There are several types of loans available. To name just a few: unsecured loans, secured loans, car loans and debt consolidation loans.

A loan is a type of credit – and therefore it must be repaid. Repayments are usually made on a monthly basis, and will continue until the loan (plus any interest) has been repaid.

Unfortunately, at a time like now, many people are finding repayments particularly hard to make, whether it’s because they’ve suffered a drop in income or because their essential expenditure has risen.

Help with your payments

However, there is help available. This help could come in the form of budgeting advice – in other words, advice on how to manage your finances more successfully.

Budgeting is all about managing, controlling and understanding your finances. It involves keeping track of your income (the money you receive/earn) and your expenditure (the money you spend).

• Your total income should include everything your household receives/earns: salary, benefits, grants, etc.

• Your total expenditure should include your priority debts and essential costs of living: your mortgage/rent, your utility bills, secured loan payments, etc. It should not, however, include the cost of servicing your non-priority debts (unsecured loans, credit cards, etc.).

By subtracting your total expenditure from your total income, you will be left with your disposable income. This is the money you can use to service your non-priority debts each month and (if you have anything left) to save and spend on non-essential goods and services.

If your disposable income is not enough to cover the cost of servicing your loan/debts, then you should take immediate action. You may wish to start by contacting a professional debt adviser.

The financial advice industry has been tarnished by a series of scandals, ranging from insurance mis-selling through to blatant theft of clients’ funds in isolated cases. Yet there are still tens of thousands of advisers out there willing to take cash from you in return for their help.

The question of whether they’re worth the cash is an interesting one. With so much information about investments, savings and pensions freely available these days it is tempting to try and deal with what could be complicated financial decisions for yourself. Make a wrong move, however, and it could be an expensive mistake – with only yourself to blame.

The argument for going to an expert, on the other hand, is that they do it for a living and should be able to approach whatever financial question you have with much wider knowledge, whether it’s pointing out tax implications, or explaining the potential risks of different opportunities, or even accessing deals that may not be available to the general public.

The key problem can be, however, finding an adviser that you feel comfortable with and can afford. And if you think you’ve received advice for free in the past, think again.

Advisers make money in two ways. Either they charge a fee for the advice, or they get paid commission on any product or plan you take out. Being paid commission can lead to the temptation for an adviser to recommend the product that pays them the most. That temptation can make their recommendations seem a little questionable.

For that reason commission is going to be scrapped from the end of next year. Instead, you will pay a set fee for advice. Also, as part of the process of cleaning up the industry, from January 2013 advisers must have qualifications equivalent to a certificate in higher education.

That is good news for consumers, but a new website is getting a head start on the new rules by offering access only to advisers who charge fees. But what makes the launch of VouchedFor.co.uk interesting is that it wants the clients to rate the advice they receive from advisers. In fact, it will pay a small amount to people who complete a review for the site.

While VouchedFor is still in its infancy, if it takes off it could prove to be a valuable resource with not only access to decent advisers all over the country, but an at-a-glance look at what other people think of them. In the search to find decent advice, that could prove very useful. If you’re looking for advice, you should also try unbiased.co.uk, a detailed register of independent advisers.

Time for crackdown on dodgy debt firms

fee-charging debt management companies are exploiting vulnerable consumers, Citizens Advice warned this week. It has called on the Office of Fair Trading to impose tough sanctions on companies who flout the rules.

The charity helped with more than 3,000 problems relating to rogue debt management services and credit repair last year, and accused some debt management companies of charging excessive fees, offering vulnerable people inappropriate debt solutions and forcing people further into debt.

“People already struggling with their finances, who are trying to do the right thing and address their debt problems, should not be pushed over the brink by unaffordable fees or inappropriate services,” said Citizens Advice chief executive Gillian Guy.

The Office of Fair Trading is currently consulting on debt management and credit repair services guidance. “The guidelines from the OFT set high standards for the debt management and credit repair industry,” said Guy.

“However, guidelines alone are not enough. In the past, debt management companies have routinely flouted the OFT’s guidelines, so these will need robust enforcement. The regulator must not be afraid to impose tough sanctions.”

