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Starting a business is one of those major life-defining moments we have, like buying a house/apartment or proposing to our loved one; all involve determination, commitment and hard work to make them succeed.
 
You may be an entrepreneur driven by innovation and want to try out a new idea, you may have a unique set of skills and business contacts and start out on your own, or you may take over a family business. Whatever the build-up and reason, you will have ideas of your own and you will be drawing up plans for different projects, or investing in intellectual capital, all to do with you becoming a future business manager.
 
Apart from knowing your business inside out, understanding your target market, having the connections and skills with which to secure your first contracts, and having all the paperwork completed and authorisations received, (and as if all of that weren’t enough!) you also need to have sound finances to make your business succeed. You need to ask yourself the right questions about setting up and managing a business; not only do you need to ensure you bring money in, you need to keep an eye on your costs and manage your cash flow. Having sound financial advice at this stage can be crucial – don’t be afraid to ask for help.
 
The main commercial company types in Luxembourg are an Sàrl (limited liability company) and an SA (public limited company). Get advice on which suits your business best as there are also implications on the capital required, i.e. €12,500 or €30,986.69 respectively. You will need to deposit the full capital amount into an (ING Luxembourg) blocked bank account in the name of the company, obtain a letter from the bank to confirm the capital is paid up and hand this to the notary so the company deeds can be finalised. Once this is done, and the notary paid, you will then have access to the capital again.
 
You should have a detailed financial plan done for at least the first year of operation; our advice is for you to engage a good accountant/fiduciary who can advise you on all aspects, including cash flow. The Luxembourg government also offers various financial aids to help new businesses. Once you meet the specific criteria you can take advantage of a start-up loan; first establishment savings premium; capital subsidy; bonus or interest; SNCI equipment credit… There is heaps of information online.
 
ING Luxembourg is the proud partner of many local projects. We’d be happy to discuss what financial aids are available and how to submit your applications to the various competent Ministries.

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We are currently in the middle of Luxembourg’s annual Autofestival and it seems the whole country is out to buy a new car.

On top of comparing all the brands and all the options comes the task of comparing the different ways to finance your new car. Banks are not the only ones to have special offers during the Autofestival; some car dealers offer leasing constructions and/or car loans as well.

Be sure to check all the solutions and make sure you take the one that is most suitable for you, either from a bank or from a car dealer.

Some ground rules for financing a car

1. Make a list and check all boxes: With the rush of the Autofestival we’re all thinking about the great prices of new cars and how to finance the price but a car generates more costs than just the price! Make an exhaustive list to ensure you know what the total financial burden is: registration costs, insurance, winter tyres, fuel consumption…

2. To borrow or not to borrow, that is the question: There are many advantages to buying a car with a lease or a loan: you can pay for it over time, interest rates are quite low at the moment and you might benefit from some tax advantages at the end of the year. On the other hand, car dealers sometimes give you a discount if you pay in cash. So if you saved up enough in advance, it might be worth it to ask your dealer about this. The “return” you get from you new car might be higher than the return your savings yield right now!

3. Compare what is comparable: Before the acquisition, make sure you compare under the same conditions. In the case of a car loan that will be mainly duration, rate and amount. Pay attention to the price and what it includes. There will be significant difference in the “financial packages” that banks and dealers offer. Whilst the latter may tease you with extras for your new car, banks might offer financial advantages such as special rates if you decide to bring some of your savings as collateral. Last, but not least, check if you have the possibility to reimburse your credit early. If yes, check if you will have to pay penalties or not.

4. Simulate your loan to avoid bad surprises: Ask for a simulation of the credit with all costs included, so the total price of your credit includes interests and possible other costs. Make sure you can face your monthly instalments with ease in case one month you have unforeseen additional expenses!

5. Check with whom you are doing business: Whether you get your loan from a financial institution or a car dealer, make sure it’s someone or an institution you can trust.

6. Save some euros: Even if you have decided to acquire a new car, it is always interesting to have it at the best price. So, do not hesitate to use your talent of negotiator and take some time to make the right decision. You often get a lower price during the second visit! If you possess a better offer then do not hesitate to show it, it may help to have a special discount or some extra features. If you are flexible, be aware that some colours are cheaper than other, e.g. green, yellow and even red cars are often cheaper than black, white and silver cars.

To conclude, be sure of your personal financial situation before acquiring a new car. Do not forget to inspect some aspects and compare wisely … you could be a happy and proud owner of a new car!

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Today I would like to share with you an article written by one of our portfolio managers: Richard Edwards...

