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Category Archives: Money

Resolutions, Schmesolutions! Part 2

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Posted on January 11, 2007 – 09:29

That New Year came and went a bit quick: I didn’t even get ’round to producing my Resolutions Schmesolutions Part 2 post – shame on me! Although, here it is, slightly delayed… better late than never hey?

So, I may be what a lot of people call pedantic and slightly obsessive compulsive. No matter how much truth lies in this it is definitely true that I like to organise things, for better or for worse – and usually the latter, which annoys me! This blog acts as a great place to organise thoughts and construct plans. That’s why, this New Year I am going to use this blog as a regular place to organise and discuss my various plans.

So what are my ‘non-resolutions’ for 2007 then? They can easily be categorised into four broad categories: Food/Health, Work, Hobbies/Travel and Money.

Food/Health: I need to start a proper diet. Not diet in the 21st Century meaning of the word but in the actual dictionary definition of the word: a diet as an eating regimen. One that is healthier than my current one and that is more enjoyable. I’m talking more eastern fresh food and less western modified products; fish; prepared lunches; a lot less junk food and more experimental, colourful and flavourful cooking.
‘Menus’ would be a good idea too as with forward planning I can buy nicer, fresher, cheaper food from local markets rather than plastic-laden, reformed goods from supermarkets.
Playing sport regularly would be good too as my once weekly Squash sessions are turning into once monthly.

Work: A third of my life is spent at work: 8 hours a day, sat in the office, writing code and not progressing – just earning. Investing in myself is key to progressing whilst also earning. Building my work-life reputation and increasing my future worth will in turn further my prospects and undoubtedly make this third of my life more interesting and, dare I say it, fun! Courses, certifications and training will all help me to obtain this, as will offering myself up for opportunities that arise in work and at home. Also, enthusiastically working on projects outside of my day-to-day employment can’t fail but help.
As well as working, a further third on my life is spent sleeping. This leaves, after preparing for and commuting to work and preparing and eating meals, around 6 hours. I plan on rising earlier in the mornings and getting into work at a more respectable time, allowing myself to get home from work much earlier and hence reducing my travel time considerably (no rush-hour to contend with) leaving myself with more time at home during more sociable hours.

Hobbies/Travel: I want to learn to take much better photographs than I currently do, make good progress on my personal projects and travel more: all whilst still being able to sit down, watch a film and have a drink.
A big one though is that I want to make the Internet profitable for myself. How? I’m not quite sure yet, but I do know that I do not want to do it with auction websites and in an ideal world I would like to think that it could open up some doors for myself and possibly lead to another income stream.
Writing for an average of 30 minutes a day would also be nice but is ambitious. It’s not something I’m going to do straight away and give-up on within a few weeks, but rather something I want to work towards. Undoubtedly blog based, I hope this will be a method for me to improve my style and content here.

Money: The ‘big gun’ of my New Years plan and something that I won’t discuss here right now to avert a fully blown (and boring) essay.

I’ve given myself a fair bit to do here and the hardest part is going to be how to start and how to continue. I’ve come up with a simple, two step process for hopefully completing all my objectives or, at least, realising that it was futile: progressive goals and ‘freeware’ testing.

Progressive: These goals are the ones that I neither plan on or hope to achieve immediately and hope to achieve in the long run by working towards a goal slowly. These include writing; photography; project work; exercise; and my work plans.

Tests: You can download ‘freeware’ programs from the Internet to use for a 30 day trial period. When these 30 days have passed and if the program is something you cannot use or can do without you delete it and do not use it again. However, if you realise after this period that it makes your life easier, better, or is something that you cannot now live without you purchase the program and make it part of your life. This is what I plan on doing with a few of my objectives: testing them for a month and seeing if it was worth it or whether the goal was futile.
If after this month trial something has made my life better or I want to continue it, it will be a lot easier to continue as I would have already been doing it for a month. If I want to quit: I will.
The foundation of this test is: if something is difficult I can continue doing it with ease for a month (“I don’t like getting up every day at 7am but I’ll continue for a month and then give up.””) but when that month passes I may be used to it and it’ll be easier to continue (“I hated getting up before but now I’m used to it.”). Whereas if something was not enjoyable or not as expected I’ll simply quit (“I ate fish at least twice a week but didn’t enjoy it so now I’ll stop.”). This will be a better method for my diet, early rising and some of my money plans.

How are you planning on sticking to your resolutions or plans?

Resolutions, schmesolutions!

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Posted on December 20, 2006 – 13:59

A few years back I made some New Year’s resolutions; one of which was to keep a regular diary. If the eclectic posting dates on this blog are anything to go by, you can guess that this was about as successful as a lead balloon. I’ve never considered New Year’s resolutions since. That’s why this year I’ve decided to throw resolutions out completely in an attempt to actually stick to one or two “goals”!

