Viewing posts categorised under: Saving
The Effect of a Greek Default
By Spectrum IFA - Topics: europe-news, Investment Risk, Investments, Saving, Uncategorised
This article is published on: 23rd June 2015
It is difficult to say exactly what the outcome will be if Greece defaults on its debt. Many people believe that this would lead to Greece exiting from the Eurozone and possibly also from the EU. However, there is still some opinion that there will not be a ‘grexit’.
The fact that Greece has missed a repayment to the IMF earlier this month is not actually considered to be a default. This is because the IMF agreed to bundle all its loans to Greece together, so that the various payments that were due during this month are now due at the end of the month. This has provided Greece with some much needed time, during which it can try to reach an agreement with its creditors.
If Greece does not make the payment due to the IMF by end of June, it will then be classified as being in arrears and could be locked out of further IMF funding. This potential default scenario would present a number of challenges – not least the fact that it seems likely that Greece will anyway need a third bailout package, but this could be difficult with IMF involvement.
Should we be worried about our investments in Euros (or any other currency for that matter)? What about our Euro bank deposits – are these safe?
The uncertainty with the Greek situation has created some short-term volatility in stock markets, but this is not the only factor causing this. Whilst important, the Greek situation is probably less of a long-term investment issue than the prospect of increases in interest rates (and the effect on bond yields), as well as issues surrounding the oil price and the still existing possibility of a continuing slowdown in Chinese growth.
If there is a Greek exit, there may be some immediate selling-off of risk assets but longer-term, the economic impact to the rest of Europe should be limited. In the main, this is because most of the Greek debt is now held by ‘official creditors’ (for example, the ECB, the IMF and the EU). We have a different situation now compared to 2011 and the exposure of banks to any Greek debt should be cushioned by the stronger capital requirements that are now in place under international banking regulations.
There is some concern about possible contagion into the peripheral Eurozone countries, which could result in some pressure on those countries’ bond yields. However, it is important to know that public finances in these countries have improved compared to a few years ago and a number of reforms have been implemented that have improved the underlying economies. So any adverse effect on the countries’ bond yields is likely to be short-term. In reality, a bigger potential effect on bond yields is the prospect of increases in interest rates.
During the last month, there has been large amount of deposit withdrawals from Greek banks and again, there is some concern that this could spill over into the peripheral Eurozone countries. The question has also been raised that if there is a Greek exit from the Eurozone, could this lead the way for other countries to do the same?
You may recall the famous Mario Draghi speech back in July 2012, when he said ……
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough”.
“To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate.”
There is great belief in Mario Draghi’s ability to ‘pull the rabbit out of the hat’ when it seems that all is lost, despite the fact that he often has to battle against some other members of the ECB Governing Council to put in place a solution to a problem. However, it is his final point above that is actually key to what might be needed now for Greece.
If Greece defaults on its debts technically, the ECB could classify Greece as insolvent and this should really prohibit Greek banks from receiving further support from the Emergency Liquidity Assistance (ELA) programme, since it is government bonds that are used as collateral. However, the ECB has the power to keep the ELA lifeline open, especially if it considers this to be in the best interests of the Eurozone.
If necessary, the ECB can also increase liquidity in the banking system by increasing the amount that is injected via the Quantitative Easing (QE) program. Of course, it will need to ensure that this does not drive inflation too quickly (since this is its primary mandate), but coming from a base of such low inflation, there is a lot of room.
I am writing this article over the weekend between the Eurozone Finance Ministers’ meeting of 19th June and the emergency EU Summit that on Greece is taking place on 22nd June. By the time that you read this article, maybe a deal will have been reached. In the meantime, the ECB has already increased ELA funding to Greece, following a further increase in deposit withdrawals from Greek banks. What seems clear to me is that this is to avoid a collapse in the Greek banking system and the risk of this spreading – perhaps even beyond the Eurozone.
