Tag: Financial Education

How to get Value for Money When Buying Foreign Currency

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My aim with each blog post is to help you move to a better financial future. I believe that there is not enough financial education in the national curriculum and I intend to share anything helpful that I have learned along the way. I am by no means a financial expert. None of the information on this website constitutes financial advice and is provided as general information only. This is my personal finance blog; my marketing blog is over here and I have been blogging there since 2010. I hope you have found this information useful. Thank you for reading.

Best regards,

Mike

Have you saved Enough into Your Pension?

* ‘Time is more value than money. You can get more money, but you cannot get more time.’ – Jim Rohn

Why you Should Track Your Net Worth

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I hope those you who did not already have a monthly household budget, have now had chance to create one. If not, this post will help you, How to Create a Budget That you can Stick to. One stage on from creating a monthly budget is to create another simple spreadsheet that records your total net worth.

Calculating Your Net Worth

Net Worth can be defined as the sum of all of your assets minus your liabilities. For many of you, the thought of creating a spreadsheet with all your assets and liabilities recorded in one place might fill you with dread. If you have large student loans or credit card debts, recording your total amount of liabilities and assets might be a painful process. However, this is a necessary step to track your net worth.

Your personal net worth looks at the bigger picture, it’s not just your monthly income and outgoings. You also get the opportunity to track all of your assets as well as your liabilities. Assets include properties, savings, investment accounts, stocks and shares and businesses owned where applicable; liabilities include, mortgages, student loans, credit card debts and loans.

For the sake of simplicity it is acceptable to leave out all regular monthly expenses that are paid out of your monthly salary or wage. When thinking about net worth I always remember a quote attributed to the mathematician, Karl Pearson.

“That which is measured improves. That which is measured and reported improves exponentially.”

Karl Pearson

Improvements to Your Net Worth

This is exactly why we are doing this! Your net worth will improve. When you complete your first total net worth tracker spreadsheet, it will take some time. By the way, feel free to think of a more exciting title than Total Net Worth Tracker Spreadsheet. 🙂

When you come to update it after a month, unless you have suffered some financial calamity, your total net worth will have increased. For example, if you have made payments to student loans and or credit cards, their totals will come down slightly and your net worth will have gone up. If you are like me, you will find this incredibly motivating! As an aside, do not compare yourself to others, just track your own progress. In time, deficits will turn into surpluses. Money that was originally to pay debts can be diverted into savings accounts when those debts have been paid. Tracking your net worth is an excellent habit and will help you to transform your finances.

What Should you do Now?

Create your total net worth spreadsheet and update it each month. Here’s a downloadable spreadsheet that you can use.

Are you already tracking your net worth ? If so, what has been the improvement in the last 12 months? Let me know in the comments section below.

If you have enjoyed this post you will also like the following posts:

Are you and Your Partner Financially Compatible?

How to get Value for Money When Buying Foreign Currency

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

Best regards,

Mike

Are you and Your Partner Financially Compatible?

Have you Saved Enough into Your Pension?

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Have you saved enough into your pension? For a large proportion of the United Kingdom population the answer is no. Most people are not saving enough for their retirement. Does your vision of retirement include freedom to travel and time to enjoy a comfortable standard of living? If we all to have the retirement that we aspire to one day, we will need to make sure that we are on track to achieve it. It is time to get serious and work out how much that will cost.

Pensions: Why Many People Are Failing

There are a lot of assumptions built into pension calculations, assumptions that are not true for many people. For example, the assumption that you will work 40 years of continuous employment with your salary continually increasing by X% and you maintaining your pension contributions at 12% of your salary for 40 years. Some of the realities of life such as redundancies, women taking time out to raise a family, individuals starting businesses, part time work, time out for studying and credit credit or student loan debts don’t exist in this Continuous Pension Saving Utopia.

