Money

Money 4

Here’s a post I put together on 29 Sept. but left unpublished, wanting to add a bit more. However, in the meantime, the UK Daily Mail newspaper has just published a scathing attack on Ed Miliband’s (dead) father,and one wonders if it’s just coincidence that it came in the middle of the Tory Annual Conference… for those not in the UK, Ed Miliband is the UK Labour party leader.

Ed Miliband protested, and was given a chance to respond, but in publishing his response, the newspaper immediately published a fresh article alongside, and repeated the first article, adding more inflammatory comments, labelling Miliband senior “evil” as well.

Even ignoring the background (the Milibands are Jewish, the newspaper’s founder was close friends with pro-Nazi ringleader Moseley), there was no obvious reason for such a story out of the blue, with many people speculating that it was simply to stir up controversy for circulation purposes – not an unknown tactic. My point is, however, as mentioned below in this article: “Self-regulation is a waste of space. The only time self-regulation works is while it’s not needed.”
It’s not that long since the media in this country were pilloried for hacking private mobile phones (even that of missing schoolgirl Millie Dowler, later found murdered). One newspaper, News of the World, was forced to close down, but there really haven’t been strong enough measures taken to ensure a bit of decency among the media.

I repeat – wherever you live, don’t let anyone kid you that self-reg. or “light reg.”, whatever, is a good thing.

Here’s my original article:

~~~~~

A couple more tips come to mind:

  • Don’t bother laying down vintage wines as an investment. You need a dark, cool cellar, no moving the bottles around, and you need a buyer. When times are hard, there are few buyers around, there are lots of sellers.
  • Self-regulation is a waste of space. The only time self-regulation works is while it isn’t needed. Think banks, think newspapers.

I spent a few years managing our lending to the diamond cutters in the bank’s books. An interesting, somewhat romantic group of clients, with the links to de Beers, Kimberley and the historic Kimberley Club, where Cecil John Rhodes spent much of his time. If the beer tasted as good in those days as it does now, I don’t blame him. A real, old style gentleman’s’ club, which by the mid-nineties, still didn’t allow women to stay there. I’m sure that has changed by now, though. Hopefully the heating has improved too, I remember staying there once when I had a really bad cold in the middle of a cold winter, and having to keep a bath full of hot water to keep the room from freezing…

However, I digress. The point is, I learnt a lot about diamonds, cutters and diamonds as investment material. Investment-wise, things are simple. If you want a quick way of halving your money, buy diamond jewellery. You won’t get more than half of what you paid for it, if you try to sell it. Buy jewellery for your good lady, but don’t think about taking it back later, even if she would let you. Remember the advertising quote? Diamonds are forever…  Genuine, sealed & certificated rocks will do better, but you have to hold them a long time to have a chance of appreciation. Don’t forget – de Beers has a long-term policy of keeping prices up and avoiding volatility, so you have that to contend with. de Beers is a force to be reckoned with, even with Russian efforts to get more of their stock out into the world markets.

 

One last tip, it set me off about writing this article. I was walking our dog this morning, when my mobile rang. It was someone from my service provider (I won’t mention the name, I don’t have anything against them), saying all the usual, “hi, you’re a good customer, how can we help you further, etc., etc.” Which, as we already know, means, “how can we get some more money out of you…”.

If they’re now hiring people instead of just sending texts to try harder to get into my pocket, what does that mean? Clearly, they aren’t doing that well, they need to bump up sales. So, do I buy their shares? No. Is this an isolated example, or are there others, in other industries? Actually, yes, I see this kind of thing quite often of late, in big and small businesses, in people’s spending patterns (the book trade is a prime example, book sales have been miserable for years), so what can one deduce from all that? Well, put it this way – George Osbourne’s bright, positive remarks about how well things are turning out in the economy may be a bit off the mark…

More later, but note how these clues turn up, even if it’s in the papers, which usually present financial developments too late for you to do anything about them. When it concerns major moves like the above, you often do have time to adjust your self-preservation first aid kit.