The last 6 months or so have been psychologically and financially significant for me; I’ve started, for the first time in my life, to mange my finances properly, set targets in my work and home life, eat more sensibly and healthier whilst being more socially aware. These things weren’t accidental: I worked towards them gradually, and I’m still a long way off perfecting them.

Whilst this gives me clarity and a target I want to achieve in the relatively near future, it’s also very confusing: I now know what I want but I don’t necessarily know how I’m going to achieve it or how long it will take.

  • I’m managing my finances; but why? It’s not just to ensure that I’m not an identity theft victim (1 in 10 in the UK are!) or to ensure I’m not spending too much money on unnecessary alcohol, snacks and food: I want to increase my wealth by spending more economically. How can I measure my success at this, and how can I even start?
  • I’ve set targets at work so that I can become more successful at what I do. What exactly is being successful at what I do? What exactly is desirable – what will make me more employable?
  • At home I want to practice and get better at my hobbies. I want to learn to take much better photographs than I currently do. I want to make good progress on my projects whilst still being able to sit down, watch a film and have a drink.

How can I train, holiday and eat better food whilst not spending so much money? How can all the above tie-in with me being more environmental and socially conscious?

There’s a way… but I’m currently trying to find it. I’ll let you know what I find before the New Year.

How to Not Work For a Living

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Posted on November 29, 2006 – 14:12

Recently I’ve been reading Steve Pavlina’s very interesting Personal Development blog. Now I don’t agree with everything Steve says and have also sometimes thought he may be a bit of a quack, but what I do know is that Steve knows how to write convincing articles. One such article is ‘Ten Reasons You Should Never Get a Job‘ which I would really like to rename ‘One Really Good Reason You Should Never Get a Job’.

And what is that reason? You are trading your time for money and only getting paid whilst you work – this is impractical and inefficient. To me that sounded odd at first as surely that’s what earning a living is all about, right? Well, now I realise that I was wrong and it’s obvious really – I just needed it to be pointed out to me. Why should I only earn an income while I’m working, especially as I have, or can easily gain, the expertise and knowledge to earn it constantly? Getting paid whilst eating, sleeping and enjoying myself is quite the attractive prospect.

To do this one must build a system that can generate a passive income (of sorts) 24/7 – possibilities can include starting a business, building a web site (Steve earns £20,000 from his blog per month!), becoming an investor and generating royalty income from creative work.

To paraphrase Steve, this system must deliver an ongoing value to people and have a way to generate income from it so that once it’s in motion it runs continuously whether you tend to it or not. Essentially the system model must involve a fixed-time investment that people can extract value from continuously so that the bulk of your time can be invested in increasing income (by refining the system or spawning new ones) instead of merely maintaining it.

I would like to look into some of these possibilities and see how viable one of these systems would be for me. The problem is, my time isn’t very flexible at the moment so to implement and generate an income stream in this way would be quite difficult – learning for the future is always a good idea though. Got any ideas?

Losing Money Every Day

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Posted on November 22, 2006 – 14:32

Now that I’m a bona-fide working man, I’ve recently been thinking about whether or not to increase my minimum, compulsory payments to the Students Loan Company (SLC) to pay off my Student Debt. Now this debt is no meagre sum – a fair bit over £10,000 – and at recent projections will take me several decades to pay it off (if I pay the minimum and never receive a pay rise).

Currently it is compulsory to make payments to the SLC to pay off this loan when you earn over £15,000 per year. The payment you must make is 9% of your wage, over the £15,000 threshold. So, if you earn £20,000 annually (pre tax) you must pay 9% of £5,000 a year – £450. For most, this will be paid in monthly instalments throughout the year using the ‘Pay as you Earn’ system (PayE) – you don’t need to do a thing to pay off the minimum.

The SLC student loan does not gather interest though – you may think it does when you look at your annual statement, but what you’re actually seeing is the debt increasing with inflation – calculated using the Retail Price Index.

The SLC loan is guaranteed to only increase at the rate of inflation – for life. This means that the government or the SLC are not making any money from the loan* – it is the cheapest form of debt available. (The UK government has similar WWII debts, and this link explains them and also gives some information on paying off student loans.)

If your bank account gives you interest higher than the rate of inflation, you’ll actively be making money when your funds are in your account doing nothing, so if you were to use this money to pay off an inflation-only loan, you’ll be missing out on the interest your money will earn you whilst it is in your bank account.

Here’s an example:

You owe friend A £5. Friend B owes you £5.
Friend A is not charging you anything while you owe him money but you have 10 days to pay off the debt at a minimum rate of £0.50 a day. You are charging friend B £0.25 a day whilst he is in your debt, regardless of by what amount. You have no money.
Friend A is the SLC loan, friend B is your bank.
Is it better to:
a) Take £5 off friend B on the first day and give it to friend A to be totally debt free?
b) Make friend B pay you £0.50 a day (£0.25 interest and £0.25 of the debt) and pay this directly to friend A daily?
The answer is the second option, as you will pay off friend A’s debt in 10 days (you’re paying the minimum) but over the period of friend B paying back his debt to you (20 days), you will actually end up with an extra £5 in interest.