Some of you may have come across the term SRI already and wondered what it meant. Others may be more familiar with the concept and have their own opinion about what it is.

SRI was originally associated with “Socially Responsible Investing” but the term has since evolved to cover the notion of sustainable development and so now we would more likely speak of “Sustainable and Responsible Investment”.

There is, however, no unified definition of what exactly is “SRI”. This can mainly be explained by the wide diversity of investors’ cultural backgrounds as well as their individual beliefs and motivations. When discussing SRI in a forum it would not be surprising to hear one, or more, of following terms being employed; “ethical”, “green”, “impact” and “clean”.

Despite what might appear to be a certain lack of clarity surrounding the definition of what is SRI, one thing is apparently becoming more certain. A recent study by Eurosif (the European Sustainable Investment Forum) has detailed the significant growth of responsible investment strategies since 2009. Somewhat surprisingly perhaps, this has been achieved in an era of ever-increasing austerity and a struggle to stimulate economic growth. In such an uncertain economic environment, maybe investors are turning more towards growth strategies that are green, sustainable and responsible.

At ING, we take a stand on ethical, social and environmental issues as well as promoting sustainable finance and aiming to mitigate the harm that may result from our activities. ING has implemented a clear Environmental and Social Risk (ESR) framework throughout its operations to avoid or minimize involvement in illegal, harmful or unethical practices. By continuously embedding environmental, social and ethical considerations into our core activities, we are striving to be an even better company tomorrow than we are today. ING believes that sustainability is more a journey than a destination – a continuous process in which changing circumstances are a given fact.

In 2009, ING launched “ING for Something Better”, an initiative that brings together our social and environmental initiatives into one format. The online platform can be found at: www.ingforsomethingbetter.com

It is also important that ING integrates environmental and social responsibility into its daily business practice and this is reflected in the fact that we offer sustainable products and services to our clients. At ING Luxembourg, one example of this approach is evident in the range of investment funds that is available to the client base. Since 2011 a category of funds has been created, under the title “Responsible, Lifestyle and Ecological”. The products selected for inclusion cover a wide range of investment strategies in order to try and satisfy the variety of criteria potential investors may use when looking for a “SRI” vehicle.

Tuesday, 07 January 2014 19:24

Barbara Daroca: Surviving the Sales

How to better start the year than by keeping control over your spending!

According to the latest IIS study on Savings, three out of four Luxembourg residents have a Financial New Year resolution for 2014 and this New Year’s resolution is most likely about “managing your money better by controlling the amount you spend.” (http://www.ing.lu/ING/PRESS_IIS_XMAS_20122013_EN )

At the same time, the Winter Sales have just started, so here are some tips to combine the two and get off to a good start in the new year.

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- Shop within your budget so you know in advance how much money you can spend during the sales;

- Try a cash-only diet: Several studies suggest that people are willing to spend more when using cards than when using cash;

- Make sure the price during the sales really is the lowest price. Shop around (also online) to see if you can find a better deal;

- Think about what you need before you hit the shops and ask yourself if you would have bought the item at full price;

- Make sure you are really happy with your sale item before you pay. Is it the right colour, does it really fit, do you really need it?

I wish you all a financially sound New Year!

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The build-up to the festive season is now underway: now that Thanksgiving in the United States is over, and particularly here in Luxembourg that we have just held the International Bazaar and St Nicolas arrived a few days ago, we can well and truly start the planning for the celebrations.

While our traditional meal with family may be on the 24th or 25th, whether we are having family here in the Grand Duchy or we are travelling abroad to be with family and friends, many of us have now started to plan the main meal, including baking the Christmas Cake and Christmas Pudding, as well as ordering the Christmas Turkey and Ham, or Goose or....

And when Christmas is over, we then have New Year's Eve to look forward to; whether planning a party at our own place, or going out to celebrate with friends, or both!

To be able to do this and not freak out when the ATM won't let you withdraw any more, or your credit card limit has been hit, let me share with you a few tips that should help planning - both financially and otherwise - for the festivities ahead.

1. Celebrate with … the financial basics: A new shirt? A toast with Champagne? It can be delightful to splash out for special occasions but make sure it’s within reason. One of the best ways is to make a budget a year in advance, put money aside regularly, then enjoy the results of your effort on the big day. A solution for this year? Agree before to cut the amount to be spent on presents. While this might be a challenge globally, setting spending limits within a family or within a group of friends may help.

