But a fundamental difference in how men and women operate was not confined to the Garden of Eden, with many modern day Adams and Eves still taking a very different view of many things, not least money.

Recent figures from Standard Life showed a difference in the level of financial confidence of men and women.

The financial confidence index found that men displayed a greater level of confidence than women, with men’s confidence ranked at almost 55 out of 100, compared with 52 for women.

Financial confidence was not the only money-related area where men and women differ, as many other surveys showed a divergence in how we save, invest and spend.

So what makes men and women operate differently? Is it psychology or culture? And how do these differences manifest themselves in our financial lives?

‘‘In my experience, women are much more attentive to their finances.

Women know exactly what is coming in and going out on a monthly basis,” said Financial adviser Liam Croke.

The mention of the word ‘shopping’ in the context of gender brings a host of clichés to mind – women in the aisles of their favourite shops, draped with bags, while their other halves hover uncomfortably outside, glancing at their watch and shuffling their feet.

Stereotypes typically have a nugget of truth When it comes to shopping, men and women take a different view. For many women, shopping is a pastime, a leisurely way to spend a Saturday afternoon with friends. For many men, it’s a purely functional exercise – buy what’s required and leave.

‘‘Typically, women are more enticed to spend in a consumer environment,” Croke said, adding that many marketing campaigns were aimed at women. From his dealings with clients, he has found that men tend not to make as many impulse purchases as women.

‘‘Guys are generally better at sticking to a budget, whereas women are more likely to use the credit card,” he said.

Also when it came to domestic purchases, such as durable white goods, home insurance or groceries, women tended to shop around more and ask the necessary questions to find the best deal, according to Croke. ‘‘Most men tend to leave this sort of stuff up to their partner,” he said.

While day-to-day differences in approach to cash are more anecdotal, much academic research has been done on how men and women treat investment risk and investment decisions.

Most commentators said women tended to be more cautious, but the consensus was that circumstances were a bigger factor than psychology.

‘‘Women tend to be a little better at doing their research before investing.

But it’s hard to generalise as age, previous investment history and the level of disposable income all come into play too,” Croke said.

Liam Delaney, a behavioural economist in University College Dublin’s Geary Institute, said: ‘‘Men tend to take more risks and be more prone to herding in investments.”

Different investment approaches extend beyond the purely personal sphere. ‘‘Over-exuberance contributes to volatility in the stock market,” Delaney said.

Research has suggested that, if trading rooms – a typically male dominated professional environment – had more of a gender balance, stock markets worldwide might exhibit a more even pattern, with women adding a lower risk strategy to the mix.

‘‘Men are more comfortable with ambiguity,” Delaney said.

He added that men tended to respond well to competitive incentives when investing. For example, he said women would tend to opt for the safe bet if given an option. ‘‘If you offer people €100 now or a 5050 chance of winning €200 or getting nothing, women would tend to take the €100,while men would take the gamble,” Delaney said. Financial adviser Rhona Blake, deputy president of the Irish Brokers’ Association and director of brokerage firm BasePlan, said:

‘‘Women are much more comfortable with low returns and erring on the side of caution. They are not really as prepared as men to accept volatility.”

Blake said women’s more cautious approach came from their historical role in a family setting.

‘‘Traditionally, women have minded the family finances, so they are more conscious of the impact when making financial decisions,” she said.

In Blake’s view, the role of women in society is a significant factor in the differences between men and women financially, with women who work in the home and those working outside it making different financial choices.

Women typically end up worse off from a pension point of view, according to Joyce Brennan, a senior consultant with Mercer. She said that women tended to take time out from the workforce to have children, leading to financial vulnerability.

A career break or part-time work can have long-term implications for the value of your pension pot. ‘‘One way women could make up for it would be to work extra years at the end of their career to make up for the lost years,” she said.

The role women play in society compared to that of men has certainly shaped financial attitudes.

‘‘It’s not that our fundamental psychology has changed. It’s society that’s changed,” Delaney said.

Audrey Byrne, a family law partner with solicitors McCann FitzGerald, said that the way men and women approached money had changed as women gained greater financial independence.

‘‘Women were completely financially dependent, and they were quite financially vulnerable until the 1970s,’’Byrne said.

A series of social reforms from the late 1960s onwards gave dependent spouses – at that stage, typically women – more rights and a greater sense of financial freedom.

Byrne cited the 1965 Succession Act and the 1976 Family Home Protection Act as two ground-breaking pieces of legislation.

She explained that the 1965 act made it impossible to disinherit a spouse, by enshrining specific rights to a spouse’s estate in legislation.

The 1976 act added another level of financial protection for homemakers, giving them certain rights in relation to the family home even if their name was not on the deeds.

Further changes in the late 1980s gave the courts the power to make property orders in separation cases.

Then, in the mid-1990s, Ireland introduced divorce.

‘‘Legislation has really broadened the scope of what the courts could do for separating couples, especially the dependent spouse,” Byrne said.

One thrust of the social reform has been to ensure that work inside the home – typically a woman’s role – is viewed as equally important as work outside the home.

But after all the strides towards financial independence, Byrne said recession had turned the tables for couples. Diminishing asset values, failed investments and negative equity are all factors that make it harder for couples to go their separate ways, while maintaining a level of financial independence.

‘‘People are in some ways more tied together than ever now. A clean break is not as possible,” Byrne said.
Read the Full Article here.

The top-of-the-range phone, television, MP3 player or home sound system may have come down in price considerably due to the recession. But relative value is not a good enough reason to make a purchase. Unless you really need the bells and whistles version, forsake it in favour of your reliable dinosaur.

2. Use it or lose it. Do you fork out hundreds of euro a year for your gym or swimming pool, but don’t feel you get your money’s worth? If your monthly membership is merely a guilty reminder of lost euros, either use it frequently or cancel your contract and opt for a cheaper pay peruse option. However, beware of tricky terms and conditions that can apply to cancelling gym contracts.

