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FOOL'S EYE VIEW
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Everyone loves a bargain. Whether we're out doing a bit of retail therapy in the shops or calling around looking to renew car insurance, we're always pleased to get a little (and preferably a lot) more for our money. However, the way we organise our finances plays a big part in what we can afford in the High Street! One problem is that financial bargains aren't as easy to identify as the special deals on the supermarket shelves – we don't come across many BOGOF ("Buy One, Get One Free") offers in our bank branches. On the other hand, the Best Buys are out there, we just need to know where to look. Here are ten tips on finding the good deals and saving money on the products we already have. 1. Life cover Another thing to watch out for is "joint life, first death" policies, which are often taken out by couples to cover mortgages or provide for their children. The problem is that, although two people are covered, these policies only pay out once – on the first death. This can leave second person uninsured after the policy has paid out. I prefer to pay a couple of pounds extra a month and have two separate policies with two payouts – one on each death. It's not quite like getting twice as much cover for the same amount, but it's a pretty good deal. 2. Home insurance If you shop around, you could find similar cover for half the price, as I did. Try searching the web, calling a few direct insurers and a local insurance broker: you'll be shocked at how much you're being over-charged. 3. Loan protection insurance 4. Dealing with illness If your employer has a low-value sickness pay scheme, you could find yourself up the proverbial creek if you fall ill, have an accident or suffer a serious illness. Some stingy employers only pay the minimum Statutory Sick Pay to sick employees – how long could you get by on about £64 a week? If you don't have enough savings to tide you over for at least three, and preferably six, months, look into arranging some safety nets in the form of income protection (long-term sickness cover), critical illness and private medical insurance. These could prove to be vital lifelines when the chips are down. 5. Better bank accounts 6. Clever credit cards If you're planning a major purchase and can wait a short while, hold off until a couple of days after your latest card statement is due. Buying large items just after your statement date can give you up to 59 days to save before paying a big bill. What's more, if you don't pay off your bills in full every month without fail, you should switch to one of the dozens of cards offering 0% interest on balance transfers (and even purchases too) for between five and ten months. Learn more here. 7. Tax-free saving One solution to this problem is to open a cash mini-ISA (CMI). You can save up to £3,000 every Tax Year in a CMI and earn tax-free interest. Most CMIs offer the bank's highest interest rates, together with penalty-free withdrawals, so serious savers should start with a CMI.
One way to lessen the impact of a one-off or annual payment is to pump some or all of your windfall into a company, personal or stakeholder pension. Every penny we pay into pensions is deducted from our incomes before our tax bills are calculated, so boosting our pensions means better retirement incomes and smaller tax bills. 9. Put shares into an ISA 10. High-income investments Rather than checking out protected stock market plans (which I don't rate at all), you could consider investing in a corporate bond fund using a maxi-ISA. This should give you an annual return after charges of between 6% and 7.5%, with a modest degree of risk (anything over 7.5% gets ever more risky.) So, on a £7,000 investment, you could earn up to £525 a year in income, compared to £224 a year in a Best Buy deposit account earning 3.2% interest after 20% tax. (With a bond fund however, the capital value of your investment is not guaranteed.) More: Visit our Insurance | Online Banking | Credit Card | ISA Centres.
Since the early 1990s, the cost of life assurance has been tumbling, to the point that it's never been cheaper than it is now. So, if you have one or more existing policies (mortgage protection or otherwise), you may find that, despite your advancing years, you can save money by shopping around for cheaper replacements.
11.5 million Brits have a mortgage and many of us have taken out (and renewed) the home insurance (buildings and contents cover) offered to us by our mortgage lenders. The problem is that these mortgage lenders know they have a captive audience, which means that they charge as much as they believe we punters will pay.
If you're shopping around for a personal loan, as sure as eggs is eggs, you'll be offered payment protection insurance (PPI). As this article reveals, PPI is hugely over-priced and can add anything up to 25% to the cost of your loan (and you pay interest on the insurance premium too)! Don't buy loan PPI – it just ain't Foolish.
These days, only the very best employers offer the comprehensive benefits packages that we need to protect us from the various risks of everyday life. Recently, in an effort to save money, many companies have been closing attractive final-salary company pension schemes and withdrawing staff benefits.
Which would you rather have: a bank account that pays you a miserable quid for being £1,000 in credit for a year, or an account that pays you over £30 in the same circumstances? What about a current account that charges you £180 for being £1,000 overdrawn for a year, instead of £80? These are just two of the differences between your bog-standard High Street account and the best buys on the High Street or with online banks. Read more here.
The most popular way to save is to stash money away in deposit accounts with banks or building societies, with the aim of building up "rainy day" money or a nest egg. The problem is that the Inland Revenue takes one-fifth (20%) of the interest we taxpayers earn (rising to 40% for higher-rate taxpayers.)
Many companies award their staff bonuses, shares or stock options for personal and/or company out-performance. The problem is that these payouts often attract tax at one's highest rate; up to 40% of the award or share gain.
If you buy shares, either from your employer or via the stock market, and plan to hang on to them for the foreseeable future, consider putting them into a tax-free shelter: the Individual Savings Account (ISA). If you do this, you'll earn tax-free dividends and avoid tax on any gains (if, as expected, the shares grow in value over time.) If you put shares from an approved company share scheme into an ISA within 90 days of receiving them, you won't pay tax on any gain from the point you receive the shares.
With interest rates at a 48-year low, many savers and investors are unhappy with the returns they are getting on their income-generating assets. With the base rate at a lowly 3.75%, most risk-free investments are offering rates around 4%. To earn twice this rate, 8%, involves taking a degree of risk that many cautious investors would find nerve-racking.