Blog Archive - Budgeting

Yesterday, The Sunday Business Post listed some websites, designed to save you money.  Here are some of our favourites: compare energy prices find the cheapest petrol stations compare Health Insurance plans for travel insurance comparisons compare mobile phone costs compare airline costs

In these difficult times. it’s important for families to budget properly and to cut down on unnecessary expenses.  John Lowe gives some tips in the Sunday Business Post.

Tips to hang onto family cash
05 June 2011 

1. Plan

It is crucial to complete a household budget as your first exercise. First, work out exactly what you are spending each month and, from this, determine initially how much disposable – and, if applicable, surplus – income you have.

That is what is left after tax, and after you pay your rent or mortgage, household bills, food, petrol and ‘spending money’.

If your expenditure exceeds your income, you then have two choices – cut costs or earn more.

Remember to ask yourself: do you really need to buy that product or service and, if you do, is there a cheaper or better alternative?

2. Cut your banking and insurance bills

Overdrafts, especially those exceeding the limits, should be a no-no. Also, try to avoid arrangement fees, high interest rates and referral fees.

Surcharges, which are additional interest charges applied for exceeding overdraft limits, can be up to another 12 per cent annually, and unpaid fees all take their toll on your disposable income.

Credit card costs are similar – try and use your credit card like a charge card and pay it all off when the payment is due.

But be wary of using your credit card to take out cash, as you can be charge up to 26 per cent from the time you withdraw.

You should also shop around for the best mortgage and loan deals, not to mention insurance premiums – life, health, buildings and contents, travel and even your car.

Always compare quotes from your insurer with other options available in the market, or seek advice from an independent authorised adviser.

3. Find the right savings accounts

The most important decision about savings can be summed up in one word: start.

By planning to save, you are setting immediate goals – for holidays, an attic conversion, the new plasma 3D screen television you want or even funding Christmas presents for the children.

Save small, but save often, whether in a bank’s regular saver account, the post office or your local credit union.

Ensure your deposit-taker is regulated.

The Financial Regulator’s deposit protection scheme covers you for up to €100,000.Then it is a simple matter of finding the best rate. Remember the mantra: better in your pocket than theirs. So what’s the best regular saver account currently?

You can save between €100 and €1,000 per month for 12 months and receive 4 per cent interest from both EBS’s family regular saver account and Ulster Bank’s Special Interest deposit account.

4. Cut down your household bills

When you analyse your household bills, you will find you may have left the lights on for too long, or not used the washing machine on the night-time rate or had the central heating blazing while you were away for the weekend.

Choose the most appropriate utility plan for your needs and take advantage of the deals created by competition in the sector.

Travel bills can also be cut easily. Buy discounted or tax friendly bus passes, get the best rates on tolls by using, or try a bicycle over time; not only is it cheaper, but better for you physically. If planning a holiday, hold out for last-minute deals.

Across all areas of spending, you will find ways to reduce your overheads. Always adhere to the Money Doctor mantra – stop spending and, if you must spend, ensure you are getting the best value.

5. Look for bargains

* Take advantage of special in-store offers – for instance, SuperValu is delivering real savings to parents with a baby and toddler event, including value-for-money offers on all things baby until June 18.

*Use coupons and discount

vouchers. * Go online and use discount websites – and to name but two.

* Have fun for free: take the family to the town library, art gallery, museum or park.

*Generic and bulk buying – especially for family purchases, like nappies and baby food.

* Clothes: buy tough-wearing items and remember your family and friends will appreciate the clothes once your baby’s grown out of them.

There is no shame in hand medowns.

* Food: portion control is key. Follow healthy eating guidelines.

Portions of mashed potato or rice should be the size of a computer mouse.

For cheese, you should eat a golf ball-sized portion, while vegetables should take up over half your plate.

*Water is free, and far better for your children and you, than any soft drink – and tap water at that.

