Tag Archives: debt

Taxation! Argh!

Money money money

All sorts of unforeseen events can affect our financial lives, not just financial catastrophes themselves, but illness, terrorism of one sort or another, even the weather.. Real world prepping encompasses many different types of skills, events and objects, and for me, finances are a part of that, as they are for many, though not all, preppers.

Financial preps are funny old things. I did a couple of posts about financial prepping a while back, but right now I’m spurred to write because as usual last January, I finished my income tax declaration/negotiations with HMRC. And on the day I did that, what should happen but a major UK bank goes down under a DDOS attack! There are thousands of people who don’t pay their income tax on self employment until the last possible day, and if they got caught out by the DDOS attack (on HSBC) then they’d really be scrabbling around to try to finish things off. HMRC has rightly said that people can estimate figures to make a final payment, and then amend them within a year, and that’s true, of course. But there’s be chaos and stress that would be totally avoidable, with a little bit of forethought: preparedness!

As preppers, we talk (or at least, I talk) a lot about how the “just in time” culture of our retailers can lead to severe shortages in very little time if there is even a small problem. Likewise, for us to rely on a just in time approach to our tax affairs could present us with problems that would then be of our own making. For instance:

31 January, when our returns have to be in, is smack bang in the middle of the ‘flu season. If you’re relying on the last week in January to get your return in, and you come down with a bad case of flu on 20 January, HMRC really aren’t going to be too sympathetic.

A DDOS attack, exactly as happened on 29 January, could leave you without access to your money.

Other forms of cyber attack exist – internet servers themselves can be overwhelmed, leaving you stranded for an unknown length of time.

Your own internet connection could go down. Mine went down earlier in January – there was a problem at the nearest telegraph pole, believe it or not, and I lost internet and phone connection for two days. I could have coped with sending a tax payment by using the banking machines at the nearest branch, but if I’d still needed to fill in the online tax form, I’d have been in deep trouble. Going to a public computer, wherever it’s based, to fill in your tax return, must be an unpleasant feeling.

House fire. Imagine it. 27th January, and you’ve easily got four days to sort everything out and send HMRC the money. But a pan boils dry in the kitchen, burns, and then catches fire: you were in the attic, fetching down the tax papers. You make it outside the house, with your go-bag, but all the papers you were about to use are burned, and everything else is soaking wet after the Fire Brigade put the fire out.

Weather-related problems. Anything from your own connection breaking down with water on the line, a local electricity exchange flooded even though your home is dry, a lightning strike on a building or a crucial cable.

Figures might be unavailable – up to date log in details, new passwords, activation codes, all sorts of things, are necessary.

Complicated financial affairs? You may well need to amend figures and resubmit. Mine are a little bit complicated because I have some assets in the European Union, not just in the UK, and believe me, it makes everything trickier.

When you’ve finished inputting, and you’ve really got everything the way you want it, it takes a few days for the HMRC website to churn through your information and tell you what you owe on what you’ve submitted. Leaving your submission to the last possible day is really asking for trouble on this – I left 10 days, and I still made a hash of it, even though I’ve been doing these returns for 5 years. Their software told me I was entitled to a refund, but then I realised I’d filled in some figures incorrectly, and resubmitted. So then the software told me I’d made late payments for the last two years and I owed interest – not much, but still, thats what they said. I should have been working more slowly and submitted the figures earlier, then I wouldn’t have made the mistake that caused this problem, and both I and HMRC would have had less online kerfuffle.

Have enough money to pay and of course this particular tax prep is becoming more and more problematic for a lot of people. Claiming everything that’s tax-deductible, claiming all benefits you’re entitled to, legal methods of tax avoidance – like a private pension! – all of these are important, and if they’re not enough then second and even third income streams are called for.

Communicating with HMRC so that if there’s a problem filling out the form, or paying, you’re able to get through to them, instead of being 118th in the phone queue.

How is this prepping? Prepping isn’t all about making fire in the woods and purifying water – even though those skills are important in some circumstances, and lifesaving in others. Currently, we all live in this society, which uses money and insists we hand over some of it to central government. Ensuring that you meet your legal and financial obligations in the world as it currently is, is also about prepping. If you don’t do that, action can be taken against you, from fines at the very least all the way up to imprisonment. Like me, you probably want to avoid those things.

Nearly all of these events are outside our own control, and the only way, really, that you can ensure their effects on you are minimal, is to take action in good time. With an important event like submission of your tax return, don’t leave yourself only a week or so to get things completely done: personally, even though I often finish the submission in January itself, I start it the preceding April, with income details, regular outgoings, the easy stuff. This year, I aim to get it all done by the start of the preceding winter, but we’ll see.