Source

If the loan you choose has a fixed interest rate, the amount you pay each month will stay the same, unless you are advised otherwise. If you opt for a variable rate loan, you will need to be prepared for the monthly amount to change this could mean that it goes up or down but it’s an important consideration when it comes to budgeting your finances.

There are lots of different companies offering loans, but broadly speaking they fall into two categories: secured (sometimes known as a homeowner loan) and unsecured (often referred to as a personal loan). Secured loans are only available to homeowners who have enough equity in their property to secure against the debt. Unsecured loans are available to anyone who meets the lender’s criteria.

Things to consider before getting a loan

There are lots of lenders offering loans. There are a few things to look out for when comparing loans, working out the cost of each one and choosing the right one for you. These are:

Don’t just look at the interest -

If you’re comparing two loans with the same APR, but which are repayable over different lengths of time, the total cost will be different. The APR includes the total interest and other charges, per year. So a loan you have a longer number of years will mean more interest paid in total over the course of the loan, even though the interest rates appear the same.

Make sure you can afford the repayments -

The APR covers the cost of the interest and charges, but what is the actual amount you’ll be repaying each month? And is the interest rate fixed or variable? If it’s variable this means it’s subject to change and can go up as well as down.

Find out what the monthly repayment cost will be. If it’s more than you feel comfortable paying, you could think about extending the length of time you take to repay it. This will give you a lower monthly payment, but might cost you more overall as you’ll be paying more interest.

Be aware of all the charges –

There may be more to the cost of a loan than the interest. Check if there is a penalty if you choose to repay the loan earlier than the agreed term. Sometimes you can incur a hefty interest charge or admin fee on the last month’s payment. And, if you’re late paying, because a direct debit bounces for example, you may be charged by the loan company and your bank. So be sure you know about all the potential charges up front.

Think about how you’ll pay if your circumstances change -

Most loan providers offer optional insurance to cover your payments in the event of you losing your job and being unable to continue paying. This insurance will add to the overall cost of your loan, but give you some protection in the event that your circumstances change. If you were unable to work through illness, or you lost your job, would you still be able to pay? If you don’t think you would, you might want to consider insurance, but it’s entirely up to you. You should never feel pressured into taking on any insurance.

Find a reputable lender

When looking for loans, use a comparison website, or talk to your bank or an independent financial adviser. Be extremely cautious of loans offered by companies you have never heard of, and always do a little research to ensure they are reputable. Be on your guard with emails offering financial products, even if they appear to be from a reputable lender. If they ask for any personal information, or you suspect they are not genuine, report it to the lender and/or delete it immediately.

Before taking out any kind of loan, check that the provider is registered with the Money Advice Service – this means you will be able to get support if you need to make a complaint.

Types of loan

As the name implies, these are loans that are ‘secured’ on your home. They are only available to people who own, or have a mortgage on, their home and who have enough equity in the property to secure against the amount they want to borrow. In taking a secured loan, you are agreeing your home can be used as security against the debt and could be taken as full or part repayment of the debt if you were unable to make the agreed payments. In straightforward terms, if you miss payments and slip into arrears, your home could be repossessed.

This option won’t be available to everyone who owns, or has a mortgage on their home, as the lender will need to be sure that there is enough equity in the property to cover the debt in the event of non-payment.
Some lenders may give a better interest rate on a secured loan, especially if you are looking at borrowing more than 15,000 but you should compare all types of loan from a range of lenders before taking one, and think carefully about the risk of losing your home if you were unable to pay for any reason.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Unsecured, or personal loans

These types of loan are widely available from a choice of lenders and are most commonly for between 1,000 and 25,000. They are not ‘secured’ against your home, and therefore could be suitable for a wider range of people and circumstances. The amount of interest you will pay depends on the length of time you want to spread the repayments over, the amount you’re borrowing, and can sometimes be affected by your credit score or financial history.

Student loans

Student loans are offered by the Government to full-time students, to help with the cost of higher education.

Most of us have some form of debt – the largest being a mortgage, as few of us have enough cash sitting around to be able to buy a house outright. The danger with debt is that it can become a habit. Things like credit cards, store cards and loans allow us to buy things that we don’t have the money for right now. And while it may be manageable if you pay off your credit cards each month, it can easily become a problem.

