Paul's Blog

There are no shortcuts or guarantees when it comes to achieving self-made millionaire status. That said, it can’t hurt to look at the financial habits of those who have managed to do just that to try and boost your own coffers. Here are our top tips from looking at those who’ve become millionaires by age 30. Who knows, they might just lead to you being worth seven figures in the future.

  1. Don’t rely on your savings – The current economic environment makes it very difficult to become wealthy through saving, so increasing your income is an obvious but good way to boost your bank balance. Whilst increasing your main salary can also be a challenge, you might think about other ways to achieve this such as earning passive income through property rental, or taking on freelance or consultancy work on the side (just keep an eye on any tax repercussions).
  2. Invest, invest, invest – Instead of saving for a rainy day, put your savings into investments. If you choose investments and accounts with restricted access to your funds, not only will this ensure your investments pay off, but it will also help you to focus on increasing your income rather than relying on money you’ve put away.
  3. Change your mindset – Nobody has ever become a millionaire without believing that it’s something they themselves can both achieve and control. The best way to do this is to invest in yourself. Spending time educating yourself about both your business area and the financial world in general will help you to understand how to capitalise on opportunities and genuinely believe you can increase your net worth.
  4. Make plans and set goals – You’ll only boost your wealth if you actually plan out how you’re going to do it. Before you can make a plan, however, you need to decide what you’re aiming for. If you really do want to become a millionaire, then think big: if you have a certain figure you want to achieve, aiming higher will help ensure you reach it or even surpass it.
    Sources
    http://www.independent.co.uk/life-style/9-things-to-do-in-your-20s-to-become-a-millionaire-by-30-a7377801.html

A recent report has revealed that millennials are set to benefit from an ‘inheritance boom’ bigger than that experienced by any other generation in the post-war period. The Resolution Foundation, the think-tank which carried out the research, defined millennials as people currently aged between 17 and 35, and found that those within this age bracket will be left record amounts of wealth by their ‘baby boomer’ parents and grandparents.

The report found that inheritances will double in size over the next twenty years, peaking in 2035, as baby boomers who generally have high levels of wealth move through old age. Additionally, nearly two thirds of millennials have parents who are property owners, of which they may receive a share in the future. This is a stark difference to adults born in the 1930s, of whom only 38% received an inheritance.

However, the Resolution Foundation also stressed that the inheritance boom will not be a ‘silver bullet’ which allows millennials to get on the property ladder or address the wealth gaps which are currently growing in society, as most will only benefit from their inheritance when they themselves are nearing pension age. The average age at which people lose both parents is getting later; people who are currently between 25 and 35 are expected to be 61 years old when this happens.

Another key finding of the report was the strong correlation between the property wealth of millennials and the amount they are set to inherit from their parents, with those who were able to get on the property ladder during their early 20s, destined to benefit the most from the inheritance boom. The new inheritance tax housing allowance will also be fully implemented in 2020, meaning that as much as £500,000 per person will be able to be passed on without incurring tax, allowing millennials whose parents own valuable homes to cut their average tax burden in half.

In comparison, those millennials who do not own their own home by their mid thirties are much less likely to receive a large inheritance from their parents. Additionally, if they inherit this when in their 60s, they’ll then be much less likely to be able to secure a mortgage, meaning that some may struggle to climb onto the property ladder throughout both their working and retired lives.

Sources
http://www.telegraph.co.uk/news/2017/12/30/millennials-will-pensioners-receiving-inheritance/
http://www.bbc.co.uk/news/uk-42519073

Research into the housing market throughout 2017 has revealed the areas of the UK where property prices increased and decreased the most last year. Cheltenham in Gloucestershire was the place where prices grew at the fastest pace, with the average price of £313,150 marking a 13% rise – nearly five times the UK average increase of 2.7%. At the other end of the scale was the Scottish town of Perth, where prices dropped by 5.3% to make the average property price tag £180,687.

The places which saw the biggest growth were in southern England, with Bournemouth and Brighton coming in second and third place with rises of 11.7% and 11.4% respectively. At the other end of the scale, Scotland, Yorkshire and the Humber were the areas where the biggest falls were seen. The second-biggest fall in house prices was seen in Stoke-on-Trent (4%), with Paisley in third position (3.6%).

Fifteen out of the top twenty areas for house price increases are located in London and southern England. This is in spite of the capital overall seeing its average house price fall by 0.5%, thanks to the economy slowing down and consumers continuing to feel the effects following the Brexit vote of 2016.

The outlook for the year ahead offers little reprieve: many in the property sector, including the Royal Institution of Chartered Surveyors, predict that the market in 2018 will, for the most part, remain flat, with some expecting property price growth to slow even further. Whilst this would be good news for those looking to take their first steps onto the property ladder, it’s more worrying news for people hoping to invest in the market.

