How Does Fiscal and Monetary Policy Impact Your Personal Finance?

How Does Fiscal and Monetary Policy Impact Your Personal Finance?

What is fiscal policy?

Fiscal policy can be defined as the means by which governments adjust spending levels as well as tax rates to influence a country’s economy.

What is monetary policy?

Monetary policy can be defined as the process by which monetary authorities of a country i.e. the central banks or currency boards control the supply of money by changing interest rates.

Effects of fiscal policy on personal finance

Since fiscal policy is simply about how the government decides to spend money as well as the tax rates/rules it puts in place, fiscal policy has a significant impact on the personal finances of citizens in a country. Government spending takes many forms varying from government investments in development to spending on social security payments, welfare, etc.

When a government spends more on development, there is a positive impact on the economy. For instance, more jobs are created, and citizens have more money in their pockets to spend on goods and services. When people have more money, they are able to support small businesses which are the main drivers of the economy. The opposite happens when the government lowers spending on development. Unemployment is bound to rise. The price of goods and services also rises making life expensive.

The government’s stand on taxes also has a direct impact on your personal finance. When the government lowers income tax, for instance, citizens have more money to spend on goods and services. This, in turn, propels the industries that make those goods and services boosting the economy in the process. When the income tax is too high, citizens have less money in their pockets which reduces their buying power and slows down the economy.

In a nutshell, your personal finances are bound to be affected favourably when there are favourable tax laws and the government is spending money on things that grow the economy and put more money into the pockets of ordinary citizens.

Effects of monetary policy on personal finance

The monetary authorities of a country i.e. the central banks control the supply of money mainly to boost the economy. Central banks have several of tools for controlling the money supply. For instance, central banks can increase or decrease the amount of reserves banks are required to maintain. This increases or decreases the amount of money banks have for lending to the public as loans. Central banks can also buy or sell financial instruments like bonds to increase or decrease the money supply. Central banks can also raise or lower interest rates to make loans expensive or cheap.

Central banks can maintain tight, neutral or loose monetary policy depending on the performance of the economy. For instance, central banks tend to lower interest rates when there is poor economic growth. This encourages people to borrow since people have more access to cheap loans. This type of monetary policy is accommodative. Central banks can also take tight monetary policy stands i.e. raising short-term interest rates to moderate the pace of economic growth. This usually takes place when inflation is increasing significantly, and central banks want to reduce the amount of money in circulation to stabilise prices.

Monetary policy has a direct and indirect impact on personal finance. The direct impact revolves around the direction of interest rates while the indirect impact revolves around the expectations of economic players. When central banks raise interests, the cost of credit also increases as lenders increase the interest rates charged on loans. New, as well as existing loans, become more expensive. In regards to expectations, potential investors who depend on loans are bound to slow down or stop investing when the cost of loans increases. Monetary policy also has an effect on asset classes such as bonds, equities, real estate, commodities, and currencies. In real estate, for instance, high-interest rates tend to make mortgages expensive.

Summary

Fiscal and monetary policies have a significant impact on every person’s finances. Government spending and tax rates have a significant impact on development, employment, social security payments and overall economic growth which determines how much money citizens have in their pockets. The interest rates set by central banks also determines how much money is circulating in the economy at any given time and this has an effect on how much citizens pay for goods and services.
You must strive to understand fiscal and monetary policy in-depth for you to be able to make smart personal finance decisions.

Secrets to Choosing the Best Credit Card in the U.K.

Secrets to Choosing the Best Credit Card in the U.K.

Introduction: Credit cards in the UK

There are countless credit card offers in the UK today which makes it hard for consumers to choose the best credit cards. Furthermore, credit card companies in the UK have aggressive marketing strategies. UK consumers get many credit card offers every day from new and existing companies most of which aren’t great. Furthermore, credit card debt is a huge problem in the UK, so it’s important to think twice before you get a credit card.
The typical UK household accumulates approximately £2,500 in credit card debt every month as of April 2017 statistics. Credit card usage stands at roughly £2 billion every day. Considering most credit cards come with hidden terms and conditions and costly fees in case of late payments, excessive usage, etc., it’s important to choose credit cards carefully. Although there are other suitable sources of short-term debt like payday loans, here’s what you need to know if you choose to get a credit card.

