Financial Ponderings

My online money lobe

What Determines The Level Of Saving In An Economy April 30, 2008

Filed under: economy — financialponderings @ 1:56 pm
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In economics saving is the decision by consumers to put aside money rather than consume goods and services. The propensity to save depends on various factors such as interest rates, consumer confidence and expectations of the future. The level of saving can have a big impact on the performance of an economy. Low saving rates can cause higher economic growth in the short term, but lead to lower levels of investment making future economic growth more difficult. These are the most important factors for determining the level of savings in an economy.

Access to Credit. If bank loans, mortgages and credit is easily and cheaply available then it will encourage consumers to borrow. For example, in the period 2002-2007, there was a period of easy credit were banks were keen to lend at a low cost. However, the credit crisis of 2007-08, made banks reluctant to lend, this was especially the case for subprime lending. As banks withdraw the availability of credit, saving ratios will increase

Interest rates. A rise in interest rates makes saving more attractive because of the interest earned from savings. The base rate is the main determinant of saving as base rates indirectly influence the commercial savings rates. However, commercial banks may offer additional incentives for saving by offering attractive deposit accounts. Also important is the level of real interest rates. This is the level of interest rates minus inflation. If interest rates are lower than the inflation rate then there is little incentive for people to save.

Confidence about Future economic prospects. If people are confident about the future, they will be more willing to borrow money. However, if they fear being made unemployed then they will start saving and cut back on borrowing. Therefore saving ratios are often cyclical. Falling in times of economic growth and rising in times of recession.

Attitudes to Saving. Saving ratios can vary from one country to another quite significantly. This can reflect cultural changes about saving. For example, China has a relatively high savings ratio and the US a relatively low savings rate. This reflects a difference in attitude between consumption and saving.

House Prices. When house prices are rising consumers see a rise in housing equity. This causes people to be more optimistic and willing to borrow money. Falling house prices create negative equity so it is much harder for people to borrow.

In the short term, savings ratios can change because of changes in interest rates and economic confidence. In the longer term saving ratios are determined by the access and availability of credit and savings accounts. Also social and cultural attitudes to debt and saving are important.

Auther: Richard Pettinger

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What is a debt management plan? March 28, 2008

Filed under: debt — financialponderings @ 9:32 am
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I was reading a post a few days back about different types of debt solutions (not that I need one – I’m not great with money, but things aren’t that bad). I saw a few I recognised & also a few that I had never heard of. One of them, a debt management plan, caught my eye & I set about finding out more.

It turns out that it is an informal agreement with your creditors, where it’s possible for them to reduce the amount you owe & even stop charging interest. I’m sure it’s not that easy, but it certainly sounds a lot simpler than going bankrupt!

That’s what I got from it anyway – of course, i’m no expert. The article I found that really explained it well is here if anyone else is interesed:

Debt Management Plan


Cheat Your Debt March 20, 2008

Filed under: articles — financialponderings @ 4:58 pm
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Cheat Your Debt
By Daniel Rembrandt

I’m lucky that I’ve been able to cheat my debt with the right techniques, and there’s no reason anyone else can’t. I’ll admit that my debt situation isn’t the same as yours, but there are some principal truths that apply to everybody.

For the past few years, real wages have not been keeping pace with inflation. In fact, the average household income has steadily decreased for five years in a row. Despite this, consumption continues to increase. How can this be? The answer is, people have been increasing their amount of personal debt. About 95% of Americans don’t have enough saved for retirement, yet constantly buy, buy, and buy.

You might be in debt simply because you’re a poor spender such that you spend more than your income and if you happen to have a decrease in your income, you still do not control your spending to balance with your income. Then you find yourself in a crisis that you could have avoided. The best solution to this is to change your spending habits and stay away from money owing. Also get to know your personal finance pattern so that you will be in a position to balance your income and your expenses.

Don’t forget, there is the other face of the coin, not many of us are prepared to face the adversity of debt, in this case it may be necessary to contact the creditors and seek a reduction on interest rates or maybe even ask for a reduced payout. A reduced pay out is also known as a settlement, or a discount on the amount owed to a particular creditor. When we follow this route we are reducing debt and therefore reducing stress.