It’s expected that the story will differ geographically, but property portal Rightmove has also predicted that different property types are likely to grow at different rates. They have forecast prices for homes with two bedrooms or fewer will rise by 3%, whilst three and four bedroom homes will see growth of only 2%.
Sources
http://www.bbc.co.uk/news/business-42539137
http://www.independent.co.uk/news/business/news/uk-house-price-increases-biggest-2017-cheltenham-bournemouth-brighton-london-housing-market-david-a8137366.html
http://www.bbc.co.uk/news/business-42555351

Anyone with an email address is likely to have experienced a scam or phishing communication landing in their inbox, and unfortunately this type of attack is becoming both more frequent and more sophisticated. Sending a message purporting to be from HMRC is a popular method criminals can use to attempt to get hold of personal and financial details. It’s not limited to email either, with hoax text messages, social media communications and telephone calls also being used in order to illegally extract the information needed.

The most important thing to remember with any form of communication from anyone is to never give out private information unless you’re 100% certain that it’s from a genuine source. Most organisations, including HMRC, make it clear that they will never ask for personal or payment details in this way, so if you’re at all unsure, don’t reply at all. Additionally, HMRC says it will never use emails to let taxpayers know about either tax penalties or rebates.

Unfortunately, there are a number of official looking email addresses (i.e. ones that end with @hmrc.gov.uk) which have been reported as scamming taxpayers, so you can’t be certain whether the email is genuine even if it comes from an address which looks legitimate. Watch out for phrases such as “urgent action” or emails which generically address you as “Dear Customer” or something similar, as both of these are red flags that the email is a hoax.

Scam emails will often take you to an online form asking for personal information, which could include bank details such as your sort code and account number. If you find yourself looking at a form like this, even if it looks genuine, never enter any details. Another method used by hackers is to attach a document to an email which may allow them access to your computer and your data if opened. If you receive an email with an attachment that you’re not completely sure about, don’t open it, even out of curiosity – once is enough for a criminal to gain access!

Whilst HMRC does use text messages to contact taxpayers occasionally, it will never ask for any personal or financial details in this way, so don’t respond to any such messages. If there is a link in the text message, make sure you don’t open this either, as it will likely pose the same threat as an online form or malicious attachment in an email.

Phone scams are often used to target elderly and vulnerable people, with the scammers often threatening police involvement if the person they have called does not give them the details they request. If you cannot be certain who you’re speaking with, don’t engage them in conversation and never give out any personal information.

Sources
https://www.accountancyage.com/2017/12/14/avoid-hmrc-scam-emails-phone-calls/

If you’re saving for a home through a Help To Buy ISA or know someone who is, it’s worth being aware of a planning opportunity which could boost your savings by an additional £1,100. But anyone hoping to take advantage of this opportunity needs to be quick, as it will only be available for just under four months more.

Any savings in a Help To Buy ISA which are transferred to the new Lifetime ISA before 5th April 2018 will benefit from a top up of 25% from the government. The opportunity has arisen thanks to the Help To Buy ISA small print relating to the transfer of money saved before the launch of the Lifetime ISA on 6th April 2017.

Lifetime ISAs have an annual limit of £4,000, which includes money transferred from another savings account. However, money transferred from a Help To Buy ISA within the first twelve months of Lifetime ISAs becoming available does not count towards the contribution limit for the 2017-2018 tax year. As such, any money transferred into the Lifetime ISA from the Help To Buy ISA will be boosted by the government top-up, potentially resulting in hundreds of pounds being added to your savings.

For example, someone who had saved the £4,400 maximum amount into a Help To Buy ISA before April 2017 could transfer this into a Lifetime ISA before 5th April 2018. As this wouldn’t contribute to their limit, they could then save a further £4,000 into the Lifetime ISA for a total of £8,400. The 25% bonus would then be added to the entire £8,400 in April next year, giving an additional £2,100. In any other year, the maximum top-up which could be earned from the Lifetime ISA would be £1,000.

So If you know anyone using a Help To Buy ISA to save towards a first home, transferring money to a Lifetime ISA to enjoy an additional top-up of up to £1,100 in April next year could make collecting the keys to their own place happen a little bit sooner.

Sources
http://www.telegraph.co.uk/personal-banking/savings/use-isa-loophole-now-1100-savings-boost/

Whether or not you’re the kind of person who sees the start of January as the time to set yourself resolutions and stick to them, the period after the excesses of Christmas and New Year is arguably one of the best times to actively get your finances into shape.

Here are five great money-related resolutions it’s definitely worth committing to in order to make 2018 the year you take control of your money.