3. Be especially discerning. You upgraded to an all-inclusive ‘special discount’ mobile phone package to avail of free minutes and bonus texts, but soon realise you are spending more than before on your basic package.

You stock up on two-for-one offers in your supermarket and end up with vast quantities of unused stuff clogging your cupboards. You buy a swanky new jacket because, at 75 per cent off, it’s a steal, but then never wear it. Sound familiar? Before you jump on a bargain, make sure that you need it, and that the offer is what it seems.

4. Relieve your wallet. Medical bills, tuition fees, rent and mortgage payments are just some of the payments on which you can claim tax relief.

A cheque from the Revenue Commissioners can significantly increase your savings, so make sure you claim all your entitlements. For example, tax relief on medical expenses is granted at the standard rate of 20 per cent, with no threshold applying. This means that, for every €5 you spend on medical bills, you get back €1.

A wide range of medical expenses qualifies for relief, including doctors’ and consultants’ fees, prescribed medication and physiotherapy prescribed by a doctor. Laser eye surgery and orthodontics are covered, but not basic visits to the optician or dentist, or the cost of contact lenses and glasses.

5. Energise your budget. For years, the ESB had a monopoly on the Irish energy market but, since liberalisation, consumers have far greater choice. Airtricity and Bord Gáis are both aggressively trying to increase market share, and many customers have already made the switch to avail of promised reductions in their electricity bills. Double-digit discounts mean a typical household could save more than €100 per year.

6. Ensure you get the best deal. Insurance premiums can put a large hole in your finances, but choosing carefully can reduce your financial pain and mean further savings. Car insurance is typically the most expensive premium you face each year, and one that you are legally obliged to pay.

Recent cost comparisons from the National Consumer Agency and broker organisations show that some drivers could save hundreds of euro by swapping insurance company. When your insurer sends your renewal letter, it is always worth trying to haggle on the price. Apply a similar approach to health and home insurance.

7. Avoid impulse purchases.

Monday morning and you reach the bus stop just as your bus pulls away.

Feeling frustrated, you pop into the cafe beside your bus stop and pick up a quick latte to revive your spirits.

You get little change from €3. Then you add a warm croissant and hand over another couple of euro. Next, you purchase a glossy magazine to read while you wait for the bus, bringing your bill to €7 or so. Hardly bank breaking, but certainly habit forming.

Force yourself to keep a record of treats and indulgences.

A two-coffees aday habit seems much more of an issue when you tot up the cost over a year – more than €1,500, based on a five-day working week.

8. Bargain on it. If you don’t ask, you won’t know. Haggling in certain arenas has always been seen as acceptable. For example, a car dealer usually expects a bit of to and fro with potential customers. Apply this to other purchases, particularly big ones, and see where it gets you.

Retailers and service providers want your money, so make sure they give you the best deal they can. Bargaining might not reduce the cost of your new couch but, with a bit of luck, you might negotiate your way out of a hefty delivery charge.

9. Cut the cost of your commute.

Transport costs can mount up without you really noticing, but a few tweaks can mean big savings. Leaving your car at home will mean you save money on fuel, but is not always practical. If you must drive to and from work, make sure you get the best value when filling your tank.

Use the website www.pumps.ie to find the cheapest forecourt in your area for petrol or diesel. A difference of 10 cent per litre may seem like nothing but, when you work out the cost based on thousands of litres of petrol a year, the extra savings can push you closer to your savings target.

For those who commute to work on public transport, buying your travel tickets via the Taxsaver scheme can reduce your annual bill by up to 51 per cent. Similarly, the ‘bike to work’ scheme can reduce costs for cyclists. 10. Consider alternatives.

The key to saving is breaking old habits and fostering new ones, so be willing to adopt a new approach to spending to see a difference in your savings balance. Look at how you spend and identify problem areas.

Tackle these first by looking at alternative, cheaper options that still satisfy your spending urges.

Think of saving as a financial diet – you’ll crave what you cut out, so make sensible sustainable choices, rather than rash ones that will be harder to stick to.

Replace lunchtime purchases of new books with library visits, cook for friends instead of spending a fortune on dining out or get up ten minutes earlier to make your lunch each morning to avoid overpriced deli sandwiches.

Read the Full Article here.

Defaulting mortgage borrowers will face substantial tax liabilities if their banks invoke parental guarantees to get their money back or minimise losses.

Revenue has confirmed that parents or other third parties that have guaranteed a borrower’s loans will be deemed to have given them a gift and triggered a corresponding liability to capital acquisitions tax (CAT).

CAT is applied at a rate of 25 per cent of the value of the gift or donation. Tax rules dictate that a borrower would face a CAT liability of €25,000, for example, if his or her parent is pursued by a bank on foot of a guarantee of €100,000.

In such a case, the invoking of the parental guarantee would result in the parent paying €100,000 to the bank to cover a son or daughter’s debt.

This payment would be treated for tax purposes in the same way as the parent giving a gift of €100,000 to his or her child. This tax liability could be deferred, however, depending on individual circumstances.

Current CAT rules allow for children to receive gifts or inheritances of up to €414,000 from their parents during their lifetime.

The government has substantially reduced this ceiling in recent years, however – it stood at €542,000 two years ago. It has also increased the CAT rate from the old 20 per cent rate over the past two years in response to the exchequer’s funding problems.

As the ceiling relates to cumulative gifts or inheritances, any parental guarantees invoked by a bank would reduce the amount that a child could inherit tax-free in the future.

The tax bill would fall due immediately, however, in cases where the borrower had already used up his or her tax free gift threshold.

The Sunday Business Post recently reported that a number of the country’s banks were preparing to pursue parents who had provided guarantees in respect of their children’s mortgages.