What are your reasons for getting a credit card?

Credit cards should be taken by people who need them. Receiving a credit card offer isn’t, therefore, a good reason for getting a credit card. In fact, credit cards which you don’t need are bad for you. People need credit cards for different reasons. You may want to buy things online, pay bills conveniently, buy things when you travel abroad, etc. There has to be a pressing need for a credit otherwise there is no need to apply for one. The need should revolve around convenience since credit cards hardly save you significant amounts of money or make you any money as many people have been led to believe.

Check the charges

Credit cards come with many charges if you don’t pay off what you have borrowed within a month. The best credit card for you is one that has reasonable charges. Credit card charges range from annual percentage rate (APR) and annual fees to minimum repayment and introductory interest charges. The annual percentage rate is simply the cost of borrowing money using the card if you are unable to settle the debt in a month. Different credit card companies have different APR charges. You should choose the company that has the cheapest charges.

The minimum repayment charge also applies if you don’t pay off the debt in a month. The charge is approximately 3% of the debt due or £5 (whichever is higher). Some credit cards also come with annual fees for using the card. The fees can also attract interest if you don’t pay your debt in full every month. The fee can also vary depending on your spending on the card. Introductory interest rate charges apply when you are paying a lower interest rate or no interest at all.

Credit card charges are usually highlighted in the credit agreement. You must compare the credit agreement of different cards to be able to choose the card that comes with the best charges. There are many other charges that apply to most credit cards today so be sure to check and compare what different cards charge to be able to choose the best credit card.

Incentives

The best credit cards come with low charges as well as incentives. Credit card incentives come in two main ways namely; cash backs and loyalty points or rewards. The best credit cards reward you for using them. You should choose a credit card that offers the most loyalty points for every pound spent. The card should also reward you for shopping in most (if not all) your favourite shopping stores. It’s also important to select a card that offers loyalty points or rewards that can be redeemed conveniently. You should also check if you qualify for cash backs (refunds) since such incentives are based on your spending. Most credit card incentives are valid when you pay all your debt in full every month so, choose a suitable credit card with this in mind.

Use a credit card comparison website

Lastly, you need to consider using a credit card comparison website. After doing your own comparison, you should compare the information offered by credit card comparison websites. There are many credit card comparison websites in the UK. You just need to search on Google and compare the results offered by different websites against your own analysis. The websites are fast and easy to use. They also give detailed comparisons based on your needs and all the important parameters you need to consider.

Summary

It takes time and effort to choose the best credit card for you. You can’t afford to jump at every credit card offer you receive before doing your own due diligence. You should first have a valid reason for getting a credit card. The card you choose should also have the lowest charges. You should also be able to take advantage of the incentives. Lastly, consider using a credit card comparison website just to confirm that you are choosing the best credit card.

There are better alternatives to credit cards today, you can apply for payday loans if you have short term loan needs. Payday loans are faster and cheaper. You can get them online, and their charges have been capped by the FCA.

Top Retirement Myths Capable of Destroying Your Retirement

Top Retirement Myths Capable of Destroying Your Retirement

Introduction

Having misconceptions about retirement can make you draft the wrong saving strategies which will, in turn, make your life harder during your golden years. The importance of knowing the truth about retirement can’t, therefore, be overlooked. For instance, you need between 65 and 90% of your pre-retirement income to maintain your current living standards. However, most people think they can do it with 50% or less. Some people also expect to keep working beyond age 65 however, less than 15% of today’s retirees manage to keep working past age 65. Most people planning to retire also fail to account for variable spending. This explains why retirement isn’t so rosy for many people. If you want to retire gracefully and avoid surviving on short term loans like payday loans, here are the top retirement myths you should beware of.

