It’s been a while since I made a post on the blog. 

Sometimes we may have the best intentions to do certain things but as events unfold during our days we get sidetracked into doing other things.  Nothing wrong with that, of course, because we have the freedom to choose what to do in any given moment.  The main thing is to be conscious of the things we choose to do.

Now, I aim to limit my contribution to “The System” (through living a simple life) but even so certain agents of “The System” can still creep up, catch me unaware, and extract money from me. 

How’s that? you may be asking. 

Well, as an example, I came down to my car the other morning and found a ‘fixed penalty notice’ attached to the windscreen wiper. 

Strange, I thought. 

The street is a one way street and cars park both sides.  My car wasn’t causing any obstruction or parked in any way likely to cause danger to any other road user. 

It turned out that the police officer who issued the ticket decided, in his wisdom, that I had parked within 7 metres of the junction at the end of the road.  Now, my car was not the only one that would have contravened the regulation but it appeared only mine had the ‘fixed penalty notice’ attached.  

In addition, to my knowledge, no other car has been given a similar ticket in this area any time recently before mine or, indeed, since.  If the police were consistent in their approach to law enforcement and saw fit to patrol here on a regular basis they could dish out their tickets left, right and center.   

Still, the police officer who, for whatever reason, decided to single my car out must have determined that writing the ticket was the best use of their time. (I hope the police officer did not deliberately target my car simply because it’s mine.) 

Maybe this is just how they see community policing should be done? 

Oh, did I forget to mention that the ticket was timed at 11.22pm (no, it’s not a typo!).  Obvioulsy, those of us fortunate enough to live here should be grateful that the police officer never had any more pressing matters to contend with.  Like dealing with drunks in the local public houses or attending to any real criminal matters.

Actually, I’ve measured the distance and it turned out to be 6.5metres.  If only I’d been more conscious and ensured it was another half metre further back from the junction it would have saved me £40! 

Oh well, it’s good practice for me.

And, we live and learn…

Today, my car was back in the repair shop - again.  The correct brake discs turned up, so Steve fited them for me this morning.  It’s all ship-shape now.

I paid the car repair bill. 

£450. 

As a relatively new business, Steve has had a payment terminal installed by his bank so he can accept credit and debit cards from his customers.  Unfortunately for him he never got to use it because I gave him the money in good, old fashioned ‘cash’. 

As I wrote in a different post it was paid from money in our ‘OOF’ Account.  (Ordinary Occurrence Fund, remember?)

Of course, if you have a good handle on your personal finances you should also be in a position to cope with a more serious hit than the car repair bill - such as redundancy or illness, where you can no longer work.  

(Or, if you decided you’d really had enough of your work or the antics of your boss and wanted to tell them where to stick it…)

And, these are real possibilities.  Only last week one of the biggest manufacturing employers here, on the island, laid off half it’s workers in one of their factories. 

A minimum of three months worth of expenses (just expenses now, not income - although for many of you those two figures will be the same) set aside would help you experience a little ‘lightness of being’ and greatly enhance your enjoyment of life.  Of course, if you could manage six months - even better!

Can you imagine how much better it would feel to be in such a position? 

Do you think such a situation is even possible? 

Of course if, like most people, you live from paycheck to paycheck you’re likely to think I’m talking a load of rubbish. 

But let me tell you that it is definitely possible. 

You just need to wake up and decide to do things a bit different. 

It’s possible…if you want it!

(If you got here from anywhere other than my website: www.ifyouwantit.co.uk
feel free to check it out)

How often do you indulge yourself using these two little words:

“What If?”

Many  people I know, habitually, do and they get themselves all worked up in anticipation of some unknown future occurrence. 

Of course, the “What If?” scenario is usually in connection with something negative.  Something that they don’t want to happen. 

And because the unknown situation is that - unknown - they invent so many different possibilities and outcomes. 

It is so mentally tiring and draining.  And that’s just for me when I’m listening to them!  Imagine what it must be like for them…

Much better to go about your daily living, expecting the best for everything you might face in the day but knowing that whatever does crop up you will deal with - at the time. 

You always have done, anyway. 

There is no need to ruminate and formulate all those different scenarios hours, days or weeks even in advance.

See if you can catch yourself using those two unhelpful words…

(If you got here from anywhere other than my website: www.ifyouwantit.co.uk
feel free to check it out)

Last week, the new brake discs for my car never arrived in from the supplier until Friday.  As a result the car was back in yesterday for them to be fitted.

At mid-day I got a call from Steve who was most apologetic.  He had stripped the old discs off only to find, unfortunately, that the new ones didn’t fit.  The supplier had keyed in the wrong part number…

So, I have to wait now until Thursday for the correct discs to be sent and for the job to (hopefully) be finished.

When things are out of your hands and beyond your control how do you react? 

Do you accept the situation as it is and get on with it?

Or do you rail against it?

We don’t have a ‘Primark or ‘H&M’ here on the Isle of Man but I’ve been to Manchester, Liverpool and London and witnessed the feverish scenes in these and other similar low-cost stores.  

In theory, you get bargains and can save a lot of money there due to the ‘low prices’ of the merchandise.  For the majority of shoppers, however, I don’t think that’s the case. 