2. Celebrate with … an eye on your credit card: We spend on credit cards differently to the way we spend cash; the theory is that the physical pain we feel parting with physical cash is diminished when we swipe a credit card now and pay the bill later. With emotions (and temptation to spend) high during the festive season, it might pay to keep a closer eye on credit cards – or consider a cash-only diet to keep tight control on money.

3. Celebrate with … a gift list: Gift givers typically want to give a surprise present, while recipients want to receive what they asked for. So what's the solution? Recipients make a list of several possible gifts, perhaps covering a range of price points, and givers can chose from it. It actually brings back memories of letters to Santa.

4. Celebrate with… homemade gifts: You’ve made a batch of Christmas pies, handmade cards or a toy for a child. This do-it-yourself way of making gifts can be particularly satisfying, with the recipient often valuing the thought and time put into creating their present more than any monetary cost.

5. Celebrate with … doing something: A ticket to a concert or a holiday away could be a good way to celebrate the festive season. Many happiness economists argue that experiences (such as going to a show or on vacation) make people happier than objects (such as getting a new dinner set or coat). One example is the research paper Does consumption buy happiness? from the United States, which says part of the joy is – again – spending time with others.

And last, but definitely not least: Celebrate with … family first: Spending time with friends and family has been found to make us happy; time with loved ones could well add a happy boost to the festive season.

You can find all these tips as well as some others also on http://www.ezonomics.com

Monday, 25 November 2013 12:39

Barbara Daroca: Optimising your 2013 Taxes

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The difference between tax avoidance and tax evasion is actually quite simple: you can avoid paying a certain amount of tax by claiming specific tax allowances, etc., all completely legitimate, while tax evasion is succumbing to illegal activity to hide money to escape paying tax; here I will tell you about how to optimise your taxes, i.e. how to reduce the amount of tax you pay while putting your money to good use.

As the end of the calendar year, and tax year too, is drawing ever closer, you should be starting to think about gathering together the various documents required for your annual tax declaration you will be submitting next spring.

In order to benefit from all of the existing opportunities to reduce your taxes as much as possible, you will need to gather insurance certificates, bank account details and the like - these all concern existing situations. In addition, you may also want to look at other ways that you can initiate before the end of the year that will help you lower your tax obligation even further; there are many fiscal products on the market to help you optimise your tax obligations for this year - below are listed a few.

One such initiative is a Home Savings scheme where you make your money work for you, take advantage of a tax break and save for a home. This high-yielding low risk-free investment allows you to build up your savings while taking advantage of a tax break of up to €672 per member of your household and gaining access to a loan at a preferential rate when the savings period comes to an end.

A second initiative concerns a private pension. You can save taxes by putting money aside and grow your savings without having to make cutbacks today, and you also can stop worrying about managing for the future. In Luxembourg one way of doing this is by taking out some form of a pension insurance allowing you to deduct the money you set aside for your supplementary personal pension from your current tax, provided the statutory criteria are met.

Another initiative is to claim tax relief on personal loans. Are you looking to purchase a new car, replace your furniture, etc., on favourable terms as soon as possible? You can deduct from your taxable income up to €336 per household member in interest on your loan.

And fourthly, you can take advantage of a tax allowance for insurance premiums of €672 per household member. If a single premium is paid for the Debt Balance Insurance, the ceiling rises by €6,000 (doubles if you are taxed collectively), plus €1,200 for every dependent child in your household.

These are some of the ways in which you can prepare now while there is still time left, to optimise your taxation for 2013, during the current tax year. For further details on these fiscal products, contact your financial advisor or ask us at ING by visiting one of our branches, or by contacting our Customer Care, tel: 4499-2273 or by sending us an email: customercare@ing.lu.

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The holiday season is fast approaching and what is more convenient than doing our shopping whilst sitting comfortably on our couch at home?

While online shopping may indeed be fast and convenient, and we do not have to brave the wet and windy winter conditions outside, it pays to be aware of the associated risks. Just like when we go into a shop and pay by credit/debit card, where we are taught never to let the card out of our sight and not to divulge our PIN code, we need to take similar precautions when shopping online.

One of the easiest ways to protect oneself is by using sites that offer a system like Verified by Visa (3d secure) or similar. However, in general:

- Be careful with sites that look suspicious or unprofessional. If it looks too good to be true, it probably is!

