Starting With the Woman in the Mirror

By the end of a week in which it became increasingly difficult to maintain any faith in the possibility of integrity and banking being at all compatible, I finally took the plunge and joined the Green Party.

This wasn't an easy decision. I was born and brought up in South Yorkshire and both my father and grandfather were miners so socialism has been in my heart and soul since birth. A degree in Philosophy didn't dislodge it from either, but rather settled it deeper, as did having children. I haven't given up on the ideas, I just don't think Labour are coming up with the goods at the moment.

The Greens haven't a hope in hell of getting anywhere in my constituency, but then neither have Labour, so I'm won't be doing anything significant by shifting my vote, but it will certainly make me feel better. Whilst reading their website to double check I knew what I was getting into, I came across the moveyourmoney initiative and their current campaign "Divest" encouraging people to withdraw support from banks that invest in fossil fuels, which is pretty much all of them as far as I can see, with HSBC being the biggest offender (surprise, surprise). My own bank is up there too.

What struck me the most about all this was the fact that I simply hadn't put 2 and 2 together as regards my recent investment in oil with climate change and the importance of creating a sustainable energy policy for future generations. I suppose I'd been telling myself that the amount involved was so small that it didn't make a difference where I put it, and that I probably had money in all sorts of things I don't approve of without even knowing it, so it was pointless being sniffy about this buy. Well in this particular case I do know and it does make a difference, so this morning I've sold my BlackRock World Mining Trust shares, taken a bit of profit and set up an account with Abundance which is a crowdfunding platform that allows you to invest in renewable energy projects.

Abundance Generation. 

I'm really interested in the current project they have under offer which involves putting solar panels into social housing in Berwickshire. I just need to check that I understand the investment properly as it's something called an Income Growth Debenture with an IRR of 7.5%. Further details state:

This is the first project on Abundance to issue an Income Growth Debenture. An Income Growth Debenture is a long-term unsecured certificate that gives the holder the right to receive a defined amount of interest income each year (for Oakapple Berwickshire 3.3% for the first year - excluding the 0.4% Pioneer Bonus), which increases annually (for Oakapple Berwickshire by 3.3%) for the life of the investment. The amount paid out is not linked to the amount of energy produced and is paid in addition to repayment of your capital in the form of regular Cash Returns.

I'm not quite sure how this all fits together. If anyone can throw any light on it please do leave a comment. Although debentures are meant to be held for the long term you can sell via a bulletin board on the site and they do state that all sales so far have been "positive" - ie have made a profit. There is obviously some risk to all this but the amount I would be investing would be quite small (£1,500), in fact you have to confirm that you won't invest more than 10% of your assets on the platform when you create an account, and I really like the double whammy of sustainable energy and social housing.

The events this week also prompted me to look at where I hold my current account, and, as a result, I've decided to switch to NationWide which come out with a MoveYourMoney score of 64/100. On top of that their Flex Account pays 5% interest on up to £2,500 for a year so we'll be setting up two (one joint for our everyday banking and one in my name to manage the rental income) and closing down everything we have with Halifax. Now I just have to work out what to do with the bulk of our cash which is sitting in a Santander account.

It's been a busy weekend but I feel better for it. I've done a lot of reading that has given me back hope that despite the events of last week, there are plenty of people out there who are working hard to give us opportunities to invest, save and use our money in a positive way so that we can secure not just our own future, but the future for us all.

I hope that at some time I will feel that I can also re-invest in the Labour Party and see it as the Party of the future but at the moment this isn't the case. Time will tell..

Labour? It is in transition. It knows the socialism it used to champion no longer functions: it knows neoliberalism does not work either. It experimented with Blairism, which for all its electoral success did not address the fundamental weaknesses in the British system. It knows it is a party for the mass of Britain, with roots that must remain in the workplace and the day-to-day life of ordinary people. It is dedicated to their flourishing, and to the justice that must underpin it. The country at different times in its history has looked to its left and right traditions to do the correct thing. It now needs Labour to complete its transition, to pick up this programme, or something like it, and implement the change we need to show how good we can be. "

Will Hutton, extract from "How Good We Can Be: Ending the Mercenary Society and Building a Great Country".
http://www.theguardian.com/business/2015/feb/11/british-capitalism-broken-how-to-fix-it

Missing the "Not So" Obvious

We have a Halifax Online Saver account attached to our main current account which is paying an introductory interest rate of 1.25% for the first year. This rate will soon be coming to an end and we'll be back down to 0.25%. There's not a lot of cash in there as it just holds our pre-emergency fund - ie for when the current account needs topping up a bit if we have an expensive month. Therefore it's pretty key that this money is easily accessible and instantly transferable into the current account. Currently the balance is around £5,500.

I have been thinking about what to do with this cash now Halifax will be dropping the interest rate and I was considering opening another of the higher rate current/savings accounts (we already have a joint Santander 123) when it suddenly dawned on me that the answer was (seemingly) obvious.

