ATTACK ON THE NAIL-VARNISH MOUNTAIN: CONFESSIONS OF AN IMPULSE BUYER

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(Another guest post from Ms Silver Screen Suppers*)

I am not a very well groomed woman.  I rarely paint my nails for example but somehow or another I seem to have accumulated over 40 bottles of nail varnish.  This is a tangible example of the fact that I am a total impulse-buy junkie.  I must stop being such a spendthrift.

This month has been all about fact finding and I have given myself quite a scare over the state of my finances. Michael’s book arrived in the nick of time and it has given me faith that I can tackle things head on rather than continuing to live beyond my means and get deeper and deeper in debt.  I am ON IT.

As Michael suggests in his book I sat myself down and worked out the extent of what I owe and decided on my goal.  I am going to try and reduce my debt by 50% by the end of 2013.  This will involve me doing two main things:

1 – Living within my means – using my salary to cover my living expenses and not overspending.

2 – Bringing in some extra money to pay down the credit card and overdraft debt.

I made myself a little spreadsheet showing everything I spend monthly on rent / bills / travel and things that are “must do” items.  When I subtract these from my salary I am left with £550.  So weekly that’s only £126.  Gadzooks – this isn’t much for a clothes-horse like myself who likes pretty things to wear and nice food and drink…

It has shown me that there is no way I can put my head in the sand over my impending rent rise of £87.  If I just carry on regardless, spending willy nilly and having a fine old time that would leave me with £39 a week to live on.  Impossible.

My debt is going to grow and grow unless I take massive action right now.  I need to bring some money in, fast.  I also need to cut back on my spending somewhere.  As I seem to be spending over £100 a week on groceries this is the place I am targeting first.  There are about 1500 pasta shells in my food cupboard so I am going to use up the cheap staples that are stockpiled – pasta, rice, bulgar wheat and some strange green stuff called freekeh.  I’m going to get organised about taking lunch to work so I’m not spending a fiver on something that would cost me a pound to make myself.  I’m going to stop buying so much booze, and I decided last month not to drink at home on my own. (see note ** below)

I will need to bring in at least £87 a month to even maintain the status quo once the rent goes up in May.  Ebay here I come – I am planning a blitz.

Luckily this month has been a bountiful month.  My figures will be skewed as I got a a bonus from work and some money for DJing but I’m pleased to see that my overdraft and credit card debt has gone down by £1,398 to £5,107.  Not really of my doing, but the next month is the NEW FRUGALITY!

Aims for next month are:

1 – Start ebaying with a view to making at least £100 a month.

2 – Reduce groceries bill.

3 – Work through all the fact finding and goal setting steps in Back to The Black chapters 1-4.

4 – Paint my nails once a week to whittle down the nail varnish mountain.

Signing off now!

Ms Silver Screen Suppers

 

Editor’s notes:

* Many thanks to Ms Silver Screen Suppers for being so open in her posts. We’re very grateful for this.

** Our guest blogger’s resolution to avoid drinking at home – see last month’s guest post – reminds me of the old joke. “My doctor has told me to stop having intimate dinners for four, unless there are three other people present.”)

WANT TO KNOW MORE?

For Ms Silver Screen Suppers’ last post on this site, click HERE.

For a link to her own wonderful website and blog, about the favourite recipes of the movie stars of yesteryear, click HERE.

For info about my book “Back to the Black: how to become debt-free and stay that way”, click HERE.

INVESTMENT FEES CONFUSING – EVEN IF YOU’RE IN THE BUSINESS

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More on that Sunday Times Money story, urging the new regulator to simplify investment fees. Further to my recent post about confusing investment fees, here’s an insider view.

David Rogerson, from Glasgow, is an equity trader of several years’ standing. He runs investor training courses. You’d think he finds this stuff easy. But no, even he says that investment fee structures are complex.

He says: “It’s not easy to navigate through the various charges. Even for someone like me who works in the business, it can be unclear how much you’re paying. (And to whom)”

If that’s what an industry insider says, we rest our case. The people at Sunday Times Money appear to have a good case in urging the recently-launched regulator (the FCA) to look into this.

WANT TO KNOW MORE?