Money can buy flexibility, but just like anything else, it has to be used correctly. And the more we use it correctly, the more we liberate for our own discretionary spending or saving.

Money and Preparedness, Part Two

Already convinced? Go to the bottom of this post for the recommendations, in blue. They’re also at the end of Part One of this article. If you’re not already convinced, please read Part One first, then come back here.  Then tell me what you think, please!

Money Prepping Stage Four: The Rest

There are all sorts of little tricks and wrinkles, all perfectly legal and above board, that will help you on your way financially. Here are some that I’ve learned over the last ten years.

Credit Cards

As long as you won’t be tempted to spend on them, have two credit cards: this is about those software collapses that banks seem prone to these days. Use different banks for each one, and also both Mastercard and Visa. If one’s out of action, the other might work.

Current Accounts

Just as with my credit cards, I have a secondary current account, with a debit card, so if my main current account goes out, I can manage with the other one, if I need to, at least for a little while.

Online Access

I know there’s a huge debate about this, but I’m a believer in being able to control my money online. Every account I have has at least two levels of access, and I consider that good enough as security, in addition to my own safeguards. The advantages to me are that it saves me time, a large amount of time. It also helps safeguard me against flu season, and as my immune system is a bit crap, that’s really helpful to me. If there were a pandemic, it would help safeguard me against that too, while enabling me to keep my finances on more or less an even keel. Computer/mobile security, however, is critical, and will have its own blogpost(s) on here in the fullness of time.

Loyalty Cards

There’s also a longstanding debate about whether or not to use loyalty cards – Nectar, Tesco Clubcard and the like. The issue that’s at stake is privacy, that companies, or even the government, will know what you’re buying. It sometimes goes further, into fears that there will be a societal collapse, and the government (police, military, local councils, I don’t know) will break into your house and take the majority of what you have.

I think this fear was inherited from American preppers, quite frankly. The “home of liberty” has had some very draconian laws in the past – Prohibition against alcohol from 1920 to 1933, and gold confiscation in 1933-34, to name but two, and those sorts of laws didn’t happen in the UK, as far as I know. While bail-ins (discussed in Part One) are also draconian, they’re different in that they’re not people-intensive. Can you imagine the number of personnel needed to knock at people’s doors and search their houses to take their food and supplies? I simply don’t believe it.

Plus, guess what – unless you use cash, anyone who really wants to know what you buy already knows! The shop, the website, your bank, your credit/debit card company, they all know. Take the money, and use the loyalty card. Without actually being loyal, of course. If you don’t use it, you’re giving the shop even more of your money than you need to.

Purchases

One completely basic use for the money that you’ve freed up by taking the steps recommended above, is to buy preps. There’s not many of us can feed ourselves from food we’ve grown ourselves, so long term foodstocks are a great area to start. If you can take your food stores from one month, for example, to three months, how much more confident would you be if you were to lose your job, or another winter like 1962-63 came along?

Other purchases to make are small, portable things that will make you safer and warmer in your house: hot water bottles, a water filter, a stove, hand tools, insulation, protective gear like rainwear and thermal clothing. Good boots, wellies too.

Investing in your garden is a good use of funds: topsoil, mulch, a greenhouse or even a polytunnel, perennials like fruit bushes or ginger roots.

Investing in yourself is a great idea too: learning skills! First aid, preserving food, keeping animals, mapreading. This might be courses or books or both.

Sometimes bigger one-off investments are right as well. repointing, double glazing, rewiring and replumbing, a woodstove.

Money Prepping Stage Five: Precious Metals

This is just the promise of a future blogpost. Precious metals have only just come into view for me, and I don’t really know much about them. I can see that they’re important to some people, and my sense is that since I think we’re likely to have another round of the financial crisis coming back to bite us in a few years time, precious metals might be relevant. I’ll research much more before I write anything more than that.

Money Prepping Stage Six: The Websites

www.moneysavingexpert.com

www.moneyadviceservice.org.uk

http://www.adviceguide.org.uk/england.htm

Recommendations

Pay off your consumer debt as soon as you can. Pay off more expensive debt first. Not paying some bills can endanger your home, so make sure those are paid most of all.

Consider your outgoings, and cut them down if at all possible.

Minimise your outgoings by looking for cheaper deals on things you need: fuel, insurance, utilities, phones, broadband, anything and everything.

Have a little stash of cash at home, somewhere very safely hidden, in notes and coins. Remember to take this into account in your insurance. Take some of your stash with you if you’re further away from home than walking distance.