The guarantees are most likely to be pursued in cases where borrowers are no longer capable of repaying their loan and the bank would not recover the outstanding balance in full from the sale of the underlying property.

Read the Full Article here.

The buy-to-let investment market has been decimated by the recession and landlords are grappling with the financial consequences. The difficulties they face have also been compounded by increased government levies and taxes.

Previously they were enticed to invest by the government with hefty tax reliefs – such as Section 23 and Section 50 tax incentive properties – but now landlords are dealing with increased taxes, following a series of measures introduced in recent budgets.

And it is the amateur buyers who invested during the boom years that have been hit the hardest.

This time last year, the reduction on mortgage interest tax relief on investment loans came into effect, following the April 2009 budget.

The interest relief was reduced by 25 per cent, increasing pressure on landlords.

However, the key problems they face are more fundamental.

In the subsequent 12 months, the difficulties facing landlords have mounted, driven by the recession and the ailing property market. The problems they now face are a further decline in rents, a continued oversupply of rental property, a further fall in property prices and, in many cases, higher mortgage interest rates.

To add further cost to an already difficult situation, the €200 non principal private residence (NPPR) tax, basically a tax on a second home or investment property, was implemented after the supplementary budget last year.

The tax was due at the end of September and again at the end of March. By now, investors should have paid the charge twice on each investment property, otherwise they are incurring penalties.

Increased interest rates are also a cause of concern for landlords. Ratings agent Fitch believes there is a high risk that the number of people defaulting on mortgage repayments is set to increase. Its latest report notes that Irish landlords appear to be under particular pressure, as arrears levels in buy-to-let mortgages are significantly higher than for home loans.

As a result of the increased costs for landlords and the property downturn, it’s not surprising that there has been a dramatic decline in the number of buy-to-let investors entering the market and in the overall share investors hold of the residential market.

The latest Irish Banking Federation (IBF) figures confirm this.

The IBF figures show that the residential investment letting segment of the mortgage market contracted significantly last year. In the last three months of 2009, the segment continued to decrease in both volume and market share terms.

Buy-to-let now represents less than 5 per cent of the overall mortgage market, compared to about 25 per cent during the boom years.

Of the total 45,818 mortgage draw downs last year, the IBF figures show that just 3,018 of them (6.5 per cent) related to the residential investment letting segment of the market. By the final quarter of last year, that percentage was just 4.8 per cent. By comparison, in the final quarter of 2006, 14.1 per cent of the overall mortgage draw downs were for buy tolet investments.

Michael Dowling, spokesman for the Independent Mortgage Advisor Federation, said there was a whole combination of factors, which were mitigating against any potential investment.

‘‘There’s no real demand from people to buy, despite the argument that it’s a better time to buy because of the lower prices,” he said. ‘‘There’s no real appetite. While taxes continue to increase it won’t change.

‘‘The yield is more attractive now, but the maximum amount of finance on offer is 75 per cent of the purchase price and that loan-to-value ratio could go down to 50 per cent. Investors are being forced to put in a greater contribution.”

The cheapest standard variable rate on the market for investment loans is with AIB, at 4.2 per cent.

The bank’s three year fixed rate on investment loans is 4.65 per cent. But interest rates are likely to increase in the coming months.

Dowling said the current sentiment and circumstances marked an end of such investment for the foreseeable future.

For existing landlords, Dowling said they should ensure that they registered each new tenancy with the PRTB or they could not claim mortgage interest relief on the investment. It costs €70 to register each new tenancy.

The greatest issue facing landlords, according to Dowling, is the risk of what would happen if the government decided to abolish mortgage interest relief altogether.

‘‘It would save €1.2 billion for the exchequer,” he said. ‘‘For a government under pressure, it’s still on the agenda. It’s a far more palatable decision than doing the same for residential loans or introducing water rates.”

But Dowling said such a measure would have ramifications for the property market and the resulting failure of investors to maintain loan repayments.

Margaret McCormick of the Irish Property Owner’s Association, which represents about 5,000 landlords, said the precarious position of many buy-to-let investors was being exacerbated by flaws in the relevant legislation. She said the incidents of tenants breaking lease agreements and battles to evict tenants, who could not or simply would not pay rent, had increased.

‘‘It can be quite difficult and quite costly for landlords when tenants remain in situ without paying rent,” she said. ‘‘It can be a long drawn-out process to get a tenant who is failing to pay their rent out of the property.”

Housing minister Michael Finneran has recognised the issue and has outlined plans to tighten up the loopholes in the Residential Tenancies Act.

Currently, if a tenant fails to make a rent payment, the landlord has to issue a notice in writing demanding payment of rent within 14 days. But if a tenant fails to pay, terminating a tenancy and the number of days’ notice depends on the length of the lease agreement.

The major issue for landlords and tenants alike is that the majority don’t know exactly what their rights are under the act. The Private Residential Tenancies Board (PRTB) was established in 2004 to resolve disputes between landlords and tenants, operate a national tenancy registration system, and provide information and policy advice on the private rented sector.

The PRTB dispute resolution service replaces the courts in relation to the majority of landlord and tenant disputes.

However, to ensure a fair and neutral service to both parties, the PRTB cannot provide legal advice or specific guidance to either party in relation to their dispute. Therefore it is up to the landlord to approach the PRTB or engage a solicitor.

Dublin-based firm Landlord Solutions has emerged from the collapse of the property market and the complications for landlords arising from the recession.

It was founded last year by Joe McGinley and a group of solicitors and letting agents when they recognised how complicated it could be for amateur landlords encountering problems with bad tenants.

‘‘With the turn of the economy and the way things have gone, I saw the opportunity opening up,” said McGinley, who has six years’ experience as a letting agent.

‘‘There are similar companies operating in Britain. I knew someone who had used the service over there, and that’s where I got the idea from.”

