Your Attitude Toward Money Impacts On Your Children Too

I was at the PSA Convention this week. PSA is the Professional Speakers Association. I met up with some of my best friends; successful, inspiring, wonderful people who are keen to help each other to Step Up to the next level! At this conference one of my dear, dear friends, a man I adore a great deal, handed me a book that he has just written and published. It's a book that I believe should be on the bookshelf of every home.

It's called “Things I Have Learnt From My... Father/Son”. Co-written by Paul Bridle and his son David, it's full of quotes, thoughts and feelings to help you learn about your Father or your Son.

A quote from David's learning was "It's not the amount of credit card limit; it's the lack of credit spent that shows true wealth" This shows some great sensible financial teachings Paul has instilled in his son. I would add the word "bad" between "lack of" and "credit"; however the lesson is sound.

Another, more amusing quote is "Don't spend £80 to buy "dirty work worn" jeans. It's cheaper to buy normal jeans and work them in". Ha Ha! Very amusing.

My challenge to you is to examine the thoughts or teachings you are giving or receiving about money and credit. Are you teaching your children the techniques in the above book, or that I write about in the DebtFree & Happy pack or even from The Six Mistakes People in Debt Make E-Course.

What you say about and do with money sets a precedent for your children. Teach them well and you'll give them the very best chance of making the most of life, money and much more.

How Will a 1% Mortgage Interest Rate Affect You?

Reports in the news this morning that mortgage repossession orders made by courts in England and Wales are at a five-year high, shows yet again the financial strain homeowners are under.
Repossession orders have increased by 22% in a three month period, when compared with the same period in 2005. Although this doesn’t mean that the homes are actually repossessed, it does mean that creditors are making an application for eviction so that they can get their hands on the money owed. Hence the reason you always receive a warning with any mortgage advertisement: “Your home may be repossessed if you do not keep up the payments on it” is required to be state at the bottom of loan adverts.
The Bank of England is expected to raise rates again, possibly as soon as this coming week and some economists are suggesting that the rate will have to rise 6% next year to keep inflation in check.
Time to tighten your belt?
Experts fear the debt situation could get worse.
"The likely increase in interest rates this month, plus the possibility of more monetary tightening in 2007, make it all but certain that the numbers entering the repossession process will increase” says David Stubbs, senior economist at the Royal Institute of Chartered Surveyors.
And that’s just a review of the mortgage situation. Those without a mortgage won’t escape lightly. Credit cards rates will increase too. This will, of course, impact on the lives of many more people.
What do that mean to you?
Every credit card, variable rate loan and variable rate mortgage will increase. Can you sustain a 1% increase?
Check this out:
Melissa lives with her partner Jeff. They don’t have the best credit history so have to pay more for their loans. They have a self certificated mortgage so pay a little more than high street rates. Melissa has a number of debts, which are broken down as follows:
220,000 Joint Variable Rate Mortgage with her partner
60,000 Car Loan at 11.9% £1092.11
15,000 Fixed rate loan, 5 years
13,500 Credit Card A – 15.9% variable Rate
5,400 Credit Card B – 14.75 variable rate

Here is the breakdown of the outgoings and what would happen with a 1% increase. I have listed the Loan Amount Borrowed, the Current Interest Rate, followed by the Min Mthly Payment and a 1% increase and finally the extra amount of money Melissa would to use to pay off her debts each month
Mortgage: 220,000 at 5.6% interest rate is 1380.10 per month. It would rise to 1516.92, thus 136.82 per month would be needed
Car Loan: 60,000 at 11.9% interest rate is 1092.11 per month. It would rise to 1127.03 , thus 34.92 per month would be needed
Loan : 15,000 at 5.6% interest rate is 287.21 per month. It would rise to 294.20 , thus 6.99 per month would be needed
Credit Card A: 13,500 at 15.9% interest rate is 183.46 per month. It would rise to 19.03, thus 10.57 per month would be needed
Credit Card B: 5,400 at 14.75% interest rate is 68.51 per month. It would rise to 72.75 , thus 4.24 per month would be needed.
Total Extra Money that Melissa would need to find with a 1% increase is 193.54

193.54 may or may not seem like a lot. Some readers will recall the early 1990’s when mortgage rates hit 15%. At 12% Melissa & Jeff's mortgage alone would be £2369.99 per month (a rise of £989.89 based on the current mortage rate of 5.5%)
By the way, many people have an “Interest Only” mortgage, which does mean the increase has less impact (for example, Melissa and Jeff’s mortgage would currently be £1026.66 and rise to £1210, which is 183.33 extra per month for just 1% increase)

For a good mortgage calculator go to:
http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

Educating Yourself About Money Makes You Richer

If you don't educate yourself about money and how it works, you will never be financially independent or debt free.

