Debt Update

Over the years, I have documented how I have brought my own credit card debt down from about £7,000 to round about £1000. I did this using will-power and 0% credit cards, the first of which was a Virgin credit card which had a 16month offer. The trouble is that now it has come down to 'manageable' levels, the debt is threatening to get out of hand again...
At the lowest point last year, the total debt was down to about £600, and now that I no longer have a 0% interest credit card, the total is slowly creeping up again, and I am once more paying interest... albeit very small amounts.
If I am going to completely eradicate, this debt, I am going to need one more 0% interest credit card, and one more effort to rid myself of this burden once and for all. However, a bit like an addict, I must always be aware of the lure of the credit card and must seek to be free of debt for the future not just for now...
My first step will be to make sure my existing credit card accounts are closed if I am no longer using them - This helps to ensure I have a good credit rating, old unused accounts with high credit limits can count against you. The second step will be to compare 0% balance transfer credit cards that are currently available to find the best offer. The third step will be to exercise the will-power to pay off the balance and start saving money.

Here comes the tax...

It is no surprise that there has to be a reckoning for the vast amount of money spent during the recent financial crisis, and the Government's Pre-Budget Report indicates that this time has just arrived.
VAT is already set to rise again in January, and we are still wondering what effect this was ever supposed to have on the economy... After all, the really essential items such as food and children's clothing are not taxed anyway. The costly step of temporarily lowering VAT appears not only to have been an encouragement to buy luxuries in the depths of a recession, but a slap in the face to those who have struggled to buy essentials for whom the tax drop has had no benefit whatsoever.
National Insurance is also set to rise by 0.5%, and the temporary stamp duty 'holiday' is to cease, and bizarrely, duty on bingo is to be reduced - Great that the government is giving a little tax relief to those who spend their money on frivolous gaming...
This Government is not adverse to making sweeping popularist gestures and maybe they believe there is a bed-rock of labour support in the Castle Bingo houses or the growing online bingo sites such as Wink Bingo? Either that or they think more people should actually be encouraged to play Bingo. Is this a well-considered, well-thought-out policy thrashed out in Whitehall offices or simply a random policy picked out of a tombola - with Camelot looking on just to ensure that the taxes changes are in fact entirely random and not part of any kind of intelligent thought patterns?
Of course, the most popularist tax that this Government are using to effectively cover up the more subtle taxes, is the tax on banking bonuses. The Government propose to tax bank bonuses that exceed £25,000 by 50% - there will be very few people who will be taking issue with this measure, however I can't help but believe that these frankly less-than-straight individuals will find a sleight of hand way around the proposed tax.
There are two measures which indicate the Governments thinking when it comes to paying for it's support of the banking sector during the crisis:

1. The plan to restrict public sector wages and pensions
2. 'Middle-earners' to pay more tax

The combination of these two policies guarantee that the public sector will bear the burden of raising revenue for the Government - they are going to take money from their own employees pockets... The 1% pay cap imposed on the public sector for the next two years is certain to keep wages rises below inflation, therefore effectively lowering income considerably across the board especially when combined with the planned VAT increase.
This sounds like the perfect recipe for a year of industrial action if ever there was one - try explaining to these workers that we are actually emerging from a recession as they count their pennies for the next two years. I happily admit that they are maybe fortunate to have reasonably secure jobs, but when the chips are down and the trade unions start to move, and a general election is looming... I think Gordon may well end up scrambling for that tax tombola again...

RBS makes bad move on bonuses

As if we hadn't had already had a gut-full of what happens when the banking sector is so blinkered to the 'real' world, claims are being talked down that RBS directors are threatening to resign if they cannot pay huge bonuses to their merchant bankers.