Myth 1: There is a magic number

Most retirement experts encourage retirees to save ”enough” and draw utmost 4% of their retirement savings each year to ensure the money lasts a lifetime. This 4% rule isn’t a universal rule. The rule works for retirees who have saved ”enough”. The 4% rule is also hard to follow given the fact that the lifestyle, health as well as investments of retirees vary. In a nutshell, there is no magic number because retirement plans and withdrawal strategies vary. For this reason, you need to focus on your own retirement as opposed to following figures which aren’t universally applicable.

Myth 2: You can work for as long as you want

Many people also make the mistake of thinking they can work for as long as they want. As mentioned above, most people think they can still work past age 65. However, very few people (15%) actually work past that age. There are also people who expect to keep working for the rest of their lives. This myth is detrimental because it stops many people from planning their retirement early. Ideally, you should start planning for your retirement during your prime age since this is when you can work and save the most. Furthermore, you may be willing to work as long as you want but there is no one willing to employ you. Health issues can also get in your way given the risks of falling sick are higher with age. This myth shouldn’t be used as an excuse for delaying to set up your retirement account.

Myth 3: You spend less in retirement

Many people have also been led to think that retirement life is cheaper and easier. This is far from the truth. Although retirees don’t incur expenses like transport costs incurred by the working population, you are not assured of spending less during retirement. Furthermore, things never get cheaper so don’t expect to pay less either. You also need to account for unique expenses such as health-related expenditures which are mostly unplanned for by most people. Retirees also face other emergency expenses like regular people. For instance, you can damage your car or an appliance. You may also get an unexpected house repair bill. If you don’t have a provision for emergency expenses already, you will have to turn to loans like payday loans or borrow from family or friend which eventually increases your spending. In a nutshell, thinking that you will spend less in retirement is a recipe for disaster.

Myth 4: You will live in your current house throughout retirement

Retiring when you have your own house is a great thing. However, don’t assume you won’t move during retirement. Although most people plan their retirement without considering moving costs, most retirees end up moving for one reason or the other. It’s better to make provisions for moving early rather than be forced to live in the same place for life.

Summary

If you care about having a great retirement, you should avoid falling victim to the above myths when you start or continue with your retirement planning process. Retirement planning should be customised to match your lifestyle. It should also be done as early as possible since no one is in control of their working years. You should also expect to spend the same amount of money you are spending currently or more as a precautionary measure. Lastly, don’t forget to make provisions for moving as well as emergency expenses to avoid relying too much on short-term emergency loans like payday loans.

The Pros and Cons of Living in a Cashless Society

The Pros and Cons of Living in a Cashless Society

Cash hasn’t disappeared from our everyday life although innovation is already working towards replacing physical (paper) money with wireless payments systems via computers and mobile phones. Global IT giants like IBM have already taken steps to link biometric signatures to wireless payments to prevent identity theft in cashless transactions. There are many digital wallets available today, and all indications suggest that we will be living in a cashless society in the near future. In a cashless society, physical money is held by third parties like banks or the government.These third parties allow you to transact as you wish. This presents both pros and cons. Some people argue in support of a cashless society while others argue against. To help you make your own decision, below are the top pros and cons of living in a cashless society.

Pros of a cashless society

1. Reduced crime rates: Numerous studies have shown that going cashless reduces crime rates significantly. When people stop handling physical cash as much, the rate of crimes like bank robberies, burglaries, extortion, and corruption decline significantly. Going cashless creates a money trail that discourages crime.

2. Financial inclusion: A cashless society enhances financial inclusion. For instance, mobile money systems have made it possible to provide financial services to people who wouldn’t otherwise have access. Increased access to financial services like loans to people who didn’t have access automatically reduces poverty. Mobile money platforms have allowed many poor people in third world countries send and receive money as well as get access to small loans instantly. Such individuals wouldn’t have access to financial services were it not for cashless systems.

3. Increased tax revenue: A cashless society also enhances tax collection since more people have money trails making it harder to evade tax. Tax authorities also have an easier time finding tax evaders. Increased tax revenue means governments will have more money to spend on development among many other programs beneficial to citizens.