~~~~~

P.S: talking about clue-tracking the economy, here’s a news item today (2 Oct 2013): “Social media spam increased 355% in the first half of 2013”. More and more people are struggling to survive, and social media spam levels are another significant indicator.

 

 

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Money: The Roof over your Head

This is important, but sometimes people either forget, or have never been told, just how to respect the value of their home.

Your home is usually the biggest purchase in your life. A lot of people in Europe get along happily by renting all their lives, but I think that isn’t the norm elsewhere. If you’re into owning your own property, then here are a few thoughts:

  • If you have a mortgaged property, you’re not completely the owner until it’s fully repaid. And, as the small print in UK adverts says, if you don’t keep up repayments, you may lose your property.

  • Therefore, it’s important to make sure you keep up those repayments; it wouldn’t hurt to save up and build a reserve specifically to cover six months repayments, so that in any eventuality, whether losing a job, illness or whatever, you’ll have six months in which to get back on your feet. Let me put that more gently, tactfully: Do it!

  • Saving isn’t always easy, but think about it – if you put away just 10 percent of your (net) income, that doesn’t hurt that much. Maybe not every month, but whenever you can.

    Save your small coins. Get the family to do the same. Make piggy banks out of empty soft drink cans, and all the small coins that you don’t normally use (I’m told some people chuck out their pennies! As an ex-banker, I cringe…). In a years’ time you’ll find that you have a pretty interesting amount of money saved up. I paid for air tickets for wife & me on a holiday, through saving pound coins as well as smaller ones.

  • This next one is really important: don’t take out a second mortgage for anything except to improve or maintain your property. Not for a speedboat, not for a holiday, nor anything. Your mortgage is meant to end while you’re not too old to still enjoy life. Once you’ve retired, you will regret the drain on your income if you still have years to repay a mortgage, and you won’t remember the holiday you used the money on.

  • Another, even bigger, never-never: don’t  ever speculate with your property. Not with the roof over your head. If you have a second, holiday property, fully paid up, repeat fully paid up, that’s different. I’ve seen people using their house as security for a loan to start a business, or to finance stock market investments; sometimes you win, sometimes you don’t. If you don’t, you could lose the wife and family as well as the house…

    A simple gambling rule – don’t play with more than you can afford to lose. Period.

  • Repay that mortgage as soon as possible. If you pay a bit extra each month, you can knock years off your mortgage. A small amount, £10 or £20 helps just fine, especially if the interest rate is high.  If rates are in double figures (it does happen. I’ve seen over 20 percent rates), the effect is much greater. A typical mortgage often allows you to repay about 10 percent extra.

    As a side bonus, this could help if you find yourself strapped for cash at some point, as the bank is likely to let you miss a few months payments as long as you’re within the laid down reduction programme.

  • Here’s an interesting one I never came across until recently; some banks, somewhere in the obligatory small print, allow themselves to attach assets like your mortgaged property to help repay a loan or overdraft if you default. Solution simple – don’t take up a mortgage with the same bank that you use for the rest of your personal and business accounts.

That’s all that comes to mind at the moment. If you have other thoughts that might help other people along, I’d love you to write in. If you have an article in you and you want a home for it, let me know.

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USA Withholding Tax II

I’ve just heard from someone about this withholding tax issue. Mentioning no names, her publisher, based in the States, has apparently withheld 80% of her latest royalty, instead of 30%. I can’t say whether there’s anything else affecting this particular case, but if not, that’s totally incorrect.

If there’s anyone else experiencing this kind of thing, I’d recommend you make lots of noise about it to the publisher. If you get no joy, go straight to the top – they usually don’t like bad publicity, and you may get better results that way.

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Books – USA Withholding Tax

Here’s an issue for all the self-pubbers out there; if you have a book or books selling through Amazon, you’ll have received a message warning you about IRS withholding tax regulations. Briefly, if you don’t register with the IRS, Amazon and any other entities selling your books (and ebooks) in the States are obliged to withhold 30% of your income / royalties, etc. And it’s not easy to get it back from the IRS once it’s been paid in.

