Sorry - Moving Site

Many apologies. I'm switching domains.

Come and join me at www.plonkee.com.

And if anyone can help me with my redirection of this webpage and they can let me know I'll be very grateful because its going very wrong :(

what shall we do with the drunken plonkee?

Aah, the cost of forgetfulness and trying to pack up on the morning after the night before.

I went to a black tie do last night in another city and stayed overnight in a hotel. There was an open bar and so I took full advantage. I was functioning well and didn't embarrass myself. All seemed good this morning, even though I was hungover and probably still slightly drunk.

I packed up my stuff, put my money back in my purse from my evening bag and left for the station. I was about to get to on the train when I realised that I couldn't find my ticket. There were two possibilities. Either it was in my hidden in the recesses of my overnight bag, or I had left it at my hotel. Wherever it was, it was in the company of my library card, my supermarket loyalty card and some first class stamps.

In my tired and emotional state, I decided that the best thing to do was to buy another ticket. So thats another £23 wasted this month.

What we should do with the drunken plonkee is not entrust her with important tasks.

five steps: step 5 invest in the future

This is the final post in an irregular series on the five steps to solid wealth. Step 1 was spending less than you earn, step 2 was paying off consumer debt, step 3 was to grow an emergency savings account, step 4 was to insure yourself adequately and no more. Step 5 is to invest in the future - this is the step that you don't so much complete as begin and continuously work on.

First of all, I should start by saying that investing in the future means sacrificing money and/or time now in order to have an improved life at a later date. The most important way in which you need to invest for the future is to ensure that you are not reliant on the state to provide you with a comfortable old age. It is true that the state is likely to keep you off the streets by way, but there is unlikely to be enough money around to keep you out of poverty by the rest of society's definition. There are tax-advantaged vehicles that can help you out with this aspect.

Other ways of investing in the future could mean investing in your children's future by putting away some money for university fees or helping them with their first house or car. It could also mean investing money and time in your career by studying for additional qualification or moving to a location that will enable you to have a better salary or quality of life.

In any case, investment considered here is predominantly for the medium to long term. Over this time frame your biggest enemy is inflation and your best defence is a high average rate of return. Both of these are factors due to the magic of compounding, which by the rule of 72, means that an inflation rate of 3% will halve the spending power of your money within 24 years, whereas an average rate of return of 3% will double your money within 24 years. Some simple maths should tell you that a rate of return over inflation is needed to make your money grow and a return under inflation will make your money shring in real terms.

One of the worst ways to invest is therefore is by stuffing money under the mattress, the best ways are those investments that typically beat inflation - generally stocks and property. I favour stocks over property because the start up money required is lower and the rate of return has historically been at least as good as property. Whatever you invest in, the key thing is to be consistent and sensible. Keep an eye on your money, learn about ways of investing and eventually you will achieve solid wealth.

single and aiming for a financially stable partner

Its probably (hopefully) not too obvious in this blog that I’m single (and as it happens female). I’m not looking for a boyfriend at the moment, although if one turns up that would be ok. But I wouln’t want my fiscal stability upset by mingling my finances with someone irresponsible. Is it ok to weed out potential partners based on the state of their finances?

On reflection, I think that its unlikely that I’d be attracted to someone who was truly reckless – in money or other matters – I’m just not that adventurous. On the other hand, asking someone about their credit card bills on a first date is probably a significant enough social faux pas that there wouldn’t be a second date.

They say that you can’t change a man (or woman for that matter) so I’m stuck with hoping that any future contenders are financially stable – or at least not going to drag me down with them.

100th carnival of personal finance

The carnival of personal finance is 100 today and to celebrate madame x @ my open wallet has gathered together 100 of the best personal finance posts of the last week and categorised them neatly in the carnival.

My personal favourites are golbguru's Husband, Does Your Wife Know How To Invest? Wife, Does Your Husband Know How To Pay The Bills? from the tao of making money and s sugars' Am I the only one that realises that having groceries delivered makes financial sense? from personal finance advice.

I am also proud to say that my very own submission starting a business will not make you rich has made the Editor's Choice for the first time. Either standards are slipping at the carnival or I'm starting to write some interesting posts - I know which I prefer to believe.

starting a business will not make you rich

I've often read comments on other personal finance blogs that essentially state that the best way to generate wealth is to start your own business. Undoubtedly there are people who have successfully made a lot of money in this way - look at Microsoft, Apple, Yahoo and Google for very modern examples. The Millionaire Next Door (which I haven't yet read) is cited as evidence for the success of this method towards wealth as one of the facts which is commonly pulled from the site is that many of the millionaires interviewed for the book own their own businesses.