I think when people realise that they are not on track to hit their pension goal, they give up and hope someone other than themselves will solve the problem. Let me be more specific, if you would like to live on a retired income of £25,000 you will need to have a pension pot of £500,000. That is assuming that you use your pension pot to purchase an annuity giving you the annual income of £25,000. Try this pension calculator to work out how much you would need at other income levels. As you can appreciate, £500,000 is a large amount especially when it’s considered that the average pension pot in the UK is around £50,000.

What Should you do Now?

Pension Pot

Work out the total pension pot you currently have, if you have had several jobs during your career you may need to do a little detective work to track down all of your workplace pensions. This article will help you find your pensions.

Up Your Contributions

Re-evaluate your household budget, can you afford to increase your contributions? If you are in a workplace pension then you should maximise the contributions that you make because these will be matched by your employer. If you are self employed, you should also increase your contributions.

Develop a Plan B

It may be that increasing your pension contributions alone will not be enough for you create a big enough pension pot for retirement. If that is the case, you should develop a Plan B.

Property is a great way to supplement your pension savings, you could downsize your main residence and use the profit for your retirement. Alternatively, you could rent out a spare room and earn extra income that way. There are other ways too, they include equity release and property investing. You can read more about these ways via this link.

If you own a business, this could become your Plan B. Depending on the nature of your business, you may be able to sell it and contribute money to your pension savings after the sale.

Don’t Lose Heart

The fact that you are reading an article like this is a positive in itself. You still have time to improve your level of preparedness for retirement and there are a number of ways you can do so.

Are you on track with your pension savings? If not, what are you going to do about it? Let me know in the comments section below.

If you have enjoyed this post you will also like the following posts:

How to get Value for Money When Buying Foreign Currency

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

Best regards,

Mike

Are you and Your Partner Financially Compatible?

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If you are going to be successful and achieve your financial goals you will need to face up to obstacles head on rather than wait and hope that they disappear of their own accord; usually, they do not disappear of their own accord. Are you financially compatible with your partner?

First of all, a quick definition, when I use the use the term financially compatible, I mean to share the same financial goals, vision and habits. Are you both saving regularly and maximising investment returns? Is your discretionary expenditure linked to value for money? I do not mean that you need to be earning the same salary. It is great if you are but it is not essential for financial compatibility. The key word in this context is together, ideally you need to be able to plan your financial future together and work towards it. This could mean saving to buy a home, a goal of becoming debt free or financial freedom (retirement) at an early age.

Financial literacy is not a skill-set everyone has, some are willing to learn whereas others are more interested in living for the moment instead of having a financial plan. Not everyone approaches personal finance and their financial responsibilities in the same way.

Are You Financially Compatible?

Disagreements over money remains one of most common causes of divorce. If one person is a disciplined, lifelong saver and the other is frivolous with money, there will be friction between the two. In my opinion, if these differences are entrenched there is no chance of achieving your financial goals together. It does not seem very romantic to consider a partner’s financial compatibility when you are just getting to know them but if you don’t, you could be storing up problems for yourself later on. Hopefully, if you are in a relationship you have already taken an opportunity to discuss money with your partner.

Depending on your starting point, following a budget for a prolonged period can be hard work. To achieve financial freedom for example, you and your partner will need to work as a team and to be consistent. You need to be in alignment.

Create a Financial Plan Together

If there are only slight differences between you then thankfully, with a calm approach, compromises can be agreed upon.

If that is the case, the following steps will help:

Arrange to have regular money meetings with your partner; during these meetings discuss financial goals and budgeting and agree a way forward.
If one of you is the natural saver, take the lead in these meetings but be careful to avoid being judgemental.
Build in quick wins on your financial journey together, this could be paying off a credit card with a low balance or saving for a planned weekend away.
Allow yourself small celebrations when you hit your financial milestones, be creative with these and do not spend a lot of money on them.

By working together you will dramatically improve your financial health and you will strengthen your relationship. Well done! Your future is looking bright.

Have you sat down with your partner and discussed finances? How did the conversation go? Let me know in the comments section below.