Debt is an expensive way to pay for things, as you’re paying the purchase price plus interest. And the longer you take to pay it off, the more expensive it is. Breaking the debt habit is the best way to take control of your finances and be able to start planning for the future.

Understanding when debt is a problem

If you have debts of any kind, it can be hard to plan for the future and achieve your financial goals. The money you’re paying in interest on debts could be going towards your savings. So the earlier you start to tackle your debts, the easier it will be.

The most important step you can take towards controlling debt is to budget – this is the only way you’ll have a clear understanding of where your money goes. And only then can you start to see where you can cut back, prioritise your debts and regain control.

Recognising when your debt is a problem

There are a number of ways you can start to take control of your debt, the best one for you will depend on the amount of debt you have and whether you feel it’s manageable. As a guide, if any of these statements apply to you, you should think about getting help.

– I can only afford to pay the minimum balance on my credit cards each month.

– My debts have increased in the last few years but I don’t really understand where the money has gone.

– I have more than one card and they are all almost permanently maxed out.

– I often don’t have enough money in my account to pay for things and cover bills.

– I spend more than I earn.

Taking action

Once you’ve gone through the process of budgeting and you know what level of debt you’re dealing with and how much you can pay off each month, you’ll need to prioritise your debts. Here’s how:

Pay yourself first –

you need to eat, get to work etc, so ensure you have allowed enough to do this – although if you can cut back, for example, by making your own lunch, you should do this.

Work out which debts are a priority -

If you don’t pay your rent or mortgage, you could lose your home, so these debts must come first.

Talk to the people you owe money to -

Be honest and explain your situation. Most will be happy you have contacted them and will work with you to create a repayment plan to suit you.

Don’t ignore any of your debts -

Especially if you’ve missed payment as this will affect your credit rating and incur additional charges.

Get help –

There are lots of organisations who will be able to offer you free advice to help you get back on track.

Priority debts

– Rent/mortgage – failure to pay could mean you lose your home.

– Council tax – as it’s a criminal offence not to pay.

– Utility bills – your gas/electric/water could be cut off.

– Secured loans or second mortgages – you could lose your home if you don’t keep up repayments.

– Hire purchase agreements – for things like your car, as it could be repossessed.

Non-priority debts

These are still important, but you’re unlikely to go to prison for not paying them. But if you don’t contact the companies you owe money to, they may decide to take you to court. If you then fail to make payments that have been ordered by the court, bailiffs can be instructed and may call and remove your belongings. Non-priority debts include:

– Credit cards.
– Store cards.
– Overdrafts.
– Catalogues.

Where does the term ‘offshore’ come from?

The term ‘offshore’ originates from the Channel Islands (Jersey, Guernsey etc.) which are physically located offshore from mainland Britain and which enjoy a tax haven status.

The term is widely used today to refer to tax havens in general, whether they are island nations or not.

What is an offshore bank account?

Simply defined, an offshore bank account is an account held in a bank that is located outside your country of residence.

Usually such an account is located in a low tax jurisdiction and offers certain financial and/or legal benefits to the holder of the account.

Who can legally open and hold such an account?

Generally speaking anyone is free to open an offshore bank account.

In fact, offshore banking has been widely used for many years by both individuals and organisations worldwide.

What are some of the general advantages of banking offshore?

There is no definitive answer to this question as every individual’s circumstances are unique, and there are so many different types of account available in so many different locations in the world, and each offers the individual customer different features and benefits!

But for an expatriate living and working overseas for example, offshore banking could have tax benefits for you, as interest on your offshore account could be paid without tax being deducted.

And if you were to transfer your current savings and investments offshore as well you may be in a position to further reduce your tax liability in your home country.

Other general benefits not limited to expatriate account holders may include asset protection, estate planning, privacy and confidentiality, better interest returns, lower taxation burden, the chance to exploit active business interests overseas in low to no taxation jurisdictions, and global access to assets and income.

Do I have to declare income I generate from interest in my offshore bank account?

Most countries in the world require their residents to declare their worldwide income. Tax is then payable on the income – the UK and the US are two such countries.

Most countries have no restrictions on where your business interests, investments or bank accounts are located; it is simply your responsibility to report any income you earn to the appropriate tax authority.

