether it be opening up a tax free ISA account or putting money away into long term savings, there is never a better time to start than right now.

You don’t have to be scared about spending money, like I was in my early 20s.  But you do have to walk through life with your eyes wide open about the expenses that may be up ahead, and this info-graphic provides some perspective.

Can you relate? Tell me in the comments below.

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Five Reasons Not To Invest In Single Shares

by Magical Penny on September 5, 2013

A few years ago in 2010, a work colleague of mine turned to me and said he had just sold some of his BP shares (shares of the oil company British Petroleum).

He had sold them as he was worried about the implications of the huge oil spill in the Gulf of Mexico on his shares. The share price of the BP, the company who was taking responsibility for the disaster, had plummeted recently, and he wanted to ‘get out’ before the value fell further. He did, however, have plans to buy them again once the shares had fallen further.

For some this market-timing strategy could pay off handsomely, but this is exactly the kind of investing that puts most people off:

  • Who has time to watch every minute of the news to see if new developments will affect share prices?
  • Who wants the hassle?
  • And, who wants to be thinking about their ‘portfolio’ when they see an oil-spill that’s affecting millions of sea-creatures and could have a huge effect on thousands of livelihoods if the spill washes up in Florida’s coastline?

Investing doesn’t have to be this way despite being *exactly* what most people think of when they hear the word ‘investing’.

If you have the time, energy and enough pennies to invest, buying individual stocks can be highly profitable but here are 5 reasons why it’s not worth the trouble:

1) Holding company stock –the good and the bad

One of the most common reasons people end up owning shares is because they work for a public company and can buy shares at a discounted rate, or are given them for free.

(A public company is a company that is listed on a stock exchange and shares can be bought by anyone –i.e. a member of the public.  In contrast, most other companies are privately owned)

If you work for a public company and are offered such a deal, you should take advantage of it as it’s essentially free money. However you should consider selling the shares as soon as you can –you already depend on the company for your job so relying on the health the company to grow your pennies may be like ‘putting all your eggs in one basket’.

2) Expensive investing

Investing in individual shares can be expensive if you are using a broker. The important thing to remember is that the more expensive it is for you to invest, the more your investment will have to perform to get the same return.

More specifically, most of us in our 20s and 30s don’t have a lot of money to invest and buying individual shares can be very expensive if you are only buying small amounts: some brokers charge per trade, regardless of whether you are investing £50 or £50,000!

Elizabeth Edwards founded a consumer venture capital firm that allows aspiring venture capitalists to get involved with a lower minimum investment. If you are a beginner, looking for opportunities such as this will make investing more affordable and attainable.

3) Too much fun!

Some people buy shares for the entertainment of watching the price go up so they can then brag to their friends about how much money they’re making.

Whilst it certainly is satisfying when an investment goes up in value, you should not be using your investments for fun.

Investing for fun brings emotions into the process, which can lead to poor choices and a rocky emotional well-being. Most notably emotions should stay out of the decision making process as it can lead to taking on excessive risk due to over-confidence in your own abilities.

When it comes to long-term investing, slow and steady wins the race. Find something else to give you your thrills.

4) More control isn’t always best

Another common reason why investing in single stocks is appealing is the sense of control it gives you. Whilst this can mean you know exactly what you are investing in, it can lead to lower returns because it’s almost impossible to keep up with the market – even the most talented money managers fail to beat the market averages consistently, year after year.

5) It’s very risky

The most compelling reason to stay away from individual stocks is that you’re unlikely to be sufficiently diversified –meaning having your money spread across different companies in case of disaster. Owning only a few different companies means if one company fails you stand lose a significant portion of your total investment. It comes down to your risk tolerance. Can you afford to lose the money you put into a single stock?

What’s the  solution?

There is another way to invest though: a cheaper, more diversified, and easier way that can still give you powerful returns to help grow your savings for the future.

In the UK we call them Unit Trusts (Mutual funds to US readers). If you have a pension at work it’s likely you’re already invested in them already. These investments hold a variety of stocks together, managed either by an investment professional or collated based on a list of companies in an index (like the FSTE 100 or similar).

As the investing returns are less volatile due to diversification of different company stocks , if you invest in unit trusts rather than individual stocks you won’t need to read the Financial Times every day. You can therefore enjoy the returns that investing can bring but still get on with living your life.

And when you hear bad news on the TV you can direct your thoughts and prayers to the people and wildlife affected rather than to the state of your portfolio.

 

For further reading on Unit Trusts click here.

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The Best Things in Life Aren’t Free

by Magical Penny on August 12, 2013

They say the best things in life are free, but there often are hidden and not-so-hidden costs.

I’ve certainly been learning this since having a girlfriend but it’s worth every magical penny! (Love you Katherine!)

What do you think?

Source: Luma.co.uk

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How to obtain a buy-to-let mortgage

by Magical Penny on July 8, 2013

Buy-to-let mortgages are usually a little more difficult to obtain than regular mortgages and they can also be more expensive. They are also not regulated by the Financial Conduct Authority.

However, getting your first buy-to-let mortgage means that you have made the first step to becoming a property investor. Once you are over this first hurdle, you will also find it easier to obtain a buy-to-let mortgage in the future.

So what steps should you take to get your buy-to-let mortgage?

Be prepared

You will find it difficult to obtain a buy-to-let mortgage if you don’t already own your own home. You will also find it more difficult to obtain this type of mortgage if you earn under £25,000 per year. In addition, you must be prepared to do your research before you even consider trying to get a mortgage. Lenders will want to see that you can cover the costs of your monthly mortgage payments as well as additional costs comfortably. This means you have to determine what your expected rent will be as lenders usually won’t consider buy-to-let mortgages unless you can cover the payments by at least 125%.

Landlord expenses

There are some considerations you need to take into account before applying for a buy-to-let mortgage. One of the main expenses is insurance. You can apply for building and contents insurance if the home is furnished. Mortgage lenders normally expect you to take out some kind of insurance cover and there are different levels depending on the type of property you own. Additionally, you must account for the possibility that your property will be empty at some point. Account for around 8% of the year to cover times of repair or when you are between tenancies. You should also account for refurbishment and maintenance costs.

Research the market

Look at what rent prices are in different areas to get an idea of what you could ask. Also look at what demand is like for property in different areas as you don’t want your house to stand empty for most of the year. A mortgage lender wants to know exactly how you will be paying the money back each month so if you are sure that you can easily rent out your property then this will give them more confidence when it comes to lending you a buy-to-let mortgage. Look into the services of a broker or a property buyer who will be able to give you an idea of what the market is like overall as mortgage lenders only give you information on their own products. A broker can also direct you to where the best buy-to-let mortgage rates can be found and who offers this kind of lending.

Should you want to let the property that you live in (for example, if going abroad for a spell) then be sure to inform your mortgage lender as this may break the terms of your mortgage agreement. You may need a higher deposit for a buy-to-let mortgage than a standard mortgage as there are many more risks associated with letting a property so bear this in mind before you start looking.

 

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