If you have enjoyed this post you will also like the following posts:

How to get Value for Money When Buying Foreign Currency

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

Best regards,

Mike

Why Choose a Gold IRA?

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An individual Retirement Account (IRA) is a particular type of savings account that helps people prepare for retirement in the United States. There are tax advantages to saving in an IRA account. In the United Kingdom, the equivalent savings account is called a Personal Pension. A 401K is a company backed retirement plan (Workplace Pension in the UK), whereas IRAs are started by an individual.

IRAs can be subdivided into Roth IRAs and Traditional IRAs. With Roth IRAs, there is no tax deduction for contributions but when your investment earnings are distributed in retirement this is done tax and penalty free. Traditional IRAs by contrast, do offer deductions for contributions but when your funds are distributed at retirement taxes on investment earnings have to be paid.

IRA funds can be invested in individual stocks, bonds and cash. There are also many mutual funds that you could choose from. Either on your own or after receiving advice decide on an asset allocation that you are happy with for your IRA.

What is a Gold IRA?

Gold IRAs were created by the Taxpayer Relief Act of 1997. A Gold IRA account is a way to diversify your retirement investments further. A Gold IRA gives the investor the chance to own physical Gold, Silver, Platinum or Palladium.

To invest in a Gold IRA, you will need to set up a self-directed individual retirement account (SDIRA), this is an IRA in which the investor is in charge of making all the investment decisions.

What are the Benefits of Gold IRAs?

Pros

Investors have created Gold IRAs because they perceive them to be a counterbalance to what is happening with their more traditional investments. If paper based assets such as stocks are trending downwards, Gold tends to move in the opposite direction. Adding a Gold IRA will diversify your retirement investments. Since the financial Crisis of 2008 Gold IRAs have increased in popularity because of this investors’ desire of investors to spread risk with their retirement investments.

You can potentially benefit from increases in the price of Gold, of course this cannot be guaranteed. Between 2000 and 2012 the price of Gold increased for 12 consecutive years. While stocks can literally become worthless, the price of Gold will never be worth zero.

Remember, it is possible and advisable for an individual to have more than one IRA. You could hold one mutual fund IRA and a Gold IRA, for example.

Cons

Setting up a Gold IRA is quite a complicated process. First of all, you need to find an approved custodian (Broker) for the IRA and an approved Depository, where the Gold will be stored. Then you buy the Gold and have it transferred to the Depository.

Historically, some Gold IRA companies have not are not completely transparent about their fees and investors have experienced surprises after they have invested. Before you create a Gold IRA or rollover an existing IRA into a Gold IRA ensure that your custodian has confirmed all costs and fees.

If you are thinking about setting up a Gold IRA, Regal Assets is one company that you should consider. Click here for a free Gold IRA guide.

Do you have a Gold IRA already? How do you think your investment is performing? Let me know in the comments section below.

If you have enjoyed this post you will also like the following posts:

How to get Value for Money When Buying Foreign Currency

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

Best regards,

Mike

How to get Value for Money When Buying Foreign Currency

The owners of this website may be paid to recommend Regal Assets. The content on this website, including any positive reviews of Regal Assets and other reviews, may not be neutral or independent.

What are the Best Savings Accounts for Children?

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If you’ve read my most recent post, How to Teach Your Children About Money you could easily have guessed that this would be my next subject. In this post, I give an overview and provide links for a selection of the best savings accounts for children. This is the next logical step, to give your children practical recommendations for where they should save their money. Do not let them lose momentum, they are forming great financial habits; now show them where to save their money.

Do not fall into the trap of advising your children to open an account at your current bank because it is convenient. A low interest rate for savers is not convenient, please give your children the best recommendations for their money.

Below I have listed my top picks for regular saving, easy access and fixed rate savings accounts for children. Please remember none of this constitutes financial advice and you should do your own research. I have provided links to all of the accounts mentioned for that purpose.

Best Savings Accounts for Children

In each example the interest rate quoted is the Annual Equivalent Rate (AER).

