Category Archives: Personal Finance

UK Markets – Should I save or invest?

If you’re looking for the best place to put your money, it’s a difficult question to answer right now. Savings, property and gold have typically been seen as good places to put money and watch it grow, but the desirability of each can seriously vary over time. Here’s a look at saving or investing in the UK markets.

Savings

A great thing about British banks is the FSCS: the Financial Services Compensation Scheme. This is the UK’s ‘statutory fund of last resort’, which basically means it can reimburse people for money lost when financial firms go bankrupt (or are ‘unable, or likely to be unable, to pay claims against them’). This can cover people to the tune of £85,000 per firm.

On the other hand, the base rate / bank rate in the UK is at an all-time low of 0.5%, while inflation is officially 5.2% (as of September 2011). So the value of a pound is actually shrinking more rapidly than usual, but savings accounts aren’t paying much in the way of interest – a quick look on a comparison site shows that the highest-interest instant-access savings account offered around 3.1% at the time of writing.

Property

The good news about property values in the UK is that they’re holding quite steady (compared with many places in the US, for example), although the South (especially London) is doing markedly better than the North.

Looking ahead, however, opinions are divided on what’s due to come next, with some people pointing out how house prices have withstood many of the financial shocks we’ve had in recent years – and others predicting a major dip in house prices (when the base rate goes up, if not before).

Property prices aside, rents are high in much of the UK, which is one reason there are so many ‘amateur’ landlords. According to charity Shelter, rents increased one-and-a-half-times as fast as incomes between 1997 and 2007. The average monthly rent for a two-bedroom property in London is £1,360 – far higher than the £568 average in the rest of the country.

Gold

Gold has traditionally been seen as a ‘safe haven’ in troubled times – something many people will buy when the values of stocks and shares are unpredictable.

According to goldprice.org, the price of gold has just about trebled in five years, rising from $600 an ounce in mid-2006 to over $1,800 in 2011. However, ‘what goes up must come down’, as they say – it’s dropped a fair bit since then, and there’s no sure way of predicting what’s next.

Don’t gamble with…

As always, you shouldn’t gamble with what you can’t afford to lose. Someone with cash to spare who’s looking to make some real profit might feel confident about investing in higher-risk ventures – but someone who needs somewhere safe to put their hard-earned money will want to be a lot more careful.

Further reading:

Achieving Early Retirement Through Personal Finance

forced retirement

Retirement is something that most of us dream about. The days when you no longer have to work hard to provide for yourself and your family are to be savoured and enjoyed. You’ve spent a lifetime working and looking after everybody else, now it’s your time to relax and enjoy the time that you have left.

As much as you’d love to be able to plan when you are going to retire, unfortunately it doesn’t always work like that. There can be circumstances when you have to retire long before you have planned. It could be that your health prevents you from working and you need to retire early. Whatever the reasons, there are a number of ways to prepare for your retirement; no matter how early it ends up being.

Health Insurance – Your Early Retirement Protection

If you are ever forced into early retirement because of ill health, insurance could help you to get through it. Suddenly losing your wage with no sufficient savings can really cause you to worry. Even if you have retirement funds saved up, it’s likely that they won’t last as long as you planned. This means that your level of living with be strained.

The right health insurance can really put your mind at ease. The costs of treatment these days can be quite high. Could you afford the treatments as well as the cost of general living? If not then insurance is a must. Another type of insurance that you may want to consider is life insurance.

Why Life Insurance Could Be Important

If you do become ill and it turns out to be life threatening, life insurance will help to ensure that your loved ones are protected. Often even in retirement you will have financial obligations. Perhaps you are still supporting your children or grandchildren? If you have dependents then life insurance will ensure that they are looked after once you are gone.

Whether you opt for health insurance, life insurance or both, it’s important to shop around. Compare as many different policies as you can. They are all different and some policies will be more expensive than others. By comparing your different options you’ll also get to see the different types of cover available.

Optional Early Retirement – Is It Achievable?

