Slow and Steady

Posts Tagged ‘wealthy

It’s occurred to me I haven’t much blogging on the wealthy side of things. To be honest, there isn’t much to say!

I’ve pretty much accepted that my time with the company I work for will shortly be over, so I’m trying to save as much as I can at the moment. I have done some shopping recently, but it’s because I’ve put on so much weight, I needed clothes to work. I’m not happy with the pictures taken on my birthday at all. I’m so fat… There I go off topic again!

Then again, why can I not go off topic? It’s my thoughts after all! I’ve noticed recently that my stomach is looking really big. I couldn’t think of a reason for it because I didn’t think I was eating that much. I put it down to pmt, but that’s past now and it’s still bloated looking. This is a big trigger for me. You know everyone has that one thing that will make them change their behaviour sharpish? For me it’s a flat tummy. I’ve always had it, even as big as I am now, and the thought of not having it is enough to get me back on track food wise. So today I decided to do 2 things: 1) Only eat when I’m hungry and 2) keep a food diary.

Guess what? I wasn’t hungry for the whole day. I ate because I felt I had to. So something isn’t working right in my digestive system. When I did my set of colonic treatments recently, they sold me this powder thing to help my digestive system. Going to use it for a few days to see if there is any improvement. I will have my flat tummy back.

 

I think it’s been pretty good going, 2 years not working, and have managed to keep myself out of the red, but yesterday that all changed. I knew it would, which is why I took out the credit card that I keep hidden away.

My car was due for both a service and MOT. There were a few things wrong and the bill ended up being nearly £450. AND… The exhaust has a slight leak and the cost of that will be over a £1000 when it needs doing.

My friend has said I’ll be able to pick up a 2nd hand one somewhere, however I’m still waiting for a parcel shelf he said would be easy to pick up too. I’m slightly pissed off, but I knew it was coming. I just didn’t expect it to be that much.

What makes me smile is how much I’ve changed over the years, because the old me would have said ‘let me just go and stay in an hotel to get away, have a massage and get a pedi, or buy new shoes (especially now its the last week of the Harrod’s sale), as I’m in debt already’.

No, the current me will go on being frugal, and as money saving as possible. I refuse to use my swimming lesson money on this. I know how odd that sounds, but I need those, and it was a present. All the money I get from surveys, anything left from my weekly budget and anything I sell on ebay will go towards the paying off that card.

As a child, when I was bored, restless and therefore quite fidgety, my gran would always say to me, ‘you’re haunted’.

That is perfect description of how I’m feeling at the moment. I’m ready to get my teeth into something, but outside influences mean I cannot, so I’m mentally fidgety.

I can’t make any plans about my health until my MRI results come through.

I can’t sort out my car until I do a few more test drives to see which one is right for me, and find out how much my old car is worth. I couldn’t do any test drives or go to get any quotes this week because of my flare up.

I can’t move back into my home, or get a tenant in until I get a decision from the benefits agency on whether I am eligible to get my mortgage paid.

I just want to do something!

I’m trying to use the time as productively as I can and have thought and done a few things:

I’m going to downgrade my car.

I don’t have a particularly special car, but it is a sports version even though it’s only a 1.2. For the time being, motorway driving is not on the agenda, and I need to run a car as cheaply as possible. I was looking at 1.3+ automatics, but I’ve decided that I’m going to go down to a 1.0. Cheap to fill up, cheap insurance, and cheap road tax.

I’m hoping that I’ll have the car for a couple of years max, and when I’m back on my feet I’ll look into getting something lovely.

I’m trying to cut down on the initial layout costs of the car so I can cover my mortgage for a couple of months if I’m not eligible for help.

I also don’t want  to cut into the money I’ve got saved to try different alternative therapies if the scan shows there is no significant damage.

I have a Virgin Credit Card which I took out for the 0% balance transfer. That term has now ended, but they have now sent me a deal saying that if I spend on it by August. I’ll have 0% on the purchases until December.

My plan is to get my car on the credit card and pay the minimum amount so if worst case scenario comes, I’ll have that money in my account for emergencies. If not (I hope), I can then pay the balance off in November.

I’ve also finally got to talk to my benefits adviser.

