Archive | June, 2013

The Power of P2P Investing

19 Jun

In the good ole days – pre the credit crunch in 2008 – if you wanted to borrow money you would go to a bank.  Post credit crunch money dried up and it became very difficult to find banks able to lend.  With a gap in the market several companies came up with the idea of Peer-to-Peer (P2P) lending.  P2P is now available to businesses and individuals.

For P2P lending you need borrowers, investors and a managing company all working together.  The managing companies are organisations such as Zopa, Ratesetter, Funding Circle and Thincats. Investors deposit money with the managing company and their money is lent to the borrowers.

How Does It Work?

A borrower wants a loan of £1000.  The managing company takes £10 from 100 investors and provides the £1000 loan to the borrower.  In exchange the investor receives interest each month on the borrowed money until the £10 is repaid.  The managing company makes its money by charging a fee to both borrower and investor.  From the point of view of the investor the fee is 1% of interest received.

The investor can opt to have interest payments automatically reinvested once there is £10 back in the investors account providing good compounding opportunities and relatively low monitoring of the investment.

While there is a degree of risk with this and any investment some of the managing company’s have reduced this risk by setting up a special fund whereby, if the borrower defaults on the loan the investor is refunded the remaining balance of their investment.

Interest rates vary depending on the company you use to manage the investment and whether you invest in personal loans or business loans.

Due to the low entry level for this investment i.e. £10 it is the type of investment most people can start with and relatively low risk.

More information on P2P lending and other investment opportunities can be found in – Surviving 2013, A Guide To Financial Education – available in paperback or ebook from Amazon.

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Building A Future

5 Jun

We live in a world of instant gratification.  We want the latest gadgets now.  We want instant riches now.  The world of get rich quick seems to be the answer to all our dreams but most fail and just compound our problems because of the money we’ve wasted on them.  Building a future takes careful planning.

The reality is most people don’t need to be instantly rich they just need to improve their cashflow.  An extra £10 here or £50 there will make a big difference to their finances and standard of living.  Little steps taken today towards improving your investments will have positive effects in 10 or 20 years time. (read blogs on compounding interest)

Where and how do we start building for the future?

Most people find themselves in a catch 22 position.  No money to do the things they want to do or no time to do what they want to do.  The best way to start building a future is to decide what we want the future to look like.

On a scrap of paper write down what you would like your future to be like.  How much time to you want to spend working – 1 hour a week or 7 days a week.  How many holidays do you want a year and where.  What type of house would you like to live in and where?  What type of car would you like to drive?  Build a picture of your perfect future in 10 years time.  Now comes the tricky part how much will all this cost and what are the running costs going to be?

Once you know what you want for the future you can build your business ideas and investments around your plan ensuring you have the money and time to live your dream lifestyle.  Most people don’t need millions in the bank but they do need sufficient money coming in each month to cover the bills and still have enough to enjoy themselves.  Most people don’t want to work 60 hours a week they want freedom to spend time with their families and friends.

There are, in my opinion, four types of investment – property, business, shares and cash.  Each investment should produce some type of income immediately if it doesn’t then it isn’t an investment.  If you need instant cash keep 25% and reinvest the other 75% back into more investments.  This ensures your income will continue to grow annually.  If you can, put the full 100% income back into your investments until you know you have built up sufficient income to start building your lifestyle.  Always put some of your income back into your investments so they keep growing and so does your income.  This helps to combat inflation.

Start building for your future and you’ll be surprised how quickly you can achieve your dream lifestyle.  It may be a 10 year plan but with focus you will probably get there much sooner.