My personal opinion on this is that a deal will be reached – maybe not at the emergency summit, but by the end of the month. What choice does Greece have but to give some way on the issues that are proving to be the barrier – pensions and VAT. After all, if the funding lifeline to Greece is cut off, where is Greece going to get the money from to pay its pensions at all? Other countries have already had to swallow the bitter pill that the Troika gave out, but they have suffered the pain and come out the other side on the road to recovery.
However, it may be that the Troika must also give a little for the sake of reducing the risks for the broader international financial markets and banking community. If a deal can be reached, there will be a third bailout package for Greece, but whether or not the same discussions will be taking place in another six months’ time remains to be seen.
As for our own investments, having a multi-asset approach with broad geographical diversification can protect against some of the movements that we may see in the period ahead. Choosing the right investment manager, particularly one who considers risk management to be a key part of the process, is also very important. Part of our role at Spectrum is to help our clients achieve both of these objectives.
The Greek situation is putting pressure on the Euro and if a deal is reached, this should help the Euro to recover a bit in the short-term. Beyond this, the effect of the QE program should depreciate the value of the Euro. On the other hand, there is also a potentially growing issue around Sterling to consider, and that is that the media is hyping up the possibility of the UK exiting the EU (‘brexit’ as well as ‘grexit’?)’. As this gathers momentum, we can expect it to put pressure on Sterling.
A final point is that markets generally only react to uncertainty, which is what we are seeing now. However, we should remember that the investment decisions we make are usually being made for the long-term and so whilst there may be short-term issues that we have to navigate around, we should try not to lose sight of our long-term goals.
The above outline is provided for information purposes only and does not constitute advice or a
recommendation from The Spectrum IFA Group to take any particular action on the subject of
investment of financial assets or the mitigation of taxes.
It is never too early to start planning your financial future
By Chris Webb - Topics: Investments, Madrid, Pensions, Saving, Spain, Uncategorised
This article is published on: 17th June 2015
During conversations with many of my clients, I hear the expression “I wish I had done something sooner” so often, that I thought I should put pen to paper.
All too often in our younger years we race through the nitty-gritty details of our finances and neglect to focus on crucial “future proofing” in the process. During our 20’s we tend to spend, spend, spend. In our 30’s we try to save, but this is the decade when most of us purchase property and start a family so that makes saving for the future difficult. In our 40’s we’re still paying the mortgage and raising our children so inevitably it is difficult to put money aside to provide for your financial future.
But if you adopt a marathon approach to money (as opposed to a sprint – see my article on this topic), it can allow you to take a more holistic look at your overall financial picture and see how decisions that you make in your 20s and 30s can impact your 40s, 50s and into your retirement years.
It doesn’t matter how old you are, being financially healthy boils down to two things. The level of debt you have and the level of savings/investments you have. The only real difference is how you approach both subjects, as this will change with age.
Tips for during your 20’s
This is the best time to lay the foundations for a bright financial future. Try creating a budget and track your expenses. Keep evaluating over a few months to ensure it’s realistic. This may seem pretty basic but you’ll be surprised how many people don’t track their expenses. This is the best time to do it, your finances are likely to be a lot simpler now than they will ever be!
- Debt – Loans and Cards
It’s easy to think that making the minimal payments and delaying paying them off, to save more, is a good idea, but this strategy rarely works. The more you make the more you tend to spend, so getting round to clearing off these debts never comes any closer.
But now is the time to break the cycle of credit card debt or loans for good!
- Start an Emergency Fund
While you’re busy paying off your debt, don’t forget that you should always try to have a “savings buffer” in the bank. To help accomplish this goal you should transfer funds straight from your “day to day” account into a deposit account. One where you aren’t likely to get access through an ATM which reduces the temptation to spend it on a whim. Ideally, you should aim to have three times your monthly take-home pay saved up in your emergency fund.
- Contemplate Your Future – Retirement
At this point in your life, retirement is far off, but it is important to start saving as early as you can. Even small amounts can make a big difference over time, thanks to the effect of compound interest. Start saving a small percentage of your salary now to reap the rewards later in life. See my articles on compound interest and retirement planning to see the difference it can make.