For the full Sunday Times Money “demands for the new watchdog” feature click HERE. 

 

 

 

NEW WATCHDOG URGED TO REVIEW INVESTMENT FEES

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Here I go again, commenting on that feature in last weekend’s “Sunday Times Money.”

The new financial regulator, or watchdog as we have to call them nowadays (just as Train Manager is “Newspeak” for Ticket Inspector), is the FCA. It replaces the mostly-unlamented FSA. When I told a friend about that, he said, very logically, “Why did they have to set up a new body? Why couldn’t they fix what was wrong with the FSA?”

One of the things the newspaper urges for attention is that of “complex” and “harmful” fund charges. It slammed asset managers for making their fee structures unnecessarily complicated in such a way that price comparisons were difficult.

Do they do that? I am reminded of the time-honoured line from British actor Ian Richardson’s most famous character: “You might very well think that. I couldn’t possibly comment.”

Utility companies tarred with same brush

Just yesterday (03.04.13) I was listening to a news item on BBC Radio 4, about the fact that a major gas and electricity provider had been fined for devious practices, one of which was similar to what we’re discussing here; creating confusing numbers of tariffs that made sensible decision-making by consumers difficult. So the financial services industry is not alone; and to the list that includes asset managers and utility providers, we could add mobile phone companies.

The FCA’s first business plan (which must have been written before they opened for business, which is impressive in itself) also slammed asset managers for “downplaying the long-term impact of apparently small increases in annual charges.”

Here’s the strange thing. The rules have changed so that commission for financial advisers is now banned. I thought that would make the market more transparent but, according to the feature, this has made the situation worse. In some cases investors could be paying different charges for the same fund.

What can you do?

The feature says you can save thousands in charges by investing online. Well, yes, provided you get impartial information to guide your investment decisions. The term “caveat emptor” has long-term implications when you have to decide which funds to invest in. It will not surprise you to hear that the intermediaries who manage your funds will sometimes promote those investment products that suit them, not you. The Sunday Times recommended candidmoney.com and that site seems to be full of comprehensive and, presumably, impartial advice.

WANT TO KNOW MORE?

For the Sunday Times Money feature “Our demands for the new consumer watchdog”, click HERE. 

For the investment section of the candidmoney site, click HERE.

NEW WATCHDOG URGED TO CHALLENGE UNFAIR MORTGAGE TERMS

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Yesterday (01.04.13) saw the official launch of the new Financial Conduct Authority (FCA). Many people in the UK media have expressed the hope that it’ll be more effective than the FSA that it replaces.

It was unfortunate that the chosen launch date was (a) April Fool’s Day and (b) a Bank Holiday, when it was a good bet that nobody would be at work; neither in the new authority nor in most of the organisations over which it was supposed to be watchdogging.

As I flagged up recently, Sunday Times Money (31.03.13) published a list of ten demands for the new watchdog. I am featuring three of them on this blog.

Unfair mortgage terms

According to Holly Thomas, who wrote the Sunday Times Money feature, the small print in bank and building society contracts is a source of problems.

[It was ever thus! Which of us reads the small print? I know I don’t. Maybe that’s one of the reasons I got into my own financial troubles]

Questionable tactics

Thomas writes that in 2010 a well-known building society (I’m not going to name them, for fear of legal action; my legal budget is not as large as that of the Sunday Times) scrapped the ceiling on its SVR (standard variable rate). By doing that it reneged on its promise that customers would never pay more than 3% over Bank base rate.

And a bank sparked outrage (I’m not surprised) when it announced rate rises for some so-called “lifetime tracker” mortgages … although the aforementioned base rate had stayed unchanged at 0.5%. In some cases rates would double, adding thousands a year!

Happy ending … for some?

There might be a happy ending for the tracker mortgage story; at least for some customers. The impressive Andrew Tyrie, chairman of the Commons Treasury subcommittee, raised concerns with Martin Wheatley, head of the new FCA. As a result, the FCA says that “the bank … volunteered that they would exclude customers from the change where there is evidence … that the customer could have been led to believe that the differential was for the ‘life’ or ‘lifetime’ of the product.”