If you are not resident in a country that has reporting requirements you may not have to declare any income you earn. You might be best advised to speak in confidence to an international accountant.

Am I guaranteed absolute privacy and confidentiality from an offshore bank?

When it comes to the declaration of assets held and ‘savings income’ generated, the EU Savings Tax Directive 2005 may limit the amount of privacy you are afforded if you bank or reside in one of the countries affected by the directive. These countries are: -

Andorra, Anguilla, Aruba, Austria, Belgium, British Virgin Islands, Cayman Islands, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Isle of Man, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Monaco, Montserrat, Netherlands, Netherlands Antilles, Poland, Portugal, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turks & Caicos and UK.

Simply put, the EU Savings Tax Directive 2005 is an agreement between the EU Member States to automatically exchange information about any customers who earn savings income in one EU State but who reside in another EU State. This is known as the ‘automatic exchange of information option’ and it is the ultimate objective of the Directive.

If you are not affected by this directive then your assets and any income you derive from them will be afforded a certain level of privacy.

But while most offshore jurisdictions offer very high levels of confidentiality, they cannot guarantee you absolute secrecy as all financial institutions worldwide have a legal obligation to report suspicions of serious criminal conduct – e.g., terrorism. If you are not a terrorist or serious criminal then you are pretty safe!

All your personal data is subject to modern data protection legislation, and there are civil and criminal penalties for breach of confidentiality and unauthorised disclosure and it would never be in an offshore bank’s interests to breach this legislation.

If you desire further guaranteed levels of anonymity and confidentiality you may be able to benefit from various other offshore vehicles such as International Business Companies (IBCs) and/or offshore trusts.

How do I open and access an offshore bank account?

Generally speaking you neither have to visit the country in which you wish to open an account, nor do you have to travel to the country to carry out any banking activity.

Most offshore accounts offered through legitimate organisations will allow you to carry out all your banking activity via the internet, e-mail, post, fax or telephone. Furthermore, many offshore bank accounts offer full credit card services and in some cases, debit cards are available as well allowing you easy and direct access to your funds at all times.

If you have specific requirements in terms of account access and method of account management make sure you shop around all the various organisations offering offshore banking to ensure your personal requirements are fulfilled.

Cutting debt

The figures suggested that people were using existing funds to cover essential payments, rather than borrowing more. Last month, the BBA said that some people were saving less because they were having to pay higher household bills. The latest figures show that the savings and personal deposits with major High Street banks accelerated slightly in July.

But the BBA said that deposits and savings had only increased by £8.6bn in the first seven months of the year, compared with £16.3bn in the same period of 2010. Repayments of personal loans and overdrafts outweighed new lending again, pushing the outstanding debt level in this area to its lowest for a decade. Credit card borrowing was only slightly higher in July as a result of the interest charged on existing debt, the BBA said.

Appetite ‘low’

The banks said that there was also a trend in the corporate sector overall for repayments to cancel out borrowing. Lending to financial companies was outstripped by repayments again in July, and debt repayment matched new borrowing in the non-financial companies sector. “Overall companies’ appetite for finance remains low, reflecting business decisions in difficult trading conditions – new finance made available to one company is simply being offset by debt repayment from another,” said David Dooks, the BBA’s statistics director.

There is similar care being taken by householders in terms of home loans, despite mortgage rates being set at low levels and activity having picked up slightly, according to commentators. The BBA figures showed that 33,717 home loans were approved for house purchases in July, slightly more than in June and a year earlier. However, Brian Murphy, of broker, the Mortgage Advice Bureau, said mortgage applications made in September and October would be a stronger indicator as to the health of the mortgage market.

In a healthy market we would expect to see an uplift in numbers post summer vacations, but whether this will happen is anybody’s guess, he said.The problem does not lie with the lending environment, which is highly attractive at the moment. The problem lies with consumers feeling the financial pinch.

Source

Belgian Finance Minister Didier Reynders said the bloc should issue common euro bonds and expand its bailout fund to calm repeated market selloffs of government bonds and bank shares of vulnerable debtor countries.

Germany has led resistance to both proposals. Belgium’s support for bonds promoted by high-debt nations such as Italy and backed by some European Commission officials will not necessarily tip the balance.