Start saving – easy access, then locked away. Consider tax free savings.

Don’t use one financial institution for all your dealings: spread the risk of bail ins and collapses.

Have two credit cards available, unless you don’t trust yourself with that amount of credit.

Have two current accounts available.

Make sure you have online access to your money, if at all possible. Remember computer security.

Make sensible purchases with the money you’ve freed up: food, small portable things like tools, thermal wear and water filters; gardening equipment; skills tuition; or bigger investments like double glazing or a multi-fuel stove.

Use loyalty cards, to lower the cost of your goods.

I’m always up for learning more about handling my finances, if you have anything to add, or any queries, let me know in the Comments below.

Money and Preparedness, Part One

Its not often a topic thats considered on most preparedness blogs, though there are a fair number of honourable exceptions. But on forums, you’ll often see comments about saving up for something, or how to get something cheaper at a website rather than a shop (just like any other form of shopping these days!) and it’s something I’ve had to consider myself, so I thought a blog post would be a good idea.

Already convinced? Go to the bottom of this post for the recommendations, in blue. They’re also at the end of Part Two of this article.

Paying Off Debt

For anyone who wants to look after their finances, the first advice is nearly always to pay off your consumer debt, if you have any. At the time of writing, the very cheapest loan available, according to www.moneysavingexpert.com, is 3.6% a year, from M&S Bank, for loans between £7.5k and £15k. But rates can be much, much higher, for general loans, car loans, improvement loans, credit card debt, anything. And payday loans, if you feel driven to use them (which I heartily advise you not to do), are likely to be literally a thousand times that: 3,600% as an annualised rate is not unknown.

There are many reasons to pay debt off: lower outgoings give you more flexibility and more safety, for instance, if a personal SHTF situation occurs (job loss, severe illness, that sort of thing). You’re not wasting money on interest payments, money which could be accumulating in your savings account or in buying food stocks, or tools, or firewood. And those sorts of purchases will also give you more flexibility and more safety. If you’re debt free, financial institutions have less power over you, and less knowledge of you. I feel the power issue is particularly important.

Some debts are called “priorities”: mortgage or rent, tax and utilities. Failure to pay these puts your home at risk, in all seriousness. It’s not a common thing, but it really does happen, so take extra care about these.

The very best advice, freely available to all, is on the page that I’m linking to here.  Every link on that page is a goldmine, especially for people who are in debt, but for anyone, really. Cutting existing debt costs, cheap new borrowing to replace higher rate borrowing or fund an emergency purchase like replacing a broken down boiler, cashback, debt help, calculator apps for all sorts of things (even including cheaper phone calls, which have their own page anyway), plus lots of links to the forum in the right hand column. The forum is astonishing, in a wonderful sort of way: it would take you weeks to look over the whole of it, but there are two boards in particular to visit first. Debt Free Wannabe, exactly what its name implies, and Old Style Moneysaving are worth their weight in gold to almost anyone. Old Style is about stretching money as far as it will go, and the posters on there can make it stretch a very long way indeed. Cutting discretionary spending, finding cheaper ways of doing things, reusing and recycling, are all in there.

The sky’s the limit for learning how to save money and even make money, whether you’re on the main site or the forum: your tax bill, your holiday, utilities, your mortgage, your pension, motoring, everything. It can save you thousands of pounds over the years.

What Then? Savings

To be prepared, you need to work on getting yourself some savings. What if every bank had their software go crazy, as has happened to individual banks recently? You can’t use your debit card or credit card in those situations, not even at an ATM. Having enough cash to pay for your groceries, or your petrol to keep you mobile for emergencies, is really important.

Having savings in the bank, earning as much interest as you can, is also part of the way forward. Look for the highest possible interest rate, of course, taking into account whether its taxed or tax free (again, moneysavingexpert can help you with all of that). Some of your savings should be in easy access accounts, and some can be locked away, which usually gets a better rate of return. So far, so normal.

Money Prepping Stage One: A Stash

Having a bit of a cash leeway, well hidden safely at home, is a good thing. This should mostly be in notes (what if there was an emergency and you had to spend the night in a B&B, or your car was off the road and you had to pay a taxi fare to see a dying relative?). Some of the cash leeway should also be in coins: either for vending machines, or for small payments you need to make when you don’t want to flash notes around, if you don’t know or don’t trust the area you’re in. Although I’m saying it should be well hidden at home, some of your stash should also be well hidden on your body, if you’re not in walking distance of your home.

