Getting back to basics

Having looked over my recent blogs, it seems they focus on the negative side of things, - why education is wrong, more gloom and doom but today I want to be a bit more factual and utilise some common sense about the current economic climate and how you can try and minimise its impact on you.

Firstly, all these things are quite dependant on having a job. A regular wage, no matter how small, is kind of essential.

Now I don't think that the following is going to be new to anyone, this type of advice can be found at www.moneysavingexpert.com with the exceptionally chirpy Martin Lewis but lets just re-iterate what the problem is first

DEBT

plain and simple.

Sorry to state the obvious but we need to reduce our personal debts to put us in a better position to save.

Reducing debt is hard work and will take major sacrifices. Again Martin Lewis and the forums on MSE can give you some very practical and achievable ideas. In my own experience, you need, shelter, heat and light as your essentials and so long as that is covered (food is helpful but I will get onto that in a minute) then the rest of your income can be used to reduce the outstanding debts.

By the way, when I say heat and light, I do mean being a little more frugal with the thermostat, re-discovering the wonders of woolly jumpers and only having lights and appliances on when you need them. This is particularly challenging to teach children.

An aside.

Today, after we picked up my son, he opened the front door for us and then proceeded to turn on every light in the house to 'welcome us in' as we unloaded the car. It was a nice; thoughtful, gesture - to help us really but was greeted with 'what the heck are you doing boy, don't you know how much that costs?'. To which he replied quite honestly "No". Kids - they are precious.

If you look at business, when they need to make cutbacks, they reduce costs, find efficiencies and become diverse in approaches to increase sales. Look at your home in the same way.

The next tip is to increase the income. Now lets get a bit clever here. First increase your income by reducing your outgoings. Heat and light I have covered, but what little luxuries can be cut out of the normal weekly shop to make the luxury a monthly luxury?

Do you need the Finest brand? Can you use something else for 3 weeks and have the last week as treat week?

By doing these small things can have a significant impact on the whole monthly shopping bill.

The other way to increase your income is to create the money - no not printing money, but by exchanging goods or services. E-bay, online auctions, car boot sales etc. If you don't want it, try and sell it, if it doesn't sell, give it to the charity shop - it will be made use of somewhere.

An important note: These suggestions require time and effort and a great deal of integrity and will power. Realise that you will never become a millionaire selling your unwanted trinkets but any money extra means more paid off and less interest.

Use these earning to reduce credit card debt. Credit cards are great, if you pay them off in full every month. If you can't it's a slippery slope and it only leads down.

Now lets look at the mortgage.

If you have one, your mortgage is likely to be your largest debt.

I won't get into figures because Martin Lewis' website has overpayment calculators, and sound advice so look at his site and seek advice before making massive payments/commitments on your mortgage. You also need to understand the terms of your mortgage to make sure there are no penalties - again this is common sense.

To substantially reduce your 'debt' you will need to pay off capital. To speed up your debt free life, you need to overpay your mortgage

Why?

If you overpaid by a small amount, it reduces the capital that the interest is calculated on. The more capital you repay, the less interest is applied. If you are currently on a base rate tracker and it is low, your normal monthly payment is working harder for you already. If you are in a position to overpay your mortgage and don't have any other debts, do so now. Make hay while the going is good because sooner or later the interest rates will rise and when they do, your normal monthly payment won't be touching the capital as it once did.

The net result is a much reduced term, reduced term, mean less interest paid. In real world terms, this could be tens of thousands of pounds.

This does work. After a re-jig of our own finances, we began overpaying and coupled with the reduced interest rates, our term has reduced by at least 5 years.

Please don't be fooled into thinking that your savings, investments and endowments will provide the money to pay off the remaining sum, it is highly unlikely that they will. Every 6 months or so we get the 'alert take action now' letter. Start paying off now and use the endowments (when they mature) as bunce!

However, a very important tip.

These times can make people edgy and are as much about cautious thinking and preparation rather than knee jerk reactions. Panicking is not a good option. If you can, before hitting your mortgage, get yourself a few months of buffer - just in case. At least that way, you will still have a place to live if the worst happens.

And lastly, people are very tempted to 'change' things because of the downturn, these changes in direction could throw you head long into the fire. Heed this, if it was working before and rather well, don't change it, progress it so it is appropriate for the current climate but keep working very hard and eventually the results will come through.

Till next time.

When your bubble bursts!

I think that almost everyone has had a rude awakening with all the stuff thats happening with the economy

However, the economic downturn hasn't hit everyone in the way that the last recession did. A lot of people are 'okay'. In their own little worlds, if you; can pay the bills, have benefitted from the interest rate cuts and have made sensible cutbacks in your lifestyle, your own little world could be quite comfortable and potentially be financially better off.