Amazon does give you a reasonable set of instructions about how to deal with the issue, but it may not be clear to everybody, especially if you aren’t good at dealing with forms and tax stuff in general, so I’m putting down a few pointers here that may be useful.

First of all, the bad news. You can’t avoid the issue. Sooner or later, if not already, any commercial entity that sells things for you in the States will withhold 30% of your sales income, whatever form it takes – royalties, direct income, whatever. They will pass this money on to the IRS, and they can’t do anything later about getting it back – you would have to deal directly with the IRS, and your (relatively) unidentifiable money (i.e. if you’re not registered with the IRS ) would be difficult to trace.

Secondly, the good news. It’s actually not that difficult nowadays to sort things out, usually pretty swiftly.

What are needed are an EIN number and a W-8BEN form. Once you have the EIN number, it’s inserted into the W-8BEN form, and you make copies of that form, sending one copy to each organisation that you deal with. They can then release all the millions of dollars you’ve made with your Seventy Shades of Grey book! Provided you’re based in the UK,  there is an income tax treaty between us and the USA, so in most cases, you won’t need to pay any USA tax. If you’re based elsewhere, the same may or may not apply. Check with the IRS website.

The first step is to get onto the IRS website and download a copy of form W-8BEN. Get all the information needed for the form, fill it in.

Then, phone the IRS (I don’t have the phone number offhand, if you can’t find it or the IRS website, let me know, leave a comment on this article, and I’ll trace it for you).

You can deal with them by snail mail or fax, but the system has been upgraded over the years, and the best way is by phone. You may sometimes have to hold on for ten, twenty minutes, but it’s worth the expense to save you grey hairs. I gather that unless they’re very busy, you may get through pretty quickly.

I have found them to be friendly and helpful. They will take down your details (as needed on the W-8BEN form) and if you have all the answers ready, they will give you an EIN number over the phone. You then complete a clean copy of the W-8BEN form, in fact, make a number of copies, as you’ll need to send / fax one to each organisation you deal with. With Amazon, it’s even easier, you can fill in the details online.

You will normally need to be registered with our own HMRC to take advantage of the income tax treaty with the USA, but everyone is different, I can’t cover all eventualities in a short article.

If you need, I can help with a few general questions about the system, but for more complicated matters, do talk to the IRS people – the feedback I’ve seen is that they are helpful.

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Money 2

Hi again.

I thought a short quote from Dickens would be a change from my own chatting:

“Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Over a century later, Mr. Micawber’s advice still holds good. Don’t “Fly now, pay later”, do the reverse. Don’t listen to the kids. Do they know better than you?

I do feel for all the single mums out there, it must be really difficult if you don’t have a partner to help with things, so that at least one of them has spare time to learn about how to protect themselves from all the incredible stupidity and greed evident in the world today, that eventually hurts all of us, while the guys at the top seem to have charmed lives. It seems to me that, if you allow leaders to experiment with people’s hard-earned, without real penalties if they muck up badly, then of course, why should they worry. Lost bonus? Maybe, but if your pay package is just bumped up to compensate, one can relax, yes? All I can say is, I’m really glad I climbed out of banking before I could be lumped in with the current lot.

Here’s a little tip for now:

  • No matter what the advertising says, remember that the prime objective of any organisation is to make money for the shareholders.

I’m not attacking the principle, it’s a valid rule, and it lets one remember that the organisation can easily go down the tubes if someone tries to run it as a charity.

What I do have a button about is when people start going overboard. I have a little motto that I use as one of my own guidelines, and I believe that a lot of people at the top ought use it as well:

  • From the Greek, “Pan Metron Ariston”, if I recall correctly.  It means, “moderation in all things”. Works with cooking recipes, works with businesses too. So, if you come across some outfit that isn’t doing that, watch out, it could be heading for problems, either for them or for you…

