Sunday, 14 December 2014

Smart Wallet Tip: The Worn Out Coin Edition

"Great investing is simple. The harder you work at it, the less money you’re likely to make." - anon

People who focus on constantly shifting their money from here to there to earn more money, in truth do not make much money and if they do, they might call it skill, but it is just luck.

Just like a coin that changes hands so often that in the process it becomes rounded and dull, moving your
money around from one investment vehicle to another open it to all sorts of risks, fees and penalties.

Great investors, diversify their money, buy when its cheap and leave it to mature and then reap the benefits. Active investors worry about the next big gain, the next dip, the latest headlines, the latest push in the market, and they lose in the long term (or maybe get the same as a passive investor, if they are lucky).

Start investing small, and diligently build up a portfolio, add to it every paycheck or at the end of every year. From the small acorn will grow a mighty oak.

Monday, 1 December 2014

Word of the Day: Equanimity

noun: equanimity
  1. calmness and composure, especially in a difficult situation.
    "she accepted both the good and the bad with equanimity"
  1. synonyms: composure, calmness, calm, level-headedness, self-possession, self-control, even-temperedness, coolness, cool-headedness, presence of mind; 

  2. antonyms: anxiety

Saturday, 15 November 2014

10 Steps to Improve Your Credit Rating

At the risk of sounding like a cheesy TV commercial, I am going to ask you "Have you been refused credit?". If so, and even if you haven't, then this guide is for you. Why pay someone else to do what you should be doing anyway. Check your credit score and learn how to bring it back and keep it healthy.

Before we start, if you have been rejected for a credit application recently (credit card, bank account, insurance, mobile phone contract etc) - stop applying for more. You need to take a step back and figure out why you have been rejected. Further applications, could have a spiraling negative effect on your credit report. So follow these steps improve your rating.

Step 1 - Access and check your report

This is basic. You can't fight blind. Get access to your credit report. There are a few major credit report agencies in the UK, and most places will check with one of these:
It usually costs to check your report, but is relatively cheap (£10 a month, with a 30 day free trial). If your savvy, you can go through a cashback site, like TopCashBack or Quidco and get paid to take out a 30 day trial of your report.

Obviously, being a Smart-Wallet reader, you will itemise the date in your calendar/diary and cancel the free trial at no cost to you - thereby earning some cashback and effectively getting paid to check your credit history. Noddle, also offers a free credit report, which is largely the same as equifax/experian, so you can use that too.

Step 2 - You need to start somewhere

If your relatively young, and have no credit history yet. This could be a reason to get rejected. Straight out of university, if your applying for a high risk credit card, loan or car finance - the lender does not have enough information on you to give you a loan. Your an unknown risk.

Start with a basic credit card, even if its the one offered by your bank account provider (although, I would recommend either capital one or aqua - as they provide 0.5% cashback), and use it lightly for your necessary expenses, spend a few quid on it monthly and then have a direct debit clear up that expenditure. Over the next few months, your credit report will have activity, and it will show you to be a responsible borrower. 

Step 3 - Too much credit is bad

On the other end of the scale, having far too much credit can hurt you too. If you have 9 credit cards, the lender may be thinking, "what if he/she spends on them all and cannot pay off the 10th card?" - in which case you might get rejected. If you have some old credit cards, close them (don't just destroy the card, phone the lender and cancel the credit agreement). Same for store cards, but why you would get store cards in the first place, is beyond my understanding.

Step 4 - Get errors amended

If you spot any glaring mistakes in your report (late payments or incorrect address or anything that is untrue) - write/email the agency (write to as many agencies as you can), with evidence if possible and get a note put in your file. This should somewhat mitigate the issue in about 30 days.

Step 5 - Stability

If you have a permanent home address, that is synchronised accross your bank accounts, passport, driving license and credit cards - it looks like you are stable. If you have old addresses on file for some, it may look like you change homes too often or are unstable. This is a risk (i.e. risk of fleeing without payment) and might get you rejected. Keep your details up to date. Check with your credit cards and loans, banks, driving license, and so on.

Other things that help are home ownership as opposed to renting or living with parents (harder to flee, if you have a £150k brick and mortar investment) and a landline number on your applications as opposed to a mobile (provide both if you can).

Step 6 - Register to vote

On the same note, get yourself on the electoral register - this is your primary source of proof of address. Check with your local council office for details on how to do so, if you are not already registered.

Step 7 - Space and time

Too many applications in too short a space of time, is trouble. It makes you look desperate for credit, which brings into question your motives. "Why do you need 5 credit card applications in 3 months? How will you use them and how will you pay them back?" - its a recipe for rejection. Multiple rejections in a short space of time look bad too. "It begs the question, why are you getting rejected so much?" Apply once, then give it a few months. Most credit lenders agree that 6 months should be sufficient.

Step 8 - Time and money

Late payments are bad. Defaults are worse. Do not do it.
Rule of thumb for credit cards is to use them as a debit card. Use them for benefits (cashback/voucher/etc), then pay off with a direct debit set to clear the whole bill at the end of the month. Do not spend money you do not have. £5 late now, could be all the difference to that loan application 3 years later.

Step 9 -  One for all, all for one.