  1. Start a budget – The secret to financial security isn’t making lots of money, but sensibly managing the money you have. A budget is the best way to start doing this, ensuring you know where your money is going and sticking to the plan you lay out for yourself. It can feel intimidating at first if you’ve never budgeted before, but it will undoubtedly help you to cut out overspending and reduce your money worries.
  2. Manage your debt – Getting out of debt can seem a long way off if you don’t make plans for how you’re going to become debt-free. There are no shortcuts – it takes both time and sacrifice – but once you do manage to clear your debts completely, it’s a liberating feeling and opens up many more opportunities to help you grow some savings.
  3. Start saving regularly – Once you’ve got your debts and spending under control, building your savings is essential. You should aim to save at least 10% of what you earn every month. Again, you may have to make a couple of sacrifices here and there in order to do this, but when you have those savings earning you money in your nest egg, missing the occasional night out or frivolous treat will feel completely worthwhile.
  4. Increase your financial knowledge – This can be as simple as finding a book, magazine or reputable website and dedicating a little time each week to increasing your money know-how. Anyone who has financial security hasn’t done it through luck, but through understanding what to do with their money, so the more you learn the more secure your finances are likely to be.
  5. Start investing – Making some sound investments is often the crucial step from financial security to prosperity and success. However, you should only invest when you’re ready (i.e. once you’ve achieved the previous four goals). It’s worth getting good independent financial advice as well to ensure you make the right investments for your personal circumstances.

Sources
https://www.thebalance.com/five-financial-goals-for-the-new-year-2385966

The Insolvency Service has given Dipak Rao, the former accountant of Deep Purple, an eleven-year ban from serving as a director. The ban follows the revelation that he had misappropriated a minimum of £2 million from the companies who held responsibility for controlling the copyright over many of the rock band’s hit songs.

Rao was discovered to have made a number of payments to his own personal accounts from Deep Purple (Overseas) Ltd and HEC Enterprises Ltd between 2008 and 2014, hiding the transactions by restricting access to bank statements for both companies and excluding them from the financial accounts. Both companies were set up in the 1970s to manage the copyright of Deep Purple’s hits, and subsequently became responsible for the rights of songs by two other bands, Rainbow and Whitesnake, which were formed by Ritchie Blackmore and David Coverdale, former members of the earlier band.

Both companies went into administration in 2016 following Rao’s resignation as director two years earlier. Whilst Rao has confessed to ‘borrowing’ at least £2.27 million, the Insolvency Service has only recovered £477,000 so far. The scheme was only uncovered after Blackmore launched a lawsuit against the companies demanding unpaid royalties of £750,000. The investigation was ‘as clear as it was damning’ according to an inside source, and led to Rao being disqualified from managing or controlling a company without leave of the court until 2028.

“Rao misappropriated company funds causing detriment to the company and its creditors, to his own personal benefit,” said Sue Macleod, chief investigator of the Insolvency Service. She urged company directors to “note from this enforcement result that actions of this kind will lead to serious censure,” adding that Rao’s “disqualification is a reminder to others tempted to do the same that the Insolvency Service will rigorously pursue enforcement action and seek to remove from them for a lengthy period.”

https://www.accountingweb.co.uk/practice/general-practice/deep-purple-accountant-rocked-by-ban?utm_medium=email&utm_campaign=AWUKINS290917&utm_content=AWUKINS290917+Version+A+CID_1fa95b5e2c29b2202a7fe1b7febaf528&

After months of speculation, the Bank of England finally raised interest rates in the UK for the first time in over a decade. The increase from 0.25% to 0.5% might seem small, especially when you consider that the last time the interest rate was increased in July 2007 it was up to 5.75%, but the fact that interest rates are going up at all after more than ten years at rock bottom is significant.

The rates rise will have an impact on the finances of millions of people in the UK, with those on variable rate mortgages likely to lose out the most. 46% of households with a mortgage are on either a standard variable or tracker rate, which are likely to move at the same time as the official bank rate.

These mortgages have an average of £89,000 left to pay off, resulting in a monthly payment increase of around £12. Those with higher variable rate mortgages will of course see their outgoings increase by a higher amount: payments on a £300,000 mortgage will go up by about £39 a month. Homeowners with fixed rate mortgages meanwhile can expect their payments to remain the same for some time following the interest rate lift, as can those with loans and credit cards to pay off.

Savers are likely to benefit from the rates increase having seen little growth on their savings for a number of years. On average, an easy-access savings account currently pays interest at 0.14% annually, meaning that £10,000 worth of savings would generate just £14 every year. If providers choose to pass on the rates rise in full, this will add another £25 to earn £39 annually. A typical ISA meanwhile will see the annual growth of £10,000 increase from £30 to £55.