Tips for during your 30’s
During this decade, your financial goals are likely to get a bit more complicated. Some people will still be paying off credit card debt and loans, whilst still working on the “emergency account”. So what’s the secret to juggling it all?
Rather than focusing on one goal you should be looking at the biggest of your goals, even if there are three or four.
- Continue Reducing Debt
If you’re still paying off your credit card balances then considering consolidating onto one card with an attractive interest free period should be your first task. Failing that you need to concentrate on the card with the highest interest rate and reduce the balance ASAP. The most important thing to consider with debt is the interest rate. If you have low interest rates (I’d be surprised) then there’s no major rush to pay them off, as you could manage the repayments and contribute to other financial goals at the same time. If your interest rates are quite high then the priority is to clear these debts down.
- Planning For Kids
Little ones may also be entering the picture, or becoming a frequent conversation. Once this is a part of your life you’ll start thinking about the cost implications as well. Setting aside a small amount of funds now to cater for the ever increasing costs of bringing up a child will reduce the financial stress later down the line. If you have grand plans for them to attend university, potentially in another country, then knowing these costs and planning for these costs should be part of your overall financial planning.
- Assess Your Insurance
The thing that most people forget. Big life events such as getting married, having kids and/or buying a house are all trigger points for reassessing what insurance you have in place and more crucially what insurance you should have in place. If you have dependents, having sufficient Life cover is paramount. Other considerations should be disability, critical illness and even income protection
- Start that Retirement Plan.
It’s time to stop just thinking about setting up what you call a Pension Pot, it’s time to take action! Starting now makes it an achievable goal, leaving it on the back burner because you’re still too young to think about retiring is going to come back and haunt you later in life.
Tips for during your 40’s
This is the decade where you need to make sure you’re on top of your money. At this point in your life, the ideal scenario would be to have cleared any debts and to have a nice healthy emergency fund sitting in a deposit account.
- Retirement Savings – Priority
During your 40s it’s critical to understand how much you should be saving for retirement and to analyse what you may already have in place to cater for this. In my opinion it’s now that you need to start putting your financial future/retirement ahead of any other financial goals or “needs”.
- Focus Your Investments
Although you may not have paid much attention to “wealth management” in your 30s, you’ve probably started accumulating some wealth by your 40s. Evaluate this wealth and ensure that there is a purpose or goal behind the investments you have made. Each goal will have a different time horizon and potentially you will have a different risk tolerance on each goal. The further away the goal is, the more you can afford to take a “riskier” option.
- Enjoy Your Wealth
It’s about getting the balance right. Hopefully you’ve worked hard and things are stable from a financial point of view. You need to remember to enjoy life today as well as planning for the future. As long as important financial goals are being met there is no harm is splashing out on that dream holiday, and enjoying it whilst you can.
Tips for during your 50’s.
You may find yourself being pulled in different directions from a financial point of view. Maybe the children still require financial support, maybe your parents require more support than before? The key thing to remember is to put your financial security first, and yes I know that sounds a bit tough…….. You still have your retirement to consider and probably a mortgage that you’d like to pay off before retirement age.
- Revisit Your Savings and Investing Goals
Your 50’s are prime time to fully prepare for retirement, whether it’s five years away or fifteen. At this point you should be working as hard as possible to ensure you reach your required amount. This means that careful management of your assets is even more critical now. It’s time to focus on changing from a growth portfolio to a combined growth, income and more importantly a preservation portfolio. What I’m saying here is it’s time to really analyse the level of risk within your asset basket.
- Prioritise – Your Future vs Your Children’s Future (It’s a tough one….)
During their 50’s a lot of clients struggle with figuring out how much they can afford to keep supporting a grown child, especially when they’re out there earning themselves. The bottom line is that although it can be tough you have to continue to put yourself first. The day of retirement is only ever getting closer and unless your planning has been disciplined there’s a possibility you may need to work longer than anticipated, or accept less in your pocket than you hoped for. You are number 1…….