4. Boosts consumption: A cashless society offers little to no incentives for hoarding cash which in turn encourages consumption. When people are willing to spend more, the economy grows significantly. More jobs are bound to be created, and the overall standard of living also improves.

5. Unmatched security and convenience: Carrying physical cash comes with a lot of security risks and inconveniences. Your chances of being robbed are lower in a cashless society. Physical cash is also bulky, so a cashless society comes with unmatched convenience. You can carry around as much money as you want and transact hassle freely.

Cons of a cashless society

1. Money is controlled by third parties: As mentioned above, third parties such as public/private banks and the government are usually the custodians of physical cash in a cashless society. This gives them a lot of control. In simple terms, you must trust the third parties to act in your best interests. This is scary for most people since the control held by these third parties can be misused. Your money can be withheld if you become an “enemy of the state” for whatever reason. When you are in possession of physical cash, you are not at the mercy of anyone.

2. Unique security risks: Cashless societies may have reduced crime rates i.e. reduced bank robberies, burglaries, etc., however, they are still vulnerable to security risks such as cyber attacks and fraud. Since all transactions are digital, cyber attacks can lead to devastating losses. Crimes such as identity theft are easier in a cashless society since all your details are available online.

3. Unique inconveniences: In a cashless society, eventualities such as power or system outages can leave you cashless for hours or even days. Losing your phone or computer can also deny you access to money for a prolonged time.

4. Reduced liquidity may cause unemployment in some sectors: Liquidity is good for certain sectors such as the retail industry. A cashless society gets rid of liquidity causing unemployment in sectors which depend highly on liquidity.

Summary

Technological advancements are pushing countries to follow the cashless route. Although there are many pros of a cashless society, there are cons as well. The above information on living cashless offers a good basis for deciding whether going cashless is good or bad. It’s, however, important to understand that there is more to cashless living that what is covered above.

Financial Planning Tips For You and Your Family

Financial Planning Tips For You and Your Family

Most couples face serious challenges when it comes to dealing with finances. In fact, many research studies have shown that finances are among the top reasons why couples argue. It gets more challenging when children get into the picture. Couples argue over how to spend money, how to save, invest, share bills, etc. This is usually the case since most marital decisions revolve around money. For instance, you need to consider your finances as a family when deciding where to live, the type of car/s to buy, where to take your children to school, whether you should take a loan, etc.

Furthermore, most people are uncomfortable discussing finances even with their spouses, yet it’s one of the most crucial subjects for couples keen on staying together in peace. This is why family finance is so important. To be able to avoid most family problems, here are the most important family finance tips to consider.

1. Develop mutual finance goals:

This is by far one of the most important family finance tips to consider. As a couple, you must develop finance goals that are acceptable to both of you and your family as a whole otherwise you will end up having endless arguments about money. You must agree from the onset who does what as well as what you intend to do with your money to avoid avenues for arguments. In a nutshell, family finance goals should be developed and accomplished jointly. The finance roles of each spouse should be clear from the onset.

2. Maintain 100% honesty:

This goes without saying. You should be 100% honest with your spouse on every issue including finances from the onset. Most spouses argue about money because they feel shortchanged. This is why it’s advisable to be open about how much money you earn so that your spouse doesn’t have unreasonable expectations about what you can afford to contribute. You should also be open about the loans you have, your credit history, credit cards, etc. from the onset since such things have an effect on your access to credit as a couple/family.

3. Have a budget and follow it:

To avoid overspending and running out of money, you must prepare a family budget and follow it. Running out of money prematurely always causes a lot of tension in families. Preparing a family budget will help to keep your spending in check. You will be able to avoid living beyond your means. You will also be able to know exactly where your money goes which will in turn help in cutting down on expenses if you need to. It doesn’t matter how much money you and your spouse earn. If you don’t have a budget, you won’t be able to move forward financially.