The company’s founders realised that falling property prices, falling rents and demands for rent reductions were dramatically changing the landscape for landlords. They developed a fixed-cost service to help amateur landlords to overcome problems with defaulting tenants.

They aim to do this without incurring huge legal costs on top of mounting lost rental income, and while recognising the landlords’ obligations in respect of the tenants.

Three of the directors of Landlord Solutions are also directors of property firm McGinley Farrelly and O’Connor.

McGinley said initially he believed it would be ‘‘fat-cat landlords from old money’’ who would use their service. But it has, in fact, typically been young-to-middle-aged people who bought a property as an investment.

‘‘It’s definitely not the traditional landlord with five or more properties and very wealthy,” he said. ‘‘A lot of our clients have made small mistakes when they rented the property and it came back to bite them.

‘‘The majority of cases we deal with are with first-time landlords, who are usually in their late 30s or 40s or retired, and in most cases bought the property as an investment either for their children or their pension.”

Most of the cases Landlord Solutions is currently dealing with are related to rent arrears.

McGinley said many landlords were not financially savvy and made simple mistakes, such as failing to check their bank accounts to see if their tenant had paid.

‘‘A lot of landlords would be using the rent that comes in to pay mortgages, so they’d have the rent going directly into a mortgage account, which isn’t their current account. They wouldn’t be checking it and suddenly they are six months in arrears.”

Marcus O’Connor, a director with Landlord Solutions, and a former PRTB adjudicator, said that, in one recent rent arrears case, a widower was renting out a two-bedroom apartment in Dublin city centre as her only source of income.

The tenant, a man, was €4,000 in arrears. The landlord called the tenant on a Wednesday and he promised faithfully that he would pay by the following Monday.

‘‘The landlord came down to the apartment on Monday evening to find that the apartment was empty, along with a number of items gone, including the showerhead,” he said.

Landlord Solutions has found where the tenant has moved and has served a notice on the tenant to pay the outstanding rent. O’Connor said the tenant will be brought in front of the PRTB and a demand for rent in arrears will be requested, along with the costs associated with replacing the items he took.

McGinley said some of the rent arrears were because the tenants were genuinely in financial difficulty, but that there were also tenants who were merely opportunists.

McGinley said most of the cases were resolved within a few weeks. The company is handling about 20 clients a week.

The services cost from €99 to €895, depending on the situation and whether Landlord Solutions has to represent the client in front of the PRTB and whether there is an appeal. For the foreseeable future, McGinley believes that the service will be in demand.

He said that whether or not the economy improved, there would always be problems between landlords and tenants.

Read the Original Article here.

The Government is yet to make a firm decision on the matter, but in the interim period, your savings are fully guaranteed.

There are a few schools of thought out there on the matter, most probable outcome is the blanket guarantee will be withdrawn, and the original deposit guarantee scheme will be reinstated whereby your deposits up to €100K per individual per institution will be guaranteed. This guarantee also applies to Credit Union movement.

Blanket guarantee has been extended for amounts of greater than €100K if your funds are in a fixed account which must be opened prior to 29th September 2010, and guarantee in this instance is extended to 2015.

For more information on savings and Investments Contact Pat Nestor of SCK Group today.

There are no hard figures on how much in tax relief goes unclaimed every year, but it is generally assumed to be millions of euro.

Consumer and tax experts say now is a good time to start claiming any tax reliefs due to you.

Over the past couple of years, some reliefs have been abolished, while others have been scaled back. But you can still claim for tax reliefs for any expenditure made as far back as 2006.

This means that you can submit a claim for tax relief relating to expenditure which took place during the tax years 2006, 2007, 2008 and 2009, as long as the claim is submitted before December 31, 2010.

Medical expenses
You can claim relief on most medical expenses, such as doctor or consultant fees and prescribed medication. There are some exceptions, such as routine visits to the dentist or optician.

In the October 2008 emergency budget, the Government announced a reduction in medical expenses relief from 41pc to 20pc from 2009.

Service charges
It was recently announced that tax relief on domestic service charges, such as bin collections, are to be abolished from 2011 onwards.

However, you can still claim back relief on any waste, water and sewage service charges paid to a local authority or private operator from 2006, and of course you will still be able to claim relief for 2010 next year.

You can claim 20pc relief on such charges up to €400 a year, which means an annual relief of up to €80.

Employment expenses
A standard flat-rate expenses allowance is available for various classes of employee, ranging from around €30 up to €700. For example, airline cabin crews are granted flat-rate expenses of €64 per year for the cost of maintaining their uniform or work clothes.

Rent relief
If you are a tenant in private, rented accommodation and aged under 55, you can claim 20pc relief on up to €2,000 of rent that you paid during the year, which means you could get up to €400 back, or €800 for a couple.

The limit doubles to €4,000 per person if you are over 55, which means up to €800, or €1,600 for a couple.

Tuition fees
You can claim back tax relief at 20pc on fees paid for third-level courses for your children as well as for yourself or your spouse. The maximum relief on such fees is limited to €5,000 a year, which means you could get back up to €1,000 in any one year.

Home carers
If you or your spouse cares for a dependent person in your own home, you and your spouse can get a home carer’s tax credit of €900 as long as the carer earns no more than €5,080 a year and you are jointly assessed for tax.

If the carer earns no more than €6,880, then this credit is reduced.

Trade union subscriptions
If you are a member of a trade union, you can claim relief on membership subscriptions up to a maximum of €350 a year at the standard 20pc rate, which equates to about €70.

Tax relief at source
Relief for private health insurance premiums and mortgage interest for first-time buyers are usually applied at source.

This means that your lender or insurer will reduce your mortgage repayments or insurance premiums by the amount of tax relief you are entitled to each year.

Additional Reading on Tax Relief

Many people who bought a house in the last seven years, especially those who took out a 100pc mortgage, are certainly finding it difficult.

