What if you stood to gain a massive return on your money by lending it to people prepared to pay insane interest rates? Let’s say you had £15,000 sitting in a savings account earning £450 per year in interest (minus all the bank charges and tax) and along comes someone who is prepared to give you £5,000 to borrow that money for just 4 weeks?
The £450 you’re making on it now is probably the best offer you’re going to get on the high street these days — so the £5,000 offer is EXTRAORDINARY.
Who would pay this much money to borrow your cash? People who can’t otherwise get a bank loan, that’s who!
Some are running cash-starved businesses that will go under if they can’t get what we call a “bridging loan” to make ends meet. Plenty of these businesses deserve to survive — they’ve got a great product or service and the team behind it has given it their all to make it work … but cashflow (as opposed to profit per se) is the #1 small business killer. Not whether the business is a good idea or the team behind it strong. This is especially so these days when many more businessses have cashflow problems and are slow to pay their invoices …. This damages businesses all along the supply chain that connects companies to each other. We live in an interdependent world — as the collapse of Europe is nicely demonstrating.
There are also other people out there ready to sign the dotted line on crazy loan terms because they’re either scamming around in an underworld of very dubious dealings or they’re in serious personal trouble and will suffer immensely to pay you back the loan.
Now, bearing in mind that if you don’t lend the money, other people will, what would you do? If you had the £15,000 and weren’t wealthy enough to laugh off £5,000?
This was the subject of debate amongst a group of friends a couple of weeks ago and I can tell you that it got HEATED.
I left the evening not knowing what I would do but needing to … it’s one of the options on the table for me this year and I’m not convinced I wouldn’t do it — under the right circumstances.
And so my friends have encouraged me to launch the £15,000 question to work out all the things one might do with this sum of money in order to make it grow. It’s not enough to buy property (though in some places in the world it’s enough for a deposit) and yet it is too much money to leave lying around in a savings scheme that isn’t worth the time it took to set up the account.
For me (and I imagine most people reading this blog) this is a significant sum, but is it enough to get the attention of the advisors most talented at maximizing personal wealth? Not really …. They’re too busy with the super-rich.
Yes, I know — it’s all relative…
There’s that expression about how the rich worry what to do with their money and the poor worry about how to get through the week.
But being rich enough to have this problem, it is a worry unless I want to work for a wage until I am 104 years old. And so for the rest of the year I’ll be asking anyone and everyone “What would you do if you had £15,000 and couldn’t afford to give it away or spend it and needed to save and invest it?”
So far I’ve received the following answers
- “Become an angel investor in a start-up business”
- “Throw it into the same savings account I already have, the idea is security not high-risk profit”
- “This is the reason I have a husband. I have no idea”
- “Use it towards property”
- “Lend it to that guy who’s promised to pay back £20,000 in 4 weeks time!”
These answers reflect both individual tolerance for risk and the degree to which one can afford to lose some, or indeed all of the £15,000 in exchange for the possibility of significantly growing it.
I mention all this today because this week’s assignment was to make a bold financial move. So while I might take the rest of the year to make either a bold or a conservative decision about the £15,000, The Deck of Small Change dictates that I make a bold decision about a financial matter RIGHT NOW.
So I’m going to sell my flat.
That’s what I decided this week.
I’ll cover my rationale for that and why it counts as a fairly bold move for me in the weeks ahead.
Till tomorrow and next week’s assignment…