We’ve been missing each other on the phone for weeks now. I’ve arranged an appointment with her so she can explain this ESA benefit in full detail.

I am waiting for the  council to get back to me. Now my flat is empty I’m supposed to pay council tax for it, but there are exemptions and I think that I’m eligible.

I’ve looked into PAYG phones

This month I’ve had to call a lot of 0870/0845 numbers, and I couldn’t find a local version on saynoto0870.com

My bill is horrendous. I have a phone that I’m going to get unlocked and it looks like I’ll be going with Asda as their call charges appear to be all 8p a minute. I’ve emailed them to double check that local numbers are part of the deal and am awaiting a response.

Volunteering

I have been thinking a lot about this, and am thinking either the radio station, or the CAB. The CAB one is looking good because it’s excellent to have on your CV and also I could learn a lot. It is also something I’m interested in.

Wealth Creation

One of the reasons I began this blog was to chart my journey into becoming financially fit, and it has fallen by the wayside because of my health. I sat down for the first time in a long time today, and read a chapter of a book I started many months ago, it got me thinking about my financial goals. I felt good as it felt productive. My pain is in my body, not my brain! Yes sometimes it feels like my brain is frazzled, but I can still think and plan. I’m going to commit to reading the books I have on becoming financially fit (I have 3 on constant renewal from the library) for half an hour a day.

Gosh writing all of that has made me realise I’ve done loads (well loads for me, I’m sure you are looking at this and laughing).

The blurb of the book promises that it is written in ‘clear accessible English’ and that it will explain the risk behind each type of investment.

The book is split into two parts, part one is called the know how and part two is called the tools.

The first part makes you take stock of what you have and what your future goals are. It explains the effects of inflation, what products are tax free and how to choose an independent Financial Adviser. There are comparison tables for different types of products, and a risk pyramid so you can see what investments are more volatile than others.

The second part lists all the different types of investments. For each type it lists the pros and cons, the type of tax you’ll have to pay, what the normal timescale of keeping the product is, how they work, what they cost, and alternative investments.

The jargon alerts that are littered through the book are very helpful as are the trade secrets.

I learnt about the effect of inflation to savings and also learnt about annuities and stakeholder pensions.

I now have a clear idea of where I want to put my savings first, and what will be the best way to save tax payments.

I also have a better idea of the type of pension schemes that are available and it seems less daunting now.

I don’t have any criticism of this book at all, it does everything it says it will. The language is very clear and straightforward. It can be dipped in and out of instead of being read from cover to cover.

Of course some of the information is outdated, but that is to be expected.

I saw this article in the week and wanted to share it.

This is the perfect example of why you need to; 1) Read the small print and 2) Understand what you are signing up to.

Link

Fifty-six pence – barely enough for a pot of yogurt or a packet of crisps. But that’s exactly how much Claire McDermott was told she would get after saving £25 a month over 10 years with Scottish Friendly. Her £3,000 investment was set to pay £3,000.56 – earning 5.6p for each year.

Her experience puts a huge question mark over the value of tax-free friendly society plans held by millions of lower- and middle-income savers in Britain.

McDermott, who lives in Surrey, bought a plan in 1999 after she saw a Scottish Friendly advert proclaiming that its “Scottish Bond” was the “ideal way to take advantage of your tax-free savings allowance”. Under legislation dating back three decades, friendly societies can take in up to £25 a month to invest in tax-free savings plans.

She received a keyring bottle opener – worth more than 56p – for responding to the mailing. McDermott, 29 at the time, signed up to start in March 1999. She was sent a £10 Marks & Spencer gift voucher.

The large print on the mailings promised “substantial tax-exempt saving” and “security plus growth potential”, adding, “as we don’t have shareholders, all the profits we make are paid out to our policyholders as bonuses”. There were unattributed ­testimonials telling how customers used plans to fund cruises, conservatories and weddings.

Finally, the clincher for McDermott: the big print showed anyone saving over the previous decade would have turned £25 a month into £5,203. But in the small print was a warning of high charges and big initial deductions, both now familiar to endowment victims.

The Glasgow-based organisation took the entire first year’s £300 payments – covering her keyring and M&S voucher more than 20 times over. So had she wanted to exit the fund after one year, she would have had nothing. There were other deductions as well.