Hmmm let's think about that for a while shall we? - these are the people who presided over a catastrophic failure of their own bank, to the extent that 70% of it is now owned by the British taxpayer.... Their failure is largely due to the mis-reading of the markets and actions of those very leaches who demand fat bonuses otherwise they are apparently going to go to other financial houses...
These directors are bawling that if they cannot pay their pariahs, they will have to step down...
OK, still thinking here... trying hard to think of a down-side to allowing the directors AND the merchant bankers to ply their slimy trade elsewhere.... trying hard to work out whether the bank will be better of or worse off without those that took the bank over the brink of collapse.... nope, can't do it - let 'em go!

It may be simplistic to say that we can completely do without an important sector of a major bank, but if they are going to try and blackmail the government and the British public, I think they will have to re-think their strategy. In essence they have to accept that along with the fact that they are still employed, comes a pay-off that means in order to remain employed, they must not be allowed to take the bank to the brink again at least until they have paid every penny back and are willing to stand or fall by their decisions like every other business that they took to the wall with them over the last eighteen months.

The UK public are not impressed by the threat of loss of so called 'talent' through lack of bonuses, not only that, but this is a Government that is willing to be punitive where it believes that public opinion is with them. Don't forget the threat of legislation to prise Sir Fred's sticky hands away from his pension... Seemingly an extremely rash threat, firmly made nonetheless.

Spin is on it's way to try and dampen the storm, it will no doubt be able to show that no such threat was forthcoming from the RBS directors - but just in case they don't get the message... really... don't try it! Do not try the patience of the British taxpayer any more, do not test the resolve of Gordon Brown. He may not be able to solve the crisis but he CAN stop the bonuses and cannot politically afford to back down on this one.

Where is the recovery?

The recovery is in the financial markets, in the banks and maybe even in the property market, but where it is NOT, is the more telling news.
The recovery HAS NOT and WILL NOT hit unemployment figures, GDP and the general population for a while yet - maybe in 12 months time we can talk about the economy being on the mend for those other than in the privileged banking sector.
There is merit in 'talking up' the economy to help build up confidence, but we mustn't behave like the problem is over, as for many families, the problems are very real or may even be yet to come.
The UK and the US are bracing themselves for record unemployment figures which can only lead to misery, poverty and financial ruin for many. This crisis is being freely described as the worst since the Great Depression, but the situation we find ourselves in is very different from the 1930's. For a start, the abject poverty of those days was characterised by ill-health, death and homelessness. The lack of material goods suffered included clothing and the basic needs that today we take for granted. Without a complete collapse of the Western economy, we will always be in a position to prevent a repeat of the poverty of the Great Depression simply because even our poverty is wealth compared to the genuinely under-privileged.
We in the West are outrageously wealthy in world-terms and we would do well to remember that when we complain about how badly things are going for us. Similarly, we would do well to remember that when we have a chance to voice our opinion on the way bankers are paid, and the general growth of greed throughout our society. So no, the crisis is not over, but even the poorest of us is still better off than the majority of the world's population. There is a slim chance that the financial crisis has enabled some people to re-evaluate their priorities and put money into perspective - if not brace yourselves for another crash in a few years time.

New Banking rules to be phased in...

The FSA (financial services authority) is to give banks time to phase in alignment with the new rules on liquidity. The upshot of the new rules is that banks will be required to hold a better equity-to-risk ratio, however time is being given so that banks are not prevented from lending to aid the long-awaited economic recovery. After the concerns following the Icelandic banks collapse, the new rules will apply to foreign banks that have branches in Britain.
In tandem with the new rulings, the Bank of England will be expanding deposit facilities to smaller banks, thus preventing the need for smaller banks to keep deposits with larger commercial banks who themselves may suffer at the hands of a future financial breakdown. The smaller banks have been dependent on commercial banks for liquidity, in future they will be able to access funds directly from the BoE.

Competing for Business

There is no doubt that the current economic climate has not been kind to companies that cannot react quickly to changes in the market place. Competitive companies that have been able to adapt their operations will be the survivors, able to take a larger market share due to the demise of the competition.

