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Friday, 2 August 2013

Cannery Row


I often bang on about money to the extent that my wife sometimes suggests that I'm obsessed by the stuff. I am careful, I have a program that allows me to track all my accounts and I try to get the best deal. For example, over the past 3 years I've had 4 credit cards with an introductory interest free period, so that I've been able to buy big items cheaply. I pay off any balance before the interest free period ends.

I switch utility suppliers yearly, as well as home and car insurance and  keep track of my saving to try to get the best rates. I have a budget spreadsheet so that I know how much I expect to spend each month and how I actually do. I regularly invest in the stock market making a purchase each month on the same date. This is not the best strategy if you're actively aiming to benefit from daily market movements, but it means the transaction charges are kept to a minimum.

I do all this not because I need to, but because I have a jaundiced view of markets and service providers. I don't think, in the main, businesses are there to offer best value, good service or quality products. They're there to maximise shareholder benefit. If they can achieve that by being nice to the customer, all well and good, but if they don't have to they won't. Frankly, they're after the largest slice of your cake with the minimum of effort.

If you don't look out they'll have you.

The pricing of utilities: a multiplicity of tariffs sold under the guise of "customer choice". It is so difficult to compare one company's offering from another that many (I'd say most people) don't bother switching and over time spend way more than they could or should.

Insurers increasing premiums year on year, yet if you ask or investigate they'll offer you a better deal. Special treatment for new customers - which is why I switch every year - when "valued" long standing customers, seen as "cows" by the industry get their premiums upped year on year.

Banks who offer call centre services that, I swear, are purposely designed to put their customers off from phoning. Banks who offer derisory rates of return and shout out proudly how much their margins have widen because they've been able to screw both the borrower and lender. It's all about the shareholder bugger the customer.

As for the regulators; they're as useless as bent copper in a call box. PPI mis selling, it wasn't the regulator who rumbled that con. Interest rate swaps for small businesses - not the regulator. Fixing LIBOR - well, it was the regulator, not our home grown one but the US's. Cold calling, the regulator is completely powerless.

So basically, it's you against the money grabbing bastards that we call businessmen.

It's not just the big boys with market power, friends in high places and armies of lawyers that will screw you. Small businesses can cause you a huge amount of angst - be they plumber, tiler, builder, electrical retailer! You have got to do your research or else you'll be lumbered with someone who shouldn't be allowed to cross any householder's threshold.

Now we learn that nearly 50% of the population have difficulty paying their bills. At a time when interest and mortgage rates are at an all time low. What's going to happen when rates do rise, by 1, 2 or 3%?

Why is it that many people speak with pride that they don't know how much money they spend a month? Why, when we have the opportunity to reduce household debt because of the low interest rates people don't. If it's because they can't as their budgets are so squeezed that's unfortunate, and extremely worrying. If it's because they have no idea what they owe, that's criminal.

It took me a long time to learn. Even after having the bank teller refuse to cash a cheque because I was seriously overdrawn a couple of weeks into the college term in 1968. Or when the ATM ate my card in the early 80's because of lack of cash in my account. Or when I leased out my flat and rented a bed sit, because that was the only way I could pay my mortgage in 1990. It took me until 1997 to take hold of my finances and as a first step know how much I owed and how much I earned. I had 4 credit cards then all maxed out. So I was paying over a large sum for sweet FA. Focusing on that debt, the highest rate card first, I managed to clear the cards in a year. From then on I never paid interest on any card. I always had enough to pay the full balance each month.

When we took out our mortgage it was for 17 years. We paid it off in 11 years. During that time my salary doubled, any increase, bonus, tax refund went to pay down the mortgage. I set up a spread sheet so I was able to calculate how much we could over pay and how many years we'd reduce our mortgage term by. We paid off the mortgage a month before I retired. Since we'd been massively overpaying, on retiring with no mortgage and the monthly payment, the 50% reduction in my salary didn't matter.

It's all about being in charge. Allowing a bank, building society or any service provider to determine how you feel about yourself is down right stupid. Getting control of your money reduces the  vagaries of life we're subjected to by one important one.

5 comments:

Steve said...

No glib comments. You are the kind of person I wish to be.

Anonymous said...

You should get a job with the Citizens Advice Bureau. A model adviser you would be.

Marginalia said...

Steve, thanks

Dear Anon, I'm a trustee of our local CAB!

Bojo said...

An uplifting tale from one of London's hard working families. You must cure Labour for having lured you into all that debt.

Bojo said...

An uplifting tale from one of London's hard working families. You must cure Labour for having lured you into all that debt.