The problem comes when something rocks the boat, for most it's when that dreaded letter is sent or a meeting is called by your employers. It's the infamous, and remarkably unwelcome, 'we need to make cutbacks' theme.

Now what we see on the news is that companies are 'making redundancies and millions more workers are going to be un-employed'. By the sound of the media, all that has ever previously happened is that companies get in to hard times and make people redundant without even thinking about the other possibilities. This isn't the case, I am sure that most organisations look at alternative possibilities

Possibilities that can ease the financial/cash flow burden and still keep the workforce and therefore the expertise in the organisation.

Things like;

• Wholesale wage cuts. If everyone gives a bit, the sum of little from many make a lot.
  
• Offering a reduction in hours if you are in a role that is less busy. This option not only eases cash flow but enables you to be able to earn additional income elsewhere.
  
• Working from home. What is the cost for people to work at work? Of course, their role may not allow them to work from home though.
  

These items on their own could potentially save a job in the workforce. With minimal impact to your own life.

I say that flippantly of course as we, as a nation, have been encouraged to borrow, borrow and then borrow some more to fund a lifestyle based on grossly inflated house prices. The times where we 'needed' to replace our TV with the most up to date version, to get the latest games console or i-pod are now in question.

No-one has been safe and almost everyone was duped in some form or other as our house equity increased, the loans came a plenty, with us thinking we were safe in positive equity, and then what happens? The market crashes and the bubbles burst.

We as a nation and as individuals need to learn our lessons from these troubled times. To start making provisions for these rainy days, to become a nation of savers again and to reduce our own personal debt.

Only by reducing debt can we stimulate spend.

We cannot stimulate spend by borrowing more.

By teaching ourselves and our young ones the value of money and of delayed gratification i.e. saving for what we want, rather then getting it now on a credit deal.

Credit is a useful tool and is sometimes essential, but I have been taught by people various, you should never get something on credit that you couldn't afford to buy. To live on credit is to live on borrowed time.

Education (or ejukashun)

Rant alert.

I am getting remarkably hacked off with our so called education system in this country. 

Schooling is meant to prepare our young folk for the world of work, to understand what it takes in the world of commerce and industry.   At the younger end of the scale, it is to teach to read and write and comprehend what is written and what is in front of them.  To garner an understanding of the subject.

But what is it now?  I t feels like it is more to do with preparing for tests rather than actually teaching them anything.  I don't blame the teachers, they have a tremendously hard time trying to teach through all the political correct rubbish and regulation and health and safety and ensuring that the children don't feel pressured or get told no . Aaaaaaaaarggh.  In fact I really pity the teachers because it is a vocation to teach and a good thing to do.  To put yourself in front of 2 dozen (more like 3 dozen) children/teenagers who think they know everything and actually engage with them en-masse must be a calling because no-one on their right mind would subject themselves to that these days.  teachers aren't allowed to discipline children 'because even if they are naughty it breaches human rights' oh please. The direct result is absolute lack of respect for authority.

So teachers, I really feel for you.  I really want you to teach but you are 'guided' (told) to do this by our illustrious government.  Thats another rant and done far better by those on Pistonheads.

What the system does is prepare the kids for is tests and tests only.  And by doing so, excludes those who struggle with tests or those that are so brilliant, they could do these tests with their eyes closed.   I would call it, in fact - training.

Just to clarify, training is to impart knowledge and information about a certain curriculum.  As an entrepreneur I know called it 'by rote'.  This means learning it piecemeal or parrot fashion.  

This is the best way to get knowledge across for tests and exams.   To educate is to impart the knowledge and the means of using it effectively.

Example.

You can train a child to do a sum in a certain way and they can do those sums because that's the way they have been taught.  Sums for sums sake.

But when you educate a child to use the process in different scenarios, that has so much more value for proper life skills. Sums to work out what they earned for pocket money and where it went.   The next step is household budgeting, work budgeting etc.  

Forgive me for using a trivial example.   But the point remains the same throughout all the subjects.

Don't get me wrong, their needs to be stages and levels of learning that are appropriate to the capability of the individual and this is where schools get it completely wrong.

Children are currently progressed not through ability or capability but by age.  This method again only caters for the average child, those born between a certain time with an expected level of understanding.  

Those born later and consequently don't have those vital extra months of mental maturity suffer - greatly.  Those born early are usually bored because they can do the subject easily and are not challenged.