- Retirement Decisions and considerations
You should begin to revisit your estate planning, your last will and testament, power of attorney if you feel necessary and confirm that your beneficiaries on any insurance policies or investment accounts are all valid.
Once you’ve covered off the administration part then I’d suggest you sit back and look forward to the biggest holiday of your life……..have a great time!!!
French social charges on worldwide investment income
By Spectrum IFA - Topics: France, Income Tax, Livret A, Residency, Saving, Uncategorised
This article is published on: 1st April 2015
On 26th February 2015, the European Court of Justice (ECJ) made a very important ruling concerning the application of French social charges (prélèvement sociaux). These charges are levied to fund certain social security benefits in France, as well as the compulsory sickness insurance schemes.
If you are resident in France, you are required to pay the social charges on all your worldwide investment income and gains and the current rate is 15.5%. However, the payment of these social charges does not actually give you any automatic right to French social security benefits and health cover.
In fact, many early retirees have been refused health cover when their Certificate S1, issued by the UK, has expired, if they have not been resident in France for at least five years. Since having adequate health cover is a condition of French residency, such people have either had to work in France – perhaps even setting up their own business – or they have been obliged to take out private health cover.
It is clear that France considers social charges on investment income and gains as an additional tax, rather than a social security contribution, since the payment does not provide any automatic rights to social security benefits and health cover. However, it is the French Code de Sécurité Sociale, rather than the Code Générale des Impôts, which lays down the conditions under which these social charges are payable in France.
Thankfully, the ECJ has reached a different conclusion. In its determination, the ECJ decided that France’s social charges have a sufficient link with the financing of the country’s social security system and benefits. In addition, there should be no distinction made between those charges payable on earnings and those payable on investment income and gains.
EU Regulation 1408/71 deals with the application of social security schemes to people moving within the European Union. The Regulation provides that people should be subject to the social security legislation of only one Member State (except for very limited situations). To have anything different could lead to unequal treatment between Members States and their citizens, which would be contrary to EU principles.
Therefore, for any French resident who is the holder of a Certificate S1 that has been issued by another Member State, this means that he/she is subject to the social security legislation of the issuing State. As such, the ECJ has ruled that France cannot impose an obligation on the person to pay social charges to France, as this would result in them being subject to the social security legislation of more than one Member State. The ECJ has also ruled that this principle applies whether or not the insured person actually pays social security contributions on the income/gains concerned in the Member State that insures the person.
Since 2012, non-residents have also had to pay the social charges on any French property rental income and on any gains arising when they have sold the French property. There is general opinion now that the ECJ ruling should also bring this to an end, at least for residents who are insured in another EU State.
EU legislation overrides the internal legislation of Member States. Notwithstanding this, we will still need to wait for the French government’s response to this ECJ ruling. Arising out of this, if France accepts the ruling, it will need to amend its own internal codes to ensure compliance with the ruling.
In the meantime, taxpayers can make an application for a refund of social charges paid in 2013 and 2014, by filing a claim with their local tax office before 31st December 2015. In addition, taxpayers may also wish to refer to the ECJ ruling when submitting their French tax returns for this year, if they believe that they are affected.
On the subject of French tax returns, these are due by 19th May 2015, if submitting a paper return or if submitting on-line by 26th May 2015 for departments 01 to 19, by 2nd June 2015 for departments 20 to 49 and by 9th June 2015 for other departments. According to the ECB website, the average exchange rate of Sterling to Euros for 2014 is 0.80612.
For those of you who came to live in France during 2014, then you will need to make your first French tax declaration and declare all your worldwide income and gains. This includes income and gains that might be tax-free in another country, for example, UK ISAs, premium bond winnings and Pension Commencement Lump Sums, which are all taxable in France.
