Posts Tagged: financial education

Financial Planning and Budgeting — 2 Comments
10
Sep 10

10 Rules To Change Your Life – Part 1

Do you want to align your financial planning and budgeting with your financial independence? Timothy Ferriss’s Best Seller, ‘The Four Hour Work Week’, is based on 10 principles that challenge the status quo without being stupid. What are these rules?

  1. Seeing retirement as the end goal of your life is a mistake for 3 reasons:
    1. It assumes you have spent your working life doing something you dislike. If this is the case you should do something to change this.
    2. Increasing life spans mean you could be retired for 30 – 40 years. Even $1M in a retirement ‘pot’ will be low also current interest rates for savings are at an all time low.
    3. If the maths works for you in your current position, and you are interested and work hard a week into your retirement you will be bored.So he argues you should see retirement where you are unable to do any kind of work as a worst case scenario because you are unable to.
  2. Your interests and levels of energy go in cycles. Rather than spending your life doing the same thing day and day out consider an alternative. This alternative is what he calls a characteristic of the New Rich (NR). These people decide to spend X amount of time working hard on something then Y amount of time relaxing. They match the hard work to their upswing in energy.
  3. Be productively lazy. As far back as the late 1800′s productive laziness has been seen by the NR as a good thing. You will note there is no relationship to the number of hours you put in work and the size of your paycheck – even in commission related work. The real top earners work smart and focus on what is important and drop the unimportant. You will be recognized by your results and your results are based on your important acts.
  4. There is never going to be a right time. The following quote from the book puts this rule best – “If it’s important to you and you want to do it ‘eventually’ just do it and correct the course along the way”.
  5. Ask for forgiveness as opposed to permission. I have lived by this rule in work. It’s far better to be a troublemaker and make things change and apologize for any genuine distress caused later. People will find many reasons to stop you doing something however when you start to move they will move out of your way.

Being truly financially independent means aligning your financial budgeting and planning with this mindset. Part 2 in the next post.

Andrew Peel

Financial Planning and Budgeting — 1 Comment
8
Sep 10

How to challenge your HMRC tax demand

Getting your tax correct is a big part of financial planning and budgeting. However what if the taxman blunders?

The big news story in the UK at the moment is the scandalous mistakes made by Her Majesty’s Revenue and Customs (HMRC). Last week they owned up to blunders worth £2Bn and blamed it on – you’ve guessed it a computer system.

This week we learn the person in charge of this mess earns more than the Prime Minister and was the subject of an investigation in his previous job for siphoning off money into businesses he was associated with. He managed to leave before any action was taken and the Government put him in charge of collecting taxes. Sound judgement there then.

In addition HMRC have admitted they have 18 million open cases they are investigating. One of the first rules regarding financial education I learned is, ‘pay yourself first’.

Most of the people affected by this debacle are employees who pay tax via our Pay As You Earn (PAYE) system. Your employer deducts your tax and sends it to the HMRC. So the real question is how can the system have gone so wrong? The only logical conclusion is HMRC is incompetent. To have allowed the situation to get this bad before doing something is bordering on gross negligence.

The Government is being very quiet about some key facts and legal rights you can use to challenge a request from HMRC to pay more tax because they say you have underpaid.

  1. The form they send you is actually a Notification of Tax Calculation as opposed to a Tax Demand however HMRC want you to believe it’s a demand. If you receive one the first thing you should do is write back and ask for a detailed explanation of how they arrived at the calculation.
  2. When you do receive the detailed calculation if you still disagree then people on PAYE have 2 choices. If you have been paid your pay and have no other income then your Employer may have calculated your tax incorrectly. In that case you should contact HMRC and inform them you believe your Employer is at fault and they should contact your Employer.
  3. If you only have one job and the amount the HMRC says you have been paid matches your P60 (you get one at the end of the tax year from your employer) then you need a Form A19 from HMRC. Use this form and say you refuse to pay the tax because you reasonably expected your tax to be correct as you provided all the information your Employer needed. In addition most of these Notifications relate to tax year 2008/9. This is over twelve months ago and is another statutory reason to refuse to pay.
  4. If the HMRC refuse to accept your A19 then appeal to the HMRC Adjudicator. They are independent from the HMRC and they are legally required to ensure HMRC behave themselves.

The Government want you to believe there is nothing you can do but pay up. Just remember the principle of ‘pay yourself first’ and contest any demand for tax if it’s the fault of the HMRC. If enough people do this the Government will probably back down.

All the leading tax experts agree avoid simply paying up on the first letter. Let’s face it challenging it is only going to cost a few postage stamps. This whole episode is another example of the conspiracy against your money.