Through careful financial planning you could choose to take early retirement even if you’re perfectly healthy. Most people would assume that early retirement is impossible; especially after the recent financial crisis. By following the tips below you could increase the likelihood of retiring early.

Tip #1: Cut Back Now

In order to save for an early retirement, you’ll need to cut back on various expenses now. Do you spend a lot of money going out and enjoying life? For most people they work to live and meals out, trips to the cinema and holidays a couple of times a year are how they get through the slog of everyday life.

However, if you constantly spend most of the money that you earn then how can you expect to retire early? In fact, how could you expect to retire at all if you have no real savings? If you want to be able to enjoy early retirement then now is the time to cut back.

Start by eliminating the larger things. If you eat out once a week then change it to once a fortnight and put the money you would have spent into savings. Once you start getting into a routine of saving money, it will become easier and you can start to cut back on little things. Cutting back doesn’t have to mean that you can’t enjoy life. Just start saving more than you currently do and that is a great start to early retirement.

Tip #2: Understand the Kind of Lifestyle You Want

When you retire what can you see yourself doing? Are you planning on becoming lazy? Would you prefer to stay as active as possible? What standard of living are you expecting? These are just some of the questions that you need to answer. Understanding what type of retirement you want will help you to see exactly how much money you would realistically need.

It may be that you need to become a little more realistic. Sure everybody would love to go on endless holidays and be waited on hand and foot for the rest of their days, but is it realistic? By being a little more honest about what you can realistically afford, it will help you to enjoy early retirement a little more.

The basic things that you need to account for in your retirement include:

  • Clothes
  • Food
  • Heating/Utility Bills
  • Accommodation (Rent, Mortgage, Care Home)

As long as you leave enough money to take care of the above, anything else that you earn is a bonus. Many people don’t bother to plan their retirement. This means that they have no idea what they have to save towards. By being prepared it will help you to enjoy life a lot more once your retirement days arrive.

Tip #3: Pay Off Debts and Avoid Further Debt

These days it’s so easy to get into debt. Most families have at least one debt that they haven’t paid off. If you are struggling with debts then now is the time to start paying them off. The last thing you need is to start your retirement in debt. You have no real income and it will just eat away at your retirement savings.

Always pay off more than the minimum monthly repayments when you can. The more that you pay off, the less time you’ll be in debt.

These are just three tips to help you to plan for early retirement. It may not be as far away as you imagine. Providing you save as much as you can and cut back, you should be able to save up a nice little amount. Follow this advice and set up a savings account today to plan for your future.

This article was written by Timothy Ng.

Get a Act of God Plan

lightning

In light of recent natural disasters around the globe-earthquakes, floods, fires-it seems only to right to recommend having an Act of God Plan, especially if you live in a disaster prone area. Ensuring you have a safety net set up should you get into strife through no fault of your own is paramount to survival, and easy to arrange.

1. Have a Cash Stash

Always have a little amount of cash hidden in your house should you find yourself in a situation where you have no access to money. Flooding will easily cause shortages to cash machine dispensers, and often in a crisis situation many staff will not be working as they’ll be sorting out their own affairs. The only problem with having a wad of cash in the house is the associated temptation. To avoid dipping into the stash when you’re a bit short of money, keep it in a locked up section of your emergency grab bag, and if you’ve already been involved in a natural disaster you won’t need reminding of why it’s important to keep your mitts off.

2. Carry a Credit Card

Even if you don’t normally carry a credit card, it’s a good idea to have one should you find yourself in a sticky situation. Whether you’ve lost your wallet or need to pay for accommodation, clothes or food, having a credit card can make things a little easier in dreadful circumstances. One advantage of having a credit card is their emergency assistance feature-emergency funds can be wired to wherever you are, should you have that function set up on your card.