Even if the income is taxable in another country, for example a UK government pension and/or UK property rental income, the amount must still be reported in France and it will be taken into account in calculating your French income tax. You will then be given a tax reduction to take into account the fact that the income is taxable elsewhere.
It is also very important to declare the existence of all foreign bank accounts (whatever the amount in the account) and life assurance policies taken out with companies outside of France. Failure to do so can result in a penalty of €1,500 for each undisclosed bank account. However, if the total value of all unreported accounts is €50,000 or more, then the penalty is increased to 5% of the total value of the accounts, if this results in a greater amount. The same penalties also apply for undeclared foreign life assurance contracts.
Pensions – I cannot pass by without saying something on this. I have personally become so fed up with all of the UK changes that I have now taken the decision to transfer all of my own UK pension benefits into a QROPS. I have chosen the well-regulated jurisdiction of Malta and I feel that I am in control of my own retirement planning again. In short, I feel that I will now have a pension for life and not just for Christmas or for the next session of the UK parliament.
With days to go before the reform takes place in the UK, if you are affected, do you understand what this means for you? If not, would you like to have a confidential discussion with me about your situation?
Pensions is one of the major subjects that we are also covering at our client seminars this year, as well as EU Succession Regulations, French taxation, health insurance and currency exchange. We are already taking bookings for Le Tour de Finance 2015 and this is a perfect opportunity to come along and meet industry experts on a broad range of financial matters that are of interest to expatriates. The local events are taking place at:
Perpignan – 19th May
Bize-Minervois – 20th May
Montagnac – 21st May
Le Tour de Finance is an increasingly popular event and early booking is recommended. So if you would like to attend one of these events, please contact me to reserve your places.
Whether or not you are able to come to one of our events, if you would like to have a confidential discussion about pensions, investments and/or inheritance planning, using tax-efficient solutions, please contact me either by telephone on 04 68 20 30 17 or by e-mail at firstname.lastname@example.org.
Producing income from your investments
By Peter Brooke - Topics: France, Investments, Pensions, Retirement, Saving, Uncategorised, Yachting
This article is published on: 9th March 2015
Restructure your investments before you need the money. This gives you time to ride out any difficult market years before you retire or move ashore. Crises in stock markets always affect stocks in pre-retirement worse, so protect the value of your funds in the few years running up to taking an income, but keep one eye on inflation as this will reduce the buying power of the “pot” of money you’ve built up.
Consider the total value of your retirement assets — shares, pensions, funds, investment properties, cash and bonds — as one entity. Then ask yourself, “If I had all of this as cash today, what assets would I buy to give me the income I need?” This question helps you reassess all your assets and bypass any loyalty to a certain asset type, such as property. If Dave bought an apartment nine years ago for €180,000, rented it out and paid off the mortgage, and the apartment is now worth €280,000 with rent at €1,000 per month, after management
charges, this works out as a 3.8 percent yield. Dave may do better using the money from the property elsewhere, perhaps by reinvesting in bonds.
Once the income starts, look at each asset class in terms of income stream and cash flow rather than capital appreciation. It’s important to try and grow the “pot” to beat inflation, but
the income is paramount. Yields on equities today are outstripping most government bonds; the capital may fluctuate but the income will remain. To draw an income of €3,500 per month, you need an asset pot of approximately €900,000. With €42,000 per year, a proportion of the cash can be put in longer term assets (property, equities, etc.) to help grow and replace the funds you withdraw.
Many yacht crew have a large proportion of their assets inside insurance bonds, as they offer tax-advantageous growth and income. However, some don’t offer a way to take a “natural income,” as the funds are all accumulating-type funds. The income that you draw down by cashing in fund units affects the underlying balance and needs to be rebalanced with a steady internal income stream.
Can You Avoid Spanish Inheritance Tax?
By John Hayward - Topics: Inheritance Tax, Investments, Residency, Saving, Spain, Tax, Uncategorised
This article is published on: 27th February 2015
Savings with UK banks and investment companies could form part of a Spanish Inheritance Tax (IHT) calculation.