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What in blue-blazers is an offset mortgage??? March 7, 2008

Filed under: Mortgages — financialponderings @ 5:29 pm
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I was talking to a friend the other day who said he had an offset mortgage with the One Account. He briefly explained the concept & the pros and cons, but I was still left wanting more. I have since done some research & here is my summary for those of you who don’t what an offset mortgage is:  

Basically, instead of making monthly mortgage payments as usual, your mortgage is actually tied into your bank account. It is kind of like a huge overdraft. Say you owe £100,000 on your mortgage. Your bank account will show -£100,000; OUCH!!!

Now, say you get paid £1500 monthly. when that money goes into your account, your mortgage balance goes down to £98,500. Of course, as the month progresses, it will rise as your direct debits, shopping bills & any other spending comes out of your account. It may eventually rise to £99,500 again before you get paid, at which point it drops down to £98,000.

So, what’s the benefit?

Well, because you are effectively paying £1,500 off your mortgage every month (albeit for a few days or weeks out of that month), you are not paying interest on that money during those days. So on a standard 25 year mortgage, if you can reduce your mortgage by £1500 for, say 5 days; that’s 125 days worth of interest you are not paying on that money – get it?

Sounds pretty good eh? I’d encourage you to do your own research though, as I’m sure that was just a load of waffle.

Over & out 🙂


730 sleepless nights, worrying about debt March 5, 2008

Filed under: Random — financialponderings @ 3:07 pm
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Sound ridiculous? I thought so too – but apparantly, on average, each person in the UK spends a total of 2 years (730 days), worrying about their finances. Not just me then eh? 😉 To be honest, I think I spend longer than that. Recently, all I seem to do is think about money – and that’s not just because I have set up this blog.

I really want to sort out my finances & get rid of my debt, but at the moment it just seems like such a big hill to climb. I am determined to do it & I am proactively working towards it now – I guess I’m just having a bad day 😦

Now that I have become part of the blogging ‘community’ I have started paying more attention to other peoples blogs & have noticed that some of them are making a decent amount of money from their blogs. This has definately spurred me on to continue as, even though it was not the reason I set up this blog, the opportunity to earn a little bit of extra cash from this blog would really be a big help in my efforts to clear my debts. Not really sure where to start & I’m pretty sure it’ll be another 6 months before I can even consider making money from this blog, but if anyone does have any ideas – or if you are successfully running a blog that is making money, please give me any tips you can. I’m open to any suggestions.

Ciao 4 now!


Successful weekend | Successful start to the month March 3, 2008

Filed under: Uncategorized — financialponderings @ 4:35 pm
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My goal was to stick to a budget of £50 this weekend (and every other weekend for the forseeable future), and I am pleased to inform you all that I have been a very good boy 🙂

All in all, it was a fairly cheap weekend with not much really happening. Most of the budget went on one meal – which was lovely, I hasten to add. I was aware that I wouldn’t be spending much else, which is why I blew most of it on the meal. Any other weekend, where I might be spending more on other days, I would have stuck to a take-away.

To confirm, I am not including shopping bills, baby (yes, i am a dad) stuff, or any other general necessities. Just luxuries and one-off purchases. E.g. On Sunday, I went to the Supermarket. I needed to buy a few things like nappies, food for the week, toiletries…etc. I also bought a bottle of wine to take to a friends for tea that night. In my budget, I have only included the bottle of wine as a luxury purchase.

Anyway, here are the details:

£0.00 – nice 🙂

£36.00 – Italian meal & drinks

£6.00 – Dinner
£2.99 – Bottle of wine (what a deal – and it was nice too!)

Total: £44.99

Well done me! And I have £5.01 left in my pocket. Any suggestions?


My 1st weekend as a financial blogger February 29, 2008

Filed under: Random — financialponderings @ 4:20 pm

Well, it’s Friday (finally) & i’m under pressure to be good this weekend. Can’t be posting about sticking to a budget & trying to save and then blow a load of cash on Saturday and Sunday. Guess that’s why I sent this thing up.

I’m confident I can do it. Got no real plans, so hopefully will be a cheap one…

I’ll be posting my spends on Monday, so watch out. If I can stay under £50, i’ll be happy 🙂