Back to the ‘small print’ issue. That bank claims that all the affected customers were issued with contracts “clearly stating that it could change the margin.” However, they have declined to show examples of the terms and conditions to the newspaper. I wonder why.

I don’t know as much of this case as I’d like but, if half of this story is true, I’m tempted to ask the bank a variant of the time-honoured question. For example: “Which part of the phrase ‘lifetime tracker’ did we misunderstand?”

What does this mean in practical terms? For example some customers will see their rate jump from base rate plus 1.75 points to base plus 2.49 in May and it will jump again to base plus 3.99 points in October. If that’s true then only one word fits: outrageous.

Finally?

Of course commercial organisations can charge what they like  … provided they didn’t promise something totally different; and that seems to be what happened here. A class action against the above bank is being pursued by Justin Selig, of law firm The Law Department. So far 170 complainants are being joined to the action.

All of them thought they were on a lifetime tracker and the lawyer says he’s “seen nothing to indicate otherwise.” Enough said.

 

WANT TO KNOW MORE?

For the Sunday Times Money article by Holly Thomas, “10 priorities for the new consumer watchdog”:

http://www.thesundaytimes.co.uk/sto/business/money/Consumer/article1237772.ece?CMP=OTH-gnws-standard-2013_03_30

“PENSION LIBERATION PLANS”: FACING A BAN?

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Last month I wrote about so-called “pension liberation plans”, which are a very tempting way to release funds below the age of 55 but in many cases turn out unwise. Today’s “Sunday Times” urges that they should be banned by a new financial watchdog that will launch tomorrow.

According to the paper, the new Financial Conduct Authority (FCA) replaces the much-criticised Financial Services Authority (FSA), “which failed to prevent scandals involving payment protection insurance (PPI), endowment policies and split-capital* investment trusts.” The new body promises to act fast and ban poor products overnight, which is to be applauded.

As for these pension liberation plans, which have grown rapidly; they promise to release funds from your pension before the age of 55, when it’s normally available, by transferring the funds into another scheme, often offshore. However the fees can be eye-watering and they can attract extra tax penalties of up to 70%.

[* I admit that when I read the article I was worried about the mention of split-cap investment trusts. Over the past year I have become a fan of investment trusts or “ITs”; I hadn’t heard of this particular scandal and I wondered if I had invested unwisely. Turns out I needn’t have worried; the scandal appears to have been unveiled, and cleared up, nearly ten years ago; and it concerned a specific type of fixed-term investment trust.]

 

 

 

 

 

“IS THE BUSINESS FUNDED BY THE BOSS’S CREDIT CARD?”

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A wake-up call went out yesterday (27 Mar) for undercapitalised small businesses. It came in an almost-throwaway remark by the eminent economist Frances Cairncross, on BBC Radio 4’s Today programme. (see below for link)

Bank reserves to be increased: how will it affect lending?

The programme asked if the new requirement for banks to increase their reserves will cause a reduction in bank lending to businesses. Cairncross thinks they will have less to lend, and so do many other experts, including the Brookings Institution in the US; also that this could lead to more expensive borrowing.

Businesses “living on the edge”

She went on: “There are a lot of companies, so-called zombie companies, which are clearly living on the edge, and for whom a rise in the cost of borrowing might be the last straw. There are some, I am told, which are living off the boss’s credit card. Those are probably companies that in the long run don’t have much of a future.”

[Well, dear reader, that group included yours truly in the mid-90s, until I bit the bullet. The zombie epithet isn’t flattering but it was a pretty good description of me at the time. “In denial”, another term in current usage, might well have fitted me too.]

The discussion continued and BBC presenter Sarah Montague asked:  “So it might be a good idea to clear them (those companies) out?”

Cairncross: “No, not necessarily a good thing. That would mean a loss of jobs. Keeping them on life support might be no bad thing.”

Three cheers for Frances Cairncross: an economist who thinks about people, not just numbers. That makes her an exception to the usual saying: “an economist knows the cost of everything and the value of nothing.”

Does the cap fit?

Is your business running on your personal credit card(s)? Mine was at one time; it kept me going for a while but eventually I had to bite the bullet, as those high borrowing costs pushed me ever-further into debt.

