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Money Links For 14th May 2008

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Despite the feel good announcements made by the Prime Minister today, focusing on schools, hospitals and law & order, as well as first-time buyers (a diversionary tactic to take some heat off following the tax chaos?), the tax problems are likely to rumble on.

An interesting point was made by Jonathan Rawle on his blog:

Ominously, the BBC report that people will gain £120 this year. We should be under no illusions that this will be a permanent tax cut. Next year, the personal allowance won’t increase nearly as much as it would have done, and over time, further reduced increases in the allowance will mean that the £2.7 billion is eventually clawed back. But as no-one can know what the increases would have been without today’s announcement, they won’t be able to complain about losing out. The amount of tax collected will be the same in the end, but I suppose at least low earners won’t be hit with a big increase in tax all at once.

So that helps to explain where the money will be coming from. It just shows how easy it is for these huge figures to be manipulated, massaged and moved around to make it look good for the majority of the population who probably won’t question it - they’ll just see the extra money in their pay packets and think it’s great.

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Tax Changes: The Aftermath

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The Times lists 10 inflation busters - items which have fallen in price this year, along with examples of the savings that can be made with each:

1. Mobile Phones: down 51%
2. Digital Cameras: down 50%
3. Flat screen TVs: down 40%
4. Home Cinema: down 36%
5. Apple MP3 Players: down 35%
6. DVD Players: down 33%
7. Fridges: down 30%
8. Camcorders: down 21%
9. Washing machines: down 18%
10. Dishwashers: down 10%

What do you notice about all of these things? Yep, pretty much all of them are luxuries or “discretionary items”, and faced with the rising prices of everything else, along with the current economic uncertainties, these purchases are likely to be low on our lists of priorities. They’re also things that you would expect to get cheaper as new models come out, and technology advances.

There are some interesting comments on the article, including this from Adrian:

The government and BoE use electrical items to try and fool us into thinking inflation is lower that it is. That way we don’t have to get pay increases in line with TRUE inflation. Increase in Money Supply = Inflation. Not the price of some rubbish mobile phone or DVD player. The BoE claim to have the goal of fighting inflation, yet then offer to print billions more £’s to bail out banks. Surely by keep interest rates low and increasing money supply they are infact creating inflation and are infact the problem.

Whilst I don’t necessarily think it is something that is done to fool us, including these sorts of items in the inflation figures certainly distorts the true increase in the cost of living.

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10 Things Falling In Price & What It Means For Inflation

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Money Links For 13th May 2008

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I was talking yesterday about how I’m planning to work out how much driving is costing me. As I mentioned, a big part of that is working out how much I spend on petrol, so I need to work out how much I use.

This morning Lifehacker featured a new tool, FuelFrog, which promises to help me do just that:

Track your gas mileage by letting us know the miles you traveled on your last tank, the price you paid, and how many gallons you added to your car. FuelFrog will compile and trend information about your gas mileage, the amount you spend, and more!

Sounds like just what I need. And even better, it integrates with Twitter, a tool I’m currently loving (follow Money Watch on Twitter).

I’ll be giving FuelFrog a try out and will let you know how I get on.

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FuelFrog: Track Your Miles Per Gallon

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Following the government’s terrible decision to scrap the 10p tax band, they’ve decided to bribe compensate those of us who pay 22% tax by altering the tax allowance rate. The money will be paid as a £60 payment in your pay packet in September, followed by £10 for the next 6 months.

Whilst it is a welcome change to get something back from the tax man, you can’t help feeling it was completely unnecessary waste of both time and money, had the 10p rate not been scrapped in the first place. It’s also an embarrassing turn of events for the government.

Look out for the extra £60 in your pay packet in September.

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Basic Rate Taxpayers Get £120 Back From Tax Man

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Money Links For 12th May 2008

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I’ve recently been thinking about how much I use my car (a 1.1 litre Fiat Punto), and whether it’s something I can cut down on, and in the process, save money.

One of the problems I have is that I don’t really know how much driving my car costs me. I know the fixed costs, but I think that if I could put a definite cost on each trip, I could then easily see the savings I could make by getting finding a different way to the destination or by cutting out the journey completely.

So I’ve decided to start recording my mileage to work out my car’s miles per gallon (MPG), which will probably turn out to be the main factor in the equation.

To get a more accurate figure, I’ll also take into account insurance, tax and MOT costs (the fixed costs I mentioned above), plus some maintenance costs. Although depreciation is sometimes taken into account in these sort of calculations, that’s not something that particularly bothers me, as I don’t buy my cars expecting to be able to get any money back from then when I get rid of them (although I did have some luck selling my last car on eBay for an amazing £350, when I was expecting to have to pay someone to tow it away). I expect the Punto will be run until it falls apart, which hopefully won’t be too soon.

The first step then is to work out my car’s MPG, which will mean keeping track of how much petrol I pump in at the next fill up, and see how many miles it lasts for. I’ll report back my findings in a couple of weeks, but in the meantime, if you have any thoughts or have tried a similar thing yourself, let us know in the comments below.

photo credit: gahdjun

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Calculating How Much Driving Costs Me

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Once I’d done a mental currency conversion ($1million = £500,000 which is actually not too far out, given the current exchange rate), I figured that I would:

1. Pay off my mortgage (£150k)
2. Save £150k
3. Invest £150k
4. Spend the rest (£50k) on holidays, new car etc.

Unlike many of the other responses to the question, I didn’t say I’d give any money to friends or family, let alone donate any to charity. Which makes me feel a little guilty. But I’ve thought about it again, and my overwhelming feeling is that I would look after my kids, partner and myself first, and although £500k is a lot of money, I probably wouldn’t feel inclined to automatically give any away.

Does that make me a bad person?

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Would You Give Money Away If You Had $1Million?

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Money Links For 10th May 2008

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