RUMSEY OF SANDBANKS

UNIQUE CONSTRUCTION

Dishonouring sunk costs

Letting go and losing a l tle is mu better than losing a lot later

If you’re a regular reader of this column you may recall me talking about the principle of working out a way of testing ideas cheaply and then putting investment behind them if they are working. If you missed out, scan the QR code below.

The key to this is to test lots of things, however there are a few things that often derail the strategy: Customer confirmation without action, modest success and honouring sunk costs.

I once worked for a company that made add ons for networked printers in the Jurassic times before broadband or Wifi. Just to explain for those of you under 40, you used to print virtually every communication both with clients and internally and when you wanted to print you had to select which printer to use on the network. The trouble was people would forget which printer they last used and send the print to another location – Senior managers would be seen tearing through the o ice to get a disciplinary letter they had sent to the meeting room printer. On several occasions I printed things out in the Copenhagen head o ice where I’d been the day before and most of all every printer would have piles and piles of uncollected printouts.

One day there was a meeting to show us the latest device on the way – a simple plug in with a card reader for each printer so you just pressed print then walked to your nearest printer which would produce the document when you put your card in. You could send everything to print and collect it on arrival in Denmark and if you didn’t collect, it was never printed, saving waste and ensuring

This brings us neatly on to one of the biggest issues in business and in life – honouring sunk costs. Once you have invested some money in something there is an almost overwhelming compulsion not to waste it. We see this in everyday life and our minds simply won’t accept that money spent is gone regardless of what we do next. You’re on a diet but you have a cake that won’t last so you eat it rather than throw it away which costs the same. The confidentiality. I can still feel the excitement value of a share is dropping and you should now and our customers shared it. One sell it but you don’t because the price is less senior executive defected to a competitor than you paid for it, yet if you were in profit who produced the same thing in record time you would sell immediately – this makes no to compete with us at the launch. sense, either the decision to sell is right or not regardless of what you paid. When we finally got the product it was brilliant except for one slight issue – nobody Many businesses take advantage of bought it. To this day I still don’t understand this e ect, even a tiny deposit of £10 why, it wasn’t even that expensive but when will dramatically reduce the number of it came to parting with the cash it just didn’t happen. You can consult all the focus EVERYTHING FOR THE HOLIDAY HOME OWNERbookings cancelled at a restaurant and it is a cornerstone of multi level marketing groups you like and get online votes but a IN SANDBANKS & SURROUNDING AREASschemes. If you’ve spent money on a test is only a test if people have to pay. It’s Shopfront on the Peninsula | Sophisticated Digital Marketing course or filled your garage with stock then

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Rumsey of Sandbanks will tailor the experience to suit your exact needs so you can get on with the rest of your life and we can turn an awkward stop gap into a great and memorable experience.

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The ‘Bank of Mum and Dad’: What you need to know about helping your child fi nancially

Are you considering off ering your child fi nancial assistance to help them get onto the property ladder? Alistair MacFarlane, Partner at Dutton Gregory Solicitors, reveals how you can provide the fi nancial support your children may need and if it is a good idea.

Alistair Macfarlane

Partner

What are we talking about when we refer to the ‘Bank of Mum and Dad’?

We’re referring to the receiving of money from parents or a family member. Increasingly young people, particularly fi rst-time buyers, are turning to loved ones and using family loans when buying a home or putting down a deposit. This can help lower monthly repayments and interest rates.

Why are more people turning to family members for financial support?

Rises in house prices and living costs are making it harder for young people to save for their fi rst home. The ‘Bank of Mum and Dad’ has never been busier, with a 2018 report by Legal & General estimating that one of four housing transactions made that year depended on contributions made by family members.

How can you provide financial assistance to a family member?

There are several ways you help a loved one fi nancially. You can gift them the money, loan it to them or set up a joint investment. It’s best to seek professional advice to help decide which is the best option for you. Gifting the money is the simplest choice, but can come with the greatest risk, as you have no say in how the money is used. If you decide to loan them the money, a solicitor such as myself can help you establish conditions to protect your assets, and off er tax-planning advice. You can also agree on how they will repay the personal loan they borrow. With expert guidance, a joint investment is easy to set up and is a great way for you to help your child buy a home and invest in your family’s future. If the property is sold, you could use the return to help boost your pension savings. You may also decide to set up a Trust that uses money from your estate, which may have tax planning advantages.

What will I need to consider before agreeing to provide any money?

First, decide how much money you want to pay them. This will depend on what you can aff ord, why the money is needed and possibly how many other children you have. I always recommend that you should treat each child fairly, and off er them all the same amount. If your child is in a relationship, contemplate asking them to sign a Cohabitation or Prenuptial Agreement before they receive the money. This can help ensure it will be spent wisely and is protected in the event of a divorce or separation. You should seek help with tax planning and consider updating your Will to refl ect the changes to your assets. It’s also best to speak with your intended lender beforehand, as some banks may not be comfortable approving a mortgage loan that’s been heavily funded by other family members.

Why seek help from a solicitor?

I can provide bespoke legal advice, explain your options, make you aware of any relevant tax considerations and put protections in place, so you can provide the fi nancial support that your child needs. In our fi rst meeting, we’ll discuss your situation and outline the next steps to make this process simple and stress-free, helping you to make the best decision for your family. Visit duttongregory.co.uk for more information, or call 01202 315005 to speak with a member of the team.