But Reynders’ call in the Financial Times for the euro zone had to prove it had “deep pockets” underlined increasing fears among euro zone governments that they would be unable to reassure investors that euro zone banks are safe without drastic action by the 17-nation bloc.

Bickering over the latest Greek bailout and lingering disappointment over Wednesday’s Franco-German summit helped drag European shares to near two-year lows on Friday.

Fears that major world economies are heading for recession are adding to worries that euro zone banks face short-term funding troubles, losses from sovereign debt and weak trading income.

Greece, at the centre of the euro zone debt storm, also announced its economy would shrink by more than previously thought — by 4.5 percent this year against an earlier estimate of 3.8 to 3.9 percent.

“The best way to resolve a debt crisis is to grow out of it so a recession certainly would not help. I think the confidence element is very important now,” said ING economist Martin van Vliet. “It’s time to break the downward spiral of a self-fulfilling recession. We are in that stage right now.”

Spain’s announcement of further austerity measures and a move to support its stricken housing market, aimed at showing it was working hard to stay out of the debt crisis, had little market impact.

BAILOUT SQUABBLE

Market impatience with the pace and complications of euro decision-making has been heightened by a rush by smaller euro economies to demand collateral from Greece in return for contributing to its bailout fund, and Austria sought on Friday to resolve that dispute.

The collateral demand, first made by Finland, has ruptured the common line found at the July 21 summit, particularly after Austria, the Netherlands and Slovakia said on Thursday they deserved the same treatment.

Dutch finance minister Jan Kees de Jager described as “very complicated” Austria’s proposal that more collateral should be available to countries whose banks and insurers were less exposed to Greece.

Marco Valli, chief eurozone economist at UniCredit, said that Europe needed more than ever to be speaking with one voice.

“If you want to sell your pact to save Greece then you should not be fighting about this. It undermines the credibility of the package,” he said.

Meanwhile opposition to the joint euro bond idea was underlined by European Central Bank heavyweight Juergen Stark, who described them on Friday as a “false solution”.

Germany, the euro zone’s chief paymaster, has repeatedly opposed a big increase in the bailout fund and says that common euro zone bonds would remove incentives for fiscal prudence, rewarding profligate nations.

BNP Paribas Chief Eurozone Market Economist Ken Wattret said he still believed that euro zone leaders would ultimately agree to launch common bonds and to increase the bailout fund.

“It would be helpful for markets if the EFSF were increased now, but the political reality is that this is unlikely to happen until at least later in the year,” he said.

Source

Ahead of a Franco-German summit to deal with the eurozone crisis, the Chancellor warned that political leaders were the biggest barrier to the global recovery. Mr Osborne called on them to follow his tough stance on deficit reduction and stressed the need for nations to tackle their debt problems. He warned that there was a ‘serious’ lack of confidence in the ability of governments to deal with unemployment, low growth and weak public finances.

Mr Osborne, who is building international support for his cost-cutting agenda, made his comments in an article published in the Financial Times. The article, which was co-authored with the finance ministers of Australia, Canada, Singapore and South Africa, called for ‘hard decisions’ on spending, entitlements and taxation in countries with large budget deficits. Getting public finances back on to a sustainable trajectory is central,’ it said. Nobody should underestimate the political difficulties inherent in the task, but it first requires a collective sense of reality.’

The finance ministers warned that the longer that nations put off deficit reduction, the ‘greater the risk of deeper and wider financial damage. In an apparent criticism of both the eurozone and U.S. response to the crisis, the ministers added that more short-term fixes without serious medium-term commitments will only weaken confidence.

French President Nicolas Sarkozy is holding crunch talks with German Chancellor Angela Merkel in Paris today aimed at tackling the eurozone’s sovereign debt problems. Their efforts to hammer out a fresh plan for restoring global confidence in the euro area come as they face accusations of a lack of leadership at the heart of the single currency bloc. There are fears that France could follow the U.S. in being stripped of its gold-plated AAA credit rating, amid a stock market squeeze on its banks.

A downgrade by one of the world’s major ratings agencies could plunge Europe back into turmoil, causing the money markets to seize up as they did after the collapse of Wall Street bank Lehman Brothers in 2008. European markets made modest gains yesterday. But the cost of borrowing for Italy and Spain rose again, indicating that fears the two countries will need a Greek-style bailout have not receded.