This will not apply to everyone, but joint financial accounts/loans etc tie you in with the other persons credit report. If you have an ex, or a partner whom you no longer associate with, check that you no longer have any accounts open that link you together. If the other person defaults, it affects you.

Step 10 - Check, then recheck

Using a service like noddle means you do not need to pay to check your credit history (or most of it), so check once every year at least and ensure nothing new has occurred that makes you look bad. If something has gone wrong, for example, a default due to circumstances beyond your control, your best recourse, is to continue to be a good borrower, and over time your report will heal.
That's it for now. It's not difficult, but by abiding to simple rules like these, you can be a better borrower and open doors to bigger and better financial tools for yourself in the future.

Saturday, 1 November 2014

Word of the Day: Provision

  1. 1.
    the action of providing or supplying something for use.
    "new contracts for the provision of services"
    synonyms:supplying, supply, providing, purveying, delivery, furnishing, equipping,giving,
    donation, allocation, distribution, presentation
    "the President condemned the provision of weapons to guerrillas"

  2. 2.
    an amount or thing supplied or provided.
    "changing levels of transport provision"

    synonymsfacilities, services, amenities, resource(s), equipment, arrangements,solutions; 

  1. 1.
    supply with food, drink, or equipment, especially for a journey.
    "civilian contractors were responsible for provisioning these armies"
  2. 2.
    set aside an amount in an organization's accounts for a known liability.
    "financial institutions have to provision against loan losses"

Saturday, 25 October 2014

When is it ok to use my savings to clear debt?

Is it OK for me to stop saving and pay off my debt?

That is a question that I see being asked quite a lot around forums and blogs about money. So to clarify the situation, the answer, here at the Smart Wallet HQ is an unequivocal and absolute YES. Get rid of any savings and pay off your debts. Go. Do it now, I'll wait until you return.

I can say this with certainty, because you stand to save more by doing this. Stop right there, first I'm told that saving is the key to good finances, and now that I have some savings you want me to stop saving and use it? Yes. Debts cost more than savings, clear it off and your finances are better off.

Lets get some things cleared. A credit is a positive addition to your net worth, like when my business pays me at the end of the month. I now have a net credit worthiness of say £2000, which means that I am now worth £2000 more than I was, 24 hours earlier.

A debt is the opposite of credit, in fact it is negative credit. If I have a debt of £1000, I am now worth £1000 less, because sooner or later, I will have to pay that money back. It is easy to calculate your net worth this way. Just add up all of your positive credits (house, car, laptop, jewelry) and then subtract all of your negative credits (credit card balances, loans, mortgages). Your OK when the sum is positive, but when it is not, then you need to start rethinking your finances.

The problem compounds because of, well... compound interest. Your £1000 negative credit can easily spiral to several times that. (Assuming a 35% APR on a credit card balance of £1000, after 1 month it will be £1029, after 2 months £1159, and after 12 months £1411).

And to add to our woes, the credit lenders are like casinos, the house always win. The debt interest rate will always beat any savings rate they provide. So if you borrow £1000, and put it into a savings account - you will lose. The savings will be paltry, compared to what you have to pay back in interest.

Ok, lets crunch some numbers. Lets assume you have a debt of £10000, with a modest 15% APR. This could be a car on finance or a personal unsecured loan. And lets say you have savings of £5000 earning 5% interest (yeah, right - that's not very easy to get, most banks pay you peanuts on your savings).

So your net worth is £5000 (without calculating for next months salary), and assuming no extra income/outgoings, your net worth is going to be as shown in the table below.

The only winning move is not to play.
-ve Credits +ve Credits Total
Current Month -10,000 +5,000 -5,000
Month 2 -10,125 +5,020 -5,105
Month 3 -10,251 +5,041 -5,210
Month 4 -10,379 +5,062 -5,317

As you can see it is a fools game. You cannot win. Your savings will never outweigh your debts. And your net worth is spiraling further and further into the negative.

Now assuming that you use your savings to pay off the debt, here is another simulation:
-ve Credits +ve Credits Total
Current Month -10,000 +5,000 -5,000
Month 2 -5,062 +0 -5,062
Month 3 -5,125 +0 -5,125
Month 4 -5,189 +0 -5,189

There is some light at the end of the tunnel, your net worth is a lot better in this scenario than in the previous one. Just after 4 months, your £128 better off than if you left your money in savings. 

So, there you have it. While my theoretical simulations above may not represent your current financial circumstances accurately, it should give you a base for doing your own napkin calculations (if your inclined that way, I would recommend a good free spreadsheet, like google docs). Your always guaranteed to save more for your future self by paying down debts now.

There are specific cases, like my pre-2012 student loan, that incurs 0.0145% interest, which is beaten by my 0.018% savings in my emergency fund.

There are certain factors to take into account, the first and foremost is to pay off the most expensive debt first. This will be payday loans (why you have those is beyond me!), store cards (again, why?!), credit cards (a bit better, but still shop around for good deals, and money making schemes), as opposed to the mortgage, or a student load or a cheap personal loan - which provide 'cheaper' interest rates.

Consideration should also be given to a consolidation of loans. This will generally require speaking to someone face to face or over the phone, but it might help to reduce your costs and repayments (and credit score) by having to make a single repayment instead of 3 or more per month. You might also be able to use credit cards to your advantage, by shifting the balances of several cards to a long 0% deal. Sometimes, just asking politely, you might get a reduction of the rates on your debts too.