Pensioners who have purchased an annuity can also expect to benefit from the rates rise. Annuities follow the yields on gilts, or long-dated government bonds. In anticipation of a rates rise, these have also increased, meaning those purchasing an annuity for retirement will receive better value for money on their investment. In November 2016, a joint annuity bought for £100,000 would receive an annual income of £4,086. That figure has risen this month to £4,468 and could continue to go up depending on how likely further base rate increases are – something which the Governor of the Bank of England, Mark Carney, has indicated is likely over the next few years.

Sources
http://www.bbc.co.uk/news/business-41846330
http://www.bbc.co.uk/news/business-41831777
http://www.telegraph.co.uk/money/special-reports/will-happen-investments-interest-rates-rise/

Retirement is undoubtedly the section of your life which receives the largest amount of planning for most people, with much of your working life spent ensuring you can live where and how you want once you’ve retired. However, as with all plans, there are always going to be aspects of your retirement which don’t end up quite how you’d expected, and a few you might not have even considered until you’ve actually given up work. Here are a few key lessons learned by those enjoying retirement already:

  1. Part-time work might not be for you – More and more people are including a part-time job into their plans for when they retire, sometimes for financial reasons but also to remain social and active. In theory it’s a great idea, and whilst it works well for some, finding something that meets all of your needs can be more difficult than you might expect. If you do want to continue working part-time, try to have something lined up before you actually retire. It’s also a good idea to plan for your part-time earnings to be extra money rather than a requirement for your monthly expenses.
  2. Think carefully before moving home – It’s natural that you’ll want to spend more time with family once you’ve finished working. But be realistic when making plans regarding your home. Keeping hold of a larger property might seem like a good idea to host family events, but if the space is rarely used then downsizing is often a far better option that makes both maintenance and utility costs more manageable. Don’t rush to move closer to family either. If your children are now young professionals it’s likely that they’ll need to move from one area to another for their career, which could potentially leave you living in an unfamiliar area and no closer to your loved ones.
  3. Maintain a realistic outlook – It may sound obvious, but retirement doesn’t automatically guarantee a stress-free life. It’s therefore important to make plans and keep a balanced mind to help you deal with any issues that either arise or continue once you’ve finished work. In fact, no longer having a career to focus on can make other aspects of your life to do with family or health feel overwhelming if you don’t prepare yourself emotionally. Taking up new interests and hobbies may seem like a cliché, but they’re a great way of ensuring you can keep perspective and make plans for the days and weeks ahead.

Sources
http://www.bankrate.com/finance/retirement/lessons-new-retirees-learn-hard-way-6.aspx

Not beginning to save towards your retirement until you reach your fifties would not so long ago have been considered leaving matters far too late to put anything meaningful away for your life after work. Previous generations saw building a pension as something to do over an entire career, with contributions throughout your working life coupled with investment growth being the only way to ensure your retirement pot was substantial enough to provide for you throughout your retirement.

However, whilst compound interest still means that anything put away at the start of your career will see some serious growth by the time you need it much later in your life, the reality today for many young people is that they simply have very little to invest when they first begin work. Many may find that they won’t be able to begin saving seriously until they reach middle age.

The reasons for this are several. First of all, your wages are statistically likely to reach their peak for women during their forties and for men in their fifties. Secondly, as the average mortgage term is twenty-five years, most people who bought their home in their twenties are likely to have finished paying it off by the time they reach their fifties. A third key reason is the declining cost of raising children. Whilst it’s unlikely that you’ll stop giving them financial support completely, if you’ve had kids in your twenties or thirties it’s probable that the cost of providing for them will have gone down a great deal by the time you’re heading towards 50.

With considerable tax relief on both ISA investments and pensions, it’s now possible to build a healthy retirement fund even if you only start saving in your fifties. For example, someone with no existing savings, earning £70,000 annually, who started saving the maximum permitted yearly amount of £40,000 at age 50 could amass a pension pot of £985,800 by the time they turn 67, assuming a 4% annual return after charges.

£40,000 a year might sound like a huge amount to save every year, but this amount includes the generous tax relief enjoyed by pension savings. Our £70,000 earner would only need to put away £27,000 of their own money in order to reach the £40,000 contribution, whilst a basic rate taxpayer would need to contribute £32,000 to achieve the same.

So, whilst it’s sensible to begin saving as early as you can, it is possible to begin putting money away when you reach middle age and ensure you have enough to provide for yourself later in life. The last ten years of your working life can reasonably be seen as some of the most important in terms of preparing for your retirement.

Sources
http://www.telegraph.co.uk/pensions-retirement/financial-planning/start-investing-50-get-1m-pension-pot-67/