One of the ways in which the surviving companies will win through, is that they will create the right impression throughout their business. The marketing budget may come under close examination, but it is worth noting that creating the impression of a clued-up dynamic company is not expensive and should not be an area of spending that is compromised.
Joined-up thinking in the area of a logo that appears across all your stationery and your website, your business cards etc.., consistent themes and colours, text, icons, graphics and fonts all combine to give the impression of a well-thought-out individual image which supports the idea that your products and services are solid and worthwhile.

If your company is heading towards an identity crisis, don't immediately head for the free business cards ads, get some professional help in sorting out a suitable image for your company that tells your clients something they want to hear. It is not prohibitively expensive to have some professional outside input from a reputable company, and it could well separate your company from the competition.

All talk and no action?

The G20 Pittsburgh summit winds up and it is a struggle to work out exactly what the point of such a meeting is... Over the last few years, the G7 grew through G8 and ended up as the G20. The truth is we are now looking at something like the 'G20 and friends', nobody is counting any more. The talking shop is now even bigger on talking, and naturally, with so many more points of view, decisions are harder to come by.
Imagine an ever-growing jury which must deliver a unanimous verdict. You may get a verdict from twelve good men, but twenty, twenty three?, twenty four??
So what has been achieved in Pittsburgh? Plenty of talk about reining-in the banking community, plenty of resoultions to 'do something about it', nothing in terms of concrete limitations forthcoming.
In the meantime, jobless figures continue to rise, bankers seem set on fleecing the markets again and the environment, arguably a far more important issue, remains the time-bomb that no-one wants to de-fuse.

Steady as she goes

The Bank of England has held base interest rates at 0.5%, the lowest rate it has ever had for the sixth consecutive month. There are also no further plans to develop the quantitative easing program despite Mervyn King's desire to pump more money into the economy.
Despite hope of a recovering economy, it would certainly be too soon to take any steps in the assumption that the market is robust. My feeling is that the financial houses see the wider economy and the stock market as being the same thing... As long as markets are buoyant they are happy regardless of the effects on the population. The truth remains that a lot of people have lost a lot of money, a lot of people have lost their jobs and this is not a pendulum swing that can swing the other way overnight. It takes a lot longer to establish a business than it does to close one down!

Personal money troubles

There are two main aims of this blog, one is to report on the global economic crisis, the other is to talk about personal debts with emphasis on using 0% credit cards to pay off debt.
I recently got very close to completely wiping out my own debt using 0% interest deals but have had a bit of a hiccup when I was within sight of my goal. I reverted to using my credit card safe in the knowledge that I would (soon) be able to clear my debts, but unfortunately have been adding to the balance at a greater rate than I am paying it off. I am resolved to be more disciplined before the onset of the expenses that will precede Christmas...
In the meantime I have been grappling with my household fuel provider (dual gas and electric) and began to think about how creeping household bills have helped to build up debt without many people even realising what is happening to their bank balance.
The scenario goes like this:
House fuel bills have been growing at an alarming rate and as most people pay these bills by Direct Debit, they have not really realised how much is leaching out of their bank accounts (recently my provider tried to increase my payments by 60%). The upshot of this is that a lot of people just accept their increased payments (or more likley don't even notice until it's too late). My own approach is to have all my outgoings in a spreadsheet which makes them easier to manage.
My questions to the householder who has just received a huge increase in their Direct Debit would go as follows:

• Have you had a corresponding rise in income? (I expect the answer to be NO)
• Have you adjusted your outgoings to allow for this extra expenditure? (In reality I would also expect this answer to be NO)

If the two questions above are answered in the negative, there could be a problem when it comes to reconciling income with expenditure, and the pressure valve in most cases is the good old credit card. I would realistically expect credit card spending to take the strain of the increase in household bills and this applies to food, insurance or any other expense that can creep up on you unexpectedly.
There are only two answers to the problem:

• Increase your income
• Cut your spending to allow for the increase

Otherwise you are heading towards debt that could take an awful long time to pay off.

