Posts tagged as:

bank-accounts

Four quick sanity checks to stop the credit crisis killing your finances

by The Investor on March 25, 2008

Welcome to my site about making more of your money. You may like to subscribe to the RSS feed for the latest articles. Thanks for visiting!

Will the credit crunch lead to a great depression?

We can’t wish away the credit crisis. However sensible you or I have been with our investments, borrowing and spending, we can’t wind back the clock and stop bankers throwing money at poor people who’ll never be able to pay it back, and who are often now paying a far higher price – repossession, dislocation, or even bankruptcy.

The bankers did it, everyone got cold feet, and now we all have to live with the consequences.

However rather than putting on The Smiths, pouring myself a large gin and tonic, and turning to Sylvia Plath, I thought it’d be more useful to assemble a checklist to help you avoid suffering too much fallout from this banker bungling. Who knows, you might even come out of the credit crunch richer! Personally, I’ll be happy with older and wiser – and not much poorer…

Today I look at personal finances. Tomorrow I’ll offer quick checks on investment, your income and more, so please be sure to subscribe to my feed.

1. Get out of debt

Because of the credit crunch, money is becoming more expensive.

I’ve written before about why you must get out of debt. But with the credit crunch being described as a great ‘deleveraging’ (in human speak, banks are reluctant to make new loans, and may even be calling them in), borrowing money instead of saving to buy things is getting even more expensive.

What it means for us

  • If you’re already in debt, I’m not saying your bank is going to call you up tomorrow and demand all it’s money back. Rather, the climate is turning against borrowers for the first time in years.
  • Banks are increasing loan rates where they can.
  • They are less willing to enable customers to shuffle debt using cheap balance transfers.
  • They will look much more carefully at impaired credit records, which will be a factor if you’ve been missing payments.

Action plan

Get out of debt, ASAP. Normally blogs work best when writers tell you personal stories, but I hate debt with a passion and have avoided it ever since I left college. If you’re struggling with debt, one of several good blogs on the subject is Blogging Away Debt. (But please comeback soon!)

[click to continue...]

{ 6 comments }

Your ultimate guide to UK savings

by The Investor on November 20, 2007

piggy_bank.jpg

Cash is the safest place for your money in the short-term.

Sounds obvious, but cash is money. Shares, property, bonds, gold and pension funds are all assets whose value constantly fluctuates according to the whims of their markets. You can only be certain what such assets are worth when you come to sell them.

In sharp contrast, while the real value of a £20 note will go down due to inflation over the long-term, short-term it’s the safest store of value there is. You know it’s worth exactly… £20.

The price for this safety is you can expect lower returns from cash compared to investing in shares, over periods of five years or more.

Note that I’m talking here about keeping the interest you receive in the savings account, to benefit from compound interest over time.

If instead you spend the interest you receive, the real value of your savings will go down with inflation. Right now that would mean your cash would lose 3-4% of its spending power every year.

Despite the low returns, everyone needs some cash stashed away for a rainy day – or more specifically for when the roof leaks and you need to get it repaired.

You’ll also want cash savings for near-term known expenditure, such as school fees or a house deposit. You don’t want to lose your dream home because the stock market happens to be having a bad month when you come to buy, for example.

You might also keep some proportion of your long-term investment money in cash, depending on your views on the stock market, and increase the proportion in cash savings if you’re feeling very gloomy.

Just remember, over time you risk losing out to inflation, so you really want your long-term money in assets like shares or property.

Cash savings are the simplest of investments, but there’s still plenty to cover. Let’s get going.

[click to continue...]

{ 1 comment }