But others are managing to repay their mortgage and have benefited hugely from the still low, but rising, level of mortgage rates.

This is especially the case with people who have tracker mortgages. Some people have tracker rates as low as 0.5pc above the European Central Bank rate, which means they have a mortgage rate of just 1.5pc.

Lenders have been examining tracker contracts to see if they can wriggle out of them.

But it is understood most lenders have recoiled from tampering with trackers as this would be seen as a step too far by a public already pushed too far by bankers.

Others still have relatively lower standard variable, despite a slew of lenders pushing up these rates in the past few weeks.

Many people with standard variable rates, and some of those with trackers, are currently overpaying their mortgage to provide themselves with a buffer to protect themselves against rising rates.

The logic here is that the homeloan is usually the biggest monthly expense in a household and paying it off seems like a life sentence for many of us.

Little wonder then that people who have a lump sum or some spare cash each month wonder if it would be worth it to use that money to take chunk out of their mortgage.

The average term of a mortgage is between 20 and 30 years. But for many people who bought in the last few years mortgage terms of between 30 and 40 years are not unusual.

And the length of time it takes to pay off a mortgage means that we end up paying through the nose for the use of the money to buy our homes.

Even with interest rates relatively low but rising at the moment, it will cost someone borrowing €250,000 over 30 years a staggering €160,000 in interest alone.

Many people are saving hard at the moment as a buffer against the recession, while others who have been made redundant and received severance pay may be considering using it to take a chunk out of their mortgage.

Paying off your mortgage is a dream for most of us, but does it make sense when mortgage interest rates are still relatively low?

No, says Frank Conway of the Irish Mortgage Corporation.

“If it were my choice, I would not overpay my mortgage right now.

“Interest rates are so ridiculously low (even still) that there is no real financial incentive to paying extra,” he added.

Mr Conway said that even paying an extra €200 per month won’t really make that much of a difference to the capital outstanding. “Cash is far too valuable to be throwing into overpayment,” he added.

Mortgage holders need to plan for higher costs in the future and so must ensure they have a rainy day fund to cover higher mortgage and other costs in the months and years ahead.

“Rainy day funds are a must have — interest rates are only going one way, up,” he added.

Justin O’Gorman of myadviser.ie said that people who are on a tracker and can afford to overpay their mortgage would be better advised to put the money into a savings fund.

“Tracker rates are not going to go up for between seven and eight months. So you should save any extra money you can in a regular savings account. “Then when rates do go up you will have got used to putting aside a higher amount,” he said.

But he understands that it is psychologically important for people to pay down debt at the moment. You can save up to €1,000 a month in the monthly saver accounts offered by EBS Building Society, Bank of Ireland or Permanent TSB.

Personal finance expert Brendan Burgess says it makes no sense to pay off your mortgage if your mortgage rate is lower than you could earn by putting your lump sum on deposit.

Even if the deposit rate and mortgage rate are close, he says it makes very little difference financially whether you put the money on deposit or pay off your mortgage.

But an important point, he adds, is that if you pay off money on your mortgage you are unlikely to be able to get it back later when you need it.

This article by Charlie Weston writing in the Irish Independent, gives good advice to those thinking of overpaying their mortgage.

Read The Full Mortgage Advice Article

Pension Assets under Threat
A recent legal decision could affect the future financial security of thousands of pension investors, especially those struggling with debts.  According to Sunday Business Post correspondent, Emma Kennedy (25/4/2010).

http://archives.tcm.ie/businesspost/2010/04/25/story48765.asp

On Wednesday, April 14, a receiver was appointed over the pension assets of businessman Brendan Murtagh. The former Kingspan boss, who went on to purchase Smart Telecom, once had a multimillion euro fortune, but is now being pursued by investors for debts of close to €30 million.
What does this decision mean?
According to figures from the Revenue Commissioners, more than 6,000 Irish people hold their pension assets in approved retirement funds (ARFs), the same pension structure used by Murtagh.

Murtagh’s High Court bid to retain shares and a pension fund, with a combined value of up to €1.2 million, to fund living expenses was rejected by Mr Justice Peter Kelly. Murtagh’s ARF, which is worth close to €800,000, is a personal investment plan for retirement income.

‘‘It’s no surprise that ARFs should be available to discharge debts, given that they are personally held assets,” said one pensions expert.

Since an ARF is not set up as a trust – the typical structure for many other types of pension – any assets held in an ARF fund are ‘fair game’ for creditors, according to pension experts.

The income from pensions has long been the subject of pension orders from the courts, but the accumulated capital is a different matter.

By extension, the recent court decision could set a legal precedent whereby pension assets are no longer safe from creditors.

However, one expert said that creditors would not be able to access the full value of the investment held in the ARF of an insolvent person, since some draw downs from ARFs are subject to taxation.

What is an ARF?
An ARF is a type of pension structure that is available to a relatively small group of people, typically the self-employed and proprietary directors.

It offers a greater degree of flexibility at retirement, as pensioners have more control over their own investment choices.

‘‘It’s a much more flexible way to spend your pension pot,” said Ian Mitchell, managing director of Deloitte’s pensions and investments division.

‘‘The structure allows people to tailor their pension pot to their lifestyle.”

On retirement, after they have taken their tax-free lump sum, individuals can transfer the value of their maturing retirement benefits into an ARF, instead of purchasing an annuity or taking a taxable lump sum.

The most common alternative is to buy a retirement annuity. Falling annuity rates have made this less popular so, for those with the option, ARFs are becoming an increasingly effective way to manage retirement income.

Withdrawals from the ARF during your lifetime are taxed at your marginal tax rate and are also subject to the health and income levies.
But on death, the value of the ARF can be paid tax-free to an ARF owned by your spouse.

Subsequent withdrawals from the ARF by your spouse are also subject to tax and levies.