Thirdly, look out for the small print. Common sense would dictate, that a lender would be happy to accept early repayment, as they are getting their money back and can use it elsewhere. But no, despite the fancy 3 piece suit your banker wears, he only does it to hide his dorsal fins and other shark like traits. There are a whole host of fees and penalties that a lender can charge you for early repayment. And in some cases, this might be the same as the interest they expect you to incur over the loan term, so you might be better off in that scenario, saving your money and slugging off the repayments as expected. Some mortgages, do allow a small percentage of penalty free over payment per year - if you can do that, do it.

Finally, don't forget to keep an accessible liquid emergency cash fund. Life can throw anything at you at anytime, from a burst drainage pipe to a broken boiler. It makes sense to pay off expensive loans/debts and should you need emergency cash, you can reborrow on a credit card and pay off the card within 30 days - but if getting a credit card is difficult or the rates are horrendous or you need the cash for longer than the 30 days interest free period, an emergency cash fund is important. For example, a cheap mortgage might mean you can use all your savings to overpay, but keep £1000 for emergencies. Or you might choose to spend all your savings overpaying the mortgage, knowing that you have a few thousand £ limit on a credit card. But should you have a 35% APR credit card loan, throw all your savings at that, and you can always reborrow from the card later should you need to. This will vary based on your circumstances, so will require some thought on your part.

That concludes my thoughts on debts vs savings. I hope that this piece encourages you to think about where your money will make the most impact (paying off debts), and hopefully it saves you some money in the long run too. Adios. 

Wednesday, 1 October 2014

Word of the Day: Acquiescence

noun: acquiescence; plural noun: acquiescences
  1. the reluctant acceptance of something without protest.
    "in silent acquiescence, she rose to her feet"

  2. synonyms: permit, consent to, agree to, allow, assent to, give one's consent to,accept, concur with, give one's assent to, give one's blessing to, say yes to, give the nod to, give one's approval to;

  3. antonyms: forbid, refusal

Tuesday, 9 September 2014

Smart Wallet Tip: The Happiness Formula Edition

“Annual income twenty pounds, 
annual expenditure nineteen nineteen six, 
result happiness.

Annual income twenty pounds, 
annual expenditure twenty pounds ought and six, 
result misery.”
– Wilkins Micawber (David Copperfield, by Charles Dickens)

Outdated literature? Not at all. You will find much happiness when you learn to live within your means. And we can do this by reducing our wants. What pushes a typical £30000 p/a income over the brink? A few extra evenings out or even a new car or some nice new designer handbags, a new laptop, tablet or a smartphone. Moments and experiences that we care not to remember shortly afterwards, items that lose their appeal after the initial wow, they soon need replacing with newer shinier items to wow us again momentarily. (This is the essence of consumerism).

The solution is not to do insurance fraud and register your car to some rural farmyard out of the city to save yourself a few bucks, claim fraudulent benefits or to lie to the taxman and earn cash on the side - immorality and sin money (and the tax-man) will eventually catch up with you. Cut your expenditure, cut the crap in your life and feel the burden lift off your shoulders. Give your credit card, your bank account and your wallet and ultimately yourself, a little room to breath.

Living within your means, is not a very appealing concept. I mean, personal finance and investment is about eventually rolling around in flashy clothes and fast cars, right? Expensive watches, sunglasses and convertible cars are what we expect, yet all we face are overdue bills and desirable items that we spent days scoping out and shopping for, but which no longer mean anything to us.

But in the long term, non of that matters if you spend more than you earn, ultimately you will have to cough up the money and still be in the red.

But, penny pinching is only for the tight-fisted and really poor. Why would a middle-class citizen or even a upper-class consider it? The rich want to keep their money so do the poor. The same rules apply. Earn £10 and spend £11, misery. Earn £10,000 and spend £10,001, result in.... misery.

After years of ultra top secret research in a urban high tech lifestyle, I can now reveal to you my ultra top secret formula for happiness:
Expenditure > Income = Misery
Expenditure < Income = Happiness
Stop being miserable.

Friday, 15 August 2014

I like big butts and I cannot lie!

First of all an apology to all of those who came here looking for something saucy. Today's musings are about water butts.

which butt are you here for?
What are they?
A water butt is a container that connects to your drainage downpipe (from the roof of your house/building) and collects the rainwater.

Why would I want one?
Because for a cheap initial outlay, over the course of its lifetime, a water butt will save you loads on your water bill costs.

How do they work?
A water butt comes with plenty of parts, the things to look out for in your kit are the following:
  • the drum (it would be a pretty useless kit without anything to hold the water)
  • the stand (not necessary, but it lets the drum sit higher off the ground, allowing you to use the tap to take water out of the drum - you can frugally make a stand out of bricks or any other durable material)
  • the tap - this lets you take water out of the drum into watering cans or buckets)
  • the diverter - this is a simple hose that connects your downpipe to the drum
  • water butt link kit (not necessary, unless you want to connect multiple drums to act as a giant storage unit)
As it rains, the roof of your building acts as a giant collector and all the rain that it collects, come down through your downpipes and collect into the water butt. Once it is full, any excess rainwater, continues to drain as normal.