3. Invest in Insurance

While most of us hate giving money to the insurance companies, it is worth it when you run into problems, be it travel, home or content insurance. The golden key is to read and double read the terms and conditions. Yes, they’re ludicrously boring and often hard to understand, but it will make all the difference when you come to making a claim. Also, talk to someone to clarify their terms if you need to. However, sometimes things happen that you’re just not prepared for so wouldn’t know to ask about, or check. In the Brisbane floods, in early 2011, a number of people who took out flood insurance in good faith were told that their claims would not be awarded because their houses were insured against flooding, not inundation from the river!

4. Emergency Contact Numbers

Pretty much everyone owns a mobile phone these days, and rarely lets it out of their sight. However, when you’re caught in a freak flood and all you think about is hanging on to your nearest and dearest, your phone no longer seems so important. Having a few numbers memorized is a good idea. And while it seems obvious, because most phones are set up to show names not numbers there is little opportunity, or need, to remember other people’s numbers. Just one or two contacts are all you need to let people know you’re safe. They can then contact others on your behalf.

5. Safe Place to Stay

If you’re unfortunate to be caught in a natural disaster, but lucky to be near your family, go stay with them until things start to return to normal. If you live in an area prone to bush fires it’s important to have a substitute home organised prior to fires breaking out, that way you know exactly where to head without having to think about it in an adrenaline fuelled situation. Sometimes things happen that you just can’t plan for, so if you’re travelling in an unfamiliar city and don’t know anyone in the immediate vicinity, head over to any of the disaster relief centres where you’ll be offered a place to stay and support during what could potentially be a terrifying and lonely time.

This article was written by William from Life Insurance Finder. Visit Life Insurance Finder to compare Income Protection Insurance

How To Make Money Using Credit Cards

credit cards

In your search to make money online there is likely to be one thing that you haven’t looked into. Making money using your credit card is relatively easy (provided you have a good credit rating at the moment) and everyone who has can do it. All you need is a little bit of extra time, and to understand your rights. It’s often referred to as credit stoozing and it enables you to beat the system.

What Exactly is Credit Stoozing?

When you look up credit stoozing you may get a little confused. Many websites don’t explain it properly and it can seem a little more complicated than it actually is. There are seven main steps involved in credit stoozing. These include:

  • Step One – Opening up a high interest savings account
  • Step Two – Applying for any standard credit card
  • Step Three – Taking out a cash advance for the full balance of the credit card. Put it into the high interest savings account.
  • Step Four – Apply for a 0% transfer balance credit card
  • Step Five – Move the balance from the standard card to the new balance transfer card
  • Step Six – When enough interest has gathered in the savings account, pay off the credit card in full
  • Step Seven – Keep the profit that has been earned in the savings account

The above steps are simple enough, and while they can work it is worth pointing out that credit stoozing isn’t always profitable. There are a number of things that you have to think about before you begin.

The Things That You Need to Consider

One of the main things that you have to think about is how expensive cash advances can be. Most credit cards will charge a fortune for a cash advance. Usually you are warned off taking out any advance on a credit card. However, in terms of credit stoozing it can work out because you are paying the balance off with a 0% balance transfer deal. Still, it’s much better to look for a credit card with a low cash advance rate as it will save you money in the long run.

The balance transfer card that you end up with will not charge you any interest on the balance for a set period of time. This means that the money can be left building up in the savings account. Say the credit card is charging you 2% each month and your savings account is earning you 4%; you get a profit of 2% each month.

One problem that you could encounter is application fees. If you want to make money from credit stoozing then you have to avoid any annual fees and maintenance fees if you can.

It is worth keeping in mind that you won’t earn a massive amount of money from this type of money making scheme. Typically you may earn a few hundred dollars over a six month period. This isn’t going to be enough to retire on, but it beats the hell out of the card companies profiting from you all the time.

If you forget to pay one of your credit card repayments then you will throw the entire system off track. You need to be sensible with your money in order to make this successful. Credit stoozing definitely isn’t for everyone and it can get you into a lot of financial trouble if you aren’t organized with money.

One question which you might have is whether stoozing will affect your credit score. The answer to that is highly likely. You will be applying for a credit card and getting into debt on that card for a six month period.

