Category Archives: Money

Resolutions, schmesolutions!

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Posted by Lloyd Morgan on December 20, 2006 – 1:59 pm
Filed under Food, Money, Work and Business

A few years back I made some New Year’s resolutions; one of which was to keep a regular diary. If the eclectic posting dates on this blog are anything to go by, you can guess that this was about as successful as a lead balloon. I’ve never considered New Year’s resolutions since. That’s why this year I’ve decided to throw resolutions out completely in an attempt to actually stick to one or two “goals”!

The last 6 months or so have been psychologically and financially significant for me; I’ve started, for the first time in my life, to mange my finances properly, set targets in my work and home life, eat more sensibly and healthier whilst being more socially aware. These things weren’t accidental: I worked towards them gradually, and I’m still a long way off perfecting them.

Whilst this gives me clarity and a target I want to achieve in the relatively near future, it’s also very confusing: I now know what I want but I don’t necessarily know how I’m going to achieve it or how long it will take.

  • I’m managing my finances; but why? It’s not just to ensure that I’m not an identity theft victim (1 in 10 in the UK are!) or to ensure I’m not spending too much money on unnecessary alcohol, snacks and food: I want to increase my wealth by spending more economically. How can I measure my success at this, and how can I even start?
  • I’ve set targets at work so that I can become more successful at what I do. What exactly is being successful at what I do? What exactly is desirable - what will make me more employable?
  • At home I want to practice and get better at my hobbies. I want to learn to take much better photographs than I currently do. I want to make good progress on my projects whilst still being able to sit down, watch a film and have a drink.

How can I train, holiday and eat better food whilst not spending so much money? How can all the above tie-in with me being more environmental and socially conscious?

There’s a way… but I’m currently trying to find it. I’ll let you know what I find before the New Year.

How to Not Work For a Living

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Posted by Lloyd Morgan on November 29, 2006 – 2:12 pm
Filed under Money, Work and Business

Recently I’ve been reading Steve Pavlina’s very interesting Personal Development blog. Now I don’t agree with everything Steve says and have also sometimes thought he may be a bit of a quack, but what I do know is that Steve knows how to write convincing articles. One such article is ‘Ten Reasons You Should Never Get a Job‘ which I would really like to rename ‘One Really Good Reason You Should Never Get a Job’.

And what is that reason? You are trading your time for money and only getting paid whilst you work – this is impractical and inefficient. To me that sounded odd at first as surely that’s what earning a living is all about, right? Well, now I realise that I was wrong and it’s obvious really – I just needed it to be pointed out to me. Why should I only earn an income while I’m working, especially as I have, or can easily gain, the expertise and knowledge to earn it constantly? Getting paid whilst eating, sleeping and enjoying myself is quite the attractive prospect.

To do this one must build a system that can generate a passive income (of sorts) 24/7 – possibilities can include starting a business, building a web site (Steve earns £20,000 from his blog per month!), becoming an investor and generating royalty income from creative work.

To paraphrase Steve, this system must deliver an ongoing value to people and have a way to generate income from it so that once it’s in motion it runs continuously whether you tend to it or not. Essentially the system model must involve a fixed-time investment that people can extract value from continuously so that the bulk of your time can be invested in increasing income (by refining the system or spawning new ones) instead of merely maintaining it.

I would like to look into some of these possibilities and see how viable one of these systems would be for me. The problem is, my time isn’t very flexible at the moment so to implement and generate an income stream in this way would be quite difficult - learning for the future is always a good idea though. Got any ideas?

Losing Money Every Day

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Posted by Lloyd Morgan on November 22, 2006 – 2:32 pm
Filed under Everything Else, Money

Now that I’m a bona-fide working man, I’ve recently been thinking about whether or not to increase my minimum, compulsory payments to the Students Loan Company (SLC) to pay off my Student Debt. Now this debt is no meagre sum – a fair bit over £10,000 – and at recent projections will take me several decades to pay it off (if I pay the minimum and never receive a pay rise).

Currently it is compulsory to make payments to the SLC to pay off this loan when you earn over £15,000 per year. The payment you must make is 9% of your wage, over the £15,000 threshold. So, if you earn £20,000 annually (pre tax) you must pay 9% of £5,000 a year - £450. For most, this will be paid in monthly instalments throughout the year using the ‘Pay as you Earn’ system (PayE) – you don’t need to do a thing to pay off the minimum.

The SLC student loan does not gather interest though – you may think it does when you look at your annual statement, but what you’re actually seeing is the debt increasing with inflation - calculated using the Retail Price Index.

The SLC loan is guaranteed to only increase at the rate of inflation – for life. This means that the government or the SLC are not making any money from the loan* - it is the cheapest form of debt available. (The UK government has similar WWII debts, and this link explains them and also gives some information on paying off student loans.)

If your bank account gives you interest higher than the rate of inflation, you’ll actively be making money when your funds are in your account doing nothing, so if you were to use this money to pay off an inflation-only loan, you’ll be missing out on the interest your money will earn you whilst it is in your bank account.

Here’s an example:

You owe friend A £5. Friend B owes you £5.
Friend A is not charging you anything while you owe him money but you have 10 days to pay off the debt at a minimum rate of £0.50 a day. You are charging friend B £0.25 a day whilst he is in your debt, regardless of by what amount. You have no money.
Friend A is the SLC loan, friend B is your bank.
Is it better to:
a) Take £5 off friend B on the first day and give it to friend A to be totally debt free?
b) Make friend B pay you £0.50 a day (£0.25 interest and £0.25 of the debt) and pay this directly to friend A daily?
The answer is the second option, as you will pay off friend A’s debt in 10 days (you’re paying the minimum) but over the period of friend B paying back his debt to you (20 days), you will actually end up with an extra £5 in interest.

So, what are we supposed to do? The answer is simple: pay off your student loan at the minimum rate as long as your regular bank account gives you interest at a higher rate than that of inflation. If your bank does not provide you with an interest rate higher than the inflation rate? Change your bank now! If you don’t you’re actually losing money every day.

Student Loans Company
Government WWII Debts
MoneySavingExpert - Should I Pay Off My Student Loan?
Bank of England (Inflation Rate Information)

*It’s not strictly true that they are not making money from these loans. You see, the inflation rate (RPI) is set by the Bank of England on a monthly basis but the SLC inflation rate is set annually (March of each year). If the rate is high when the SLC rate is set and then drops dramatically (as it did in the 2005-2006 academic period) the loan is increasing at a rate higher than that of inflation because interest is charged daily on the SLC loan.
What does this mean to you? Just make sure that your bank is paying you interest over the rate of inflation (as set in March of that year) and you’ll be OK.