As you can probably guess from the title of this post, I think that this argument is flawed. I actually think that its quite hard to become wealthy through working for yourself. When you start off, you are likely to have a negative cashflow for a while as you try to get your business off the ground. You'll probably need to work long hours for a long time paying yourself at wages that are effectively much less than the minimum wage. Your business is likely to fail within ten years, with luck this might not leave you out of pocket, but not everyone can have all the luck all the time. In any case, you need a lot of time and start-up capital to build a business that will truly give a good rate of return - not that many people have both on their side.

You could argue that if you are working for yourself you are more likely to be motivated and so will generate more money. That might be true, but there is also the possiblity that you will be more risk-averse than you need to be because its your own money at stake. Its certainly the case that when you are working for yourself, any money that is made through your efforts goes into your pocket. Making an effort, however, doesn't necessarily lead to making money.

My final point, is that getting rich isn't really about the money you make, its about the money you keep. The foundation of true monetary wealth is likely to be a well diversified portfolio. If all your money is invested in your business, then that the very definition of poor diversification. The simple way to wealth is to spend less than you make and invest the difference. This is probably easier to do with a regular salary than with your own business.

By all means, start your own business if you think it will make you happier, but don't think that it is a path to wealth.

let us celebrate and pfblogsround

Let us all celebrate because the contracts for my new house came in the post yesterday. I'm sure you're all pleased to hear that there don't seem to be any problems with it, and there is only one query outstanding.

Moving on, this week in pfblogsround, my round up of the best of other personal finance blogs:

• what is the next step? @ blueprint for financial prosperity a guest blogger asks what he should be doing now that he's got a well diversified portfolio
• money question: how do you handle financial disagreements @ the tao of making money golbguru hosts the money question this week, don't forget to pile in with your comments
• the big battle: money versus job satisfaction @ the simple dollar trent's take on the quarter life crisis, with some good advice

taxing plonkee

Those of you who have been reading my blog for a little while may have noticed that I've added some adverts to the site. They're adsense ads from Google, and I don't think that they detract too much.

When you sign up for adsense you have to make a declaration regarding tax. As Google is a US company, this is declaration concerns US Federal Tax. As a non-resident of the US without any business interests in the States, the declaration that I made basically means that any earnings from adsense will not be reported to the IRS. Of course, for me, this is a good and logical thing as I can see no reason why I should pay income tax to a country with which I have no connection other than the location of my debtor and hosting server. I'm glad that the IRS agree with my position as in general tax authorities can be a law unto themselves.

However, I think that this means that I will need to file a tax return to HMRCS for this financial year. Some web advice on Ebay sellers suggested that if the amount earned is not much then its probably ok to put it down as casual earnings. On the other hand if it gets to be a more substantial amount (unlikely but plausible) then I'd need to register as self-employed. I think I might need to contact the tax men (or women) themselves to find out for sure. In any case, I plan to save at least half the earnings in a high interest account and keep proper records to ensure that I don't get in any trouble.

Aah the joys of generating additional income.

setting goals

I posted earlier that maybe getting out of debt was easier than just trying to get rich and the primarily this was because when you're getting out of debt you have a particular target. brad @ analyzing wealth commented on the post and kevin @ kmull stated in his roundup of the carnival of personal finance that I should set some goals. In particular brad said that I should create some arbitrary goals and kevin said that I should create some SMART ones. Also, recently trent @ the simple dollar has been running a series of posts on setting goals.

So, I've decided to set some arbitrary, SMART (specific, measureable, attainable, realistic and timely) goals.

1. I am going to invest £2700 in retirement savings in 2007.
2. I am going to invest £1200 in my stocks and shares ISA in 2007.
3. I am going to donate £250 to charity in 2007.

I was going to write a fourth goal which was not exactly personal finance related to do with decorating my new house, but I thought that it might be a little pre-emptive since I haven't finished the purchase yet.

So there we go, there are my personal finance goals, I hope you all think that they are good, they are certainly arbitrary, specific, measurable, and timely. Now we just have to see if they make me think that becoming rich is do-able.

carnival of personal finance no. 99

The 99th carnival of personal finance is up at the tao of making money, a great blog written by golbguru. If you get the chance, check out the carnival and his whole blog.

