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Friday Five: shocking facts to kick-start your money makeover

If you're putting off sorting out your finances, these shocking figures may give you the impetus you need.


by Michelle McGagh on Jan 18, 2013 at 10:40

Friday Five: shocking facts to kick-start your money makeover

If you’re lacking the motivation to sort out your finances, these shocking facts should make you look at your money in a new way.

Whether it’s starting a pension or buying life insurance, we’re all guilty of procrastinating when it comes to tackling the frankly boring topic of finance. But here are five reasons why you should bite the bullet.

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16 comments so far. Why not have your say?

Tony, Wallsend

Jan 18, 2013 at 15:19

Compound interest, 2%-4% and I come up against the opposing forces of compounding inflation, I must try and work out my real returns after the latter has taken it's toll.

As for investment returns of 12% over a long period of time, the only person I know of who achieved that, was Bernard Lawrence Madoff,until he didn't that is.

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gggggg hjhjkl;'

Jan 18, 2013 at 16:01

There was a guy on one of these boards who claimed he was making 24% per year (from unit trusts, would you believe).

When I praised him for doing better than Warren Buffett and asked for his secret, he never even said thank you!!!!

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Michael Hellman

Jan 18, 2013 at 16:52

'the frankly boring topic of finance'....... wash your mouth out Michelle

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Jan 20, 2013 at 09:54

If the person who wrote this article thinks finance is boring, are they in the right job?

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Anthony Palmer

Jan 20, 2013 at 10:01

Great in theory but have just lost a great deal more in selling Faroe Petroleum after hanging on forever, and forever hoping, and also K3 Business Technology whereas I still have only lost a small amount by comparison in my e-saver and I still have the cash to invest. And these weren't the only ones. But I have had successes and on these I build.

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Ian Craig

Jan 20, 2013 at 11:25

I was rather shocked when I realised that I hadn't been comparing total returns of long held investments against compounded interest. Guess I'll have to work out some tables for interest-rates against time, it's bound to take some of the gloss of my pride-and-joys. Not that the banks actually allow compound interest; they mess around with interest rates when you're not looking or a bit busy.

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steven fieldfare

Jan 20, 2013 at 12:14

The biggest shocker is that Government remains unwilling to regulate/legislate to even up the imbalances between savers and borrowers.

While urged to save for old age, the tilt remains towards encouraging lending to small businesses, unsuccessfully fuelled by QE (as was the experience of Japan in the 1990s). So far the result of QE has been to shore up Banks capital, inflate bonds (reducing their interest) and equities (making the forward investment outcome uncertain), and reduce mortgage lending costs to minimal interest rates (shoring up those who over borrowed in the boom times).

If Government were serious over saving:

they could regulate against vested sharp practice by the banks over interest rates, as highlighted by Ian Craig, in outlawing teaser rates and/or regularly closing accounts to new entrants, while lowering their interest rates, and opening similar new accounts with an enticer rate of interest. Savings in closed accounts should be automatically transferred to similar replacement accounts.

they could introduce lower BoE lending rates for business (to meet aims for economic growth) and higher rates for private lending (to encourage realistic mortgage rates and positive returns for savers).

Not a chance of it happening, of course, given the political outfall of mortgage rate rises and bankers vested interest already nibbling away at new capital holding requirements.

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peter hart

Jan 20, 2013 at 13:22

When and if NS&I bring back their index linked bonds fill your boots. I have averaged a tax free return of about 5.5% over the past 10 years which is, as I pay tax at 40% around 9% gross

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Anonymous 1 needed this 'off the record'

Jan 20, 2013 at 13:29

Dell didn't put away 6 times more than Rodney.

His last £2000 was worth nothing like as much as Rodney's last £2000.

The arithmetic is much more complicated.

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Rodney Clarke

Jan 20, 2013 at 15:08

Simple arithmatic--divide your interest rate into 72 and thats the number of years your capital takes to 72/12 = 6 years or more uptodate 72/2.5 = 28.8 years.

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Anonymous 1 needed this 'off the record'

Jan 20, 2013 at 15:58

Don't understand how the rule of 72 works when the capital varies.

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an elder one

Jan 20, 2013 at 18:11

The basic rule is simple to the point of childish, or was once upon a time, don't they teach such anymore; the 10-12% per annum is the difficult part; 5% or so, is more likely. At the present time with interest on money savings so low and the difficulty many experience with investment in equities, people are probably better off spending the cash on something useful.

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peter hart

Jan 20, 2013 at 18:35

Would a Ferrari been deemed as something useful?

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an elder one

Jan 20, 2013 at 19:26

Classic cars are worth a look.

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Johnny Boy

Jan 20, 2013 at 20:44

Equity investment returns of 12% or even slightly more are perfectly possible over the long term, by which I mean 10 years at least. Unfortunately it takes a lot of time doing research, developing a strategy that suits the risk level with which you are comfortable, willingness to buy when others are predicting further price collapses and most of all patience. It took me many years of struggle and frequent failures to get there but my portfolio has grown at above 12% over the last 21 years. If I can do it you certainly can.

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an elder one

Jan 21, 2013 at 19:41

You had frequent failures, yet still achieved 12% over the past 21 years; I wonder how you made the calculation?

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