But I hear you scream, "tap water is dirt cheap! How frugal can you get?"

Hold your horses. I pay 97p for a cubic meter of water from severn trent on my current tariff. That sounds cheap. 1000 litres of water for 97p ~= £0.001p a litre (rounded for easier calculations). Still cheap. Flushing the toilet uses 15 litres of water, and costs 1.5p, flushing twice a day for a whole year costs costs £11 a year. For a family of 5 - that's £55 a year of good clean water, flushed down the toilet per year - which has a high energy requirement to produce and pump around the country, so it is not only wasteful of precious water, but also burns precious fossil fuels to produce. 

That was the napkin calculation for a 15 litre toilet flush. Shall I get started with that lazy soak in the bath that uses 120 litres of water, or the 300 litre car wash or the watering can fiesta some of us have in our gardens during summer? ... I will spare you the details. But let it be known that I do believe with all my heart and soul, that we are a wasteful society and it is in our nature to spend the resources that we have in abundance. Not for once thinking about the bruises and scars we are leaving behind on the surface of the earth, in our mindless exploitation of it.

For all intents and purposes, we can use tap water for pretty much anything and everything, but do we need to? For drinking and hygiene - yes (although it is perfectly safe to boil water to clean it to drink). But watering a garden patch, flushing the loo or washing a car does not need clean, expensive tap water, with fluoride added to it, does it? 

And in those situation why would you use expensive water? For £20~50 you can get water butts of all sizes and shapes. Not only is it good for the environment (and generally speaking, this is one situation where the bigger the butt, the better it is for the environment) as it saves water and energy, it is good for your finances. depending on your water usage, a water butt will pay for itself within the year. So what are you waiting for, get your butt to the store and get a water butt!

Monday, 4 August 2014

Musings on tyres

Oh how fickle the heart is, it wants what it wants. I have said it before and I will say it again. Owning a car is expensive. Owning a luxury car is even more so.

The underlying costs of owning a car is what really mounts up; insurance, road-tax, MOT, repairs, and fuel - are all part of the on-going drainage on the wallet. But here at the smart wallet HQ, even in the face of defeat, we will save a few quid.

Todays topic of discussion is tyres. Cars get a lot of wear and tear, especially if your job role see's you travelling up and down the country, and meeting clients and discussing projects - a mans got to make his money somehow. Of all the parts on a car, the part that gets the most wear are the tyres. They are on the ground all of the time and are subject to contact with mud, water, tar, metalworks, pot-holes, stones, grit, sand, rubbish, heat, cold, ice, snow - you name it, the tyre comes into contact with it.

I have recently discovered a split in the sidewall of one my rear tyre. The tyre itself is still in great condition, with loads of tread left on it. I am a little unsure of how the tyre split, as it looks very unnatural. There are 2 distinct cut marks on the tyre, almost like a stabbing from some sharp metallic object.

The damage is by no means extensive, it is just superficial and on the surface. The cuts are barely more than a mm deep. But it is alas, enough to warrant an MOT failure, or so I am told.

So, I will now need a new tyre. But no, to ensure even performance, and wear and tear, I will need to replace BOTH rear tyres. (you can image, the new tyre has more grip than the other, and then if you apply the brakes harshly - one side of the car will brake faster than the other, leading to swerving or spinning of the car - not a situation you want to find yourself in).

So, what are my options? Well, my first port of call to the Lexus showroom in Birmingham, 2 recommended manufacturer tyres - £155 each, plus fitting, plus geometry and tracking of all 4 tyres - total cost was just shy of £600. No thank you.

Part worn, again you cannot be sure of the safety of part worn tyres. I mean, they are all not bad and will not kill you, but there is a small risk in putting on part worn tyres, also as they are part worn, they will wear out faster, lead to MOT failures or problems faster than new tyres. It is in my opinion, not much financial economy to be gained using taking this route.

I then proceeded to call a few local tyre fitters, having experience with them in the past, I was a little wary. The tracking and geometry of performance cars is very subtle and should ideally be taken care of by a professional, who has enough reference material to look up exact angles, weights and variances to set the position and angle of the tyres correctly. A lot of small garages, use a string and hammer to measure and set tyres straight - which isn't accurate and may not be best for your car. Again, there were savings to be made here - I could get 'like new' tyres for £50 each, fitted - but again, there is no financial economy or reassurances on doing a shoddy job on car tyres - the only point of contact that I have to the ground at any speed.

Then I turned to a hybrid approach. My plan is to buy tyres online, at low markup. This is possible as a lot of online only companies have very little in the costs of storage (small warehouse or even no warehouse - stock is bought in, as and when ordered), employee costs (very minimal administrative tasks), and very little running costs (web hosting, no large office or building costs). Some reputable ones that I have found are listed below: (who will fit and balance tyres for you on your driveway, you will still need to go to a garage for the tracking) (Whom I have used in the past, with plenty of success)

Most will do price matches too, so you are able to research your tyres across all of these sites (read reviews and performance metrics), and find the cheapest and get them all to price match each other, to see if you can save a little money. Plus also search online (google: websitename voucher) to see if there are any current discounts for the site in question.