One of the key advantages of an ARF is that it can play a valuable role in estate planning. Typically, an annuity ceases on the death of the pensioner, but may provide a small pension to a spouse for a limited period after the pensioner’s death. However, an ARF becomes part of an individual’s estate on their death.

‘‘An ARF allows people to pass on their money to their children,” Mitchell said.

Income requirements for ARFs
In order to have an ARF, an individual must have a guaranteed pension income for life of €12,700, unless they are over 75 years of age.

Individuals who fail to meet this minimum income requirement on retirement must create a financial buffer zone for themselves in the form of an approved minimum retirement fund (AMRF).

Once individuals have taken the tax-free lump sum, they must put a further €63,500 into an AMRF before transferring any remaining assets to an ARF.

Alternatively, an individual can satisfy the minimum income requirement by using the €63,500 to buy an annuity.

When an individual turns 75 or dies, the AMRF automatically becomes an ARF.

Extending the rules
ARFs are currently restricted to specific types of people, typically the self-employed, but the recent National Pensions Framework announced plans to extend the flexibility associated with ARFs to a much broader group of people .

The framework document announced that, from next year, all members of defined-contribution pension schemes would have access to the ARF option on retirement.

However, one pension expert expressed concern whether this would actually happen, given the lack of details about how this would operate with just eight months to go until the deadline.

Currently, employees who are members of a defined-contribution occupational pension scheme – except those who are 5 per cent directors of their employer’s company – have limited choices on retirement.

They can take their tax-free lump sum, and the balance of the fund must be used to purchase a guaranteed fixed pension for life, known as an annuity.

From next year, it is proposed that members of defined contribution schemes will have access to these ARF options, provided they have a minimum annual income from other sources of at least €18,000.

National Pensions Framework: key milestones
The first week of March brought a shock for many Irish workers, with the government announcing plans to increase the amount of time people have to work before they can claim a state pension.

For hundreds of thousands of Irish people, that means three more years in the rate race.

As part of the government’s recently-introduced national pensions framework, anyone aged 49 or under this year will have to continue working until the age of 68 before they can draw a state pension.

This shifting of the goalposts for current workers is just one of a series of measures announced by the government in a bid to address the looming funding crisis caused by a rapidly-ageing population with insufficient pension provision.

The new pension framework will see individuals, employers and the state share the responsibility of providing adequate retirement income. A higher retirement income age, mandatory pension system and a new system of public sectore pensions are among the key points in the government’s strategy.

While the government has outlined its ideas, many of the details have yet to be worked out. An implementation group will work on the legal and policy issues that need to be ironed out, so many of the policy changes may still be years away.

2011: on the cards for next year is a plan to extend the rules about approved retirement funds (ARFs) to members of defined-contribution funds.

2014: an automatic enrolment scheme for pensions is set to be introduced, and employers will make a mandatory contribution towards employees’ retirement funds.

2021: the state pension age will increase to 67, and in 2028, it will rise to 68

How a financier reads a business plan

How financiers read a business plan depends on what kind of financier they are. There are two types of financier: the lender and the investor. The lender is typically your bank manager.

Lenders will invest money in your business if they think it worth doing so by their criteria, in return for interest on the capital. The professional investor, on the other hand, will invest equity in your business and share in your risk as owner of the business.

Professional investors will postpone their return for a period -typically three to five years – but will look for an above-average return for the risk involved in doing so.

The Lender
The average bank manager will be looking to see how you have handled or propose to handle the risks, particularly the financial risks, which your business may encounter. Bank managers are concerned about the security of the bank’s money – or, more properly, the depositors’ money – which you are seeking and for which they are responsible.

That is not to say that a bank manager will not back you. Most bank managers have discretion in the amounts they lend and will sometimes back their own hunches or gut feelings against the apparent odds.

But don’t bet on this. Turn the odds in your favour by writing your business plan and framing your request for finance in the best possible light.

Arnold S Goldstein, the American author of Starting on a Shoestring (John Wiley &Sons), suggests the following likely line of questioning from a bank manager:

• Why do you need the amount requested?
• What will you do with it?
• How do you know it’s enough?
• How much less can you live with?
• Who else will you borrow from?
• How do you propose to repay it?
• Wow can you prove that you can?

What collateral can you offer?

Unless you can answer these questions to your bank manager’s satisfaction (especially the last two), it is unlikely that you will get the money you are looking for.

And don’t wait for the interview with the manager for an opportunity to give the answers to these questions. That is far too late.

The bank manager’s mind will already be made up, more or less, before your meeting. Your plan will have been read thoroughly.

The interview is intended to confirm the manager’s decision. If you have not answered the relevant questions in the plan, you are not likely to have much chance to do so later.

You don’t need to write your business plan in a style that asks the questions in the form above and then gives the answers. What you need to do is to ensure that the information that answers the questions is:

• Contained within the plan
• Visible within the plan
• Capable of being extracted by a reader from the plan.

In another words, a bank manager will look for three things: character, collateral and cashflow.

Character means you. A bank manager who has any reason to distrust or disbelieve you – from previous dealings or because of your reputation or because of errors or inconsistencies in your business plan – will not invest money with you.

Collateral means the backing you can give as security for the loan. In some cases, collateral is not needed. But to the banker, who is responsible to the bank’s depositors for their money, security is everything. If you can offer collateral, it will certainly help your case.

Cash-flow means your ability to repay the loan on time, out of the proceeds of the investment.

The bank manager will prefer to see the loan repaid at regular monthly or quarterly intervals with interest paid on the due dates – anything else upsets the system.

Unless you can show that the business will generate enough cash to make the payments the bank manager requires – or you have explained clearly in your business plan why this will not be possible for an initial period – you will not get the money that you ask for.

