End of Year Summary

'Positive results from a Negative Economy' is the way I am going to sum up the year for me financially. Although the Western economies are in a steep decline this does not mean that individuals cannot create a positive financial environment. I am pleased to be able to report that my goal of paying off credit card debt is now within reach (and don't forget I have paid NO interest on this debt for two years)The green graph above was my debt progress about ten months go. The latest version (pinky-blue below..) shows how I have been able to continue to shrink this debt down to a manageable size.
Some major factors in this have been a small bonus from work which I have used to clear debts, the massive drop in mortgage interest which has freed up more disposable income, and some online earnings which although not used directly for debt, enable me to spend some money without touching my 'off-line' income.
The whole picture is a demonstration of how, even when things are tight, we can still make a positive impact on our finances. The major reason I have been able to achieve this is through sensible budgeting and self-denial with the ultimate aim of having sufficient disposable income in the long-run to be able to save significant amounts of money. In order to do this I had to learn that a 'treat' now could have an unwanted impact (a lot like dieting...) in the long term. I also had to learn that having money in the bank AND interest-accruing debt, was a nonsense - paying off debt is a better investment than saving. However I also learned that getting 0% financing through a credit card helps enormously, but ONLY if you NEVER use the credit card to buy more 'stuff'. In essence I had to reach the point where getting out of debt was more attractive than all the things I could have by increasing my debt (along with the inevitable consequences).
I really hope my story help others, and rest assured when the debt is finally paid off, I will be posting about it at least one more time...watch this space

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Credit crisis

In these tough financial times there are many resources we can use locally, nationally and on the internet. There are services for debt consolidation, financial advice and Debt Counseling, and we can have little excuse for being uninformed about our options.
If your debt has reached a level which is difficult to manage, then there is a possibility that you may need some good advice. Resources giving advice like 'The Credit Cruncher' can be useful up to a point, but beyond manageable debt levels more professional advice may be required.
There are a number of options that people consider, firstly you might consider a loan to cover your debts or a consolidation loan bringing all your debts together - but unless you can get a very good rate, this may not be helpful. For more manageable amounts, a 0% for transfers credit card deal can be very useful for clearing credit card debt. When things get a little more serious, bankruptcy or an IVA might be advisable, but these options require detailed expert advice.
Many, many people have debt at some level, and different advice is available for each individual situation. Our advice is to trawl the internet for advice appropriate to your situation, but take on board opinion from a couple of different sources. Before taking any steps, it would make sense to find out what free advice is available locally as many places provide free advice on debt.

Less than ideal financing...

The latest offering from dNeero surveys is all about 'Payday loans', personally I was glad to have the chance to express some of my doubt about the effectiveness of this type of debt. My philosophy of budgeting and only spending the cash you have is severely challenged by schemes of this type.
To take part in the survey, click on the widget below and make your opinion heard too:




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Credit Card Sins

We all surely know that credit card debt is usually a very expensive form of debt, but are we fully aware of some of the tricks that the banks employ to maximise the revenue on their cards?

• First off, there's the way that they allocate your monthly payments. Let's say you have a 0% transfer deal which leaves you with $1000 at 0% on your card. You spend $200, and pay $200 back at the end of the month - you imagine that the $200 will be taken from your spending, but think again...the cheapest interest items will often get paid off first leaving the 'expensive' debt generating more income for the bank. Read the small print - many, many cards operate this way - use my philosophy: Get a 0% card for transfers for all your debt and NEVER use this card for purchases EVER....
• Cash withdrawal on a credit card will often attract far higher interest than the normal rate for purchases, add to this the cash withdrawal fee that you will be charged and Bingo, the most expensive way to borrow money ever! Charges will accrue immediately on withdrawal, leaving no breathing space, no interest free period. We have often seen interest charges in excess of 30% for cash withdrawals, and the best trick of all is that despite plummeting base rates, credit card interest rates are going up! (gotta get the money in from somewhere...).
• Beware of the current trend for offering lower minimum payments - if you're serious about paying off your debt, then having a low minimum payment is NOT an advantage. Low minimums are designed to keep you paying off your debt for decades... don't look at this as being a benefit! Also note that if you meant to clear your balance and accidentally underpay by just $1, you could be charged interest on the entire balance.