Andrew Peel

Financial Planning and Budgeting — 5 Comments
13
Aug 10

Beware the loan sharks are back

Looking at financial planning and budgeting the Internet has allowed the return of an old enemy, the loan shark.

Today while I was watching TV (yes I do have some downtime) I was shocked to see the return of the loan shark. It was a very different looking version of the loan shark from previous economic crises. This was a very slick modern looking, Internet based beast that appears to be the answer to your financial problems.

One of the most important about financial planning and budgeting is to learn the difference between, ‘good debt’ and ‘bad debt’. Good debt is when you borrow money and invest it in a business and the returns from the business are larger than the debt payments. Bad debt is when your outgoings exceed your income.

Now certainly in the 1960′s and 70′s loan sharks were common in the UK, especially amongst people who know little about banking. People could have obtained a loan from a bank however many of these people distrusted banks. So other wealthier people in the community would offer ‘short term’ loans. These were meant to be a ‘one off’ to see you through an emergency. The issue was these loans were never a solution to the real problem. The real problem being a lack of financial planning.

These people then ended up in a never ending cycle of loans each week and the interest rates were high, 25 -50% being commonplace. By the way that is 25% after just a week, borrow £100 and you owe £125. Now you can guess the next part, they were unable to repay the loan so they take out another ‘short term’ loan. In their own mind being convinced they could get out of the situation. Of course the ‘loan sharks’ always intended the people to become dependent upon them.

Back to the modern version, it starts with a nice glossy advertisement. A woman sat doing her budget but unable to make it balance. The picture changes to the same woman this time with a laptop (questionable priorities in spending straight away) and we are told she can go onto a website and get a ‘pay day’ loan. Of course we are told this is to see her through this short term problem and she can borrow up to £1,000 and have the money in her bank account in 2 hours.

Right at the end of the advertisement is the obligatory legal information. Have you ever noticed this is always written in white, small writing and stays on screen for the minimum time. Well I paused the advertisement and read the legal information. I was truly shocked by the Annual Percentage Rate (APR) 2278%. Compare that to a bank overdraft – the highest (APR) I could find in the UK main banks was 20%. In the other words the modern ‘loan sharks’ are charging 1000 times in interest than an overdraft (another form of short term borrowing). They may be glossier and based on the Internet however in my opinion it’s still financial suicide to use this type of lending.

The key to improving your wealth is to learn the principles of financial planning and budgeting and put them into practice. Improving this area of your life by just 1% a day will lead to over a 100% improvement in 100 days. In addition the improvement is permanent because you have changed your habits.

Andrew Peel

Financial Planning and Budgeting — 3 Comments
10
Aug 10

Success is 50% attitude

Improving your financial planning and budgeting means you are serious about becoming more successful See how two important parts of your attitude affect this.

Successful people in any field have a higher than average amount of two things:

  • Positive Self Image (PSI)
  • i-CAN attitude

To find out more about how these two factors link to success read this article now.

Andrew Peel

Financial Planning and Budgeting — 1 Comment
6
Aug 10

What is your PSI?

Everyone needs a PSI. The question is why and how good is yours? It will directly impact on your financial planning and budgeting.

A major part of financial planning and budgeting is being successful. Success involves three major areas; health, wealth and wisdom.

Under the wisdom area you need a good PSI. So what is a PSI? It stands for Positive Self Image. An important question to ask is why do so many people have a NSI – Negative Self Image? Once you understand this you can work on strengthening your PSI.

PSI is belief in yourself. It is so important that the experts on thought and personal performance say success is impossible without it.

PSI is rooted in whether you believe you deserve success. Interestingly most people believe they can achieve success however far more lack the belief they deserve it.

PSI is rooted in your emotions and what you believe about yourself? It is difficult to improve your PSI by logical and rational argument. In his book The Midas Method, Stuart Goldsmith gives an example conversation of what we say as opposed to what we mean?

Person A, ‘Skiing is for rich people, as opposed to the likes of us. Pity really because I’m sure I would be good at it.’

What we mean the translation of this using a PSI analysis is:

‘I’m a second class citizen and I’m going to make sure I stay that way. I am confident in my abilities though.’

So the issue here is we have a person with a low PSI and a good belief in their abilities. What this person needs to do is work on their PSI.

The really important message to take away from this is that while you need a PSI and a positive belief in your abilities. They are separate. Increasing one will never lead to an increase in the other. So you need to spend time understanding where Negative Self Image (NSI) comes from and how to reverse it. The next few posts will explore where NSI comes from and how to strengthen it.

Andrew Peel

← Older Entries