You can beat your money problems

Published on Saturday 14 February 2009 12:32

THE suicide of a war hero, who went alone to a park and shot himself through the head after losing his life’s savings in the alleged Madoff fraud, is a sign of the panic shaking investors.

William Foxton’s death, sadly, was not the first. Late last year Kirk Stephenson, the 47-year-old head of a private equity firm, jumped in front of a train in Berkshire. Steven Good, head of one of the largest property auction houses in the US, died from a self-inflicted gunshot wound.

In Ireland, property developer Patrick Rocca shot himself in the family home after losing nearly 500m. Just before Christmas, a 65-year-old French investment manager, Thierry de la Villehuchet, committed suicide in his New York office, also because of Madoff losses. A fortnight later, 74-year-old German billionaire Adolf Merckle killed himself after losing more than 350m on a wrong-way bet on Volkswagen shares.

For a former major in the British Army to meet such a tragic end as that of 65-year-old William Foxton is not only truly shocking but should serve as a warning. Here was a man of outstanding courage, who served in conflicts around the world, and had lost his arm in combat. But he wasn’t brave enough to face financial ruin after he entrusted two hedge funds with a six-figure sum, and they handed it over to Madoff.

It is always dangerous to attribute motives for suicide.

What we do know is that money is one of the last reasons why anyone should ever think of harming themselves. Financial difficulties are never insurmountable, and there is plenty of help and options to get you through.

If you lose your job

Nearly 3,000 job cuts were announced last week, including 2,300 at Royal Bank of Scotland.

If you are made redundant it is vital to sit down and take a hard look at your finances, to see what money is coming in and going out. You will need to balance the books until you find a new job.

If you leave work with a sizeable lump sum, the first 30,000 is tax-free, but after that it will be taxable. It may be possible to save more tax by paying some of it into your pension. It can be boosted further if your employer makes the payment on your behalf, via a salary sacrifice, as it saves National Insurance.

But think carefully about locking up funds in a pension if you are likely to need them to pay your bills. On no account allow a big redundancy cheque to burn a hole in your pocket by splashing out on a fabulous holiday or dream car. Not until you get a new job anyway.

And don’t be tempted to follow a friend’s advice and put it all on a ‘dead cert’ horse or share. It should be deposited in a secure bank or building society, or spread between various ones if it is more than 50,000.

You may be able to get state support for mortgage payments after three months. The Government will pay interest on mortgages up to 175,000 if the household has no proper income.

Finally, if you are over 50 and find yourself seriously short of money, it is possible to withdraw cash from your pension to see you through.

Homeowners under pressure

If you are struggling to make your mortgage repayments, the good news is that fixed rates fell last week on the expectation that the Bank of England will cut interest rates again soon and begin quantitative easing.

The Chelsea Building Society led the way, cutting its two-year fix to 3.39%, although you need a 35% deposit.

Nationwide followed hard on its heels, cutting its fixes by up to 0.2% and pushing the price of a two-year fix down to 3.98%, but only with a 40% deposit.

If you need to borrow 85% of the loan it will cost 5.73% and the Nationwide will not lend above this level. But other lenders are expected to follow in pushing rates lower.

If you are struggling to make your repayments, speak to your lender. You can cut premiums by switching to an interest-only loan or extending the term.

Offer to pay half what is due each month. Lenders work hard to separate the “can’t pay” from the “won’t pay”. They will often bend over backwards to help the first group.

Consider taking in a lodger to help toward mortgage costs.

Finally, mortgage-to-rent schemes are run by the Scottish Executive and housing associations, which allow you to convert part or all your mortgage to rent for a period, with an option to buy the property back again.

Steer clear of lookalike options run by private companies. You have no legal protection.

If your investments have tanked

Investors, particularly those saving for retirement, have every reason to be angry with the financial community. They have been badly let down, particularly by the banks.

But panicking won’t change that. Rather, see it as an opportunity to take a look, possibly with a financial adviser, at your holdings.

Weed out anything toxic. Then decide whether you are happy playing safe, which means utilities and bonds, or whether you want to be ready for recovery when it comes. This involves deciding where the upturn will strike first. The US and Far East are the hot tips. At home, bigger corporates are expected to pick up before small firms.

Where to go for help

If you have debt problems, contact Money Advice Scotland ( www.moneyadvicescotland.org.uk) or one of your local Citizens Advice offices.

Scotland on Sunday runs its Money Help Desk, where our experts offer advice on your individual problems.

If things are getting on top of you, visit your doctor. He or she may be able to help with medication or counselling.

Finally, mental health charity Mind has a helpline on 0845 7660163, and you can e-mail the Samaritans at [e-mail], or talk to someone on 08457 909090.