This will show on your credit report. However, what will also show are the repayments that are regularly made. Then at the end of the six months when you pay off the debt completely, it will improve your credit rating.

You should always close down all credit cards once you have finished stoozing. This is useful in case you want to apply for another credit card. The lender will look at how many cards you currently have and if you are using them. If you aren’t then they will wonder why and they will be less likely to give you their credit card.

The Benefits of Credit Stoozing

As well as earning a little extra money from credit stoozing, you can also use it to pay off your credit card debts without the use of a loan. If you have debts then you can transfer them onto the 0% balance transfer card and open up another high interest savings account to pay them off. Of course, the only trouble with this is that if you have a credit card debt, you will find it more difficult to get a good deal on a balance transfer card.

Although this little money making scheme can be used by everybody, it doesn’t mean that it’s suitable for everyone. As long as you aren’t forgetful you could earn hundreds of dollars a year doing this.

Before you start a credit stoozing scheme, make sure that you use an online calculator to estimate whether or not it will be worth it. There are various online stoozing calculators which will work out how much you can expect to earn from your stoozing deal.

Stoozing has been around since the early 2000’s. It is quite new and many people have been using this method for years to make back thousands of dollars.

Beware of the Risks

Overall credit stoozing can be really beneficial and it is a great way to beat the creditors. However, it really isn’t for everyone. If you tend to be forgetful, aren’t great with money, and suffer with a lack of financial discipline then it would be a bad idea to take part in this type of money making scheme.

Remember there are things out of your control that can go wrong too. Changes to interest rates often occur and that can throw the whole thing out of whack. You could lose a couple of points off your savings interest rate meaning you have to move your money, or you could find that your credit card company decides to start charging an annual fee.

You have to stay alert and look out for anything that could turn this little venture from a tidy income stream to another drain on your finances.

This article was written by Timothy Ng.

5 Easy Tactics to Safeguard Your Personal Financial Freedom

Since the first time you asked your mum for a chocolate at the checkout and she said no, you’ve been striving to achieve financial freedom – the freedom to buy what you want, when you want and live a comfortable and happy life. However, just because you have a regular job and a strong income doesn’t mean you have achieved personal financial freedom, unless you also have measures in place to protect your finances.

These personal finance protection measures can include:

1 – Disability insurance

While you may think that your house, your car or your investment fund are some of your biggest assets, in reality your biggest asset is your ability to earn money – if you lose that, you’ll likely lose your other assets as well. Therefore, you need to look at disability insurance policies which will replace your income if you are unable to work. This is in addition to insurances such as social security, which will only pay out if you are injured while at work.

While there are also social security benefits you could be entitled to if you suffer a disability, they usually won’t be enough to cover your previous income, and may only apply if you are so disabled that you can’t do any job, not just the job you have trained to do. Therefore, to avoid the risk of working in a call centre if you are unable to return to your regular career after an injury you can be protected by a long term disability insurance policy.

In most cases, insurers will offer a disability insurance policy which will cover around 70% of your previous income amount, but shop around for the highest percentage you can find. Also make sure the cover will continue to pay out until you are 65, when you will be able to access your superannuation fund.

2 – Health insurance

When you’re young, fit and healthy, the last thing you think about is getting sick, and unfortunately this is what can make the situation even more devastating if it does occur. When you are unprepared for an accident or illness you can find yourself struggling financially very soon after, so no matter how young or healthy you feel, if you are serious about taking steps to protect your financial freedom then you will want to take out a fully features health insurance policy.

Look for a health insurance policy which has a high excess as this will mean your monthly premiums are lower, and during a time in your life when it is unlikely you’ll need to make a claim, a high excess to pay isn’t as much of an issue as you’re unlikely to have to pay it. Compare insurance policies to find the one with the inclusions you want and need, for the right price, keeping in mind your premiums will increase as you get older, but are still much easier to manage financially than full medical costs.