4. Consult each other when making “major” purchases:

Since everyone has different ideas on how they should spend their own money and you seize having your own money when you start a family, it’s important to consult especially on major purchases like cars, homes, expensive jewellery, etc. Consulting your spouse is important because it makes them feel valued as an equal partner in the marriage. Furthermore, there may be a better way to spend the money in question, and you wouldn’t know this if you don’t consult. Furthermore, you would want to be consulted by your spouse when he/she is making a major purchase so, do the same.

5. Set financial goals:

Budgeting isn’t enough since it focuses on how you should spend whatever you make. You need to think of growing your income as a couple so that you can afford the things you want in the future. Financial goals are critical for growth. They help couples avoid the stress associated with being stuck in the same social class for years. If you set solid investment goals now, you should be able to afford a house or new car in the future which eliminates financial stress in the future.

6. Review your financial progress periodically:

Having a budget and following it isn’t enough. You need to review your financial progress often to ensure you are on track. Furthermore, money discussions shouldn’t be confined to budgeting. You should also review the progress of your long-term financial goals. For instance, you should discuss progress on your savings and investment accounts. Reviewing your finances periodically helps to identify and solve potential problems. It also helps families focus on achieving their goals.

Summary

Most family problems revolve around finances. Most couples argue because of lack of enough money, misappropriation of money, dishonesty when dealing with money, name it! The above information highlights the basics of family finance every family should follow to avoid common family finance problems.

Unexpected Payments in Britain and How to Deal With Them

Unexpected Payments in Britain and How to Deal With Them

A new study by online lender MYJAR has revealed that unexpected payments have cost British citizens approximately £175 billion. According to the study which involved 2,000 participants, every adult Briton incurs £3,146 in unexpected payments over their lifetime. The study also reveals that the latest unexpected bill sets each Briton back £485 on average.

According to MYJAR’s spokesman, there are many studies on how much money people have, how much they save, etc. The study uncovers how unexpected payments accumulate over a lifetime to an incredibly high figure. The study also brings the importance of having an emergency fund to cover unexpected costs given that 50% of the respondents in the study stated that they were anxious about receiving unexpected bills. 10% stated they were extremely worried about receiving unexpected bills.

The study also revealed that the most common unexpected payments in Britain are absolute necessities such as expenses associated with a damaged washing machine or dishwasher. Parking ticket expenses are also among Britain’s top unexpected payments. The third most common expense is computer-related expenses followed by boiler, car damage, and dental surgery expenses respectively.

What’s more interesting is; more than 25% of all Britons adults have had to pay overdraft fees as unexpected expenses. This is a shocking statistic given the high fees associated with unexpected overdrafts. Pet related illnesses or injury also top the list of most common unexpected payments in Britain.

According to the study, Britons encounter unexpected payments at least three times a year, and 60% usually have no spare money to cater for the expense which forces them to spend money allocated for another expense. The study also revealed that 25% of Britons faced with unexpected payments struggle to pay bills that are £500 or more.

In an effort to take care of unexpected payments, most Britons turn to their savings, take short term loans like payday loans, borrow from friends and family or sell assets. From the study, it is clear that most Britons turn to friends and family first before taking short term loans or selling assets. 40% of the respondents in the study also stated that unexpected bills have left them struggling to cater for other necessities such as electricity, medical care, and gas.

Given the impact of getting unexpected payments, it’s important to forge a way forward. So, how do you deal with unexpected bills/payments?

Change your budget allocation: When you are faced with an emergency payment, your first step should be checking if you can change your budget allocation. If the expense is not as much, you can cut allocations from different expenses to raise enough money for the unexpected expense. You can slash your clothes, shoes or entertainment budget.

Split the cost: If the unexpected payment is too big to be catered for by re-allocating your monthly budget, you can consider splitting the cost over two months. Of course, this applies if you have the luxury of time to settle a payment. You can also choose to forgo something in your current budget for the next few months to raise enough funds to cover the expense.

