Making the most from my finances?Posted by Andrew Stallard
Andrew Stallard's quick tips on budgeting to help you managing your finances better.
With around 26 million Britons struggling with money because of the economic downturn, a major report into the health of the nation's finances by the government-backed body the Money Advice Service (MAS) has seen the development of a "live for now" culture. (1)
With fifty percent of those surveyed saying they were struggling with their finances this is a sharp increase from thirty five percent of people who were having difficulty keeping up with bills the last time similar research was carried out in 2006. (1)
One of the root causes of this difficulty is due to peoples income per hour dropping by six percent in real terms since the previous research was carried out, followed by the "live for now" culture plus poor financial skills also found to be other likely causes. (1)
The report also revealed that a worrying number of Britons lack financial knowledge and money skills. Twelve percent of those questioned believed the Bank of England's base rate, which has been at a historic half a percent low for more than four years, was over ten percent. (1)
It is easy to say spend less than you earn but we all live in the real world and individual circumstances tend to be less black and white. (1)
So how do I make the most from my finances?
Whether you fall into the category of living for the day or are one of those people such as those who are retired there are simple steps at budgeting that help put you in the right direction for managing your finances better.
If you do have money to deposit and are one of the many who rely on income from deposit savings with returns very low and rarely matching inflation, getting the best from savings really is difficult. Things that your independent financial adviser will help you consider could be;
PROTECT YOUR SAVINGS FROM TAX
Don’t overlook your annual cash ISA allowance. This year 2013 the annual ISA allowance is £11,520 with £5,760 eligible for a cash ISA. (2)
DON’T PAY MORE TAX THAN YOU HAVE TO
If you are a non taxpayer make sure you register a R85 form to receive interest in full rather than having the 20pc which is customarily deducted for tax taken off at source. Ask the people where you deposit funds about what needs doing. (2)
Also don’t overlook the 10pc tax rate band applicable for tax paying deposit savers with low incomes. This will need to be claimed back via a R40 tax form. (2)
KEEP UPDATED ON WHAT THE BEST RATES ARE
There are many guides and Worldwide Financial Planning does publish a monthly guide to best buys that you can sign up to and get direct to your inbox. “Monthly Money Savers” is also available on the website http://www.wwfp.net/monthly-money-savers.html
KEEP UP TO SPEED WITH FIXED RATE BONDS THAT ARE MATURING AND INTRODUCTORY OFFERS THAT ARE EXPIRING
Make sure the deposit taker is not putting your money into a worse product than the money could be in once a fixed rate deposit bond has run its course. Similarly keep a watchful eye out for when any higher headline catching introductory offers you have taken advantage of expire. (2)
Accounts for paying in a sum monthly for a fixed term often display a ‘headline’ interest rate. However the end result can be disappointing if you haven’t taken on board that for an account with monthly payments going in for a year it will only be the final balance in the final month that attracts the interest that is flagged up. It will only be during that month that the full sum will actually have been in the account. (2)
Sometimes a small building society in your area may be offering special rates for locals. Some do have better interest rates on some products for its regional savers. (2)
PAY OFF DEBTS FIRST
It is very difficult to match inflation with returns from deposits so pay off any debts which you are likely to be paying more interest on than any deposit account will pay. (2)
OTHER QUICK WINS
- Avoiding pay day loans and trying to create financial solutions within families (the bank of mum and dad!)
- Transfer of assets between husband and wife to reduce exposure to tax.
- Remember you have a tax free capital gains allowance each year of £10,900
- Check protection policies - are they still required? Are they competitively priced?
- If you want a flutter NSI Premiums bonds are fun- tax free prizes, operated online, capital 100% safe and all you risk is the interest!
These steps may cover the situation where you may have finances to deposit. We would recommend as a first step to make an appointment with an independent financial adviser who will be able to understand your circumstances and aspirations. The advise you will then receive will balance your requirements for now and looking to the future.
The value of shares and investments can go down as well as up.
Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made. All information is based on our understanding of current tax practices, which are subject to change. Your home may be repossessed if you do not keep up repayments on your mortgage.
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