3 – Liability insurance

Liability insurance is an important option to consider, as it can protect you if you are sued, or if you cause someone else damage. While your home and your car insurance will have liability clauses included, check the limit of the cover as it may not be enough for a serious claim. For example, the typical car insurance policy will allow $300,000 to cover liability costs but if you are in an accident where the other person claims $1 million in damages you could suffer significant financial damage.

To choose the amount of your liability insurance, choose a figure which is equal to at least twice your net worth if you are at a high risk of being sued, for example you are a doctor, lawyer or you have your own business. When you are looking to add liability insurance to your personal finance plan, look for umbrella coverage which is relatively cheap to maintain – usually between $150 and $300 a year. Umbrella coverage then extends over your existing home or car insurance policy and comes into effect when the original policy is exhausted.

4 – Long term care insurance

Long term care insurance is designed to help you protect your assets, and make sure that you receive a high quality of care if you can no longer care for yourself. Therefore, this type of cover is best suited to those over 50 years old, who have more than $100,000 in assets.

A long term care insurance policy will cover all of the costs associated with a serious illness which aren’t covered by a standard health insurance policy or government health programs. For example, if you need help to feed, clothe or bathe yourself, then long term care insurance can pay for a support worker.

Remember that long term care can be very expensive, for example a year at a nursing home will cost you around $60,000 and to have that same level of care at home will cost even more. If you have significant assets then you will probably be able to cover the costs of a high level of care if the need arises, but if you want to make sure you don’t put unnecessary financial strain on yourself or your family, consider long term care insurance.

5 – Manage your debt

With financial freedom comes financial responsibility but many of us learn this the hard way, after we’ve accumulated a deck of credit cards and our savings plan has fallen by the wayside. Therefore to help you safeguard your financial freedom you need to take control of your debt, which you can do in the following ways:

1.Stop saving if you have high interest debt. If you have been desperately squirreling away savings in an attempt to counteract your credit card debt and personal loans – stop. The amount of interest you’ll be earning on your savings will be much less than the interest you’re being charged on your debts, so you will be better off financially if you put all of your savings into getting rid of your high interest debt.
2.Consolidate your debts. If you are still having trouble clearing your debts consider a consolidation loan which will roll all of your credit cards and personal loans into one loan, with a much lower interest rate. You’ll then have a set term and set repayments so that you have a realistic goal of being debt free to work towards, plus all those sporadic monthly repayments can be made in one go.
3.Reduce your spending. You don’t have to give up all of the luxuries in your life, but you simply need to look for ways to cut back. For example, if you go out to dinner one a week, cut back to going out twice a month instead; rather than taking the family to the movies, put on a DVD at home and make your own popcorn. You can also make other conscious decision to save, such as buying in bulk at the supermarket or switching to the supermarket brand products. You can even start collecting coupons to make savings. Every little bit you save will help you pay off your debts, build up a savings balance and spend less than you earn to guarantee you financial security.

Kristy Ramirez writes for Life Insurance Finder, an Australian life insurance comparison website, where she helps people to compare life insurance quotes and select the best policy to meet their needs.

Spending Habits That Spells Havoc in Your Bank Account

broken piggy bank

We all like having money, and we all like spending them. Yet did you know that the little things that we use our hard-earned money on can spell problems for our bank account?

Our spending habits say a lot about ourselves. It shows how much we care about our bodies and welfare with the products that we buy. However, there are instances when what we purchase do not bode well for our finances. Let’s take a look at these habits and see how they negatively affect our bank account.

Giving in to impulse buying. This is one of the biggest pitfalls anyone can have when it comes to bad financial habits, regardless of whether you use cash or credit. Window shopping is a harmless enough activity, only if you truly do not have anything with you that will cause you to spend (meaning, no cash or credit cards). Maybe giving in once (once a year, maybe?) is acceptable. But if you give in to these urges every time you go out; if your closet is bulging with things you bought but don’t really have a use for, you need to curb your impulse buying.