For many years, we have been advising our clients to ‘over-pay’ their mortgage if they can. With deposit interest rates low and condsidering DIRT, it made more sense to clear down debt rather than increase savings. This is still the case, but with most entrepreneurs and individuals in survival mode, not many will be able to pay more. However, it still makes sense if you can afford to do so. Last week we saw the first increase in ECB interest rates for some time, how many more increases will follow? If nothing else, paying extra on your mortgage each month now, will prepare you for the increased repayment in the months to come, and you will be reducing your debt. For tips on how to keep your mortgage costs down, see the article in last Sunday’s Business Post

John Lowe – The Money Doctor gives you some advice in managing your finances in this weeks Sunday Business Post
The easy way to fix your finances
23 January 2011 By John Lowe

Debt management is not just a simple matter of setting aside a certain sum each month to meet the mortgage, loan and other fixed repayments. It requires planning, prudence and a degree of discipline which many of us may have lost sight of during the boom years.

What is debt?

Debt comes in many shapes and forms, but can be divided into three simple categories.

1. Long-term debt: this mainly consists of mortgages, but can also include any other debt that you have held for longer than seven years.

2. Short-term debt: borrowings Which would run for less than seven years and can include borrowings for car purchase, furniture, holidays, educational or other family purposes. Increasingly, this also includes conversion of hard-core overdrafts and credit card borrowings.

3. Running or current debt: typically, this would include bills which have to be settled every two or three months.

These include utilities such as electricity, gas, telephone/broadband, etc. Credit cards used for day-to-day expenditure would also be included here.

The crash of 2007/2008 has meant that most people who have been fortunate enough to hang on to their jobs have suffered sizeable reductions in real income, through a combination of pay cuts and income levies.

Add to this the interest rate increases for all but holders of tracker mortgages and the pressures on borrowers are all too obvious. Here are the key steps you need to take in tackling your debt.

Taking stock

Where are you now in your financial life and where do you intend to be at the end of this year? In five years? More importantly, where are you now in relation to 12 months ago and what steps have you taken to prevent any further drift ?

As I said, debt management is more than meeting your loan repayments as they arise. It should be an active rather than a passive exercise and should form part of a strategy of constant review. If you are in control of your finances now, it’s important to stay in control.

Where to start

1. Look at your family’s n et monthly income.

While you may Not be able to increase your gross earnings, it is important to ensure that you avail of all the tax allowances and credits et al.

For instance, have you claimed your medical expenses, dental costs, bin charges, your rent relief or pension relief for the last few years?

Social welfare and child benefit payments, additional jobs and any other forms of income should all be included in your net monthly income.

2. Now, consider your expenditure.

Many of us have no clear idea of our spending on such things as groceries, travel, entertainment or clothing. On the other hand, we know only too well how much we spend on utilities, heating, insurance, etc.

Keep a record of all your spending over a two or three week period – use a diary or a notepad – and involve your partner and family so that a full picture of family expenditure can be determined.

The initial shock of how much you spend on casual unwanted items will wear off. That bar of chocolate you munch every time you fill your car with petrol, the magazine you don’t have time to read – the list goes on.

3. Go through your bank statements over a three-month period, and have a look at al l standing orders and direct debits.

Are you still continuing to pay club subscriptions or making donations to charities which you no longer wish to continue? Consider each and every financial commitment: are they all necessary?

Remember the Money Doctor mantra: stop spending and, if you must, ensure best value.

Your expenditure can be broken into three categories, the ABC of expenditure:

A. Fixed outgoings: they consist of such things as mortgage/rent, loan repayments, electricity, gas, telephone costs, transport, educational, food and essential clothing, insurance, etc.

B. Discretionary spending: these cover all non-essentials such as entertainment, holidays, sporting and leisure activities.

C. Savings: these would include the provision of a rainy day fund – remember the ideal is to have three to six months annual income in an accessible account pension contributions, educational plans or other sums set aside to meet future expenditure for you, your partner and/or family.

By now, you should have mapped out your spending on a monthly or weekly basis.

You should then look at your fixed outgoings to see if there are cheaper alternatives. Electricity, gas, telephone/broadband and cable television are items that should immediately come to mind, but there could also be substantial savings to be achieved by shopping around for cheaper car and household insurance, and reviewing your life and health insurance.

Also, interest rates both for loan and savings products constantly change. What might have been the highest rate for your savings last year could very well be the lowest this year.