The key-features document, home of the small print, showed that if the fund grew at 12% a year, policyholders would get £4,740. Achieving the £5,203 would have needed growth of around 15% each year – unlikely at any time, the more so when inflation and interest rates were falling.

The costs were also expressed in another way – reduction in yield. This shows the percentage an investment has to grow to pay the plan’s expenses before the policyholder starts to earn any money. In this case, the reduction was a massive 2.9%. But even that, as the small print shows, was not guaranteed. “Our deductions may turn out to be higher than anticipated,” it warned.

McDermott received optimistic bonus mailings in the early years. But by last year, the bonus notice had no heading at all – and only 0.75% added.

“To make matters worse,” she adds, “they offered me the option of a further year of paying £300 but all they would guarantee was an ­additional £225. They failed to answer requests for information over charges, how my money was invested, and what I would have earned without their fees.”

Scottish Friendly was more forthcoming when Guardian Money called. It said the costs incurred in providing the policy amounted to £867, including the £326 setup charge and the cost of “life insurance” – the value of the policy at the time of death. For a woman of her age, this would cost pennies.

It added that without “tax freedom” she would have received around £100 less from her savings. Friendly society tax-exempt savings plans (Tesps) are free from the “composite” tax rate levied on life companies. But as this contains an element for capital gains, which most investors do not pay, its value is limited.

Scottish Friendly says it amended her payout to £3,015.93. It concedes this is “not a massive difference” and says: “While we clearly understand her disappointment, in the context of returns achieved by competing products, we believe we have sheltered investors from the worst excesses of the market downturn as well as providing life cover.”

But if McDermott had put £25 a month into an Abbey regular saver plan, her £3,000 would have produced £3,841 before tax.

Some other friendly society plans have produced slightly less worrying returns. A similar policy at Liverpool Victoria’s LV= scheme would have come up with £3,509 and although Engage Mutual was unable to produce a figure, pleading “prior actuarial commitments”, a recent Money Management table points to around £3,600.

But the best result comes from the little-known Sheffield Mutual. It has only a handful of investors but would have turned the £3,000 into £6,356.

Fewer friendly societies now market tax-free plans than 10 years ago. Family Assurance only sells plans to existing customers, although Scottish Friendly is active in pushing the policies.

Many question the point of Tesps when tax-free Isas will be able to take in £850 a month after limits were raised in last month’s budget.

“The charges are high, the product is inflexible, the funds are unexciting and the tax savings are negligible for most,” says investment specialist Mark Dampier at Hargreaves Lansdown. “Over 10 years, an Isa is a better bet.”

Martin Shaw of the Association of Friendly Societies is, unsurprisingly, an advocate. He says: “Societies have worked hard to ensure charges on more traditional products are competitive. Over the past 25 years, friendly society with-profits funds have outperformed non-friendly society funds, But we are about more than investment. Friendly societies are vibrant and vital, and should be an important part of plans for a more secure financial future.”

I would be furious if this happened to me, however, I would hold myself somewhat accountable.

I think the lady in question should have made sure she understood what costs are involved, £867 in just sounds ridiculous.

I really hope that the lady in  question learns from this and puts her money in a better home, although to be honest most saving accounts are paying virtually no interest now.

Someone posted this on a forum I frequent, and I thought it was very interesting. I thought about each point in turn, and have written my thoughts on each.

Original article

The reason why you aren’t a millionaire (or on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money, but the truth is that for most people, whether or not you become a millionaire has very little to do with the amount of money you make. It’s the way that you treat money in your daily life.

Here are 10 possible reasons you aren’t a millionaire:

1. You Care What Your Neighbors Think: If you’re competing against them and their material possessions, you’re wasting your hard-earned money on toys to impress them instead of building your wealth.

Oh trust me, the older I get the less I care what people think. I’m forever being told I should have a new car, or should have a 2 bedroom flat. My reply is usually asking them if they’ll pay for it. That shuts them up!

2. You Aren’t Patient: Until the era of credit cards, it was difficult to spend more than you had. That is not the case today. If you have credit card debt because you couldn’t wait until you had enough money to purchase something in cash, you are making others wealthy while keeping yourself in debt.

