Friday, 10 February 2017

Money talks

I seem to be obsessed by money at the moment.  It's partially because I'm still finding my feet as a contractor - I'm still trying to work out how much money I need to leave in the company to pay the taxman and stay afloat if my contract with the Swedes ends.  Salary-wise, I'm paying myself £12k less than I was earning before BUT my take-home pay has only dropped £200/month. With a bit of rejigging and lower commuting costs, it's doable and leaves me with the same money-to-live-off each month.  (No, I don't understand it either.  While I used to contribute 9% to the corporate pension scheme, that was out of pretax income and doesn't explain the entire change.)

The other reason, I think, is that team I'm in at the moment are all contractors and they're obsessed by investing in shares and in property.   We had quite a discussion yesterday about the economics of rental properties.  I was surprised to discover that, in a group of accountants, I'm the only one who knew that mortgage interest will no longer be tax deductible on a privately owned rental property, thanks to George Osborne's misguided 2015 budget.  (He thought it'd force buy-to-let property owners out of the market, freeing housing stock for owner occupiers.  He is wrong.  The solution is to incorporate and own your rental properties through a company.  Interest will still be tax deductible and the company will pay 20% corporation tax instead of 40% income tax.  Those people who don't incorporate, will just put up the rents they charge, in order to compensate for the decrease in income.)

One topic that hasn't come up yet, is how people are saving.  Not the amount they save*, but the mechanics.  We've talked about car loans and leasing, but not saving.  Well, not yet. At least, for this I have an answer...Oddly, in the last six months, I have been put on the spot twice about the same thing.  Both times by bank people who wanted to know why I have so many savings accounts.  The first time, I was moving my savings operations to a new bank after the UK operations of ING were finally absorbed into Barclays.  (I can't abide Barclay's Bank.  They treated me like dirt when I was a customer of their's when I first came to the UK.).  The second was when I was setting up my business bank account.

Each time, the answer is the same:  "I micro-budget".  The response is usually a puzzled expression, so I elaborate:  "Each account has a purpose and is used for saving for something specific, so if I want to know how much money I've got set aside for my football season ticket, I can just check the account balance".

Usually, that's enough of an explanation and it's as if a lightbulb has light up.  Suddenly, they get it and want to know more. "What sort of thing are you saving for?", they ask.   I tell them that I've got accounts for the car's services and insurance, holidays, Christmas presents, the garden fund, clothing, crafting, etc, etc.

It's like a formalised version of the Sanity Fund, without the wallet card.  Partially, you can blame Anita Bell - the Sanity Fund is all her idea - and partially you can blame a poster on the Motley Fool years ago, who mentioned that they could have up to 10 sub-accounts when you opened an account at ING, which lead to a wider discussion about how people could use their sub-accounts.   Most people used theirs for saving for annual or irregular recurring expenses (such as car maintenance bills), and called the whole ING thing thneir "Freedom Fund".  "I've got $xxx in my Freedom Fund" is not an uncommon statement on the Fool.  (ING used to facilitate this by showing you the total balance of all your accounts, when you logged in.)

Eventually, I discovered that ING had a UK operation and signed up as fast as the pixels would carry me.  They paid the Bank of England base rate of interest, which was better than the majority of instant access accounts at the time.  Sadly, ING was one of the banks caught in the middle of 2008's credit crunch and their international operations were sold off.  I don't remember who bought them in the States, but Barclays bought the British branch and, about 2 years ago, moved all the accounts to their own online platform, which requires a card and card reader and is a pain because you can't just spontaneously check your account balances while at work.  The final straw in my relationship with Barclays this time, was when they reduced the rate on their accounts to below 0.1%, which in no way compensates for the hassle of dealing with their online portal.

Bye-bye Barclays.  The new bank is paying above the Bank of England base rate of 0.25% on an instant access savings account.  They have an easy to access on-line portal.  Their website is logical and easy to navigate (unlike yours).  Sod off.

- Pam

* This being England, you don't discuss salaries or day rates.  We know virtually everything else - what someone paid for the house, the size of the mortgage, etc, -  but not that.  (For once, I can't get this information from the finance system.  The Swedes aren't time-sheet-costed!)