I've had a submission accepted, getting out of debt would be easier, other great posts are why you should become a personal finance blogger by money smart life, the beatitudes of money by active duty military money and matters, and the four terrible money mistakes we make with our kids by mymint.

Enjoy.

lending money to family

A friend of mine was telling me how her younger sister had opened a credit
card without telling her boyfriend (who she lives with) and had the bills
sent to their parents house. When my friend found out, she lent her sister
enough money to pay off the credit card and insisted on confiscating and
destroying the said credit card.

Apparently, it isn't the first time this has happened, and the sister thinks
that if the boyfriend finds out then he'll leave. I think that this is a bad
situation that the sister has got herself into, but that my friend's action
probably hasn't helped. Frankly, if the boyfriend will leave if he finds
out, then maybe thats the best outcome for their relationship. I don't for
one minute think that my friend's sister will stop doing things like this.
The worst thing is that it also alters my friends relationship with her
sister. She now feels even more aggrieved when her sister does unrelated
things she doesn't like.

I told my friend some of what I think, because I'm that

pfblogsround 5th May 2007

Apologies for being late with the pfblogsround, my excuse is that I was attending a free classical music concert last night - not a great excuse, but not a bad one either.

Anyway, my favourite posts from other personal finance blogs have included:

• paying off your mortgage and saving/investing @ free money finance it is possible to multitask your finances folks
• investing without goals @ money and such shadox's brother is doing something about his future, but it would be better if he had some goals
• sharing money works for our marriage @ cleverdude good for you mate, but just because it works for you, doesn't mean it'll work for everyone
• adjustable rate mortgages are awesome @ blueprint for financial prosperity another of jim's devils advocate posts, this time written by a guest blogger - read the excellent comment by livingalmostlarge (whose own blog is here)
• tips and trick to ensure you track your money @ get rich slowly one of jd's friends is having difficulty recording all his transactions

five steps: step 4 insure yourself adequately and no more

This is the fourth in an irregular series on the five steps to solid wealth. Step 1 was spending less than you earn, step 2 was paying off consumer debt, step 3 was to grow an emergency savings account. Step 4 is to insure yourself adequately and no more. I'll discuss the areas in which you need to consider insurance below.

The key principle in deciding whether insurance is adequate is to think about the things that you need that you don’t have the resources to replace or fix.

Most people in the beginning or middle of their plan to get rich and end life as a lad/lady of leisure are reliant on income from working (either for themselves or someone else) to not only keep on the plan, but also pay the bills. If you fall into this category, then you probably need to insure yourself against an accident or illness that means that you are unable to work. For this you need income protection and permanent health insurance (also known as short and long term disability insurance)

Anybody with dependents who rely on them for provision of housing, food etc also need to consider having a serious amount life assurance (or life insurance if you’re a Yank). The key word here is rely. If your husband / wife / partner currently earns their own income and you have no children, you probably don’t need major life insurance. On the other hand if you have a non-working spouse / partner you probably need some and if you have children, you probably need a lot.

website review: money saving expert

I'm trying to get round to reviewing all the websites I have listed as links to give you an idea of why I'm recommending them. The first review was of www.organizedhome.com and this second one is of the UK based www.moneysavingexpert.com.

The "money saving expert" is a consumer finance journalist called Martin Lewis, he has his own radio show and a book. The money saving expert website is devoted to a comprehensive set of articles and forums. Its relatively easy to navigate, there is a no advertisements policy and it makes its money through referral links.

The articles cover all the main ways to save money by choosing the best financial product, utility company, getting the best deals on flights etc. If I want to know what the best credit card is for my particular circumstances I check out this site. There is a full time staff of 13 who I'm assuming research all the best deals. Without doing all this leg work myself of course its impossible to be sure that they really are the best deals and methods, but they are certainly good enough for me.

The articles are the strongest point of the site, and I don't visit the chat forums as much. They have more UK-specific information than most money forums on the web, which is to be expected and there are forums for debt-free wannabes, budgeting, saving money at the shops, in fact most topics where there is the possibility of saving money. The forums are well-frequented in general and as with most, there are regulars that seem to hang out there all the time.

The forums that I most frequently visit are the Savings and Investments and Pensions, Retirements and Annuities. And here is where the problem lies for me. I disobeyed the cardinal rule of not reading posts extensively before I started a thread on SIPPS and index funds (I've posted what I found out here). Mentioning using index funds on these boards is like a red rag to a bull to some of the regulars, at least one of whom is an Independent Financial Advisor and strongly prefers actively managed funds. The weight of discussion that is in favour of actively managed funds only just falls within the realm of ethical non-advice IMHO, and as a fan of index funds, I would be loathe to recommend these forums on that basis alone.