Money Prepping Stage Two: Protection from Bail-Ins

Basically, if you’re able to grow your savings and investments, don’t keep them all in one place. Governments are now refusing bail outs (when taxpayer money saved the banks, in the financial crisis of 2008) and the concept of bail-ins has developed: when the money painstakingly accumulated by savers is used to save the bank. This is what happened in Cyprus in 2013: savings were hit. If you had a deposit of more than E100,000, 37.5% was taken by your bank to shore itself up, and another 22.5% was frozen as a possible buffer. The figures I’ve quoted are in The Telegraph.

Any other, future bank crashes will almost certainly be dealt with by bail-ins, and this article from The Huffington Post goes through it well.

It sounds a lot of money, doesn’t it, E100,000. But that can apply to pensions too, nowadays. And if you’ve just sold your house, or a parent has died and you’ve sold their house, well, that counts too.

The only way to protect yourself, if you’re keeping your money as money, seems to be to keep it in separate accounts – as small as possible, I’d say. So if you’re one of the careful people who’ve managed to open an ISA every year for ten years, don’t transfer them all to the same institution, keep them in at least two separate institutions.

And of course, this also protects against a straightforward bank collapse! If there’s no bail in or bail out, a bank thats in deep, deep trouble will collapse. Deposits are supposed to be safe, and until the financial crisis that was definitely true. Now, who knows? The rules and the institutions they govern are changing. I don’t believe any bank to be safe enough to put all my financial wealth with it. Just my opinion.

Money Prepping Stage Three: Keeping Your Savings Safe

This is the last of the big stuff, and it won’t really matter until you’ve got a fair amount of savings, but as you save for your house deposit or any big purchase, or your retirement, it becomes crucial. It’s basically an amplication of the previous point, Money Prepping Stage Two.

There are five points I’m going to list here, shamelessly lifted from Moneysavingexpert.  The reason they’re so important is because of all the mergers and takeovers that have happened since you opened whatever account it is that you have. Sometimes the accounts are all safe, sometimes a bundle of accounts is only as safe as one account.

1. Every UK-REGULATED account gets £85,000 protection

All UK-regulated current or savings accounts and cash ISAs in banks, building societies and credit unions are covered by the Government-backed Financial Services Compensation Scheme (FSCS). So if the bank fails, you’d get back up to £85,000 per person, per financial institution. The majority should get it within seven days.

2 Not all UK savings are UK-regulated

Most banks, including foreign-owned ones such as Spain’s Santander, are UK-regulated. Yet a few EU-owned banks opt for a ‘passport scheme’ where you rely on protection primarily from their HOME government.

This includes Triodos etc. Moneysavingexpert has a full list of the relevant banks.

3. The amount’s double in joint accounts

Cash in joint accounts counts as half each, so together you’ve £170,000 protection.

If you’ve an individual account with the same bank, half the joint savings count for your total exposure, and any amount over £85,000 isn’t protected.

4. An institution is not the same as a bank

The protection’s per institution, not account. So four accounts with one bank still only get £85,000. The definition of ‘institution’ depends on a bank’s licence and giant banking conglomerates make it complex. For example, sister banks Halifax and Bank of Scotland’s 5. Spread savings to keep ’em safe.

5. Spread savings to keep ’em safe

For perfect safety, save no more than £83,000 per institution (the extra £2,000 gives room for interest). Spreading can be worth it even if you’ve under £85,000; if your bank went bust, the money could be inaccessible for a spell. Using two accounts mitigates the risk.

I strongly advise you to read the full page I’ve linked to: there’s a lot of really good information there.

Recommendations

Pay off your consumer debt as soon as you can. Pay off more expensive debt first. Not paying some bills can endanger your home, so make sure those are paid most of all.

Consider your outgoings, and cut them down if at all possible.

Minimise your outgoings by looking for cheaper deals on things you need: fuel, insurance, utilities, phones, broadband, anything and everything.

Have a little stash of cash at home, somewhere very safely hidden, in notes and coins. Remember to take this into account in your insurance. Take some of your stash with you if you’re further away from home than walking distance.

Start saving – easy access, then locked away. Consider tax free savings.

Don’t use one financial institution for all your dealings: spread the risk of bail ins and collapses.

Have two credit cards available, unless you don’t trust yourself with that amount of credit.

Have two current accounts available.

Make sure you have online access to your money, if at all possible. Remember computer security.

Make sensible purchases with the money you’ve freed up: food, small portable things like tools, thermal wear and water filters; gardening equipment; skills tuition; or bigger investments like double glazing or a multi-fuel stove.

Use loyalty cards, to lower the cost of your goods.

I’m always up for learning more about handling my finances, if you have anything to add, or any queries, let me know in the Comments below.