In the U.S., however, the Dow Jones index offered some comfort, rising 213.88 points to close at 11,482.90. It has now clawed back all of the losses it suffered after ratings agency Standard & Poor’s stripped Washington of its AAA credit rating earlier this month. Mrs Merkel and Mr Sarkozy are likely to turn the screw on ‘peripheral’ eurozone states to reform their economies, as well as back an expansion of the €440billion (£388billion) European Financial Stability Facility, the eurozone’s bailout pot.

But Germany ruled out any discussions over ‘euro bonds’ – which would be issued jointly by single currency states.
Supporters of the bonds say they would allow Europe’s poorer countries to raise money cheaply, due to French and German financial guarantees. But Germany said they were not ‘the right way’ to solve the debt crisis.

Source

Rumours that France could be the next in line for a credit downgrade after the United States sparked panic across Europe. Concerns about the European debt crisis, and the prospect of a break-up of the eurozone, clearly haven’t gone away.

With this in mind, many of us are wondering just where to stash our spare cash. Is it time to move some of our money into strong non-euro currencies?

Is it time to invest in gold? Clearly, you would be mad to pour all of your spare cash into gold — or to move all of your savings into another currency. But it might be time to consider other homes for your savings and investments — as long as you don’t put all of your eggs in the one basket. The secret is to spread your money across a mixture of investments. So what might be worth throwing into that mixture?

SWISS FRANCS

The easiest way to put your money into Swiss francs is to open a foreign currency account. Along with international banks such as HSBC Private Bank Ireland, Barclays and Investec, some mainstream Irish banks allow you to open a deposit account in Swiss francs.

You can open a currency deposit account in Swiss francs with AIB, National Irish Bank and Permanent TSB, for example.

If opening a Swiss franc savings account with an international bank, you usually need to have a large sum of money ready to put on deposit.

With HSBC for example, you need at least €3m (or currency equivalent) to open an account in Swiss francs, and you usually need about €2m to open a foreign currency account with Barclays.

With Investec, you need at least €20,000.

Don’t expect to earn the same interest on a Swiss franc savings account as you will on a euro savings account. Investec, for example, only pays 0.25 per cent interest on its 12-month Swiss franc deposit account and 0.15 per cent interest on its six-month account.

Bear in mind that you will be hit with charges for foreign exchange transactions and for transferring money out of your Swiss franc account. It is important to get a good foreign exchange rate when transferring your euro into Swiss francs — otherwise, you could lose a good whack of any euro you change into Swiss francs. If currency movements go against you (that is, if the value of the Swiss franc falls against the euro), you could lose between 10 and 15 per cent of your savings. Switzerland’s central bank last week said it would take steps to curb what it described as a “massively overvalued” franc.

The Norwegian kroner is another currency in which you might consider parking some of your money. It is considered by some to be one of the world’s safest currencies.

Like Swiss franc accounts, you can open a Norwegian kroner account with Investec, Barclays and HSBC — though you will need a few million euro to open such an account with HSBC and Barclays. You can also open a Norwegian kroner account with AIB and National Irish Bank.

GOLD

The price of gold hit new record highs last week when it rose above US$1,800 an ounce. About a year ago, it was about $1,160 an ounce. If you invested in gold back then therefore, you could be sitting on a tidy profit.

No one knows for just how much longer the price of gold will go up. The investment bank JP Morgan said last week that the gold price could hit $2,500 an ounce by the end of the year.

Wealth managers have long warned that gold is a bubble which will soon burst. As gold prices are at record highs, it is an expensive time to invest in gold — and you could get burned if prices start to fall. It’s worth remembering that those who got burnt most by the Irish property collapse were those who bought at the top of the market.

You can invest in gold by buying gold bars or coins or a gold certificate. The Dublin company, GoldCore, offers a gold certificate (the Perth Mint Certificate) which allows investors to buy gold bullion stored in a warehouse in Perth, Australia. The certificate can be sold at a later date.

You can also invest in gold by buying shares in a gold exploration or mining company or investing in a financial product that tracks the price of gold directly, such as a gold-backed exchange traded fund (ETF). However, do your research beforehand. If you invest in a gold exploration company that is badly managed, you could lose money.