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Money 3

Oops; I’ve just published Money 4, for reasons mentioned in it, so I guess I’d better publish this one, which I still wanted to polish up a bit:
~~~~~

Ever since I left the bank, long, long ago, I’ve obviously not had access to all the data streams, in-house gen, and other sources of information that exist. It does help to have a sound financial advisor, but that depends on how flush you are.

So, what to do? Well, first of all, be sensible and save. Especially in hard times. Don’t keep all your reserves in one basket, have some in the stock markets, some in other, balancing investments like gilts, some in good, solid assets like gold, silver, some in liquid form – needs to be accessible at a moments notice. There are so many books & magazines and Internet resources that can keep you up-to-date with what’s available, I couldn’t be more help even if I wanted to, I’m now a publisher, not an investment advisor. I can give out ideas in general, and everyone is different, so you have to take thing further yourself.

What I say has to be adapted to your own circumstances. Also, style is a factor; if you’re young, you can afford to take a few risks (always within reason). Come to middle age, less so, and if you’re approaching retirement, then you need to be risk-averse. Then, also plan out your strategy to spread through short-term, medium term and long-term investments. The latter is usually your home sweet home. Hopefully, by retirement age, you want to be rid of the mortgage as well, leaving you in relative peace…

What I can do, is to mention things to watch out for. And help you to sharpen your mind to developments that you can learn from. Like a Native American Indian, or an African Bushman hunting for food, you need to learn to pick up the scent, have a keen eye for clues and tracks, footprints, except that yours will be of the financial kind, and not physical.

For example, I mentioned earlier that back  around 2003, personal borrowing passed the trillion pound mark, for the first time in history. That’s time to start watching out for property bubbles, stop buying property at ridiculous prices, etc. Soon after New Labour got into power, Gordon Brown didn’t waste time. He sold off most of our gold reserves at the pitiful prices available at the time; he added a really painful levy on the pension funds, that really hurt. With the result that your investments, pension and otherwise suffered, because eventually, it’s always the customer who pays, be it pension funds, supermarkets or fuel. Yes? Did he make saving more attractive? Of course not. He reckoned we/he had the bubble trap well under control, so spend, spend, spend. No more boom & gloom…

Enough. Those were more clues/tracks to note down. You also have to know a few rules, before you recognise they’re being broken. For example:

  • Always, repeat always, help people into a save mentality.

  • Don’t mess with the pension funds. Regulate them so they don’t do stupid things, but don’t bleed them.

  • Residential property prices have to fit into affordable levels. If the average property is not priced within about 3.5 to 4 times average annual earnings, things are out of kilter. If cheaper, you know you’re getting a good deal. If higher, you’re paying too much and running the risk of negative equity sooner or later. Nowadays, people tend to move every 8 years or so. If you can’t get your price when moving, you probably can’t move. People didn’t want to hear that ten years ago, now everybody understands it.

Let me know what you think, tell us about your experiences. Am I making sense? I’m interested. I do want to pass on tips that help people, It costs me nothing but a bit of time. Leave a comment, or if you want to contact me directly, here’s a contact form below; it isn’t for harvesting your email address, it’s to prevent spammers from harvesting mine.

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Money 1

I’m still experimenting with the structure here, so please bear with me if you see odd layouts and changes happening now and again.

I want to bring in some tips and advice about money, finance and the like. A lot of it will be from “The Money Book”, one that Sasha and I wrote back in 2003. Having been in banking earlier in my life (N.B: a sensible, ethical banking group, the third biggest in Southern Africa at the time), I think I may have a few tips that help.

In my thirty-one year banking career, I’ve been through droughts, recessions, stock market crashes, financial exhilaration, govt. over-regulation, farming, diamond cutting clients, personal, commercial and corporate finance, and on top of it all, I eventually qualified to head the bank’s internal Credit Audit Division.

Throw in a few years of managing risk and creating M.I.S. for our then fledgling mortgage loan division, I’d covered enough ground by the time I left banking in 1996 to realise, by 2003, that people here were in a pretty risky scenario financially. With personal debt exceeding One Trillion Pounds!! and rising, it wouldn’t take very much to upset the apple cart, had there been a serious enough trigger, and dump us all into the biggest load of manure you’ve ever seen.