Well, with delivery of 2 goodyear performance efficientgrip tyres 245/45/R17 at £220, fitting at £10 (local garage, I then got Lexus to do the tracking at a one off cost of £99 - a total cost of £329 for what would have cost £600 initially. I also sold my old tyres through gumtree, as a set (clearly stating the issue with the defective tyre) for £60. (so total cost of £269)

Not a bad result, but it still stings that I had to shell out unnecessarily in the first place.

Thursday, 31 July 2014

Money Saving Apps and Sites: FPL edition

Welcome to the "Money Saving Apps and Sites" feature on the site. The idea here is to list and discuss mobile apps, blogs and websites that are designed to help us save or earn money in our day to day life.

Money Saving Apps and Sites: FPL edition

This time round we will be looking at a great free site called Free Postcode Lottery.

What is it? Its a free lottery which randomly selects a postcode daily. If your postcode is selected you win the pot (which at the moment is £40 a day, but this rolls over if the winner does not collect it within 24 hours). Recently they have had their highest ever payout of £320. So go and join the site with your postcode, and remember it could be you!

If multiple people from the same postcode win (i.e. you and your neighbour), only the claimants get the prize split evenly between you. If anyone forgets to claim within 24 hours, they lose out of their share of the pot.

The site is paid for by adverts, but after having used it for a few months, I assure you there is no malware or adware on the site. It is run by one generous person and it is pretty automated. You get a draw reminder everyday by email (you can opt out of emails), click the link and check the postcode.
If you scroll to the bottom of the page, there is a mini £10 draw at the bottom of the page, so you might win £10 on any day - even if you do not win the main prize that day..

But wait, that's not all, for every day you visit you get a penny added to 'your' bonus. You can increase this bonus by doing a whole host of things. Current bonus boosting tasks include, shopping at tesco through a referral link on the site for an extra £5, liking them on facebook, referring friends and booking train tickets. It may not seem like a lot, but some people have bonuses of £30 just waiting to be picked up. Should you win, you get paid the bonus alongside your winnings.

So, there you have it, great little freebie. What are you waiting for?

Thursday, 24 July 2014

On consuming and giving

In this day and age of mass consumerism, we are raised by society and expected by society to consume. No longer are our shopping sprees about ‘need’, it is about ‘want’. One of the focal points of my life recently has been to reduce how much I consume, and reduce my wants. Focusing instead on high quality products, that is applicable in many situations.  The kitchen for example, modern kitchens have a plethora of equipment, pots and pans and electronic gizmos and devices that crush, and slice, and scrape and do all sorts of things. Do we need them all? Do they add as much value to our lives as they take away (shopping, maintenance, warranty, worrying about bigger and newer models).  

I personally do not think these items add value.
Take a knife set, you can purchase a large set of knifes for cheap, with fancy shaped blades, but you will have to replace the set within a short time span. Why? Quality, they do not hold their sharpness and edge for long, and some of the knives you will rarely use.  Me, I invested in a singular Naifu D67 chefs knife (I would have spent on a Kai knife, but it was a over twice the price of the Naifu, and didn’t offer as much value to me). Both of these blades are high quality, have a last-a-lifetime construction, and are useful in every situation, slicing, cutting, crushing – letting me use a single knife in multiple situations and reduce the clutter in my kitchen. But this is not the point of this post. I will rant about consumerism another day. For now let’s discuss after sales service.

Businesses no longer sell singular products, along with the product comes presales service, and after sales service. It’s all done to tie you in to the brand and grow loyalty and sales. And many people are willing to pay a premium to show their loyalty. I have never understood this need. I would only use the manufacturers services, if there was no one else out there who could do this. 

For example, a jeweler can hike up the price of a ring polish up to £45. On the high street, I have found prices less than £10 – while you wait. Shopping around for things you cannot do pay dividends.

Other recent examples follow.

Mobile phone screen: I recently took apart my friends phone and replaced his cracked screen for a total cost of £37 (the tools supplied with the kit was inadequate, and my trusty toolkit came in handy).

Car tyres: I bought them online, to the same specification as my car manufacturer recommended, saving myself £100 on the cost of tyres, and my local garage fitted them for £15, saving me another £99.

Wing mirror for my car: One of the uncertainties in life, is having people hit you (I am a good driver and have not hit anyone as of yet), luckily in this case the only damage was some shattered mirror glass on my wing mirror.  Just the glass costs £150 from the dealership (not the housing for the electronic motor that attaches to the car, just the mirror glass!), google came in quite handy, as I was able to call a few car breakers and scrap yards and get quotes (~£75 region), until eventually I found a part on amazon, that I could either stick on top of the shattered mirror or I could replace the mirror with. £11 and about an hour of my time is all it took, but I saved about £140, so that was well worth it.

A replacement watch battery, £10 at high street retailers (they will do it for you while you wait). I have invested in a precision screwdriver toolkit with plenty of removal heads and a flexible attachment that lets me work the screwdriver at odd angles, this lets me take apart plenty of small things, like glasses, watches, car keys, toys and so on. My cost for replacing the battery on my Timex? 99p for a set of 5 batteries, I still have 4 left over, so total cost was 20p and and 3 minutes of my time.