GOVERNMENT BONDS

If you are still worried about the Irish banks and the debt problems in Europe, short-dated German government bonds could be a good home for your money, according to Vincent Digby, founder of financial advisers Impartial. The interest paid on these bonds, however, is very low, at about 0.7 per cent. If you put money into these bonds therefore, you will be purely doing so to keep your money safe — not to make a good return.

Canada’s low government debt has also prompted some investors to eye up short-dated Canadian government bonds. This is a road that should be trodden carefully, however, warns Digby. “If you are running for safety, it’s important to remember that you’d be taking on a currency risk if you invest in Canadian bonds,” he says.

Canadian bonds might be suitable as part of a well-diversified investment portfolio but pouring all your money into them is an investment no-no, according to Digby. The interest paid on these bonds is currently below 1 per cent.

DEPOSITS

If you are happy to leave your money in the Irish banks, you could earn 4 per cent interest or more on your savings. Permanent TSB’s Interest First deposit account, for example, pays 4.1 per cent interest (before tax) on lump sum savings of €10,000 or more. EBS’s 18-month fixed return savings account pays 4.29 per cent a year on savings of between €3,000 and €50,000.

Most Irish banks are covered by the Deposit Protection Scheme, which protects your savings up to €100,000 per bank.

You could also put your money into a State scheme. The 10-year National Solidarity Bond pays 4.14 per cent interest a year — as long as you can tie up your money for 10 years.

CAPITAL GUARANTEED

Capital guaranteed deposit accounts — where the interest earned on part of your savings is linked to the performance of certain stocks and shares — are an alternative to straightforward deposit accounts.

It’s worthwhile getting the advice of a wealth manager or financial advisor before choosing one of these products as some capital guaranteed products have hefty costs built into them. One that might be worth considering is Investec’s Emerging Markets Dual Deposit account. KBC Secure Income Plus Account Series 3 was closed to new investors earlier this month, but a new series could be launched over the next few months.

FUNDS

Liquidity funds and enhanced cash funds are considered good low-risk alternatives to stand-alone deposit accounts.

Most banks, including Rabobank and Investec, offer liquidity funds. Barclays, Blackrock and Pimco are among those that offer enhanced cash funds.

Source

But I am not in that camp. I think things will improve. But that doesn’t mean folks shouldn’t plan for the worst. Right now, the average length of unemployment is around 40 weeks and the average job search takes over eight months. With this in mind, folks need to buckle up and check the strength of their financial safety nets.

Build a Cash Cushion

With the average length of a job search today measuring a bit over eight months, building and maintain a sizable cash stock pile is critical. And a job search could take even longer if you are employed in a sector that’s in turmoil. You also may need more time to shift your skills to a career with more opportunity. For this reason it’s important to have at least six to eight months of cash on hand. You may want to err on the high side of this if you are the sole income earner or self employed. Consider these moves to increase your cash cushion:

Decrease your 401(k) plan contributions to the minimum required to collect your employer’s company match (typically six percent of your pre-tax pay). The increase in net pay should be used to build up your emergency fund.

Eliminate all unnecessary payroll deductions, such as savings bonds or charitable contributions. Use this cash to bolster your savings.

Reduce your income tax withholding from your pay, especially if you typically receive a tax refund. Over 70 percent of all tax filers, over 95 million folks, received a tax refund each year. The average tax refund received this past tax season was over $3,100. Of course a large tax refund each feel good, but larger take-home paycheck NOW will help you to build your cash cushion more quickly.

Here’s why getting a tax refund every year is not a smart thing: when you get a large tax refund, this simply means that you are having too much in taxes deducted from your pay. Since you only settle this overpayment up with the IRS once each year at tax time, you are letting the IRS keep this money as an interest free loan. Would you overpay your cable bill or over pay your rent by several thousand dollars just to ask for it back a year later without any interest? Of course not!!!

If you could use the cash instead of giving the IRS a zero percent interest loan, then reduce your tax withholding by increasing your withholding allowances, changing your withholding status or both. Here is how to do this: Complete a new Form W-4 and submit it with your employer’s payroll department. Do this now so that the change will be effective for the next pay period and you can then put the additional cash in your pay to work increasing your savings.

Source