- Always keep proof (receipts) of your transactions;

- Read all the small print before you purchase (it is too easy to click on "I have read and accept the terms and conditions" without actually reading them);

- Inform yourself about delivery costs before buying;

- Get the contact details of the webshop, in case you need to contact them about their service or their product;

- Before sending any credit card information over the Internet, check if the data is encrypted (the web address should start with "https");

- Keep your software and anti-virus programmes up-to-date;

- Use a prepaid (debit) card like the Visa CyberCard – it does not prevent fraud, but it helps in limiting the risks (the amount that can be used via these cards is limited) and you often have extra guarantees that come with your credit card.

Happy shopping!

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ING regularly conducts Europe-wide surveys to know more about how people save, invest and feel about money.

ING Luxembourg also participates in these studies and for each study, 500 respondents from Luxembourg are included.

According to the results of the ING International Survey on Mobile Banking, Social Media and Financial behaviour, 93% of the respondents from across Europe state that people should receive financial education. In Luxembourg, 77% of the respondents claim school is the best environment in which to receive financial education; however, only 21% said they received financial education when at school.

Financial education is important because it helps us to manage our finances in adulthood and helps us to make informed choices. It helps us budget for big spends (e.g. cars and holidays) as well as everyday expenditure (clothes, household shopping, entertainment, etc.) and also managing financial risk, from household to life insurance, etc. A sound understanding of the concepts and reasoning behind financial education helps understanding of money management and cashflow.

 

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Read the full report here.

Thursday, 10 October 2013 09:00

Barbara Daroca: Solidarity with the Community

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A few months ago I announced the launch of the ING Solidarity Awards; the voting period how just started and now it is up to you to vote for your favourite association on www.ing.lu.  

As a brief reminder, ING Luxembourg decided to relaunch the Solidarity Awards following the tremendous success of the initiative last year. The aim of the ING Solidarity Awards is to reward and support the Luxembourg community sector through a competition, with the initial phase linked to nominations and the second to public voting.

Participation was open to non-profit associations or foundations registered and established in Luxembourg, and matching the eligibility criteria stipulated in the ING Solidarity Awards rules, regardless of whether or not they are ING Luxembourg customers.

The 40 associations with the higher number of online votes registered between 10 - 30 October 2013, will each be the lucky winners of a cheque of €1,000. In addition, The Jury will reward each of the four best projects nominated with a €6,000 prize, as well as each of the four projects in second position each with a €3,000 prize.

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One of the advantages of working for a large financial institution is that you can avail of the expertise and experience of colleagues from all over the world.

Below you find an interesting article on how to bargain for a better price written by our colleagues from the economic research desk in London, for their financial blog www.ezonomics.com.

Experienced market shoppers will know negotiating a good price takes skill. The same holds true in other shopping situations as well – think of buying a house or haggling over the cost of a car. And different “rules” apply in different parts of the world. Our six tips examine some of the research about how to drive a hard bargain.

1. Who “anchors” wins. The anchoring effect is a tool used to pin buyers’ expectations on a (usually high) price. Market shoppers may remember a time a seller offered a high price and then discounted it – making the reduced price seem more attractive than if it was the original offer. A lesson to be learnt is to be aware and to try to be the one to set the anchor rather than letting the seller do it for you.

2. Know your neighbours. Being alert to local customs can go a long way when negotiating the best price – especially when travelling, writes Yale political science and economics assistant professor Chris Blattman. In many countries there are what he calls the “national bargaining fraction”, an unwritten rule which gives a guide to by how much to negotiate. In order to find out this fraction, Blattman suggests calling upon the locals and quizzing them on the “real” price.

3. Busy is best. Market sellers might agree on how much they will charge for certain products, but University of Chicago economist John List wrote in The Economics of Open Air Markets that these agreements tend to break down on busy days. This means when markets are busy, it might be easier to strike a cheap deal.

4. First impressions. The same research by John List also suggests that market sellers are more likely to offer higher prices to well-dressed individuals, especially those shopping with children. As the old adage says “first impressions count”. To try and avoid being offered such extortionate prices, try leaving your best outfit (and the children) at home.

5. Flash the cash. Paying with cash can reduce spending because you are forced to think harder about the purchase process. Behavioural economists refer to it as the “pain of paying”. When it comes to negotiating taking cash rather than card may bring the true cost to the top of mind and encourage buyers to drive a harder bargain.

6. Out of season. Picking the right moment, or in this case season, is a great way to give shoppers an advantage when negotiating. The off-season shopping style can apply to a wide range of products, from small items such as clothing through to holidays and homes. Take advantage of sellers wanting to get rid of stock. Budgets are Sexy blog even goes as far as to recommend a “best time to buy list” to give a guide as to when to negotiate on what.

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