So, what are we supposed to do? The answer is simple: pay off your student loan at the minimum rate as long as your regular bank account gives you interest at a higher rate than that of inflation. If your bank does not provide you with an interest rate higher than the inflation rate? Change your bank now! If you don’t you’re actually losing money every day.

Student Loans Company
Government WWII Debts
MoneySavingExpert – Should I Pay Off My Student Loan?
Bank of England (Inflation Rate Information)

*It’s not strictly true that they are not making money from these loans. You see, the inflation rate (RPI) is set by the Bank of England on a monthly basis but the SLC inflation rate is set annually (March of each year). If the rate is high when the SLC rate is set and then drops dramatically (as it did in the 2005-2006 academic period) the loan is increasing at a rate higher than that of inflation because interest is charged daily on the SLC loan.
What does this mean to you? Just make sure that your bank is paying you interest over the rate of inflation (as set in March of that year) and you’ll be OK.

Penny for the Guy?

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Posted on October 20, 2006 – 16:15

Today I read that in the US you can make any amount of change between $0.01 and $0.99c using 10 coins. This was written to minimise the amount of change carried by a person and also to reduce the amount of change a person may have if they have accumulated a lot and want to get rid of it.

The coins are:
3 x quarters
1 x dime
2 x nickels
4 x pennies

Now I’m no pro regarding American coinage, but could you not obtain the same thing using 9 coins?
1 x half-dollar
1 x quarter
1 x dime
2 x nickels
4 x pennies

You Americans may not have a half-dollar coin though, I’m not sure. Regardless of my pedantry, this is not the point of this entry and nor is the fact that us Europeans can go 2 better (as always, huh?) by using one less coin and also making anything up to 1.10 using the following coinage (this works in both GBP and EUR as we have the same denominations). The following are in GBP pence (£0.01) or EUR cents (€0.01):
1 x 50
2 x 20
1 x 10
1 x 5
2 x 2
1 x 1

This got me thinking about low denomination change, specifically the penny. For starters, I only recently found out that America has a penny – it’s the common name for 1c! I found this out in November 2005 when playing Pictionary with a guy from Woodstock when I was in Prague. Strange place to learn that, huh?

So, let’s get on-topic then, shall we? I was thinking: is the penny worth the hassle? It was well documented a while back in the UK that the metal cost of a penny is fluctuating, in accordance with inflation, around the actual value of a penny – not taking into account the production and transportation costs. So essentially the Royal Mint is spending more than a penny producing a penny! However, the penny is now made from copper-plated steel and as such, production price is lower.

Let’s now consider what are known as ‘micropayments’ and also payments where pennies are included. Is the cost of the physical handling, counting and transporting of pennies (transaction costs) greater than a penny per penny spent? Is it not only the Royal Mint losing money on every penny produced, but the entire country?

With the average UK wage being £9.56/hour, it takes just under 4 seconds to earn a penny. If we assume that every transaction involving a one pence piece takes an extra half-second to complete, then for the retail trade it is understood that £75m (£75,000,000) of employees time is lost annually on handling pennies.

Consider a few more facts:

  • the majority of vending machines in the UK do not accept pennies;
  • retail stores in the UK pay more for pennies than they are worth (£1 of pennies costs a company approximately £1.10);
  • the penny is not legal tender in the UK for amounts greater than £0.20 (stamps are not legal tender at all, and is, in fact, just a myth);
  • hundreds of thousands of pennies goes missing every year due to ‘collectors’ who hoard pennies and other small change in jars to exchange with banks (but never do!).

But would fading out the use of pennies in the UK, Europe or even America save money? There are many reasons to keep the penny – especially for consumers. Classic arguments are:

  • without the penny, prices will be rounded-up (£2.00 rather than £1.99) and this will cost the consumers millions per annum and consumer confidence will wane, with people believing their money will (rightly) not go as far;
  • charities depend on ‘small change donations’ which amount to tens of millions every year. With the removal of the penny, people will be less reluctant to give their change to charities as it won’t be as ‘small’ as it was, causing unfathomable harm to charity institutions;
  • the two pence piece (£0.02) is worth twice as much as the penny, but actually contains slightly more than twice the material, so the increased demand for small change will actually cost more with the increase in production of the 2p piece.
  • the above increase in demand will also effect the higher valued change-coins which are all made out of cupro-nickel which actually costs more than the copper-plated steel the penny is made of (a 10p piece contains 13p worth of cupro-nickel) which would be even less efficient!

Should the penny be scrapped? Be damned if I know!

(For the British among us: did you know that Americans do not use the plural ‘pence’, and instead say “two pennies” rather than “two pence”?)

(Facts all obtained from the Office of National Statistics)