Overall, this site is an excellent resource but some of the forum discussions are best taken with a large pinch of salt and your own extensive research.

getting out of debt would be easier

Unlike many people, I'm in the fortunate position of not having any consumer debt. I often use my credit card, but it gets paid off in full every month. I have student loans, but at the interest rate they are on, it makes more financial sense to pay them off as slowly as possible. I've never had a problem with overspending so a subscribing to a completely debt free lifestyle doesn't have major psychological benefits.

With that said, I often feel that its easier to get out of debt than it is to start with a little over zero and just try to grow it. When you're in debt, you have that initial target that you can motivate yourself for, getting to the stage where you have no debt. This means that you have an end in sight and when you're struggling you can convince yourself that this is just temporary. By the time you get to being debt free, you are in the more frugal mindset.

In contrast, I don't have any immediate goals for my money. I only want to be rich eventually so that I don't have to stack shelves in my old age. Its hard to motivate myself when my net worth is so small. I'm trying to maintain a balance between saving and spending, but I don't make a huge salary and what I can contribute seems pitiful, yet I feel slightly poor.

In short, it feels like I'm getting nowhere fast and I'm hideously tempted to put myself into debt buying stuff that I would love to have and then work my way out of it. I don't do this, because doing this deliberately would rank as one of the stupidest and most ridiculous financial mistakes of all time. Still, at least I'd have a goal to aim for.

money and security

In another doomed attempt to win a competition for which I am not eligible, I'm going to give a response to a post on five cent nickel's blog. Here is the mandatory link to his welcome page - sorry couldn't work that into the intro.

Apparently, Dave Ramsey is a well known personal finance guru in the US. The Dave Ramsey plan is multi-step and simple. The second step is the most ubiquitous. Pay off all your consumer debt using "The Debt Snowball".

In the debt snowball, you pay off your debts in the order of smallest balance to highest balance, the principle being that with early accomplishments you are more likely to stick to the program.

Five cent nickel's most commented upon post is Dave Ramsey is bad at math, later he responded to the comments with another Dave Ramsey is good at psychology. Its undoubtably true that the debt snowball will not necessarily save the most money when it comes to paying down debt. As explained in the bad at math post, the cheapest way to pay off all your debt is to order the debts from highest interest to lowest interest. The key point that most of his commentators wanted to say was that it wasn't about the math, which nickel summarised in the good at psychology post.

Its true that debt - especially debt caused by overspending - isn't about the math, or the money. Its in the mind. In my favourite money programme, Spendaholics, the individuals cannot stop overspending until they address the underlying cause(s). But what if your money issues don't revolve around overspending? In my case, I have no consumer debt, just some exceedingly low interest student loans and I'm soon to take on my first mortgage. I'm not a good candidate for Dave Ramsey's plan because I don't have issues with too much debt. My money issues resolve around security.

I often work out worse case scenarios, like I lose my job, or I become permanently disabled, or I unexpectedly have a child. Not in the case of how this would affect my life, but whether or not I would be able to cope financially. Is this healthy? Is there a plan that will enable me to feel truly free, without sitting on a massive pile of cash in a savings account? Should I mentally rely on the safety net of my parents, even though I'm extremely loathe to ask them for help?

I feel like, maybe this is an age thing. I'm in my late twenties, and I've been living more or less independently since I started university. Perhaps I'll just get used to this feeling and learn to cope. What do other wiser (older?) people do? The feeling of being permanently on the precipice of disaster needs to be mitigated. Perhaps as in Spendaholics, therapy is the best answer - but if I have to pay for that, thats more money spent and less money saved. And how can an independent individual with a traditional British stiff upper lip, truly contemplate therapy anyway. Isn't it all a bit, well American?

Suggestions on a postcard please (or if you don't know my address, just add to the comments).

april 2007 plonkeesround

Here are the best* posts from April 2007

• tourist in london town save money whilst travelling in London
• pensions are actually invested in equities pretty much self-explanatory
• I need a strategy and I still don't have one
• pension allsorts a summary all the different sorts of pensions you can invest in
• atheists should tithe or the less catchy "humanists should donate a reasonable proportion of their income to charities"

*as always, best is defined as my favourite posts in plonkee money.

Let me know what you think of my selections by commenting on them.