Now, have a look at your net monthly income and see how it matches up to your outgoings. All of these steps may achieve some savings, but essentially they merely consist of a tidying-up of your finances. This is something you should do every year, in good times or bad.

That is why you need to spend about two hours every month on your finances. By now, you will know your position and whether meeting your monthly commitments is causing, or is likely to cause you, problems.

Examine your Options


Your mortgage repayments are likely to be your biggest commitment but, in terms of interest rate, they are also the cheapest. If you are fortunate enough to have a tracker mortgage (tracked to the European Central Bank rate, now 1 per cent), do not be tempted to switch to any other product.

Trackers are like gold dust, and lenders are using all sorts of means to switch you from them.

Looking for an extension to your interest-only facility only gives them leverage to discuss that switch. Pay the full capital and interest repayment if needs must.

If, however, you are on a standard variable rate mortgage, some of these vary from lender to lender.

Check where your rate is compared to others on the market. If it is on the high side, you should first of all consider taking out a fixed rate with your existing lender.

Variable rates are set to continue to rise, even though the ECB rate will probably stay at its present level until late 2011. If you are not offered an attractive rate, you could shop around if you qualify.

You will be well placed to switch lenders if:

* your loan is less than 80 per cent of your home value

* you have sufficient earning to justify such a switch (as a rule of thumb about 4.5 times your annual income for both applicants)

* most lenders will approve a mortgage up to age 65, with a few up to age 70 and this has to be borne in mind if switching

* you have a good credit history, with no missed payments or judgments.

Personal loans

You may also have car loans, furniture or home improvement loans or overdrafts.

The ‘‘sniper approach’’ to getting out of debt should be adopted. This is where you ‘‘pick off’’ the most expensive debt first if you can. Some of these personal loans can attract interest rates over 16 per cent.

The greater the risk, the higher the interest rate.


These are bank mechanisms for giving You money upfront – ie, a loan – on the promise of an eventual lodgment to the account to regularise the account, but charging you through the nose for it. They can also be misleading and lure you into a false sense of security.

Firstly, they are hugely expensive – personal overdraft interest rates start at around 13 per cent. Secondly the set-up charges, referral fees, unpaid fees, surcharges (an additional amount of interest – could be 1 per cent per month – chargeable if you exceed the overdraft limit without permission) are simply not worth it.

Managing without an overdraft is the ideal. Remember also the requirement for overdrafts is that they must be in credit for 30 days each year.

Credit cards

So you’ve ‘maxed out’ your credit card or cards, where you have used the full credit limits in your cards. What are your options? Paying 3 per cent of the balance each month will effectively create a 20-year loan for you based on the high credit card interest rates.

If your credit rating is good enough, however, and you are still in satisfactory employment, you could switch to one of the seven credit cards that offer 0 per cent on transferring your balance over to them for a period of time.

If you have an asset that you can dispose of in order to reduce your borrowings – such as a holiday home you rarely use, or even a second family car – be prepared to swallow your pride and take the hard decision. If you are sitting on any substantial level of savings, it would make sense to use some of them to payoff your most expensive borrowings, particularly credit cards or personal loans.

Also, if you are making monthly payments to a savings plan and you have sufficient rainy day funds, you should consider suspending the plan for a period and diverting the payment in reduction of your debts.

If none of these is an option you can avail of, then you could consider consolidating all your non-mortgage borrowings either on the security of an asset, eg, your home or, if allowable, in one unsecured personal loan and you can show the ability to repay. Credit unions are still obliging thousands of customers once they have been able to prove repayment capacity.

If your mortgage is sufficiently low, and you have good equity in your home, you may be able to convince your mortgage lender to let you top up the mortgage over its remaining term.

However, such loans are getting more difficult to obtain, with some of the bank lenders only accepting their own personal loans for limited consolidation.

Establishing priorities

The greatest priority for most of us must be to retain the family home. Therefore, maintaining mortgage repayments, no matter how small, has to be a must.

Other lenders can take various legal steps against you and impair your credit rating by registering missed repayments with the Irish Credit Bureau, but your mortgage lender is the only one who can repossess your home.

They have a legal charge against it.

Be proactive

If the warning signs are there in terms of an ever-increasing overdraft or a credit card on which you make the minimum payment each month, now is the time to take action.