The banks will be using credit card debt earnings to shore up their cash flow after foolishly buying all those worthless sub-prime debts. Don't be the one to pay the price, shop around and pay attention to the APR, and read all the small print about how payments will be allocated. My stance remains that the best way to deal with credit cards is NOT to use them. If you must, use the 0% for transfers to pay off your debt (but don't spend on the same card). If you have a card that you spend on, pay off the balance immediately otherwise you are walking into a potential trap. The credit card is NOT your friend!

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Billions set aside for car industry

The Whitehouse has announced that $11.7bn is to be loaned to car manufacturers that can prove that they are viable. The loans are for a three-year term and will be provided within weeks of the announcement. Like the conditions attached to bank bailouts, executive perks are strictly banned - (I wonder how much could be raised by clawing back the executive payouts over the last five years??)
The money has been ear-marked from the £469 billion Troubled Asset Relief Programme so we can at least be assured that this will not add to the already soaring national debt.
This comes at the same time that the UK government is considering bailing out domestic carmaker Jaguar-Land Rover which is not even currently owned by a UK company. Business Secretary Lord Mandelson (sorry still can't get use to 'Mandy' being a Lord...) has said that a bailout, rumoured to be in the region of £1bn is a possibility. I am sure the Indian owners (Tata) are delighted to find that a foreign government are willing to hand them a cool billion...
In even more bizarre news, NASA are flogging off space shuttles and for $42m you can have one delivered - if you can pick it up yourself, the price tag drops to $36m - one careful owner, full service history apparently, but I'm not sure what insurance group..??

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Why interest rates can't go negative

As the US federal discards convention and sets a 'range' for base rates instead of a specific target, one is left asking 'how low can it go?'. The range set is an astonishing 0-0.25%, enabling borrowing at an unprecedented zero percent.
On idea behind dropping interest rates to near-zero levels is to persuade people to spend. The thinking is that if people do not earn anything from their savings, then they will be less likely to save. However, this ignores the fact that when people have no confidence in their financial future, they are not likely to spend any more than necessary.
My feeling is that market confidence is so low that even at a 0% rate, consumers will not be rushing out to convert their precious savings into goods and services (assuming the average consumer has any savings which may be a myth anyway).
The low interest rate however, has the potential to make a difference to the banks' commercial customers which is surely the intention of the measure - the effect on tracker mortgages is merely a (very welcome) side effect. I am aware however that some banks are still charging 29%pa for unauthorised overdrafts on accounts for small businesses, so clearly it is not the small businesses that the measure is aimed at but the big fat corporations who have the politicians in their pockets. Is this an economic or political decision? I'll leave you to decide...
So the question remains - what happens if interest rates go negative? Simply put, anything on deposit could then have a charge applied to it - so...anybody with any money would immediately withdraw it from a deposit account and place it in a current account, or take it home and put it in the mattress or place it in a foriegn bank. The money available to the banks is already depleted, that's what the credit crunch is all about - setting a negative interest rate would more or less clean the banks out and leave them gasping for air. Borrowing money at negative interest would become a way to earn money - once more there would be such a clamour to borrow money that the banks would be cleared out in no time - and because the borrowers would be looking to make money rest assured they will be spending NONE of it!
This is my submission then, interest rates cannot under any circumstances go negative or pure chaos will ensue and the banks will all go to the wall.

Popular Questions:
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Christmas Bonus

The Credit Cruncher strives to bring you ideas that help to promote your business at a time when, more than ever before, competition determines which companies will survive.

The Gallery Collection is offering saving on Corporate Holiday Cards this year, not only that, they have a fantastic free offer to go along with the cards. The collection is not at all limited to Christmas cards, but includes cards for every occasion including all-purpose cards and birthday cards which extends the range that corporate cards are normally limited to. What if you started sending birthday cards to your best clients, how special would that make them feel?

