MBA Geek

Here’s an interesting way to present some golden rules to help the general public deal with the current recession. It’s a great post today that lists the 10 Commandments of Personal Finance. Here’s a summary:

• Though Shalt Take Action
• Though Shalt Pay Off All Credit Card Debt
• Thou Shalt Understand the Difference Between Wants and Needs
• Thou Shalt Live on Less Than You Earn
• Thou Shalt Pay Yourself First
• Thou Shalt Set Financial Goals
• Thou Shalt Educate Yourself and Be Responsible for Your Decisions
• Thou Shalt Save and Invest
• Thou Shalt Protect Your Finances
• Thou Shalt Donate to Worthy Causes and Those Less Fortunate

Some of these are down to common sense, but it’s amazing how many people aren’t aware of the fundamentals. I have a friend who’s an expert at keeping himself and his family healthy (he can talk about healthy grilling for hours), but really doesn’t have an idea how to manage his finance. I bookmarked the post to send to him because it’s versed in a way he might understand.

So pop down to The Abundant Alliance Blog and read the detail.

With economic turmoil at our shores it is easy to forget that others around the world are facing similar hardships. I was reading today that Japan’s economy isn’t looking too hot at the moment. The base rate is set to 0.1% (lower that the UK or the US), unemployment has risen to 4% and output has dropped 8% in November with another expected 8% drop in December.

The problem is that forcast sales of the goods produced by the Japanese economy is down. This is felt by factories and support industries, all the way down janitor and programmer jobs, everyoen is affected. Unfortunately until a positive outlook appears, everyoen is going to be affected and this is the net effect of the economic crisis we are facing.

There have been a couple of ripples here in the Isle of Man, but the politicians feel that we will not technically suffer a recession. The reality is that the Island has had a number of years of unprecedented growth and the hope is that any short-term blips will be cancelled out by long-term growth. We’ll just have to watch that …

I was reading about a financial instrument we have available here in the UK called an IVA (Individual Voluntary Arrangement) which is a formal and legally binding agreement between someone in debt and his creditors. It’s not quite a free ride through because although the terms of may vary, creditors will expect that their prospects of recovering money will be at least as good as in bankruptcy. Creditors also don’t lose their right to bankrupt you if you don’t fulfil your part of the agreement.

In order for the IVA to be binding, a minimum of 75% of creditors must agree to the IVA proposals. Creditors can suggest changes, however you must agree these in order for them to be implemented. The proposals usually call for the party in debt to make monthly payments and a dividend is paid out to creditors in full and final settlement of their debts.

The reason why creditors usually go for this sort of arrangement is because they expect a larger repayment than they would otherwise get if the debtor were made bankrupt. This is enough incentive for them to accept the IVA.

If you need to go down this route, it is always advisable to get a professional to guide you through the process. There are a number of organisations who will help you to avoid bankruptcy and get back on your feet. If you want to learn more about IVAs, check out the FAQ page on ClearDebt’s website.

I was looking at how much the Sterling is worth against the Euro today and was shocked to see the exchange rate is pretty close to 1. Here’s how the Pound has dropped recently:

It’s amazing to see how far down it has come, I remember it being at around 1.5 Euros to the Pound. Will be interesting to see what happens in the next few months …

I came across a really interesting article in FT talking about offshore jurisdictions and the pressure they are under because of the worsoning economic climate. I must say it is of personal interest as I’m based in the Isle of Man, but it’s also interesting to see how major economies around the world have started trying to look at their finances and trying to plug leaks. The article calls the UK’s threats towards the Isle of Man as ..

a sign of the growing hostility to the tiny states and islands around the world that harbour an estimated $6,000bn (£3,895bn, €4,725bn) of offshore assets. After months of financial crisis and banking scandals that rocked Liechtenstein and Switzerland, the world’s most powerful countries have lost patience.

An interesting part of the article is a reference to Delaware, a US state with much less transparency than most offshore jurisdictions:

Delaware company agents advertise the state as allowing even greater secrecy than offshore tax havens. “The Delaware LLC provides the anonymity that most international jurisdictions do not offer,” claims one agent website quoted by the task force.

So, for example, if a company selling Wilmington NC real estate was incorporated in Delaware, it has huge tax reporting flexibility without having to go offshore.

If you find this interesting you can read the complete article: Harbours of Resentment

If you live in the UK you might have heard of Faster Payments, an initiative the banks are putting in place to speed up inter-bank transfers. Previously bank transfers used to take 3-4 days and using Faster Payments a transfer can be done in a couple of hours. Not all banks are taking part in this yet, so a useful resource to know about is one where you can check if a bank is participating in the scheme. Just type in the Sort Code into the Faster Payments Sort Code Checker and you can find out if you can use it or not.

It works pretty well; and you can use it whether you’re paying for Moen faucets or even for your online hosting. Definitely a step in the right direction.