In the process of all of this tinkering, I believe I have learnt a lot. Not just handyman skills (I am quite a handyman already), but my curiosity about how the world works was sated a little each time I attempted something new, I have now replaced parts on broken watch complications, I can refurbish alloy wheels at home, repurpose old computers, reuse wooden pallets for building things, fix broken buttons, and shorten/lengthen the cuffs on my trousers – I am no longer just a consumer, I can create and repair and give back to the world.

I no longer hoard lots of things, in case I might need them some day, I find value in high quality items that I can build a bond with and reuse time and time again.

The point of this post is that, shopping around and getting your hands dirty can not only save you money, but bring about a better person in you. It certainly has in me.

Tuesday, 22 July 2014

The NISA's have landed!

July the 1st marked the date when the UK government upped the Cash ISA limit to a whopping £15,000, up from the previous £5760. And that's not all, you can now decide to invest the whole amount in either cash or in stocks or any combination of the two. They have now been named NISA (New Individual Savings Account).

Junior ISA’s (JISA) have also upped their limit to £4000.

This is a radical change from previous years, where your cash ISA was limited to £11,880, and only half could be held in cash and the rest HAD to be in stocks and shares or you could have had all of it in stocks and shares.

My recommendation is to locate a good ISA account, and fill this up to the max as soon as possible, to ensure the best returns for your money.

What is a NISA?
It is a savings account, in which you do not pay any tax on the returns. Every other type of investment in the UK, once you claim your profit, requires you to pay the tax-man his share. If you invest in shares and stocks, your dividends and profits are taxable after your salary. If you run a business buying and selling cars, the returns are taxable. If you earn interest from your current account or a savings account - the returns are taxable.

A NISA account protects your returns from the taxman. No matter how much you earn, the taxman does not get a slice of the pie. Nothing at all. Regardless of how much you earn and what tax threshold you fall under and how much National Insurance you pay, your NISA earnings are yours to keep.

So a savings account that gives you a £100 return, is only worth £80 to you after you pay 20% tax (if your on the lower threshold, obviously if your on the higher tax threshold, you pay 40% tax and only get £60 back). A NISA that earns £100, lets you keep £100.

How do they work?
Each year you are given a limit (it is £15000 for adults for April 2014-2015), you can put up to that much, in any number of NISA accounts with any number of banks. It is completely up to you, how you split it up. There are 2 types of NISA accounts available, Cash NISA and stocks & shares ISA. Previously there were limits imposed on how much cash you put in. This limit has now been removed.

You can open up both types of ISA’s. And invest your £15K limit 50/50 (or 20/80 or any other combination - as long as you don't exceed £15K in total) to reduce some risks. You can completely forgo the shares if you don't want any risk and just put £15K into a cash ISA and reap the lower % rewards. Or you can go guns blazing and invest in a shares ISA for maximum returns (and maximum risk, as stock prices do drop sometimes).

The NISA will continue to pay returns on this account year after year, as long as you do not close the account. The returns paid are cumulative, so in the first year from a 3% NISA, if you invest £15K you earn £456.23, in the second year that same account pays £470.12 and so on. If you have a partner or a spouse, you can double that (by opening 2 accounts, one for each).

The only limit imposed is that £15K limit. Any withdrawal also cuts into the £15K limits. So if you say, put in £14K (you only have £1K left of your limit), then withdraw £2K (for a luxury cruise trip), your limit is still £1K - the withdrawal does not increase your limit. So if you can, avoid withdrawing from NISA’s, have a contingency fund elsewhere.

Also you're able to switch your NISA provider (anytime during the financial year or afterwards), if they change the returns rate, or if you find a better deal elsewhere; But you must fill in a transfer form and get it transferred, DO NOT withdraw the cash, and open a new account elsewhere. A new NISA account eats up your cash limit for the current year.
For example, if I had invested £3000 a few years ago in the old ISA and wanted to switch to a higher rewarding NISA account, if I withdraw that cash and put it into a new NISA account. I lose £3K of this years £15K limit. If I transfer that old account, to the a new account, I still have my £15K limit for this year.

Some NISA accounts also have a very slow withdrawal rate (120 days in some cases to access your money), and some of them will penalize your returns if you withdraw from an account you have opened in the last 12 months. Read the small print - but in most cases, I find that the penalties and low access, are acceptable, as the returns are still greater than the paltry 0.01% a current account pays (and then you get taxed on that too).

Finally once the financial year has ended, you are no longer able to add (you can still withdraw your cash) to the NISA for that year. A new £15K limit will be imposed and you can open up a new NISA for the next year.

So from 5th April 2014 to April 2015, you can invest £15K. If you do not use up your £15K limit by 5th April 2015, you cannot add to that account any more. But you can open up a NISA for the April 2015-2016 financial year, and that year will give you a new £15K limit (this depends on the government, they usually increase the limit as inflation rate increases). This limit is not tied into an account or a bank, it is tied to a person, you, and applies between april of one year and the next. After which a fresh new limit starts. Any money you save this year continues to gain returns. Hence why I strongly urge you to use up as much of this limit as is possible, before the start of the new financial year. Obviously withdrawal from the account removes that tax-free shield it has. A 3 year old ISA will continue to be tax-free until you take the money out and put it into a savings account or something. Sadly, you cannot top up that old account any more. So again, I urge you to try and leave old ISA’s alone, and let them accumulate.