Turn to your emergency fund: If you can’t change your budget allocation or split the cost, you can turn to your emergency fund. If you don’t have one, you should start thinking of setting one up immediately. Meanwhile, you can;

Take a payday loan: Payday loans are specially meant for taking care of unexpected payments/expenses. You can apply from a reputable payday loan broker like SwiftMoney to enjoy the best rates. Reputable payday loan lenders have the best lending practices as they are all authorised and regulated by the FCA. Apply online and get a payday loan within minutes.

Summary

Unexpected payments are increasing at an alarming rate in Britain. Most Britons worry about getting unexpected payments. Those that get them struggle to pay them. To avoid worrying about unexpected payments, you need to set up an emergency fund immediately if you don’t have one already. If your current emergency fund is inadequate, you need to refine your cash strategy and build a reserve that is capable of handling the most common unexpected expenses as well as other serious eventualities such as unemployment. Since you can never tell when you will be hit by unexpected bills, its better stay prepared.

Data Protection Act in the UK Explained

Data Protection Act in the UK Explained

Definition

The DPA (Data Protection Act) in the UK is a law that controls how the personal information of any UK citizen should be used by businesses, organisations or the government. Every person or entity responsible for using personal information or data of any UK citizen must follow data protection principles which are simply, strict rules on the proper use of data. The individual or entity must ensure the personal information is; used lawfully and fairly, used for the intended purpose and used adequately in a relevant manner that is not excessive. The individual or entity must also make sure the data is handled according to data protection rights, and the data is kept in a safe and secure manner. Stronger legal protection applies to more sensitive data such as a person’s overall health, sexual health, criminal records, political opinions, religious beliefs and ethnic background.

Data subject rights: Finding out the type of data an organisation/company has about you
Under the DPA, UK citizens have the right to see the type of information a company or the government stores about you. The DPA allows you to ask about personal information in writing through an enquiry referred to as a subject access request. When writing to an organisation to get a copy of the information they have about you, you should address the letter to the organisation’s company secretary. The organisation has a legal mandate to share with you such information as long as you make a formal request.

What it means for customers submitting their information to companies

Customers don’t have to guess or remember the exact kind of information they submit to companies. If you aren’t sure about the information a certain organisation has about you, just write a formal request.

It is, however, worth noting that information can still be withheld even after making a formal request. For instance, if the information is about the armed forces or national security, organisations reserve the right to withhold the information. Organisations can also withhold information if it is about detection, investigation or prevention of a crime. Information about assessment/collection of tax as well as judicial/ministerial appointments is also supposed to be withheld and organisations aren’t obligated by law to disclose why they are withholding information.

In a nutshell, if you are a regular UK citizen who just wants to know the kind of information an organisation has about you, there is no reason why you shouldn’t get access to such information.

Cost

Although you can get this information for free, some organisations charge to provide such information. Most organisations charge £10 or less although the cost can increase depending on the amount and type of information. For instance, it will cost you more to get numerous paper records held by a public authority in an unstructured way. Health and education records also cost more.

Launching a complaint

If you suspect your data has been stored insecurely or misused by any organisation/company in the UK, you should contact them immediately and share your concerns in writing. If you are not happy with the response you get, you can contact the ICO (Information Commissioner’s Office). The ICO is also open if you need any advice on data related issues or concerns. The ICO has a telephone helpline: 0303 123 1113. The ICO also has an online chat feature that allows you to talk to an adviser.
The ICO has the mandate to investigate claims as well as take the necessary action against individuals or entities that misuse personal data.

What it means for the company taking the information

The ICO takes its data protection mandate very seriously. Just recently, the ICO fined UK telecommunication provider TalkTalk £400,000 after finding the company guilty of maintaining poor data protection measures. TalkTalk failed to prevent a data breach which compromised personal data belonging to approximately 157,000 of its customers back in 2015. Payday loan lender Wonga is set to face the same fate after facing the worst customer data breach in history. In April 2017, the lender suffered a data breach that saw the theft of sensitive data belonging to 270,000 customers. If Wonga is found guilty, the payday loan giant could pay a hefty fine amounting to millions of pounds.

Companies which receive sensitive personal information from their clients have no choice but to invest heavily in data protection security measures or face disgruntled customers and the ICO.