Where Does It Go? – UK Money Blog £

I know its in dollars, but this calculator seemed appropriate to you, my noble readers in the UK:

A few facts have been sent to Where Does It Go over from Compare And Save (www.compareandsave.com), a UK leading credit card comparison site:

• The concept of a credit card for consumers came about when an American enjoying a meal out for dinner in 1949 realised he had left his cash at home and decided that an alternative to cash would be a good idea. Frank McNamara came up with the Diners Club Card and by 1951 there were 20,000 Diners Club cardholders.
• The first credit card was made of cardboard and it was only in 1951 that it was changed to plastic so that it lasted longer.
• Credit cards are normally the same shape and size because the follow the ISO 7810 – an international standard that outlines formats for certain types of cards.
• The most common size for a credit card in 85.60 x 53.98mm.
• Whenever you get a new credit card (or debit card for that matter), you must ‘activate it’ before using it by ringing up an activation number or by going online.
• There are more credit cards in the UK than people – at the end of 2007 there were around 60 million people who between them carried 73.2 million credit and charge cards
• 70% of consumers with cards did not take the time to compare credit cards before applying.
• You have to be at least 18 years of age to get a credit card. In fact to get some credit cards you need to be as old as 25 and on a certain annual wage in order to be accepted.
• Credit cards must be signed by the authorised cardholder in order to be valid.
• Credit cards may be your ‘flexible friend’ but if you bend them too much, they will snap!

One aspect of the 2009 budget was a initiative to make people pay their taxes more by threatening to “name and shame” them on the HMSC website.

The budget report states:

Legislation will be introduced, to be bought into effect by Treasury Order, enabling HM Revenue & Customs to publish the names and details of individuals and companies who are penalised for deliberate defaults on or after 1 April 2010 leading to a loss of tax of more than £25,000.

What could be better disincentive for an upright British gentleman businessman, dependent on his reputation, than to avoid having his name splashed across a virtual “naughty step”?

This could be a nod to the public outrage over pensions and such like, angry at the notion of rich bankers suspected of playing the system and so avoiding paying their fair share of tax. This is in addition to a pretty much purely symbolic of adding a 50% tax bracket on the £150,000 bracket – a move that will only bring in £1billion worth of income, small fry compared with the huge sums of ever increasing debt the UK faces for the next 10 years.

The “name and shame” scheme has already been tried in Ireland to good effect, improving tax revenues.

Why not just tie them to the village green stocks and supply free rotten tomatoes to the public – such a move I’m sure would add 10 points to their opinion polls overnight!

Read it for yourself at the hm-treasury website – this is where YOUR money is being spent, you have a right to know where!

Financial Statement and Budget Report

* Chapter A (PDF 307KB)
* Chapter B (PDF 488KB)
* Chapter C (PDF 436KB)
* Lists of abbreviations, charts and tables (PDF 49KB)

At the moment how to spend £10,000 from say inheritance or another windfall is a surprisingly hard question. The classic answers such as ISAs, property or shares have all taken a pounding in these last few months.

ISAs

These are tax free accounts which typically have high rates of interest to encourage you to put the money away for 12 months. At the moment these are looking around the 3.5% mark, if you leave it in for a year. If you draw out the money in the 12 months, a lot of accounts will only pay you around 1% on your money.

This is not just a low rate, you could actually lose money in real terms – with inflation running at 3.2% any money put aside not earning any interest will devalue that amount.

Inflation figures April 2009

Taking inflation into account your 3.5% ISA could in fact only be getting 0.3% a year in real terms! On £10,000, you would earn a paltry £30.

This would be better than leaving it under the mattress though, but only just! Its all to do with the government trying to encourage you to spend your money on goods to help kick start the economy.

Property

For so long the easy option if you had the money, property prices have plummeted over the last 12 months, with some predictions saying houses will lose 50% from their peak. Even if the house price crash had never happened £10,000 wasn’t enough for a sensible deposit if you wanted to stay away from the 100% mortgages (which with the hindsight of history would have been a GOOD thing).

Suffice to say, if you can buy at the moment you may pick up some bargains compared to recent years, but don’t expect your property to be sold for profit for a good few years, maybe even 10 years. This will probably mean you buy to live in the house, which is really what buying a house should primarily be for; the culture of get-rick-quick by investing in property must be held accountable for half the trouble of what we’re in at the moment.

Shares

If property prices are bad, then shares are an even more tragic affair. The FTSE which tracks the 100 best performing companies in the UK has crashed from peaks of 6500 to around 4000 today, and no one knows if that is the end of it. Saying that there are some shares thatt have bucked the trend, so if you’re a financial wizard or someone who knows something every other share trader doesn’t, you may still have a chance to make some money, especially if you manage to buy a stock at a current low and it soars upwards over the next few years – but with the current climate that £10,000 invested could equally end up as £0 once the company goes bust.

A good overview of shares verses house prices over the last 20 years is found at Fool’s new site, LoveMoney, which states:

If I were to summarise these results, I would say that both asset classes have produced useful returns for investors since 1984, with shares winning by a nose. However, the FTSE 100 is considerably more volatile than house prices, so investors in shares need to be patient in order to ride out the fairly frequent setbacks which the stock market springs on us.

So, all being told, where would my £10,000 go?

• I’d concentrate on clearing all debt, thats a no-brainer these days. Why pay 7+% on a loan if any saved money is only getting 0.3%?
• Buy anything you’ve been thinking of getting for a while, taking advantage of the temporary 15% VAT (and also do your bit to save the country from financial Armageddon)
• Look to invest in people or business – if you’ve got a good idea, now may be the perfect time to lend money to an idea you think will succeed, since banks are being so tight with their money.
• Buy things that will increase in value over time – antiques? Limited edition items? Art?
• Go on that holiday trip of a lifetime. May as well enjoy the world in a cheaper country whilst you have the chance.
• If you have a mortgage, try and overpay as much as possible for when those interest rates will rocket up in the future

Those are my suggestions, if you have any other bright ideas, feel free to say underneath – I think we could all do with some!

Some good videos looking at the current crisis.

A good overview for amateur:

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

A more in depth look (1 hour):

Will Hutton Capitalism Crisis is a good overview of what went wrong from the viewpoint of a Keynesian.