How to maximise profits
Kill off debts. Most lenders charge a higher amount of interest on debts than a NISA can return. A £100 debt on a credit card will leave your bank balance -£134 at 34% APR. A payday loan, pfft  -£200 or more. An overdraft or personal loan of £100 at 5% will leave your bank balance at -£105, once paid back. The tax free NISA gains on a £100 at 3%  will give your account £103 at the end of the year. Use the money to pay off your debts first or your returns from your NISA will be wiped out.

Siphon the money into a NISA as soon as possible. Most people only wait until the end of the financial year, near the deadline for the year end, as they accumulate cash in their current account, before investing in a cash NISA. This wastes valuable tax free savings, and the only entity that benefits from this is your bank, as your current account probably does not beat the returns of a good NISA. If you invest a month prior to the deadline, £15000 will get you £37.5 tax free returns, for the year. Invest at the start of the year, and you will accumulate £456 tax free savings. If you drip feed the account from your salary, you will still reap more benefits than a lump sum at the end of the year.

Play the banks. Savings in current accounts are generally quite good, with Santander paying up to 3% on sums of up to £15K, for earnings of £564.23 for the year - but don't forget that the returns are taxable, leaving you with £364.98.
Nationwide FlexDirect, though pays 5% on sums of up to £2,500, so that £2500 would earn £75 in a cash NISA, but  £125 at nationwide, which amounts to £100 after 20% tax. Its worth £75 after 40% tax. So it could be an extension to your £15K cash NISA limit, as it still beats most of the other accounts out there. Also a current account gives you access to your money instantaneously. I recommend utilising both.

Do not withdraw. If you decide to withdraw from your NISA, the amount you withdraw is not taxable. So your £15,000 NISA will give you £15,456.23 after one year, but once taken out of the NISA and sitting in your bank account returns you get from your bank are now taxable. So if you're planning a holiday or buying a house and need cash, do not withdraw earlier than you need to as you lose the tax free earnings (think £30 or £40 lost out on, if you withdraw a month earlier than you need the cash).

Keep an eye on your old (N)ISA accounts. Banks may change their return rates, and may have ‘forgotten’ to let you know or you may not have read that letter they sent you. If rates drop, transfer the account, as soon as possible.

Consolidate old ISA accounts. Another tip, not to maximise profit, but to save you some time (time is money, afterall), you are able to consolidate your previous NISA accounts into one. This lets them all share the same returns rate and also lets you keep an eye on them from one online account, or a single telephone call, as opposed to having to log in multiple times to multiple accounts to check balances and rates of returns. Discuss this with your banks and they can consolidate all old accounts in one place.

Thursday, 17 July 2014

Shaving the cost of shaving

18 months ago I took the plunge and went for my first ever shave with a straight razor. This was prompted by the many discussions online regarding the benefits of wet shaving. I have not looked back since then.

For many a man, daily shaving seems a chore; waking up a little early to scrape your face to remove the remnants of stubble growth that takes place over night. And the plethora of ruddy shaving equipment on the market makes it all too easy for us to continue to damage our face on a daily basis, just to save a few minutes of our time. And marketeers would lead us to believe that its perfectly fine to have a mediocre shave as long as we buy expensive multi-bladed shaving equipment and some chemical gloop. Nada, no more, I wanted out, I wanted to treat my face better and I wanted to enjoy my shaves.

When it comes to old school wet shaving , there are 2 choices, either the double edged shaving razor or the single edged straight razor, which is even older and perhaps employed by your great grandpa. I chose to go with the latter, having seen Clint Eastwood use it in a movie. (Its not just Clint, many manly figures shave like this).

But either is fine and in retrospect, the double edge razor would have had a lower learning curve for me. I opted for the straight razor, which had quite a steep learning curve. I wanted a razor which used disposable blades, the reasons for this were manyfold; First, looking after the razor would be easier, than the stropping, sharpening and oiling required on a traditional straight razor. Secondly, if I couldn't get the technique right or my face did not take too well to the fine shave promised by the straight razor, I could sell the unused blades or experiment with different blade types. Finally, the initial outlay was a lot lower. A decent Dovo straight razor would have set me back at least £70, then the leather strop, stropping paste, sanding block and so on would have mounted to the cost. All in all, I shelled out £27. Here is what the £14.95 kit included:

  • A stainless steel straight razor
  • Pack of 100 Derby blades
  • A shaving brush (boar hair)*
  • Arko Shave stick
  • Alum sticks (in a cardboard fold out matchbox)**

* The shave brush was rubbish, so I got myself a Vulfix 404, (in black), due to its favorable reviews, at about £10.
** I also got tempted to try a larger alum block, which my barber gave to me for £2 (the same sized blocks are about £6 on amazon)

There is a wide variety of lovely
shaving creams and soaps available
I normally find myself spending about £12 a year on Gillette cartridges and shaving cream cans. So the initial outlay may seem extraneous. However considering that the, razor and brush do not have to be replaced, the ongoing cost, year after year, are just the shaving soap, alum block, and blades.

After 18 months of usage, I can confirm, that I have not had to replace anything. That's right, I have not spent a single penny on shaving since that £27 initial outlay.