Don’t wait until you’ve missed payments and the letters start to arrive. Ignoring communications helps no one, neither you nor the creditor.

With mortgages, all the lenders have an agreement with the government in terms of how to deal with mortgage arrears and the various time limitations of pursuing legal action, but this only applies where the mortgage holder is already engaged with the lender in relation to those arrears and is actively communicating.

Your mortgage lender will already have a dedicated section dealing solely with borrowers in arrears.

Taking early action can head off impending trouble, and will also impress upon the lender that you are determined to work your way through any problems.

Define your Endgame

Decide what you want to achieve, but also be realistic enough to know what is achievable.

Look at the trend in your finances over the last two years, and determine if your situation is temporary or likely to last for a number of years.

Have you any source of additional income coming available in the next few years, such as an inheritance, a maturing investment plan or endowment policy or anything of this nature?

Will any of your dependants become self-financing?

Will your partner be able to enter the workforce if unable to do so at the moment?

Will you yourself be able to develop any sources of additional income? Reinvention is fast becoming a buzzword in business circles.

In other words, if you are preparing to approach any of your lenders/ creditors to negotiate with them, be sure you can show them that, as far as possible, you have a plan that is realistic and achievable. Part of this approach will be cash flows, budgets and any potential dreams and plans for the future that will repay their debts.

First things first

Look at any short-term borrowings where the repayments are large relative to the size of the loan. If you can manage to extend the terms of these loans without attracting a higher interest rate or any punitive penalties, negotiate these first.

If you then decide to renegotiate your mortgage, it’s likely that the lender will give you their own version of an income and expenditure worksheet which you can complete from the budget template you’ve already prepared.

Current account statements, all loan statements, insurance policies, savings accounts and investments including pension contributions will all be required by your lender.

Going to the initial requested meeting armed with all these facts and figures will show your lender how serious you are.

What to expect

Your creditor/lender will by now have developed a good level of expertise in handling these situations, and will have a suite of tailored solutions to cover most scenarios.

The most likely financial solutions they will offer are:

* for mortgages, extending the term

* interest-only payments for six months, one or two years

* a moratorium on all repayments – capital and interest – for a number of months

* a top-up mortgage/loan to allow you to consolidate all your other loans.

The first option of extending the loan term ould be attracctive if it alleviates the problem – ie, eases the cashflow and allows capital and interest payments to be continued.

Bear in mind that, if you are on a tracker mortgage interest rate, extending your loan may terminate your original loan contract and you may be forced to accept a standard variable or fixed interest rate.Your lender will always send you full details of any switch agreed.

You will need to carefully read the same. Interest-only for a period will obviously help, as in many cases it can effectively halve your monthly payments.

The saying that you can’t make a silk purse out of a sow’s ear rings true: if you haven’t got it, you can’t give it. So lenders are forced to at least grant interest-only extensions for a set time. Obviously, this cannot go on forever, but there is little choice for the lender while the property market continues to weaken and sales are flat.

Some of the lenders will not give further interest-only extensions on home loans, but will approve payment reductions – this is tantamount to the same thing.

The third option, of a moratorium on all payments, is purely a very short-term solution and, unless your problem is also short-term – eg, due an inheritance – it will not really be of any assistance to you.

The final option of the top-up, if available, would be the optimum solution where additional funds are approved to consolidate other debts, possibly give you some upfront cash and some breathing space. In the present climate, this is probably the least likely, as all lenders have liquidity problems and have enough impairments without potentially taking on more.

In the absence of a top-up, a combination of the first two would be most beneficial to you, as it would extend the term of the loan and also give you the breathing space of interestonly payments for the initial period.

Give a little

In any negotiation case, there is give and take.

Your lenders will expect sacrifices to be made if you are looking to extend facilities with them. Just as with a new enterprise, prudent bankers like to see entrepreneurs invest their own money into a project before agreeing loan facilities; so too the debtor. To sum up, if you have debt issues, these are the steps you have to take.

1. Communicate: do not ignore creditors’ letters or calls. Burying your head in the sand will only prolong the agony.

2. Check your income: are there any other channels of income? If your employment has gone or your business ceased, have you reinvented yourself?