The baskets the stores have available always seem very big to me.  When you put your £2 top or £3 multi-pack of socks in there it just looks pretty puny, and a little lost, all on its own.  Walking round with it, how silly do you look to all those other  shoppers?  Would you really want to waste your time queuing up to pay for that solitary item?

Much better to fill the basket with lots of stuff.  Each item is only £2, £3, £4 and…and…

So, before you know it, you get carried away and the result is you get home with several BIG bags of the cheap stuff.  Excited, you probably spread it out on your bed and admire it all.  Look how much you got for your £50 or £60!  (Or did you spend more?)

Then the issue of where to put it all.  That can be a struggle can’t it?  Not much room in the drawers and the wardrobes.  If you stopped and looked you’d realise you’ve already got too much stuff and most of it you never wear.  Still, you cram it all in somehow. 

And what you find is that an awful lot of those new bargains never see the light of day again.  You have so much you forget what you have.  Should you ever re-discover an item, long since bought, you probably won’t wear it anyway because it’s no longer in fashion.

Now, imagine if you had just bought one piece of clothing for that £50 or £60.  Would you do the same?  Or would you treat it with a lot more respect?  It’s because the stuff you bought was cheap that you don’t care that much.

Now, I’m not saying that a £2 piece of clothing is necessarily worse than that item at £50.  After all, pricing of goods is pretty arbitrary and often you’re only paying a hefty premium for a particular label or brand.  

It’s more a case of choosing what you do buy with more care and consideration.  You might think about the consequences of your purchase: what benefit is it to you? 

If we spend money on things we don’t need, we are not saving a penny.  Worse still, we are taking our hard-earned money from other (much worthier) expenses, such as paying off debt or making savings.  Things that can be of real benefit to us and our families. 

Less can be more… 

The 112th edition of the Carnival of Personal Finance is up at Frugal Law Student and he’s done a really first-class job of organizing and hosting the carnival. 

My submission (Want A New Car?) is the second one on the list.

Anyway, there are many excellent submissions - why not check them out?  (N.B. You could be there for a while, though!)

My personal favourites, in no preferential order, are:

My Money and My Life’s Retire with $3 million by driving paid for cars;

The Dough Roller’s 10 Things I Now Know at 40 That I Wish I Knew at 20;

Four Pillars And A Baby’s Pay Yourself First (Again);

Millionaire Mommy Next Door’s How I Became a Millionaire While Working In My Pajamas;

Home Finance Freedom’s Homeowner Profits Ignore Huge Costs;

Grad Money Matter’s Campaign Against Financial Myths: Part 7 - Debt;

No Credit Needed’s Store-Branded Cards: A Shocking Look Back”.

(If you got here from anywhere other than my website: www.ifyouwantit.co.uk
feel free to check it out)

We’ve all parked our cars in the supermarket’s car park.

How many of you have had damage done to it while it’s been left unattended?

I used to have a BMW and it happened a couple of times where the damage done was quite extensive, and costly. On those occasions it was due to someone else driving and bumping into my car.

Well, it’s happened again.  Only this time, fortunately, the damage was minor.

Upon returning to my car I found a couple of shopping trolleys abandoned next to it.  And, the offside driver’s and passenger’s doors both had scratches and a couple of small dents in them. 

Some people are so careless and thoughtless in their actions. 

If they had been inclined to walk the extra 10 - 15 yards, to put the trolleys in the parking bay, the damage would not have happened.   

Fortunately, as you may know, my current car is actually 12 years old and, although in good condition, these new dents and scratches are not such an issue for me. 

But how would you feel if it had been your car? 

What if you had ‘invested’ a lot of money in it and were very attached to it?

A survey out today says that some 8.2 million people in the UK have unsecured debt of more than £10,000.  Apparently, a quarter of them regularly struggle to keep up with their repayments.  

And this debt is only for the likes of credit cards, store cards, personal loans and overdrafts. It does not take into account any debt secured on their properties.  You can read more about it here.

Having spent the borrowed money, undoubtedly buying things or experiences they believed would make them happy, these people are now having to face up to stress and feelings of insecurity.   

True.  Having spent the bank’s money may have given them an initial feeling and that ‘rush’ associated with the purchase, or acquisition of whatever, but that good feeling soon fades…otherwise they wouldn’t have to keep going back doing it again and again. 

You know this for yourself.

Being in serious debt can, and will, emotionally drain you.  This emotional cost - anxiety, shame and depression even - robs you of the joy of life,  so you have less of a sense of fun, enjoyment and wonder.   

It is too high a price to pay.   

(If you got here from anywhere other than my website: www.ifyouwantit.co.uk
feel free to check it out)

We live in a really nice, light and airy, two-bedroomed apartment. 

It is one of three in the building which is situated in a lovely, quiet area.  We have a sea view from the lounge.  It is only a very short commute into the centre of town.  Our neighbours in the other apartments are quiet and considerate and we have perfect landlords.  We feel very grateful.

Well, the other day we found out that the apartment above ours is for sale.  It is also two-bedroomed.  Some friends of ours, who have recently bought their own two-bedroomed cottage, wanted to know whether we would buy it.