Here are what the costs might be once I do run out of replacement blades:

Assuming that I use a blade for 2 shaves before disposing of it, and I shave twice a week. I can stretch 50 blades to last me 52 weeks, so 1 year. The whole pack will last me 2 years. Ebay sellers list derby blades at £4.99 (inc. p&p) for a 100 blades, so yearly that's a cost of £2.50.
The reality is the derby blades are usable far more than that, and I find them dulling after 3 uses, and completely useless after 4 shaves. So, that £2.50 is slightly pessimistic, I expect the cost to be closer to £1.25. The most optimal, sharpest, smoothest shave is either the second or third shave, for my skin and bristles, YMMV.

Again assuming I can use half a shave stick in a year, (the reality is the arko shaving stick is still going strong and I am about halfway through it. It has a lovely smell to it and lathers really well), shave sticks cost 49p in the UK. So my yearly cost is 25p.
(Asda and Tesco both sell palmolive shave sticks for 49p, and from what I hear, it is one of the better shaving soaps out there). 

Alum block is not necessary, it is soothing (and horrendously painful at first, especially after a good sharp shave), but it helps your skin heal and closes up any capillaries you may have opened during shaving. I estimate my £2 block to last me at least 5 years, as it seems like it has not shrunk at all since I have been using it (the corner that I do rub on my face, is slightly rounded). Since I do not use it all the time, I do not think I will add it to my ongoing costs.

I need the half penny to be
reintroduced to measure my shaving costs
My very pessimistic costs, then are £2.75 a year, and shaving twice a week, thats 104 shaves, making my cost per shave equal to £0.026 (or 2.6 pence per shave). And, being optimistic, since I cannot use as many blades and as much shave soap as my pessimistic estimates within 12 months, my current costs are less than 1.5 pence per shave.

My shaving journey has not all been about driving down costs, I have improved the quality of my shaves, I actually look forward to having a shave, as the lathering process and careful shaving is quite therapeutic, and not to mention, having the sharpest bit of metal put to your neck just makes you feel alive and so very manly. The cheaper costs are a side benefit.

At less than 2 pennies per shave, thats a lot of cost shaved off the cost of shaving. Adios Gillette.

If you are interested in learning more about wet shaving, and interesting in putting together your own kit, here are some resources to get you started:

These are the resources I found most useful (in order), I cannot recommend Art of Manliness enough, every article they have is a gold mine of information.
Art of Manliness
the HUKD shaving thread

Other forums you might want to visit, browse and ask questions at:
Badger and Blade
The Shave Den
The Shave Room
Straight Razor Place
Shave my face

And finally, do not forget the power of visual learning, use youtube!

Wednesday, 16 July 2014

How I got 22.5% guaranteed return on my investment

I just got myself a 22.5% guaranteed return on my investment.  Impossible you say? Not at all, it’s plain common sense.

First direct are offering £125 incentive to switch to their 1st current account. This is a limited time offer as, at the end of this month, it reverts to £100 again.

All you have to do is go to their site and click on apply now, fill in details of your current account and then within 7 days they will move all of your direct debits and payments to the new account. And you will get £125. But do read the terms and conditions, here are the most important ones:

  • ·      There is a £10 monthly charge which is waived if you have an income of £1000 per month (salary of £12000 after tax). There are other ways to avoid the fee – read on.
  • ·         To qualify for the £125, you must switch from an existing bank. Do not open a new account with them.
  • ·         £250 fee free overdraft
  • ·         Pays no interest on balances, but will give you a separate 6% interest paying savings account.
  • ·         No need to set up a direct debit to receive benefits (unlike some other current accounts that require direct debits set up)
And they seem to have great customer service, with humans at the end of their phone lines, which are open 24/7.

So what was that thing about return on investment? Well, I have multiple current accounts (as do all finance savvy individuals). So, I switched one of my dormant current accounts to first direct. And got myself £125. But what about that pesky £1000 monthly fee – well after a brief perusal of their site, they state:

Is there a charge to bank with first direct? Banking with first direct usually costs £10 a month, but you will not be charged this fee for the first six months from account opening, when you pay in at least £1,000 to your 1st Account each month, or maintain an average monthly 1st Account balance of £1,000, or you hold a selected first direct additional product. Take a look at our Interest rates and charges for more details of other additional products.

Which was confirmed with their customer services team over the phone. So here’s my plan:

  • ·         Switch accounts (£125 reward)
  • ·         Put £1000 into the account and leave it for 6 months
  • ·         Switch away after 6 months (£100 for leaving)

So for investing £1000 for 6 months, I get back £225. Which is a 22.5% return on investment, for very little work, I cannot find any other investment vehicle that offers those kind of guaranteed returns. Even without leaving them after 6 months, 12.5% returns trumps the stock market for most average investors.  And the benefits are vast, instant access to cash (plus that overdraft) – just pay it all back before the end of the month, and there are no fees.

I’m not advocating milking the bank just for money, after all they are one of the few banks that offer truly great service, so by all means I might stay with them after 6 months, but let’s see how annoying Halifax get in the meantime, their £160 this year is quite enticing for now.

So what are you waiting for, go and earn some free money.  Comment below to let me know your thoughts and feedback.