Back to the Christmas cards then, there are a staggering 225 different designs on offer. This amount of choice means that your clients are less likely to receive the same card from several suppliers, you will stand out from the crowd, your card will be pretty much unique. What's more? They are sponsoring free downloads of Charles Dickens' "Christmas Carol" - this alone makes the site worth a visit. Charles Dickens is my very favourite author and I believe I have read pretty much every book he wrote. Christmas Carol is a classic (as all his books are...) that needs no introduction, introducing characters that live on beyond the confines of the story in 'Scrooge' and 'Tiny Tim' to name but two...

All cards are helpfully categorized, so that you can quickly drill down to look at just cards with established works of art, or cards with a religious theme, or wildlife cards - this way you can choose a card that is appropriate for your industrial sector. A famous work of art for a design company, wildlife for an environmental engineering company, patriotic cards for armed forces, and emergency services - something for everyone. Each card comes with a range of greetings in several languages and you can even include a customized greeting to make the cards more personal. Don't feel limited to Christmas Cards because this site represents good value for cards for all occasions.

Has the automobile had it's day?

Don't get me wrong, I love cars, I enjoy driving and have been driving for more than 25 years - yet I have only really owned cars that were convenient - apart from one that I bought for my wife, other than that, the other eight cars I have owned were cars of convenience rather than ones I had researched and hunted down for their particular characteristics. This is simply because I have always understood that automobiles make very little economic sense.
The standard family cars deteriorates and depreciates rapidly, not only that but they cost a packet to run - very few people can genuinely afford to run the cars that they have...
In the world we now live, the amount of transport options shows up cars as being both dangerous (it has long been acknowledged that planes are safer than cars), and as grossly detrimental to the planet itself. In the long term the hydro-carbon powered vehicle is unsustainable however attached we are to the concept.
This is the mindset we must adopt to put the proposed bailout of the auto-industry into perspective. The bailout of financial houses is one thing - arguably both political and economic at the same time. In contrast, the proposed bailout of one specific industry whilst ignoring all others is purely political, there are no economic merits to sustaining a commercial industry which cannot sustain itself.
There is a justifiable fear that job losses and impact on the economy will cause many knock-on problems in related industries, but the question has to be posed: where does this intervention end? At some point we will have turned ourselves into the thing we in the West believed we had triumphed over after the Berlin wall fell - and economy controlled not by the free market, but by the bureaucrats in government. For those in the US, those of us in the UK can tell you what sort of cars you can expect from a nationlised auto-industry. Gentlemen, we give you the Austin Allegro:


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Mortgage safety net announced

Gordon Brown used the Queens speech to launch a new scheme aimed at helping those who will face unemployment in the coming recession. A government-sponsored mortgage-payment break enables families to stave off repossession for up to 2 years by deferring payments. the only limit is that your mortgage is less than £400,000 which will cover 90% of the population.
This, after news that 75,000 homes could be repossessed next year in the UK, that's 30,000 more than expected figures for this year.

The details will be worked out between individuals and their banks, but the scheme is only a deferral of payments to a later date, so there will hopefully be little chance to exploit the scheme for personal gain, though no doubt some will try!
The announcement came out of the blue, so some of the finer detail is as yet unclear, but eight major banks have signed up to the new Homeowner Mortgage Support Scheme.

As far as I can see, this is the first real policy of substance that will really help individual families to come forth from number 10 Downing Street since the start of the crisis. Never mind tiny tax windfalls and 2% off VAT, this looks to me to be a real policy which will have far-reaching positive effects.

I can't help wondering though, if it means that we should stop paying mortgage protection insurance?
Surely the insurance companies are not going to be delighted to learn that the Government is going to arrange for the underwriting of 90% of UK mortgages...

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The Good Consumer

An excellent 'tongue in cheek' Youtube Video which is a little too close to the truth for comfort, thanks to bonfireofthebrands.com