Recently I have been contacted by a client who was in a great deal of debt and was struggling to pay her bills.

She had already gone into an IVA (Individual Voluntary Arrangement) by the time she found out about the DebtFree & Happy programme. She was facing bankruptcy because she was struggling to keep up the repayments on the IVA.

She explained to me that she'd started on this slippery slope by agreeing to a debt management plan with a debt management company at the beginning of 2006.

A month after she had signed up for the debt management plan she had received a call from the debt management company representative.
He had said to her "How would you like to reduce your monthly payments further? By say... another £100 or so less per month? And it's all for free."

Obviously she was keen to reduce the payments as much as possible even though she was managing quite well with the new arrangement. So of course, when offered a "free £100 per month" she said "yes (please)". Afterall, she thought that she would have nothing to lose and a lot to gain.

A few months later she had received the paperwork and was told it would result in her saving £100 per month. In her excitement, she simply signed "by the X's" marked on the paperwork, and obediently returned it, without reading the agreement or really understanding the implications.

She then heard about my programme in September, bought the DebtFree & Happy programme and took up some coaching. Just before subscribing to my coaching programme she had been contacted again, but this time by the Insolvency Practitioner and he had asked her how things were going. She wanted to move house, but said that if she did she would find it difficult to repay the IVA. At this point the Insolvency Practitioner said that her only option would be bankruptcy.

When clients join my debt elimination coaching programme they can send me documentation for review (as part of the service), so she sent me her agreement. Upon reading the agreement, it was obvious the arrangement was costing her more than she had realised:

In round figures, her debts were £47,000.
When she signed up for the IVA she thought she had agreed to pay £20,000 back over 5 years, then the rest would be written off.

However, I pointed out that although she would be paying out £20,000 over 5 years, only 7,000 would be going to her creditors. A whooping £13,000 would be paid to her Insolvency Practitioner. Whilst I don't object to Insolvency Practitioners receiving payment for their service, this certainly seems like a lot of money - and far more than my Debt Free & Happy Educational Programme or caoching! :-)

This would mean that for the next 5 years she wouldn't be able to utilise the power of OPM (Other People's Money - well, the official sources that is!). OPM is important to create wealth. She had now put her ability to achieve any financial goals for at least 5 years into jeopardy.

It also means that she was not getting it for "FREE" as she was told. She has to pay for it through her arrangement.

When I explained to my client what the agreement included and what the implications of her actions would be, she was shocked. She could not believe what she had done.

ALWAYS carefully read any documents you are asked to sign - otherwise you might make this costly mistake. Before signing anything, always find out the implications and ask a few different people, not just the advisor who is trying to sell you the plan. Then you can make a sound judgement based on the information you have available. If you believe you have been misled then there are organisations such as the Financial Services Authority that will investigate the matter for you. But make sure you have as much information and facts as possible. Always make notes of any contact you have with advisors, and the dates along with what has been said.

With a little education and know-how you can easily effectively utilise a lot more money, just like this client could have done. You could make agreements with your debtors yourself and as long as you stick to the agreement you'll pay more to your creditors and build up a good credit history too. (By the way, with the DebtFree & Happy pack, you get access to "hidden" pages on my website that includes template letters you can use!)

People believe that when they get into financial difficulty, that they are financially ruined. You are not. In fact, if you have been in debt and managed to make agreements with and pay back money to your creditors then you are considered to be a better risk than someone who has never owned a credit card! :-) So they will be more willing to lend you money in the future for good investments (more on that in part two of the DfH course)

If you pay off your debts quickly you'll then be able to use the money you have available to invest in financially sound opportunities. So you see, educating yourself about money really does makes you richer.

One Pay Day Left Before Christmas

Can you believe it?
It's 1st November, which means you've probably received your monthly salary payment for October and so you have one more payment due before Christmas arrives.
Have you made your plans on how you will use your cash wisely?
What about making your own Christmas Cake and Christmas puddings this year? This is a great way to connect with your family too.
Why not make your own cards? The recipients will, no doubt, be stunned and your card will certainly stand out from the crowd. You could even do what one of my clients did - she got her kids and their friends to make up lots of little cards, while she made them an evening meal. So it didn't even eat into her own time!
Think about getting lots of little gifts rather than larger gifts. Often we appreciate the small things and provides more of a mystery to the recipient.
Write down your Christmas gift list and stick to it.
Start your shopping now, otherwise if you leave it to the last minute, you'll end up spending more money - guaranteed!
Look after your body this Christmas - rather than overindulging and breaking the bank in the process, buy a small number of additional "treats" rather than filling the cupboards full.
Throw a party and ask guests to bring a bottle and some food! A party is really about the connections you make with the important people in your life, not how much food and alcohol you can provide.
Refer to my previous Christmas Tips posting for more good ideas.
And remember... enjoy the process.