With financial commitments, they have to be serviced and income therefore has to earned. Dust off your CV, prepare that new business plan and create income. Jobseeker’s allowance or benefit should only be temporary.

3. Check your expenditure: do the analysis of your spending and prepare a full budget that you may need to show your creditors.

Show clearly where you have made cuts and sacrifices. If you haven’t got it, you shouldn’t spend it.

4. Give hope: if you have lost your job or ceased your business, you must have a plan that will at some stage recreate an income stream and recommence loan payments or fully pay off the debt. Declare your intention and put a time limit on the recovery yourself.

5. Pay something: even if your lender does not agree with your proposals, choosing to ignore demands or to pay nothing at all will only escalate repossession or worse, prison. If your interestonly extension request is refused by your lender, for example, you could cancel the lender’s direct debit and manually pay the interest each month on time.

By making these payments, you stand a far better chance of leniency should the lender take you to court.

Finally, take professional advice. I cite the example of golf professionals: they still use coaches.

As we near the end of January, people are getting their first pay packets and are seeing for the first time what the recent budget changes will mean for them. This article from Emma Kennedy, Sunday Business post, tells you to get creative with less cash!
By the end of this week, most of us will see the full extent of how Budget 2011 will affect us in black and white. December’s austerity budget announced €6 billion in spending cuts and tax measures, including a 4 per cent cut in social welfare payments, except pensions.

With the tax changes effective since January 1, people who are paid monthly will see just how much their wages have shrunk when they receive their January pay-packet this week.

Tax credits were reduced by about 10 per cent, taking the single person’s tax credit from€1,830 to €1,650.For a married couple, their personal tax credit is now €3,300, down from €3,660.

The tax rate bands have also been narrowed, meaning you now pay tax at 20 per cent on a smaller proportion of your income and consequently pay more tax at the marginal rate of 41 per cent. For a single person, the standard rate threshold was €36,400.Now it’s €32,800.

For a married couple with two incomes, the higher rate of tax now kicks in on income above €65,600. Previously, the threshold was €72,800.

The new universal social charge, which replaces the income levy and the health contribution, applies at 7 per cent on income of slightly over €16,000. Add to this the abolition of the PRSI ceiling, and most taxpayers will see a significant drop in their take-home pay.

With that in mind, and with the prospect of more harsh budgets ahead, it’s important to get your financial house in order to ensure each euro you earn goes as far as it can.

The financial habits we adopted in the boom days need to be changed, replaced with habits more suited to the current climate.

Make holding onto your cash, or at least as much of it as possible, your main objective for 2011. But before you can make changes to how you manage your money, you need to recognise your financial personality type.

The ditherer

Do you worry endlessly about your finances, but yet never get around to sorting them out? If you are worried about the financial position you are in, you must address the problems, as they won’t go away on their own.

Sticking your head in the sand and putting off important financial decisions only serves to give control of your finances to someone else.

For example, not engaging with your lender in relation to personal debt or mortgage arrears means that the ball is in their court. However, taking a proactive approach gives you more options.

Turn to p2 for The Money Doctor’s guide to getting your financial house in order and tackling your debts

The inert consumer

Do you grumble about your bank, your insurer or your mobile phone company, but continue to avail of their service? If you find that you are not getting value for money and good service, put your money where your mouth is and move.

Switching provider is easier than it seems, and there are statutory provisions in place to help you. For example, if you pay hefty transaction fees on your current account, look around at the other options.

Under the terms of the Central Bank’s code of conduct on current account switching, your bank is obliged to make the process easy for you.

If you suffer from consumer inertia, make 2011 the year that you actually shop around, rather than just intending to do it. Turn to p3 for tips on what to consider when switching provider for a variety of financial products

The impulse buyer

Do you take €50 out of the ATM and then scratch your head wondering where it went? If you are not in control of your spending, you need to become more disciplined if you want to meet your financial goals.

Taxis, takeaways, your morning coffee, a glossy magazine, expensive gizmos, underutilised gym memberships – the list of unnecessary spending goes on. If you can afford these items, great. But in most cases, these discretionary spending nasties can eat into already strained budgets.

Before you make a purchase, think about it. Keeptrack of what you spend, and realise that your spending has an opportunity cost.