Related posts:
the decline of my debt
where did it all go wrong?
how to get out of debt
Are we in too much debt?
credit card warnings

G20 prepares for recovery

The G20 leaders are acknowledging the changing state of the global economy, but are being urged to pursue a co-ordinated approach to the winding-down of the economic packages.
Ministers are being urged to continue with the stimulus packages that they are already committed to (a global total of US$5 trillion), but one of the sticking points has been the mechanism for accurately measuring the end to the crisis. It is proving difficult to get agreement on what parameters will be used to track the levelling out of the crisis.
Many promises have been made about requiring banks to behave more responsibly over pay, but the main emphasis now is focussed on how to prevent another crisis as opposed to previous meetings where the emphasis has been fire-fighting the crisis itself. Banks will be required to set aside more capital as a buffer against future hardships and they may face limits on speculative acquisitions defined by the value of their reserves.

Less than was absolutely desirable was agreed with regard to a G20 response to Global Warming because of deep divisions between developed and undeveloped nations. IMHO it is the developed nations that have to bite the bullet on this one seeing as they have created the best part of the problem in the first place.

Related posts:
Recovery or false dawn
IMF recognises recovery
Is the credit crunch over?

Recovery or false dawn?

I admit that my outlook on the current crisis is fairly dark and negative, but I think it's worth countering the spin that is being raised to paint a rosy outlook for supposed economic recovery.
These are the elements that are being cited as signs of recovery:

• Rising house prices (remember THIS is what got us into the mess to start with!)
• Recovering bank profits (sound familiar - see above...)
• Steady growth in GDP (hopefully this will be evidenced soon, but this is not the ONLY thing the economy needs - see below)
  

The real indication of a healthy economy would be:

• Stable and progressive public spending (UK borrowing will approach and unbelievable 80% of GDP this year)
• Steady rising of employment figures (We are approaching critical levels of unemployment)

It is only when the economy has stabilised (don't forget the Government has yet to reveal how it is going to pay for all the craziness thorough possibly crippling taxation), and employment levels are manageable that we can be satisfied that our economy will not go into free-fall. The danger is that this short-memory economy will rely on rising house prices to prop up spending again, it does not even bear thinking about the consequences of a similar crash before the effects of this one have been ironed out.
Can we be so stupid as to allow this to happen again? My answer is that yes, we are possibly on the verge of doing exactly that.
What have the banks learned from dragging the economy close to oblivion? They have learned that they can personally profit from such a crash and will do so again...
This is the sad state of human nature, now the profiteers have seen and tasted the good times, they will want to go there again and again to personally satisfy themselves regardless of the growing unemployment queues. Our only hope is that the Government have legislation lined up to prevent the financial community from profiting from their greedy nature - Sorry, still dark and foreboding for me - I really hope my skepticism is unfounded, but I think we have seen what can happen and I think we may be powerless to stop it happening again - Welcome to the combination of the powerful Free Market and the equally powerful sense of Human Greed.

Related posts:
G20 prepares for recovery
IMF recognises recovery
Is the credit crunch over?

Making your money work for you

If you have not done so recently, there is no time like the present to review your financial position - even if you have done this in the last 12 months or so, there is every reason to take another cold, hard look at your outgoings and take advantage of some of the recession-inspired saving that can be made...
Firstly, take a look at those Direct Debits to see where savings can be made, the obvious ones are to shop around for lower cost insurance, and get rid of any outgoings that are less than essential. Consider the cost of your car insurance to see if you can get a better price - make sure you check if there are reductions for keeping the car off road or in a garage overnight. Check those insurances that offer reductions for households that have more than one car.
Consider also the life insurance and critical illness policies etc. that you might have and check to see that you are getting the best value for money - remember the financial market is squeezed and there are savings to be made now.
Talk with your partner about whether now would be a good time to overpay your mortgage with mortgage rates being so low (this is something that I have been doing this year) this could mean that you pay your mortgage off a lot earlier than expected. Consider the all the options for every Direct Debit that you have and set yourself the target of slicing at least 10% off your overall outgoings, you will be surprised at how easy that is...