If you have money in a Spanish bank, the Spanish tax authorities know about it. If you have money in a UK bank, they probably know about this too due to information passed over by the UK tax authorities. Of course, if you have over €50,000 in a UK bank account you will have reported this to Spain within your Modelo 720 form.
For a Spanish tax resident inheritor, Spanish IHT is due on worldwide assets. Therefore, a Spanish resident wife, inheriting from her husband, could pay tax based on their Spanish property and other Spanish assets PLUS tax on the overseas assets.
The English Will does NOT stop the Spanish tax authorities claiming Spanish IHT (Succession Tax) on overseas assets. The Will governs the distribution of the estate, not its taxation directly.
We can help mitigate, delay and even sometimes completely avoid Spanish IHT by placing money in a Spanish compliant insurance bond based outside Spain. Suitably arranged, the bond could save many thousands of euros in inheritance tax.
Financial Independence: What’s your number?
By Jonathan Goodman - Topics: Barcelona, Inflation, Investments, Pensions, QROPS, Retirement, Saving, Spain, Uncategorised, wealth management
This article is published on: 16th February 2015
What does financial independence mean to you? Are you on track for a future free from financial stress? Do you know what your number is?
Knowing the answers to these questions could help determine how soon and how well you could retire, yet many of us don’t…
If you are financially independent you have amassed enough wealth to generate a passive income sufficient for meeting all financial obligations, without the need to work. Your potential for financial independence is dependent on your current net worth, your target net worth and the years remaining before retirement, as well as how much you spend. The more money you spend now and going forward, the more you will need to accumulate to support your lifestyle.
So how do you calculate exactly when you could comfortably retire?
The first step towards financial independence is to calculate how much you’d need to save. A simple formula can tell you not only how much you will need, but also how close you are now to getting where you want to be:
- Study your statements and determine how much you require annually in order to meet all your financial obligations. Could this number be reduced? Are there any unnecessary expenses? Could home and car insurance premiums be reduced? Is downsizing your home an option?
- Determine what return you could get on your investments. As intimidating as the stock market may seem at first glance, it’s possible to assemble a portfolio that pays you 3-5% in dividends annually. This dividend income is cash paid to you monthly, quarterly, or annually and doesn’t erode your investment.
- Calculate what nest-egg you need to build to generate the annual income you require. Annual income required divided by the percentage return you expect to get. Calculations should include cash only, not property or assets.
- This calculation does not account for inflation or taxes.
- This calculation only covers essential expenses. Determine how much spending money you need monthly, then calculate the annual amount and add it into your figure.
- Your life could change in the next few years, which means you’d have to recalculate. If you decide to upgrade your home or have a family, you’ll need a bigger number.
What’s Your Number?
Smart Ways to Make the Most of Your Finances
By Chris Burke - Topics: Barcelona, Saving, Spain, Uncategorised
This article is published on: 10th February 2015
The year 2015 is picking up speed, and now is the perfect time to stop and re-evaluate our finances before we slip back into our old comfortable routines. A time to review the past year and determine those areas with potential for improvement, to make sure we are getting the most out of our investments and reaching all our financial goals.
Do you know where your money goes each month? Could you be making more if you invested elsewhere? Is your credit rating a true reflection of your financial situation, and are there things you could be doing to improve your standing?
Follow these smart ways to make the most of your finances and put you and your family on the right track for a wealthier future.
Study your Credit Report
Have you ever seen a copy of your credit report? Most people haven’t and it may surprise you to hear that they very often contain errors. Research online and get access to your report and make sure there aren’t any mistakes which could be having a negative impact on your rating. If you don’t, you could be at risk from undiscovered inaccuracies.
Study your Cash Flow
Set some time aside to study your cash flow. Go over all your statements from the past year and crunch those numbers to gain a true understanding of where your money goes each month. How much are you spending? Where is it all going? Where can you make cuts to your monthly outgoings?