Buying a coffee a day on your way to work, for example, means you are spending about €15 a week.

Don’t just let this money waltz out of your wallet. Instead, regain control of your finances by making an active consumer decision on whether you really need, or want, to make this purchase.

The saver

Are you saving and feel mildly smug that you are completely in control of your financial destiny?

Think again. Saving is about more than putting money aside each month. Firstly, are you getting the best interest rate on your savings, and are you aware of the rate your savings are earning?

Also, if you have debts, saving might not make sense. You need to compare the relative costs of each option. For example, leaving a few hundred euro in a demand deposit account at a miniscule interest rate makes no sense if you have an outstanding credit card balance that you are paying exorbitant interest on.

Saving is great, but make sure you save smarter to get the maximum benefit from your efforts.

Shop around for Health Cover

If you’ve been stung by VHI increases. Shop around for a better price. The following article is by Dick O’Brien (Sunday Business Post).
Consumers affected by the VHI’s hike in premiums last week should begin shopping around for better alternatives, a health insurance consultant has said.

Aonghus Loughlin, head of healthcare and risk consulting at Towers Watson, said VHI premiums had gone up by such a margin for many customers that better value was likely to be found by changing policies.

‘‘The first thing I’d say to people is that they have to take stock of what is important to them,” Loughlin said. ‘‘If they want to maintain cover in a particular hospital or type of hospital, they need to tell their current provider – and possibly the others – that these are the benefits they want to keep, and ask can they get them at a lower rate.”

Loughlin said that, in general, consumers were likely to be successful in getting what they wanted.

There are now 250 plan options available from the three health insurance providers: VHI, Quinn Healthcare and Aviva.

‘‘It is possible to switch – either with their existing provider or a new insurer – to a plan that will provide the same, if not somewhat better, coverage as they have now for a lower cost,” he said. ‘‘It will take a little bit of research but, once people take the time to decide what’s important to them, they can definitely make savings.”

Loughlin said many of the newer plans were more suitable to consumers than older options.

‘‘The vast majority have added what I would call a guaranteed outpatient element,” he said. ‘‘In the past, on Plan B, if you went to a GP, you paid the bill, and you got something back only when you hit a very high threshold.

These new plans have a €1 excess and guarantee that, on anything over that, clients will get something back. People who have young children or who are accident prone and end up going to the doctor a lot, should consider those plans.”

However, with speculation rife that other health insurers could follow the VHI’s lead and increase premiums, consumers are concerned that, even if they shift to an alternative provider, they could be again hit with price increases. Loughlin said that, while there was always the risk that another provider could also hike prices, they could only do so from the annual renewal date.

‘‘Anybody who renewed on January 1 with the VHI will not be affected by price rises until January next year,” he said. ‘‘You are guaranteed that, at the very minimum, prices won’t go up until renewal.

You can always make the decision to switch again at renewal date.”

Another alternative for those affected by the increase is to opt for a corporate plan.

While these plans are designed for businesses, every health insurance product has to be made available to all consumers.

Consumers could also seek to make their annual renewal early, before the new rises take effect, and thus get a number of months extra at the current price.

The VHI announced last Thursday that it was increasing premiums by between 15 and 45 per cent from February 1. The annual premium for the average family (two adults and two children) will increase by about €331, or €27.60 a month.

The 15 per cent increase will be levied on about 60 per cent of all VHI customers, namely holders of Plan A, Parents & Kids, LifeStage Choices and One plans.

Other VHI plans will be subject to larger increases. Plan B and Plan B Excess will increase by 35 per cent. Plan B Options will see the highest increase of 45 per cent.

Premiums for Plan C will be increased by 25 per cent, while Plans D and E will see a 21 per cent increase.

Adam and Eve had very different approaches to risk and reward.

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.

Continue reading…

1. Be a technosaur. Marketing can convince us that we absolutely must upgrade our antiquated gizmos and gadgets in favour of much shinier, sleeker and more expensive versions.

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.

Continue reading…

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Seamus C. Kane T/A Seamus C. Kane and Associates is regulated by the Central Bank of Ireland
Seamus C. Kane T/A SCK Financial Services is regulated by the Central Bank of Ireland