Professional investors

Professional investors, such as venture capitalists, have a different viewpoint. They accept risk, though, like any prudent investor, they will avoid undue risk and seek to limit their exposure to unavoidable risk.

David Silver, another American venture capitalist and author on enterprise, suggests that their questions will be along the lines of:

• How much can I make?
• How much can I lose?
• How do I get my money out?
• Who says this is any good?
• Who else is in it?

Writing the business plan

There are three stages in writing a business plan:

• Thinking
• Writing
• Editing

Each is important but the most important is the first one: thinking. Be prepared to spend at least 75 per cent of the time you have allocated to preparing your business plan in thinking. Time spent in this way will not be wasted. Use this time to talk through your business with anyone who will listen, read widely – especially about others in your area of business – and avoid finding reasons why things cannot be done.

Writing can be done fastest of all. Use a computer to give yourself the flexibility you will need to edit the document later. If you find it difficult to start writing on a blank page or computer screen, talk instead. Buy or borrow a hand-held dictating machine.

Talk to yourself about your business. Explain it to someone who knows nothing about it. Get the tape transcribed, and your business plan will be on the way.

Editing is the last task. Editing is an art. Some people are better at it than others, but everyone can learn the basics. Essentially, it’s about clear communication.

Read through your draft business plan – aloud, if you find that helps. Does what you have written say what you want? Start deleting.

You will find that quite a lot can come out without doing damage. When you are happy with your draft, put it aside for a day or two. Come back to it fresh and see whether it still makes sense. Edit again where it does not.

And when it is right, leave it alone.

A standard business plan format
Each business plan is unique. However, those whom you seek to convince to invest in your project have come to expect certain information in a broadly standard format that presents information in an easily digested logical sequence.

For a very small or simple business, the following intuitive format – adapted from Applying the Rules of Business (Steps to Entrepreneurship series), by Ron Immink & Brian O’Kane, Oak Tree Press – may be sufficient.]
You need to cover all the information that a reader of a business plan is likely to want to know in order to come to a decision on the plan. and ensure that you have fully thought through all aspects of your business.

Simple business plan outline

I am . . .

Explain who you are, your education/work experience etc, especially insofar as it applies to your proposed business.

My product is . . .

Explain your product: what it is, what it does, how it works, how it is made, what makes it different/unique, etc

My customers are . . .

Explain who your customers will be and what evidence you have to support this.

My customers will buy my product because . . .

Explain why your customers will buy your product and what evidence you have to support this.

My customers will pay . . .

Explain how much your customers will pay for each unit of your product and what evidence you have to support this.

At this price, my customers will buy . . .

Explain how many units of your product your customers will buy at the price set and what evidence you have to support this. I can make . . .

I can make . . .
Explain how many units of your product you can make in a given period and what evidence you have to support this.

To make each unit of product costs . . .

Explain how much each unit of product costs to make and what evidence you have to support this.

The start-up investment I require is . . .

Explain the start-up investment you need, what it will be used for and what evidence you have to support this.

I have a viable business because . . .

Explain why you believe you have a viable business and what evidence you have to support this.

In summary . . .

On a single page, list the main points of your plan in bullet point form. This is the part of the business plan that will make the biggest impression on your reader – make sure it’s easy to read and understand. Then put it at the front of your plan, where it will be seen.

Planning for success outline

1: Summary/Overview

Founder(s)

Business name

Contact details: address, telephone, fax, email, website

Status: sole trader, partnership or limited company

Registered for: Vat, PAYE, corporation tax

Formed as: purchase of existing business/ purchase of franchise/start-up/other Business objective

External accountant: address, telephone, fax, e-mail, contact name

Product/service range: include descriptions and prices

Staff: numbers employed in production, sales/promotion, administration, other duties

Competitors: include estimates of competitors’ turnover

Investment and financing: details of fixed assets, personal assets, current assets, long-term/medium-term assets, liquid assets, short-term finance, start-up costs, subsidies/ grants, allowance for contingencies, total investment, total available finance.

Budgets: forecasts for turnover, gross profit, gross profit percentage, net profit, cashflow and personal expenses over first three years

Other information

2: The entrepreneur

(If there is more than one founder, each must complete this section.)

Personal details: name, address, date of birth, etc

Income: details of present income, source of income, benefits, income of spouse/partner, etc

Education: details of post-primary education, including any courses that you are currently attending

Practical experience: details of your working history and experience and any other significant experience that could be useful for your business

Motivation, objectives and goals: why do you want to start a business? What do you want to achieve with your business?

Personal qualities: what special qualities of yours are important for your business? List your strong and weak points. What are you going to do about your weak points?

3: Formal requirements

Overall description: a general description of your proposed business

Research: list the organisations you have contacted to discuss your plans and summarise the outcome of these discussions

Legal status: what legal status will your business take? What considerations led you to this choice?

Name and location: what is the name of the business? Have you checked that this name is available? Describe your location. How can customers reach your location? Is access for supply and removal of goods available?

Is there enough parking for your customers’ cars and for your own cars? How big are your office premises? Are there expansion possibilities at these premises?

Are the premises leased or purchased? Give details of cost of lease/mortgage. Have the premises been professionally valued? Has a lease or purchase contract been prepared by a solicitor? (If so, give the name of the solicitor.)

Is there any pollution in the ground at your premises?

Licences: do you fulfil all of the licensing and permit requirements for the field you will be working in? If so, which and on what grounds? If not, why not and what are you doing about it? Is your business registered at the Companies Registration Office? What other licences do you need? Are there any other legal applications required (for example, environmental concerns)? If so, which?

Employer and employees: initially, how will your staffing be organised? Have you drawn up clear job descriptions for your future employees? Do you plan to expand your employee numbers quickly? Who will replace you during any required absences?

Administration: who will do your accounting? Who will do your bookkeeping? Give names, addresses and contact numbers.