We are definitely a ‘have it now’ society. When I was in debt, I didn’t have the facility to get what I wanted straight away, and now I’m debt free, I doubt that is going to change.

Having chronic pain also makes you patient. There are days you cannot move, and you can’t fight it. You just have to wait until your body is ready to move again.

3. You Have Bad Habits: Whether it’s smoking, drinking, gambling or some other bad habit, the habit is using up a lot of money that could go toward building wealth. Most people don’t realize that the cost of their bad habits extends far beyond the immediate cost. Take smoking, for example: It costs a lot more than the pack of cigarettes purchased. It also negatively affects your wealth in the form of higher insurance rates and decreased value of your home.

I agree to a degree. I honestly don’t think a bottle of wine every so often is bad.

4. You Have No Goals: It’s difficult to build wealth if you haven’t taken the time to know what you want. If you haven’t set wealth goals, you aren’t likely to attain them. You need to do more than state, “I want to be a millionaire.” You need to take the time to set saving and investing goals on a yearly basis and come up with a plan for how to achieve those goals.

I’ve realised the importance of goal setting last year. When you write down why you want to achieve your goals and how, it seems to work better.

5. You Haven’t Prepared: Bad things happen to the best of people from time to time, and if you haven’t prepared for such a thing to happen to you through insurance, any wealth that you might have built can be gone in an instant.

Yes this is what happened to me last year. It’s now too late to get health insurance as I have too many pre existing conditions, so I’m going to build up an emergency fund of a year rather than the suggested 3-6 months.

6. You Try to Make a Quick Buck: For the vast majority of us, wealth doesn’t come instantly. You may believe that people winning the lottery are a dime a dozen, but the truth is you’re far more likely to get struck by lightning than win the lottery. This desire to get rich quickly likely extends into the way you invest, with similar results.

Nope, I’m very sceptical of these schemes.

7. You Rely on Others to Take Care of Your Money: You believe that others have more knowledge about money matters, and you rely exclusively on their judgment when deciding where you should invest your money. Unfortunately, most people want to make money themselves, and this is their primary objective when they tell you how to invest your money. Listen to other people’s advice to get new ideas, but in the end you should know enough to make your own investing decisions.

I am in total agreement of this, and this is why I’m reading up on savings and investments so I can make informed decisions.

8. You Invest in Things You Don’t Understand: Your hear that Bob has made a lot of money doing it, and you want to get in on the gravy train. If Bob really did make money, he did so because he understood how the investment worked. Throwing in your money because someone else has made money without fully understanding how the investment works will keep you from being wealthy.

See the above point.

9. You’re Financially Afraid: You are so scared of risk that you keep all your money in a savings account that is actually losing money when inflation is put into the equation, yet you refuse to move it to a place where higher rates of return are possible because you’re afraid that you will lose money.

I will bear this in mind once I’m in a position to invest. I can see how this can happen, especially if you’ve build up a lot of money for the first time.

10. You Ignore Your Finances: You take the attitude that if you make enough, the finances will take care of themselves. If you currently have debt, it will somehow resolve itself in the future. Unfortunately, it takes planning to become wealthy. It doesn’t magically happen to the vast majority of people.

This is not me at all. Like a garden, I believe finances need pruning and a bit of care. I currently set aside a day a month to have a quick run through.

In reality, it is probably not just one of the above bad habits that has kept you from becoming a millionaire, but a combination of a few of them. Take a hard look at the list, and do some reflecting. If you want to be a millionaire, it’s well within your power, but you’ll have to face the issues that are currently keeping you from creating that wealth before you will have a chance to call yourself one.

Many people assume they aren’t rich because they don’t earn enough money. If I only earned a little more, I could save and invest better, they say.

The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it’s how you treat money in your daily life.

The list of reasons you may not be rich doesn’t end at 10. (Caring what your neighbors think, not being patient, having bad habits, not having goals, not being prepared, trying to make a quick buck, relying on others to handle your money, investing in things you don’t understand, being financially afraid and ignoring your finances.)

Here are 10 more possible reasons you aren’t rich:

You care what your car looks like: A car is a means of transportation to get from one place to another, but many people don’t view it that way. Instead, they consider it a reflection of themselves and spend money every two years or so to impress others instead of driving the car for its entire useful life and investing the money saved.