Surely a better way is to make sure that before they move through to each year, every child reaches the designated capability level.  In one of the Nordic countries (can't remember which) they keep the small children in the first year until they can read a bit, write a bit and do some maths a bit.  I am not sure how much a bit is but I can guarantee that it is to a higher standard than some of our children who are studying for their GCSE's at the moment.   Before I carry on, I must state that this idea has been bandied around before and I read it in the Mensa Magazine.

By adopting this principle, no child would ever leave school without the basics of reading, writing and arithmetic.  For sure, some of them will leave a year or two later than their peers and some will be in a position to leave sooner, there will be mixed year groups - possibly upto 3 or 4 years difference in certain exceptions.  But guess what, the exceptions will be easy to spot.   The prodigals and geniuses will fly through the years, they can be challenged at an education level appropriate for them, those that struggle can be easily identified and extra help given thereof and the rest will carry on. 

While I am ranting about education, why don't we add some other subjects onto the curriculum. How about, business ethics, hard work, living within your means -why credit is bad (contrary to Gordon Chubber tongue Brown's dictate that debt and more debt will get us out of recession -fool), delayed gratification, how to write a CV, how to conduct yourself in front of people, what respect means (I really am ranting now). And so and so forth.  

Perhaps, if our education system started churning out young people that had the capability to walk into a job and hit the ground walking, there wouldn't be such a need to import expertise. 

Or perhaps the populace would become better educated to see the tomfoolery that is our supposed governmental leadership.  I think the government prefer sheep, but perhaps that is a different post.

Just a quick story to finish off and illustrate my point.  

I was having a wander around Tesco's near my son's gym class and was in the DVD section.  A young couple - early twenties I guess - were browsing the DVD's looking for their evenings entertainment.  He had a cap on (it wasn't Burberry but you can see where I am going) and she was in what would pass as 'fashionable lounge wear' (and would look alright on Paris Hilton).  They were stereo-typical of their age group.

She - lets call her Waynetta - picks up a DVD and says (shouts) "ere, Wayne (made up), its Soor."

Translation: "Excuse me Wayne, I have found the movie 'Saw'"

He replies "ugh, which one?"

She replies "I dunno, its got Sooor wun vee"

Translation "I am not sure which movie of the series, it says one vee on the cover"

At this point I am now staring in disbelief. 

She couldn't work out what IV was or even began to work it out.  It wasn't hard.  

Saw V (5) was running at the cinema's so that was ruled out, the original - SAW is just that, SAW II and then SAW III are quite obvious.  So even without knowing that IV is roman numeral for 4, you could make a pretty good guess.  

I could stand it no longer, I walked over to Waynetta and said that it is SAW 4, the IV is Roman Numeral for 4.  

Waynetta replies "Ere Wayne, its soor fooor. This geezer knows roman noomarools" I won't bother translating  - say it as you see it, it was really that bad. 

I am not sure where my disbelief came from, the lack of  trying to work it out, the lack of core knowledge around English history (the Romans had quite a bit to do with it) or the fact that she had possibly never seen an old fashioned clock face.  I still wonder to this day.

Had her schooling been appropriate to her, she would have left school with the ability to use her brain to relate IV to Roman numerals and work out what it meant.  

It would take a brave leader to shake up the education system in this country, it would cost a lot of money, but I truly believe it would be for the better and have a much more positive impact on the economy and to make Great Britain Great again and not the laughing stock of the world it currently is.  Thanks Gordon, you have created a nightmare that my children will end up paying for.

What is this country coming to???

Oh my word.

The country seems to be falling apart at the seams. 

What with Chubber tongue Brown ruining the country day by day by throwing our money (yes, you and me) at failing businesses and then letting them carry on with their bad business practices.  Attempts at stimulating the economy with interest rate cuts (good for me thank you very much), reduction in VAT (bad for business), printing more money (devaluing the pound further) and yet he keeps on encouraging people to borrow more, to buy what they want without the real understanding  of the consequence of getting into further debt. 

The banks basically lent the money out and got us into further hot water. 

The answer?  The current ones aren't working and perhaps a more radical idea is needed.  An entrepreneur I know suggested something radical and I think it could work.  He says to cut debt, in half or a percentage to release everyone back out of the cycle of debt.   Not be paid off by bail outs, the banks actually are forced to write it off.  It's happening with bankruptcy's and defaults anyway so why not stop the painful process of bankruptcy and give people a chance to solve it themselves.  There are several forums posts on Pistonheads regarding this

And whats with the weather?  A week an a bit of snow?  The country is not geared up for such weather. Now the debate is whether or not we should invest in infrastructure. Er No. This happening is so infrequent that the amount of money lost is so much less than the potential spend to ready our infrastructure. 

Please won't someone get these eejits out of parliament