Credit Cards & Banks
Check the Terms and Conditions of all your credit cards and compare terms, rates and fees with those of other cards. Are you getting the best deal or are you just renewing cards out of habit? Get rid of credit cards which don’t give anything back, and compare rewards and cash back with other offers. If your current bank is letting you down and not providing the service you need, change.
Most of us don’t fully understand investments. Be the minority. Do your research and find out as much as you can about viable investment options. Use the Internet and its many free tools, and study the market to assess how to make the most of your finances.
Seek Professional Advice
Ultimately, the best advice is professional advice. The Spectrum IFA Group can assist you in reviewing your financial situation and advise you on smart ways to make the most of your finances. For more information or to contact one of our Financial Advisers please use the contact form below.
Smoothing: Reduce Volatility and Increase Growth
By Jonathan Goodman - Topics: Barcelona, Investment Risk, Investments, Pensions, Saving, Spain, Uncategorised, wealth management
This article is published on: 15th January 2015
Investment Smoothing is a process used in pension fund accounting by which unusually high returns in a given year are spread over a multi-year period. By taking an average of all the different values, smoothing can deliver a constant figure for shorter time periods.
Instead of simply sharing out what the fund makes or loses each year, a smoothed growth fund aims to even out some of the variations in performance. This process is what we call ‘smoothing’.
How Smoothing Mitigates Volatility
The logic behind smoothing is that it lowers the volatility of profit and loss credit from pension fund returns. During positive markets, some profits are retained by the underlying fund manager as reserves to be paid out during market downturns. This process dampens the volatility typically seen when investing in other types of long term mutual funds.
Smoothing from the Pru
The PruFund funds are designed to deliver smoothed growth by investing in many different investment areas. By investing in a range of assets the fund is less exposed to significant changes in the values of individual assets.
Prudential’s investment specialists will constantly look for the best opportunities for growth within a wide range of investment areas. Prudential apply a unique smoothing process to these funds to provide a more stable return, than if you were directly exposed to daily changes in the fund’s performance.
Prudential Smoothing: Reduce investment volatility, but keep the potential for growth.
Expats in Italy and bank accounts
By Gareth Horsfall - Topics: Investments, Italy, Saving, Uncategorised
This article is published on: 13th January 2015
During the course of my many conversations, one particular issue comes up all too frequently which I thought I just have to write about. It is something which has been on my radar for some time now. Now the time has come.
What am I talking about?
I am referring to basic bank accounts that expats use in Italy, those bank accounts which were probably set up when you first moved to Italy, either because the person who you were buying a house from suggested you open an account at the same branch to make life easier, or you were referred to the local branch because most people used it, or someone knew someone who could open you an account when you may not have even been a resident at the time. I am sure these reasons may sound familiar to some of you.
But unfortunately, you are more than likely being charged an extremely high amount of bank charges for little to no service.
Monte Pashi di Siena;
Monte Paschi di Siena keeps coming up as the worst culprit, by a long stretch, but yet, seemingly used most frequently by the expats I meet. One person I met last week was paying 34 euros a quarter for the bank account and then on 210 euro transfers to another Italian bank account (a simple bonifico) a commission of 4.50 eur. (2% commission PHEW!).
I did not even get to see what they were paying for exchange rate conversions (the mind boggles) or transaction fees for taking money from the hole in the wall and other services.
I estimated the costs could be as high as 800 Euro a year.
But it is simply daylight robbery and too many of you could be getting ripped off (I have no better words for it I am afraid) because you think that ‘it is just not worth the hassle of changing’ or ‘they are all alike’ or ‘banking back home is much better’.
However, this is no longer the case. In the last few years, Italian banks have really started to compete for business and there are options available. If you are happy with internet banking, then that’s even better.