I’ve had my car from new, and it’s nearly 10 years old. I am unfortunately going to have to get rid of it soon as it’s a manual and I can’t drive it for long periods without being in pain. I’ll be looking for an auto, and if I don’t use the motability scheme then it will be from a quality 2nd hand dealer.

You feel entitlement: If you believe you deserve to live a certain lifestyle, have certain things and spend a certain amount before you have earned to live that way, you will have to borrow money. That large chunk of debt will keep you from building wealth.

I feel this point can work for or against you. You can look at it the way the author has, or look at it my way. I feel entitled to my standard of living, and know the only way I’ll be able to keep it is by looking after my money well.

You lack diversification: There is a reason one of the oldest pieces of financial advice is to not keep all your eggs in a single basket. Having a diversified investment portfolio makes it much less likely that wealth will suddenly disappear.

I’m currently reading different saving and investments books. Before I start diversifying, I want to know how different investments work and what the risks are.

You started too late: The magic of compound interest works best over long periods of time. If you find you’re always saying there will be time to save and invest in a couple more years, you’ll wake up one day to find retirement is just around the corner and there is still nothing in your retirement account.

I’m 30 this year, and have had to use my ‘rainy day’ savings as I’ve had a few rainy days! So I’m starting again, but am sure it’s not too late to have compound interest work in my favour.

You don’t do what you enjoy: While your job doesn’t necessarily need to be your dream job, you need to enjoy it. If you choose a job you don’t like just for the money, you’ll likely spend all that extra cash trying to relieve the stress of doing work you hate.

I’m not sure about this one. If you don’t 100% enjoy your job, doesn’t it even out if you can pay your bills? My personal opinion is that people take work a bit too seriously. We work to live, not the other way round. If my job gives me enough to live and save, does it really matter if I find it boring?

You don’t like to learn: You may have assumed that once you graduated from college, there was no need to study or learn. That attitude might be enough to get you your first job or keep you employed, but it will never make you rich. A willingness to learn to improve your career and finances are essential if you want to eventually become wealthy.

I love learning. I’ve started buying the weekend edition of the Financial Times, and have a book that’s almost like a dictionary to help me with investments and terminology I don’t understand.

You buy things you don’t use: Take a look around your house, in the closets, basement, attic and garage and see if there are a lot of things you haven’t used in the past year. If there are, chances are that all those things you purchased were wasted money that could have been used to increase your net worth.

I used to be like this, but have cut it out now. I realised that ‘things’ don’t make me happy.

You don’t understand value: You buy things for any number of reasons besides the value that the purchase brings to you. This is not limited to those who feel the need to buy the most expensive items, but can also apply to those who always purchase the cheapest goods. Rarely are either the best value, and it’s only when you learn to purchase good value that you have money left over to invest for your future.

This is something I’m learning slowly. I do this for my flat already, it’s just too small to have lots of things in it. I need extend that into my clothes.

Your house is too big: When you buy a house that is bigger than you can afford or need, you end up spending extra money on longer debt payments, increased taxes, higher upkeep and more things to fill it. Some people will try to argue that the increased value of the house makes it a good investment, but the truth is that unless you are willing to downgrade your living standards, which most people are not, it will never be a liquid asset or money that you can ever use and enjoy.

Good point.

You fail to take advantage of opportunities: There has probably been more than one occasion where you heard about someone who has made it big and thought to yourself, “I could have thought of that.” There are plenty of opportunities if you have the will and determination to keep your eyes open.


I think knowing yourself is key. I’m not really a creative person, so for me I feel my time would be best spend learning about the stock market and different types of bonds.

I think creating wealth is a bit like dieting. Everyone knows how it can be done, but prefer to find a quick fix than put the effort in. The rule I see on every personal finance blog, every personal finance book is spend less than you earn, but people don’t want to believe it’s so easy.

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I’ve been trying to take it easy this weekend, and haven’t been out so no FT weekend.

I tried to go on their website, but to be honest, I much prefer to read the paper.

I am thinking of subscribing to the weekend edition, it would work out to £2 an issue instead of £2.50.

I looked about online to see if there was any sites about investment and found incademy.

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