The solution: When you go out, bring only enough money for your needs. Don’t bring a credit card especially if you’ll be going to a place where the temptation to shop is strong. For emergencies, just add an addition 10% to your budget for the day. If it doesn’t get spent, consider putting it into your savings. And if you’ve got a lot of purchases that are still in their wrappers, consider having a garage sale and adding whatever you earn from that into your savings too.

Not keeping track of your credit card expenses. Having a credit is a great thing. It gives you more buying power. The opportunities to be able to get the things you want are quite endless. The downside? Not keeping track of what you’re spending it all on creates a huge pile of debt for you. The bills rack up, not just for the cost of the item or service itself, but also for the interests and other fees. Plus, you end up shelling out more than you have to because of all these added expenses.

This includes not knowing the fees your credit card company charges you for each transaction, for each late payment, or for every time you go beyond your credit limit.

The solution: Collate all your bills, outstanding or otherwise, and see how much you owe. Next, hold off all other spending until you’ve paid off your existing balance. Find a method or system to pay off your debt that will work best for you. One such system is the “debt snowball”. Starting with your smallest bill, think of an amount you can easily add to the minimum amount due. Pay off the bill and move to the next. Add the amount you used with the previous bill to this bill until you pay it off. Keep doing this until all your bills are paid. Note that you have to stop using your credit card for the duration.

Trying to keep up with the Joneses. In this day and age, it’s hard not to be envious of the cool things other people are buying or doing. You see your coworker with a spiffy new mobile, and you want one too. Your neighbor went on a vacation to the Bahamas, you’d like to go out of town too. The thing is, trying to keep up with what everyone is buying or doing will create problems with your bank account. Sure, you can charge them, but once those bills pile up, you’ll wish you didn’t give in to envy at all.

The solution? Evaluate your envy. Do you want the same thing they have, or are you all right with a more affordable but equally satisfying alternative? Once you know the answer to that, you’ll be able to curb your expenses and work your way to getting what you want. Who knows? They might end up envying you for what you have.

Spending more than you can afford. This is a trap we all get in to so very easily. It’s closely related to the previous habit of keeping up with the trends and other people’s spending habits. The tendency to shell out more than what we can afford is what buries us deep in debt.

The solution: Set up a small fund where you can stash some money. Call it your “splurge savings”. Think of how much of your monthly budget can you set aside for these savings. Make a goal, either a certain amount or an item you want to purchase, and build towards the amount. Once you have enough, use it to get what you want. It make take some time, but on the upside one, you got what you wanted and two, you’re not in debt.

Buying what you don’t need. Again, it’s closely related to the previous items and it’s another habit that can create problems for your finances. So maybe you’re not an impulse buyer. Maybe you don’t really keep up with what the neighbors are doing or you’re buying things that are within your budget. The question is, are the things you are spending your money on are things you really need? Many people are able to work well with a budget but sometimes, half of the things they buy are not necessities.

The solution: Double check your expenses for name brands against generic and less costly alternatives. Their effectiveness is just the same, and at a lower price. If you can cut these out of your expenses all together, so much the better.

Not having any financial goals. It’s simple enough to say “Oh, I’ll set aside a couple of hundred dollars each payday,” but if you have no clear purpose for that money, there’s a chance that you’ll end up spending it once you reach a substantial amount. You’ll never run out of money, but your finances will never be stable either.

The solution: Take a step back and think about what you want to accomplish with your finances. Do you want to save up for a big expense or investment, like a house or a business? Think long term. It’s one thing to save up for a splurge, it’s another thing to save up for your future.

It’s the little things that matter the most, they say. It applies to your finances as well. Watch out for the little habits that slip by unnoticed, but can create problems if left unchecked. Here’s to a healthier bank account!

Author: Cathy

Cathy is part of the team that manages http://www.australiancreditcards.com.au a complimentary loan comparison service and a personal finance blog based in Sydney, Australia. Before she joined PLF, she was a staff nurse at Clark Airbase Hospital and conducted lectures on First Aid, Bio-terrorism and Disaster Management.