I personally use 2 banks (personal and business). My personal account is Fineco (who? I hear you say). Fineco! (part of the Unicredit group). I am VERY satisfied with the service they offer. It is an exceptionally well operated online bank and even won the Global Finance Award for Best bank in Italy in 2013. It is 100% online. Now, I imagine that you might be thinking, online – Italy – errr, not sure, I need to keep an account where I can talk with someone if things go wrong. But, for basic banking it operates very smoothly. And I have emailed them many times and got responses within 24 hours.
And the best part is, at the time of writing:
ZERO canone. In other words no monthly, quarterly or annual charges just for having an account. FREE withdrawals from ANY cash machine throughout the whole of Italy. FREE credit card cash withdrawals from any Unicredit machines in Italy (and there are many). ZERO cost bank transfers in Italy.
My other bank for the business is Banca Popolare del Commercio e dell’Industria. This does not mean much, but it is part of the larger UBI banca group network.
I chose this account at a branch as it is a business account and I need to speak with my bank Director from time to time, but otherwise I operate everything online.
I pay only 5 EUR a month for this account and 0.50 Eur to make bank transfers. I can also withdraw cash from the UBI Banca group bancomats for FREE. The account, in general, is more expensive than the Fineco account but it is a business account and it has to be expected.
However, there are other personal account options with similar cost structures to Fineco, such as Ingdirect, Webank, Chebanca or Hellobank.
A good comparison website is www.confrontaconti.it
My simple message is to pay some attention to your bank account in Italy if you have not done so for some time. It is not difficult to change or use accounts, as in the past. With basic Italian you can do it without any problems.
You could be making huge savings just through changing bank accounts. They are as easy to operate as online bank accounts abroad and if, in this person’s case, a saving of 800Eur a year can be made then I would think it is definitely worth it. Any savings made can compensate for the increased taxes in recent years!
Take some time and have a look at your old bank statements to see what charges you are paying and compare this on the web link above to find out how much you ‘could’ be paying.
Financial success from your yachting career
By Peter Brooke - Topics: France, Investments, Saving, Uncategorised, Yachting
This article is published on: 27th November 2014
RULE: Conceptually plan out different financial pots.
This is a really good way to plan your future in yachting. There is no need to have different accounts for these “pots”, although it may help.
Pot 1 – Emergency fund – we all know how volatile the yachting industry can be in terms of job security. It is important that if you suddenly find yourself without a job you can at least survive for a few months, get yourself to one of the main yachting centres and afford accommodation while looking for work. I recommend having at least 3 months’ salary in a bank account at any time.
Pot 2 – Education – in order to progress your career it is vital to consider the costs of education. Hopefully you will be on a yacht where Continual Professional Development (CPD) is part of the culture but there will still be courses that you need to fund yourself. Start to plan when you will need the money for the next course and how much it will be… then divide the amount by the number of months until the course, and save that amount EVERY month into an account. Remember there may be additional travel or accommodation costs too.
Pot 3 – Exit – you have now saved an emergency fund and are putting money aside for the next course…. now consider what you plan to do when you leave yachting? Are you going to start a business? Return home? Retire? You should now look to save at least 25% of your income for this purpose. It is very easy to go through a yachting career and end up with very little saved for when you want to leave. There is no provision made by your boss for your long term future, it is down to you to save.
Remember if you worked on land you’d lose at least 25% to social charges and tax anyway. As these are longer term savings you can now consider making investments to try and grow your money more. Make sure as your income grows, your savings and investment amounts grow too.
Pot 4 – Property – if one of the investments that you want to make for your long term future is into property, then you need to start planning what you need to put aside every month to be able to save enough for a deposit and legal fees/taxes. In France, for example, a yacht crew will now need at least 28% of the property purchase price to be able to borrow… saving this amount takes discipline and planning.
Pot 5 – Expenditure – all of the above requires a habit of saving and bit of effort to form the best plan… the single best way to successfully save for your future is to be strict with your own expenditure. Look at all of the above and then give yourself a set amount each month that you can spend on having fun and travelling. Do this well and the more difficult disciplines above will be easy. Saying no to another night out is the hardest part!!
This article is for information only and should not be considered as advice.