Insurance: are you insured against the normal risks? If so, what is insured and for how much?

Terms of trade: how is responsibility for product delivery arranged? Are product deliveries insured? If so, for how much? Summarise your terms of trade.

Vat: Is your business registered for Vat?

What is your Vat number? What rates of Vat apply to your business?

Start date: On what date do you want to start the business or when did you start?

4: Marketing

Market: who are your target groups? What do you have to offer? What is your business objective in seven words?

Market research: describe your market, future developments and your potential customers (local, county, national and international).

Describe the level of competition you face. What are the leading indicators in your market sector? Estimate the size of the Irish market for your product. What part of this market do you intend to service? Have you contacted future customers? What was their reaction? Have you obtained any forward orders?

What comments did you receive with these orders?

Image: what image will your business present? Formulate the core of your marketing plan based on your target groups, product assortment, price level, etc.

Product (range): describe briefly the product( s) you want to launch. Describe the primary and secondary functions of your product(s).What choices do you offer your customers? What extras do you offer compared to the competition?

Price: what are customers prepared to pay? What are customers used to paying? What are your competitors’ prices? What is your price? How is your price made up? Will you offer discounts? If so, what will they be? Will you give special offers? If so, what will they be? Will cost calculations be monitored during operation? If so, how?

Place: explain your choice of location. Will future developments change the attractiveness of your location? How did you allocate space for the various necessary functions?

Personnel: profile yourself as a businessperson.
How many people will be involved in production, sales/promotion, administration, other duties? How are you going to make sure that your staff uphold the image of your business?

Presentation: how are you going to present your business (layout, colours, music, atmosphere, correspondence, brochures, business cards, van signs)?

Promotion: rate those areas your customers are most interested in and your relative strengths in those areas. How are you going to approach your customers and what buying motives are you going to emphasise? What marketing and promotion resources will you emphasise? Explain your promotion methods (how, where, frequency, etc)

Competitors: list your main competitors. Assess their strengths compared to your own.

In what ways do your products/services differ from those of your competitors? Can you estimate the total turnover of your competitors?

What are your strong points compared to those of your direct competitors? What are your weak points compared to those of your direct competitors?

Purchasing: have you contacted your future suppliers? If so, what are their terms of trade? Are there alternative suppliers? What advantages do these alternative suppliers offer you?

Production process: are you involved with (or will you be using) new techniques or new products in your production processes? If so, are you receiving assistance from experts? If so, who are they and how are they involved? Describe your production process.

What experience do you have with this process?

What equipment do you use in the production process? List the equipment you intend to lease, buy new or buy used. What guarantees/ back-up do you have for this equipment in case of malfunction?

Have you enough capacity to achieve the revenue for which you have budgeted? Have you checked your products and production processes for environmental considerations?

Are there any environmental objections? If so, what are you planning to do about them?

5. Investment and financing

Investment: describe the investment you will have to make to start your business and to run it over the first three years (exclusive of Vat)

Personal assets: what assets can you (and your business partner or partners) put up? How did you value your personal assets?

Other (bank) finance: details of long term/ medium-term, short-term finance, subsidies/grants; shortfall, surplus, etc.

Credit assessment: can you support the required investment in fixed assets with quotations from suppliers? If not, how did you calculate your investment? Is your investment cost-effective? In your estimates, did you take seasonal business influences into account, and calculate based on your maximum requirements?

How did you estimate your stock and work-in-progress levels? How did you estimate the value of your debtors? Do you have sufficient liquid assets to cope with disappointments and unexpected expenses?

Did you approach a bank or banks about the financing of your plans? If yes, which banks and who was your contact person?

Did those contacts lead to any agreements?

Did you approach other finance companies about your plans? If yes, with whom did you speak? Were any decisions reached or arrangements made?

6. The operating budget

Turnover forecast: list your revenue sources and project the amounts you expect from each in the first three years

Costs: give details of costs for staff, production, premises, transport, sales and promotion, general expenses, finance and depreciation in each of the first three years

Profits and cash-flow: give detailed cash-flow projections for the first three years

Comments on the budget: describe how you calculated and estimated your revenue (number of customers, average order per customer, turnaround).What expansion do you expect over the next few years? How did you calculate your purchase costs? How did you estimate salaries? What effect will any shortfall in turnover have on your business and how do you plan to handle it? What is your minimum required turnover?

7: Personal expenses

Personal expenses: fixed expenses; rent/ interest and repayment gas, water, electricity; taxes/charges; insurance; study expenses; membership expenses/contributions; TV licence; private use of car; repayments (enclose loan details); household expenses, etc.

Home equity: do you own your own home? If so, have you had it valued? What is its market value? How much equity do you have in your house?

Additional debts: what other debts do you have (personal/private loan or credit, car financing, study costs, etc.)?

Minimum required turnover: what is the minimum required turnover for your business, including your personal expenses?

8: Cash-flow

Detailed cash-flow projections for each month/quarter, outlining all income and expenditure, together with the opening and closing bank balances each quarter over the first three years.

Executive summary

Sometimes the summary or overview is expanded with a narrative executive summary, a concise oneor two-page summary of the entire plan.

This executive summary is the last thing to be written, but the first to be read. It must persuade the reader that the idea is good; otherwise, he or she may not read on. It summarises the company, its objectives and why it will be successful. It describes the products, the market, critical financial information and, finally, outlines what form of finance is required, how much and when. It assumes that its reader is not expert in your industry and knows nothing about your business. And it does all this in as few words as possible.

You should avoid giving detailed personal reasons for wanting to be your own boss. It is very easy to confuse your personal ambitions with your objectives for the business.

Bankers and other investors are primarily considering your prospects for success (getting them a good return), not your prospects for personal satisfaction. It is important to keep your focus, like theirs, on the business. Nonetheless, your character and skills will be of importance to them, so these are things to mention.