Last year I took up a M&S current account and credit card. I shop there a lot and this has definitely been a good move as the points I have earned have gained me plenty of money off vouchers and special offers. I have also been able to take advantage of a 6% regular savings account which is limited to £250 a month for one year (interest paid at the end of the term). The M&S credit card is interest free for 18 months so I have been saving my £250 a month rather than paying it all off knowing that I will be able to do so when the savings account matures whilst gaining the interest along the way. ("Stoozing" the card as I believe it is called).

It then occurred to me that surely the best action would be to pay off the £2,300 credit card balance using some of the cash in the Halifax saver. On the surface this feels like it would be a good move - my basic "commonsense" tells me that this way I will be gaining 6% on the cash and I will come out better off than if I continue to save the money and pay off the card at the end of the year as I originally planned. But is this true? Is there really any benefit to be gained? Don't I get exactly the same benefit either way?

What this exercise has shown me is that although there are lots of cases where we do ignore the obvious in money matters - paying off mortgages when we would be better to keep the low rate of debt and use the money elsewhere, being tempted by BOGOF offers when we didn't even want the "one", putting money into very low rate cash ISAs when there are current accounts paying better interest rates, racking up credit card debt and putting money into low rate savings accounts at the same time, the list goes on and on - there are also cases where our intuition is well and truly fooled by the mechanics of finance.

I am reminded of those "Magic Eye" puzzles which were popular a few years ago where you had to train yourself to squint in order to be able to see what was hidden inside the pattern.

Despite the fact that numerical literacy is generally of a fairly high level in this country some of the basic rules of how money "works" are not obvious, although they are (of course) always logical. This seems to be the root of the problem. We may not struggle with simple numbers, and we can be taught the rules that help us deal with them fairly easily, but the laws of logic are a little trickier to formalise, grasp and apply to real life. We can end up going round in circles and not actually doing anything because the best route isn't actually all that clear. It's easier to just concentrate on one part of the picture at a time rather than try to see it as a whole, work out how the bits interact and act accordingly.

As far as my dilemma goes I'm pretty sure that I'm only going to earn my 6% on the 12 x £250 payments once, so it doesn't really matter which money I use to get it (does anyone disagree?). In any case I will still be left with the problem of finding some way of getting a little interest from what's left over without giving myself too much hassle as regards managing it. Back to the drawing board.

(By the way my ISA transfer has finally completed and I put in a sell order for around £10,000 worth of my CIS UK Growth fund yesterday - I'll be double checking my strategy for what to buy with the money this weekend against Tim Hales and Monevator - hope I can do it without having to squint - those Magic Eye puzzles always gave me headaches :-))

Beating the Banker (Or At Least Putting Up a Fight)

Spending wisely is just as important as investing well or saving hard.

This is something that has only just started to dawn on me and I would love to be able to provide myself with some hard facts and figures to back up this newly discovered and enlightening realisation. So I've been working on a few calculations based on our previously rather chaotic monthly budget and tried to assess how the changes I have started to put in place are making a difference.

Firstly - How we pay for things:

We have no mortgage but pay most other regular bills via Direct Debit or Standing Order from our two joint current accounts (Halifax and Santander 123). I set up the Santander account a few months ago to hold some of my husband's pension lump sum (3% interest) and to take advantage of the cashback it offers.

We tend to put most of our shopping (food, household stuff, clothes, cosmetics, travelling expenses etc) onto credit cards. I currently have a M&S 0% interest card as I spend a fair amount there on a regular basis. This is a recent acquisition (part of my drive to get "value" out of my spending) and I also took up a M&S current account which came with a 6% regular saving account at the same time. I'm making a real effort to get back at least some of the profit I've leaked into M&S over the years.

Additionally we have a Halifax Platinum card with a high credit limit (£14,000) for larger purchases and my husband has just started using a Santander CashBack card for everyday groceries (1% cashback) and petrol (3% cashback).

We pay back all cards in full each month (in effect, although I am using the M&S deposit account to hold some of the money eventually destined to pay off the card when the 0% interest period comes to an end, so I am running a balance on that one -  my small stab at "stoozing" as I like the idea of turning things in our favour a little, rather than the banks', once in a while, but I don't have the nerve for the heavy stuff).

What this all means

It is difficult to put an accurate figure on the changes I have made to maximise the "value" of the current accounts and credit cards and what they can give us in terms of points, credit and 0% interest but I've done a very quick and dirty on the figures and I reckon we're about £785 a year better off:

Extra Interest from Santander 123 as compared to Halifax Online Saver: £500
Interest from M&S Regular Saver: £85
CashBack from Santander cards/account: £100 (after charges)
Points/vouchers/discounts from M&S: £100 (after charges)

That may not sound much but it would actually go a long way towards paying for an extra week's holiday or, if I add it to my investments at the rate of £65 per month it gives me:

After 6 years, you would have £96,553

How much will you invest each month? * 

For how many years? 

Is there an initial lump sum? * 

What is your expected rate of return? 

So, it actually pushed me up past my target :-)

Already I'm looking at being able to reduce the time that I have to stay at work to 5 years, I just need to find a little more to save. I really don't think that this should be too difficult.

After 5 years, you would have £86,180

How much will you invest each month? * 

For how many years? 

Is there an initial lump sum? * 

What is your expected rate of return? 

(Thanks again to motleyfool.co.uk for providing the calculations).