Posted by Jill Kerby on July 27 2011 @ 09:00
EVEN SCOTTISH EUROMILLION WINNERS HAVE FINANCIAL WORRIES
The couple from Scotland who won last week’s €185 million EuroMillions draw now have an entirely new set of personal finance issues to deal with.
No longer do Colin (64) and Chris (56) Weir, they have to worry about the usual problems of generating income, paying bills, educating children, making provision for their retirement.
Their worries now have to do with the management of, dare I say it, too much money: €185 million is the sort of windfall that requires far more care and attention than an earned salary.
When you have €185 million in the bank, rather than say, even, €185,000, your expenses and costs don’t get smaller, they soar: aside from now needing to engage and pay for accountants, tax, and financial advisors, you also need full-time private security. Forever.
I know that most people reading this believe that they would happily put up with the ‘inconvenience’ of a lottery win that is greater than the gross domestic product of some developing nations.
But the Weirs, who have lived an ordinary, prudent, middle class existence up to now and say what they are most interested in doing is to travel and ‘securing the future’ of their two children (who are in their early 20s) have lost their anonymity.
That said, the rest of us have to get on with the more mundane task of coping with the reality of our lives right now and that means coping with not just lower incomes (or no incomes) and higher taxes, but the fact that the country itself is bankrupt and part of a wider economic eurozone that is also in serious trouble.
We Irish are responding in a number of ways. The government is doing what it has been told to do by the EU/ECB/IMF by repaying the insolvent bank debts and tightening the spending screws. By December, another austerity budget worth probably €4 billion worth of cuts and taxes will be introduced.
Because public sector pay/pensions and existing social welfare payments will not be touched – together, these two alone account for more than all tax revenue raised – we all need to be prepared for the public spending cuts that have already been flagged regarding hospitals, schools, other contract employment, the widening of income tax bands and tax credits, and numerous social welfare benefits that will be simply cut or the terms under which one can qualify, tightened.
The reaction of the citizenry to our increasingly difficult economic circumstances is pretty much on course as well: those people whose lives are going to be impacted by the cuts – communities whose hospitals are being closed; parents of children losing teaching assistants or affordable bus transport; nurses who see the effect of cutbacks on their wards and even judges who are unhappy about their pay (finally) being cut – are protesting.
Those who still have some disposable income are saving it.
Everyone is sincere in their protest, and genuinely feel let down by politicians and by the state. But they fail to see the wider picture when it applies to their little individual position: the state is bust and the only way funding is going to be re-instated for them (or their hospital, or school or roadworks) is if it is taken away from somewhere/someone else.
For example: there are nearly 100,000 homeowners, deep in arrears. Many of them are unlikely to ever repay their huge mortgage debts, even if economy recovers. But they are still living in their homes for one simple reason: if they all lost their homes because they were deemed personally insolvent, the Irish banks would fail. Instead, money from the European Central Bank continues to backstop these debts (via the Code of Conduct on Mortgage Arrears) and behind them, ultimately, is the taxpayer who will be presented with this bill as well.
Would these ECB millions be redirected to pay for Roscommon hospital or to Special Needs Assistants if they weren’t going to the banks and mortgage borrowers? Probably not. But every decision the government takes to re-distribute differently what little money is available to them must come from somewhere else.
As for our savings – they’re up again. One in every €7 worth of disposable income is now being saved for one very good reason: we’re all worried – quite rightly - about the future.
I think there are three top financial priorities you should be focussing on, especially in light of last week’s European bank stress tests, which have, frankly, just upped the eurozone’s stress levels. They are, 1) the security of your money and savings, 2) health care provision as the cutbacks intensify and 3) can you afford to retire?
We’ll start next week with savings.
You might not have be the lucky winner of €185 million but you certainly have one worry in common with the Scottish jackpot winners: the security of your savings.
In the 36 hours that the Weir’s took to claim their winnings, they lost over Stg£20,000 in interest.
If they leave all their winnings in sterling – all £161,653,000 worth – they will watch a large chunk of it bleed away due to inflation and the devaluation of their currency, which is now underway as the Bank of England tries to inflate away the UK’s catastrophic debts.
It could happen to you…albeit on a smaller scale.