To reveal the Hints & Tips tailored for you please select the product areas below.
SAVINGS
- If you are being charged a higher rate of interest on your debts than you would earn on your savings, you may be better off repaying those before building up your savings.
- It might be helpful to start a spending diary, listing everything you buy over a week or a month - you'll be amazed at where your money goes and will probably be able to see where you can make cuts.
- 44% of Brits save any extra cash they have at the end of the month (fairinvestment.co.uk - 17th March 2009). Put away a small amount of money each month to build up your savings. Arrange to start regular payments into your savings account just after your income is received and you're unlikely to notice the impact on your day-to-day money.
- Use your annual Cash ISA allowance (currently £3,600) where possible. The allowance can't be carried forward into the next tax year and if you don't use it you lose it. Interest is paid tax-free on a Cash ISA.
CURRENT ACCOUNT
- It's no longer complicated to switch your current account to another bank or building society. So if you are not getting the best service or a good deal, shop around. What's more the new provider will usually help you change all your standing orders and direct debits over.
- Check what the authorised and unauthorised overdraft fees are to avoid paying over the odds if you go into the red. Banks will charge you a fee as high as £25 if a cheque or standing order bounces due to insufficient funds in your current account. Always check you have sufficient funds to meet your obligations and avoid being left out of pocket when it comes to bank charges.
- Make use of Internet Banking. This lets you monitor your incomings and outgoings so you know where you are and helps you to avoid any unnecessary overdraft charges. If also gives you 24-hour access to your account, so you can manage your money whenever you want not just in branch opening hours.
- Scour through your bank account and credit cards and make a list of all the regular payments that are still coming out of these accounts. Are you paying forgotten standing orders for an old gym membership?
BORROWING
- Remember that if you apply for more than one personal loan or other kind of credit in a short period it will adversely affect your credit record and you could be refused credit in the future.
- Personal debt is rising by £1 million every nine minutes (creditaction.org.uk - January 2009). Borrow only what you really need so you can pay back the money quicker and reduce the amount you pay in interest. Before you borrow, understand the true cost of what you'll have to pay back. Interest payments over a long period of time will greatly increase the cost of that new purchase.
- Make sure your name is on the electoral roll as this will affect your credit score.
- Work out a plan to pay off your debt as quickly as possible - pay off your credit cards and hire purchase in the order of highest rate of interest first. Your mortgage is your most important debt, as it keeps a roof over your head so always make sure you are paying your mortgage first.
- Act quickly if you know you have a problem paying your debts, contact the people you owe money to. If you're honest with them, they may agree to extend your contract or agree to a different payment scheme.
- Make the plastic work for you. Credit cards are great, but they give you plenty of rope to tie yourself up in. The best self discipline is to only buy with a card something that you could cover with the cash you have. If the money's not there at the end of five weeks, or whenever the card bill comes through, you will end up paying more than the cash price. Of course cards can trip you up even when you have the money. If you don't have the minimum balance on time you are going to get stung for a fee of £20-£25. If you can, get this set up as a direct debit.
- Credit cards offer a convenient way to pay, but if you can't clear the balance every month, and thus pay no interest, consider a low cost loan as an alternative. Do the sums: a credit card debt (APR 16.8%) of £2,500 over five years will cost £1,212 in interest. A loan at 7.8% will cost £527. Saving: £685.
- Benefit from 0% interest on your credit card spending: if you want to make a big purchase but need a few months to repay the money, a credit card with 0% interest on purchases allows you to spread the cost of your repayment over several months without paying interest.
- Avoid credit card cheques. As well as carrying high interest charges, credit card cheques carry an additional fee, typically of 2.5%-3%. There is also normally NO interest-free period on transactions, even if you repay the full amount.
MORTGAGES
- The Bank of England Base Rate stood at 5.25% in March 2008 and it has fallen significantly since then so it may pay to re-mortgage. Check your dates and make a note three months before your mortgage deal comes to an end. When it does, it will revert back to your lender's standard variable rate, which might not be the best deal available. It can take time to switch to a new deal so you need to start the process early.
- Use a mortgage calculator to help work out exactly what you can afford to pay for a property before you start to look for your ideal house.
- Mortgages for more than 90% of the value of the property may attract a higher lending charge (a one-off payment to the lender which protects them if you default on payment). Always check with the lender to see if this applies.
- If possible pay any mortgage fees upfront rather than adding it to your mortgage or you will be paying interest on it for the length of your mortgage.
- Always check the KFI (Key Facts Illustration) which gives you the total sum that you will have to pay back to make sure you are happy with the total cost of the mortgage. This also helps you to compare different mortgages.
PROTECT AND INVEST
- Check to make sure you have insurance on your larger possessions such as your car and house. Payments for health or life insurance, or to insure your home may seem like an unnecessary burden when times are tough. But look for other financial sacrifices first and ditch insurance at your peril. If you stop paying and then the worst happens you will be unprotected. But even if nothing happens, it will cost you more to reinstate insurance at a later stage because premiums may be linked to age. And you probably will not be able to get the same level of cover. Critical illness insurance started today, for example, covers fewer illnesses and medical problems than policies first taken out a decade ago.
- Find out what you are entitled to from the Basic state Pension at www.thepensionservice.gov.uk. The forecast will tell you the amount of State Pension you will get, based on your National Insurance contributions so far, and the amount you may get when you start to claim it. You can then start planning how to make up the shortfall if this isn't enough for your retirement.
- Start saving into a pension as soon as possible - the best option is usually to contribute to your employer's company pension scheme. Most employers will also pay into it, giving you a bigger pension pot than going it alone.
- Because your pension contributions qualify for tax relief, it's a really effective way to save for your retirement. So, effectively it means the taxman 'tops-up' your contribution, a basic rate tax payer gets 20% tax relief and a higher rate tax payer gets 40%.