(As you probably know, the interest rate you’d be paying on a credit card is always massively above the historically-low and much-publicised Bank of England base rate.)

WANT TO KNOW MORE?

  • Frances Cairncross interview, Radio 4 “Today”, 27 March 2013. LINK HERE  (scroll to 2hrs 46min 30secs). NB Only available for six days.
  • Hopefully you’re not running a so-called zombie business. But if you are, or you think you might be, then you’re in exactly the same situation as I was. Read my book! LINK HERE

AFFORDABLE RENTS IN LONDON?

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Housing associations join private market … “to fund affordable rents”

We know that house prices in London are astronomical; and rents are similarly sky-high. But a new development might bring some relief to hard-pressed renters.

The top fifteen housing associations in London plan to join the private property market in order to help ‘generation rent’ – the people unable to buy or to afford those high rental costs.

They will build 13,000 new affordable homes; but will also let and sell properties at market rates to fund those affordable-home projects.

These housing associations say they want to extend their social housing mission to help the growing number of people who cannot afford to buy in the capital and are “vulnerable to exploitation from unscrupulous landlords.”

13,000 new affordable homes

This so-called G15 group, which houses one in 10 London residents, will build 13,000 affordable homes by 2015 – and will also provide an additional 4,000 properties for rent at market prices and at least 1,100 homes for sale at regular London prices. They will use the profits of the latter to fund the former.

Housing associations have traditionally focused solely on affordable housing for low earners and for key workers. The new strategy is a widening of their scope.

Secure tenancies

They also promise to grant more secure tenancies than those available on the private market; and intend to allow tenants to settle down for longer with a plan to “kitemark” label better-quality homes for those who rent.

According to a report by the Guardian, “the average home in London costs more than £400,000. That’s 15 times the median income for Londoners – the highest ratio in Britain. Wages are higher in London of course but not nearly high enough to allow most people to meet their own housing needs … younger people are increasingly priced out of home ownership and find renting takes a growing portion of their salaries. Those without access to capital may become lifetime renters.”

Housing associations insist moving into the private market to capitalise on the increasing rental and sale prices in London will not undermine the social purpose of its members – to provide affordable housing for those who can not meet their own housing needs.

Tenant views on the plan

The move is being welcomed by some tenants and staff working to tackle rogue landlords in the capital. Ben Reeve-Lewis, a tenant liaison officer in south London who also rents privately, said he’d be interested in one of the properties himself. “Housing associations don’t have a great record for speed of repairs, but that pales in comparison against the security they provide. In private rent you never know if you’re going to get home and find a note on the doorstep because the landlord is likely to sell.”

Vincenzo Rampulla, who rents in west London, said the exorbitant cost of market rent was (partly) tied up in letting and management agency fees which could be cut out by social landlords. “A lot of the skills that they have developed in managing housing association stock are really needed in the private rented sector,” he said.

 

WANT TO KNOW MORE?

For more details of the G15 plan, click HERE.

For advice on how to deal with rent arrears, consult Citizens Advice or get my book: click HERE.

SHOULD PAYDAY LOAN FIRMS “FACE INSTANT CLOSURE”? YES AND NO.

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Payday loans are in the news again. In just the last week I’ve seen headlines like these in the press and the BBC:

“Payday lenders face accusations of illegal activity”

“Payday loan firms face threat of instant closure.”

http://www.news-panel.com/news/bbcbreaking-uk-payday-loan-companies-given-12-weeks-to-stop-irresponsible-lending-or-risk-losing-their-licences-httptcopjnkfnegje

These firms get bad press and in many cases that’s deserved. When the loans “roll over”, the companies make obscene amounts of money, with massive interest rates; and their customers end up in a vicious circle of ever-increasing debt.

After much criticism for inaction, the OFT (Office of Fair Trading) here in the UK has taken 12 months doing a study and has given the firms 12 weeks to clean up their act. Those that don’t could be “shut down immediately”, we read.

Two questions:

  • If it took the OFT 12 months simply to find out what was happening (most personal finance commentators knew already), how realistic is it to expect all these companies to change their practices (and to prove they’ve done so) within 12 weeks?
  • If firms are closed down, what happens to borrowers who rely on them and can’t get loans from anywhere else? Even viable businesses have a hard time getting funding from banks; what chance have individuals with poor credit history?