The short answer was no. 

We like renting and having the flexibility that gives us.  We like to travel.  And in the recent past, every two or three years, we have stopped ‘normal work’ and taken 6 months time off.  We’ve spent one of those six month periods living in England and two, separate, 6 month periods travelling in India, which is our favourite place.

Additionally, should we find that, for any reason, we no longer like living in a particular place we just have to give notice and move.  You never know what’s round the corner. 

Another thing we have to consider is the values of the properties…and here on the island they are high.  The apartment above ours is on the market for £155,000.  (As it happens, that is just a little less than the average value of loans approved for house purchases, in July 07, according to the British Bankers Association - £159,600.)

So, how would the figures work out, Renting versus Buying?

I’ll do it fairly simplistically and only consider the basic financing costs but excluding any mortgage arrangement fees, associated legal fees and also the annual buildings insurance, which can be quite substantial in themselves when you buy a property.

The Rent payable is £625 per month, inclusive of service charge and rates.

Assume a Repayment Morgage of £155,000 @ 6% over 25 years (the standard variable mortgage rate from the Halifax - Britain’s biggest mortgage lender- is currently 7.75%)

Mortgage would be £998.67 per month, consisting of £775 in interest, £223.67 in principal

(As an aside, you may notice that 77.6% of your monthly payment to the bank is interest.  What happened to the ‘good’ interest rate of 6% you got from the bank?)

Service charge and rates £101.83 per month.

Total buying cost = £1,101.50 per month.

Okay, I hear you saying, “What about the tax relief?”

Well, I’ll come to that in a minute. 

But first, why is it that you get tax relief on mortgage interest payments you make to the bank and yet you have to pay tax on any interest you receive on savings from the bank?  It seems there is tacit encouragement for you to acquire debt…and we know who really benefits from that, don’t we?

Anyway, let’s see.  Total amount paid in a year to mortgage company £11,984; Total interest paid £9,225; Tax relief on the interest paid (@10%) £922.50.  Therefore, net amount paid for the mortgage £11,061.50.

Or £921.79 per month, plus £101.83 service charges and rates, makes £1,023.62. That’s a saving after the ‘Tax Relief’ of £77.88 per month.

But wait.

Because the mortgage is for 100% of the cost of the property you have to pay for PMI (Private Mortgage Insurance) - which kindly covers the mortgage company should you default on the loan.  In fact, you generally have to pay this unless you have at least 20% equity in the property. 

So, we also have to add the cost of this insurance.  A typical cost for this, to cover a mortgage of £155,000, would be £697.50 per annum, or £58.12 per month.

And now we have £1,023.62 + £58.12 = £1,081.74.

This makes buying the apartment £456.74 more expensive than renting.

As it stands, at the moment, let’s avoid having so much debt, keep renting and put the £456.74 in a savings account.

Of course, if the property market here took a turn for the worse and prices should fall substantially then maybe we’d change our minds…who knows?

I noticed an advertisement in a supplement of the local (free) newspaper for a shiny, new Mercedes:  The New C-Class Saloon.  Pure Luxury, it proclaimed, for only £355* per month. 

So, only £355 per month and you, too, could look wealthy and successful. 

Does that sound reasonable, or even affordable, to you?

Perhaps. 

But that little * is the important bit of the whole advertisement.  If you go to the bottom of the page you’ll find another *, along with the smallest writing in the whole advertisement to explain:

“On the road price is £29,472.  48 monthly payments of £355. All finance subject to status.  £7,368 deposit with final balloon payment of £11,800.  Terms and conditions apply.”

It is only when you look into this small print that you begin to see the real cost:

Deposit £7,368 + Payments £17,040 (48 x 355) + Final Payment £11,800 = £36,208. 

You’ll pay £6,736 interest, which is just over 30% of the amount that was financed (£22,104). 

Plus, you’ll have foregone the interest you would have accrued on your deposit money over the period, which could (@6%) be £1,998 (before tax). 

And, you’ll have foregone the interest you would have accrued on your monthly payments, if you’d saved the money instead, which could (@6%) be roughly £2,216 (before tax). 

So, lost interest on your money amounts to another £3,792 (after tax of !0%)

The real cost now looks like this:

Deposit £7,368 + Payments £17,040 (48 x 355) + Final Payment £11,800 + Lost Interest £3,792 = £40,000. 

This means you get to keep the car for a net cost to you of a little over £833 per month, over the period.

Of course, this is just to own the car.  We’re not even considering the cost of taxing it and insuring it for the road or for actually driving it…

In addition, those car payments are made with money from earnings after tax and national insurance has been taken off.  So, you’re looking at having to make earnings in excess of £51,000 just to finance the purchase.

What about the second hand value, after those 4 years?  Well, Mercedes tend to have reasonable deprectiation but, even so, you could realistically expect only half the new cost price.  

So, the car that you had to work and earn £51,000 for will only be worth, maybe, £15,000. 

I don’t think that’s such a good deal.

What do you think?

(If you got here from anywhere other than my website: www.ifyouwantit.co.uk
feel free to check it out)