So Sasha and I wrote The Money Book. The intention was to give the man / woman in the street some help when in or approaching financial hassles… Speaking from memory, we sold about a dozen copies that year. Less the next year. No one was the least bit interested; when your house is growing in value hand over fist, when the government encourages you to borrow, when saving is discouraged, what else does one do but take out a second / third mortgage to cover that holiday in Florida the family has begged you for. And the speedboat, and the caravan, and so on.

So, here’s the first tip: don’t ever increase your mortgage for any reason except to improve / maintain the property itself. Ok, if in dire straights to survive, that too. But never for holidays, luxuries, or anything else. In fact, one really needs to concentrate on getting the mortgage repaid, the sooner the better.

And tip No. 2: Pay off a bit more than necessary each month. Very often, you can increase your mortgage repayments by 10% each year. Make every effort to try to do this; I know money’s tight as a… a.. darn, not allowed to make jokes any more. Yes, money’s tight for most of us today, but this tip was out there 2003, when it was feasible…

I have to add very clearly, that I don’t believe it’s not all our own fault that so many people didn’t have / don’t have any savings to cushion the hard times. I’m very categoric that the banks, other financial institutions, and government itself, have all played a part in our woes, in a manner that a third-world country like, for instance, South Africa, would never have dreamed of allowing to happen. After all, they are all supposed to know better than us. When you go to the doctor, you expect him to tell you what medicine to take. Not so?

Maybe after I left in the mid-nineties things changed in South Africa, but not earlier. I lost all interest in banking after I left, and in retrospect, I can see that things may have started to go the wrong way at that time, because I was getting more and more fed up with tried and trusted rules falling by the wayside, slowly but surely.

Interesting that, in our book, I felt I had to soften our line somewhat, because a). people just weren’t in the mood to hear a negative/hard attitude – they would have laughed if I’d suggested a depression was possible – the worst I thought I’d get away with was to explain what deflation was, and b). I was totally unaware and never, ever dreamed it even remotely possible that banks could be so incredibly stupid (greedy?) as to break one of the strictest rules in the history of finance – you don’t fund long-term finance (mortgages) on short-term money (overnight / three-month money). Simples! You just don’t do it. Why? Because if you do, you get into the most horrendous funding problems you can imagine. Just ask anyone at Northern Rock…

Right, that’s enough for now, and I hope to keep the wordage down next time, with more tips and less retrospective analysis.

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VAT and You

Just when you thought things were settling down a little, comes the news that with effect from 1st January 2015, VAT changes affecting digital downloads (i.e. including ebooks) are to take place, across the EU.

In a nutshell, VAT will be charged at the rate applicable to the consumer’s country of residence, rather than the supplier’s base.

This is to negate examples of major VAT sidestepping, such as Amazon.co.uk, which used its Luxembourg head office’s 3% VAT rate , while selling zillions of pounds worth of ebooks in the UK, where the rate is 20%.

That will no doubt help the UK Treasury, but it’s something to consider for anyone or any organisation in the UK selling ebooks. The main route to selling ebooks is through some form of shopping cart software, and these programs will have to be adapted to cope with this new, more complicated scenario.

Anyone selling by other means will also have to work out how to handle transactions in line with the new legislation.

What I would like to know is, how does one actually find out the purchaser’s country of residence? Presumably the operative factor is the location of the computer that does the buying, but even so, how does a simple shopping cart work that out? That’s all beyond my level of Internet savvy, but as a publisher, I’d be interested if anyone has something to say in the matter.

It’s also interesting for anyone who does any kind of digital selling, whether personally or through a business of any kind. It’s all relevant, because I reckon the taxman is going to be fairly vigilant about this new regulation, especially while we’re in “austerity mode” – in my opinion, that’s for at least the next five years. Simply put, one needs to be in a position to prove you know who is buying from you, whether they live in Spain or Solihull, and whether they were on holiday in Florida when they bought the book…

It will also be interesting to discover if my assumption is correct – that where the sale takes place is the criterion – or whether the consumer’s actual home country will be the prime issue.

Any comments?

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