According to the companies, 80% of the loans are in fact repaid by the following payday. If that’s true, then for those borrowers it was an affordable solution, maybe their only solution.

So I still say “yes and no” on the fast shutdown plan.

Or, as today is Red Nose Day here in the UK, I should quote Vicky Pollard: “yeah but no but yeah but  …”

 

COMMENT IS FREE!!

Have you used a payday loan company? How did it work out for you?

GUEST BLOG: “PAYDAY ARRIVED!”

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This is our first guest blog. It’s from Miss Silver Screen Suppers, who lives in London  (details below) and it’s wonderful!

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Payday arrived.  I was getting a big fat bonus and had promised myself that I’d give myself a treat – the new Ottolenghi cookbook.  I checked my statement after my salary including bonus had cleared.  I was £27 in credit, the cookbook from Waterstones was £27.  Magic.  My current account started the financial month at ground zero.

 A few days later I got a letter to say that my rent was going up by £87 a month.  Holy Hannah.  Every month I get deeper and deeper in debt so how on earth am I going to find £87 a month more?  I guess there are two ways:

 1 – try to bring in some extra dough.

2 – try to economise.

I have ordered a copy of Michael’s book from Amazon and I hereby pledge to follow EVERY piece of his advice and report how I am doing once a month.  I have been living beyond my means for many, many years.  Time to wise up.

So here is where I am at on the beginning of this journey.

My debts total £6505.99 (my credit card bill plus the amount I was overdrawn when my salary went in) and I am aiming to reduce this debt slowly but surely every month.

My aims for March.

1 – stop drinking alone – this is going to save me a fortune!

2 – start listing things on ebay – I am going to try and make £100 this month.

3 – try and cancel my 12 month eharmony membership – all the men I am being matched with are BONKERS and this is costing me £40 a month.

Will report back!

Miss Silver Screen Suppers – http://silverscreensuppers.com

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Many thanks to our guest blogger for her honesty. This post is written with the humour that’s so characteristic of her “Silver Screen Suppers” blog.

Watch this space for monthly updates!

 

WANT TO KNOW MORE?

About my book: http://getbacktotheblack.com/books/

About Silver Screen Suppers (“Eating and Drinking Like the Stars of Yesteryear”):  http://silverscreensuppers.com

 

CITIZENS ADVICE – AN OVERSTRETCHED BUT REMARKABLE RESOURCE

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BBC2’s Newsnight ran an informative and inspiring piece this week, highlighting the wide range of support provided by the Citizens Advice organisation. Demand for their services is increasing – nationally it’s quadrupled since the start of the recession – while funding has been cut.

Volunteers: the backbone of the CAB service

We saw the workings of the Coventry CAB (that’s what the individual bureaux are called here in the UK), staffed mostly by volunteers including Brian Adams, a 75-year-old former miner who has been a volunteer there for almost ten years. He says he finds it “fulfilling to help people” and the feeling is shared by three generations of his family. His daughter began volunteering at the bureau and then made the switch to paid work as the receptionist; and his 16-year-old grandson, who is still at school, volunteers too.

School outreach: a win/win collaboration

Talking of schools, we saw a most innovative collaboration with local schools, through whose involvement confidential referrals can be made. And while the school is acting as a kind of outreach branch of the local CAB, we heard from a head teacher who reported a fantastic impact on the pupils: measures of academic achievement had doubled and absenteeism had halved.

Personally, I cannot speak highly enough of the benefits that Citizens Advice brings to communities in so many ways. Watch the film, I urge you!

Debt advice

This blog is about debt. When I had my own problems in the 90s, the local CAB were a fantastic help to me, as they have been to countless others. You can book a face-to-face meeting – though you might have to wait a little because, as I said, they are overstretched – or use their excellent online help service.

WANT TO KNOW MORE?

For the Citizens Advice online help service.

For details of your nearest CAB (UK only: sorry, folks, if you don’t live here), there’s a search box on their home page.

For the full Newsnight TV piece (only 12 minutes).