Regular Savings

Halifax

The Halifax Kids Regular Saver account pays 4.5 % interest. You are allowed to save between £10 and £100 per month but not allowed to make any withdrawals. More details here.

Saffron Building Society

The Saffron Building Society Children’s Regular Saver account pays 4.0 % You are allowed to save between £5 and £100 per month and can make unlimited withdrawals. More details here.

Nationwide

The Nationwide Flex One Regular Saver account pays 3.5% interest. You can save between £1 and £100 monthly and make unlimited withdrawals. More details here.

Easy Access

Santander

Santander 123 Mini Current Account 123 Mini Current Account pays 3% interest providing you have £300 to £2,000 in it. Account holders can make unlimited withdrawals and those over 11 will receive a debit card. More details here.

HSBC

The HSBC My Savings account pays 2.75% interest for account holders aged between 7 and 17. Account holders receive a cashbook that they can use to make deposits and unlimited withdrawals. More details here.

Nationwide

The Nationwide Smart Limited Access account pays 2.5% on amounts up to £50,000. Account holders must be between 7 and 17 years old. It’s important to note that you are only allowed to make one withdrawal per year. More details here.

Fixed Rates

The Cambridge Building Society 3 Year Children’s Fixed Rate Bond pays 2% interest. You are permitted to deposit between £1000 and £20,000 More details here .

The Kent Reliance two year fixed bond pays 1.85% interest and has no minimum age. Withdrawals and closures are permitted subject to 180 days’ loss of interest on the amount withdrawn. More details here.

Have your children got any of the accounts mentioned above? Let me know how in the comments section below.

If you have enjoyed this post you will also like the following posts:

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

I hope you have found this information useful. Thank you for reading.

Best regards,

Mike

How to get Value for Money When Buying Foreign Currency

How to Teach Your Children About Money

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Few adults have truly mastered money and yet it is incumbent on adults who are also parents to teach their children about money. Parents are the number one influence on children’s future financial behaviour. If parents always seemed to be concerned about money or the lack of it, this is what their children will learn. However, by being proactive and intentional about the lessons we teach our children, we can set them up for future financial success. Below I have listed six key points that you can teach your children that will help them understand money. They have certainly helped me explain money to my son, I hope those of you who have children find them useful too.

Teaching Children About Money

Making a Choice

Explain to your child that you have a limited amount of money, it could be £10 or $10. The next step is for you and your child to decide to buy product x or product y, because you cannot afford to buy both.Those of you who have studied microeconomics, will recognise this as the ‘opportunity cost’ attached to the decision. This is a great way to introduce needs and wants too.

It’ is good for children of all ages to understand the need to make a choice between the two. Use it with real world examples when you are out and about. This website is great resource for explaining money to your children. Please make use of it.

Now or Later

Slightly more difficult to explain to many children is the concept of delayed gratification. Instead of buying something now, why not save your pocket money/ birthday money and save up to buy a larger item in a few weeks’ time? If a look of incredulity comes onto your child’s face, do not worry, you’re not alone. Once again, demonstrate with practical examples from their daily life.

Managing Pocket Money and Expenditure

Another great financial lesson is encouraging your children to have some financial freedom to make their own choices. If you are able, allow them to ‘earn’ pocket money by keeping their room tidy and helping out with chores. The money they earn is theirs and they should budget, save and donate; the remainder can be spend as they see fit. Please explain that if they deposit their money into a savings account it has a chance to grow because of the interest. Money stored in a piggy bank will not of course.

Financial Rationale & Commentary

I provide my son with a financial rationale for financial choices to build up his knowledge and help him to understand concepts such as value for money. For example, I have explained why I filled up the car with fuel at the local petrol station ahead of a long journey instead of at motorway services. Today, he told me that he would buy a Ferrari if he had the money so I’m not sure if everything I’ve said has been taken on board. 🙂

Regular Saving and Compound Interest

This website is a great resource that will help you explain to you child how compound interest works over time. The great amounts that can be created by regular saving and compound interest, as demonstrated by the website’s calculator tool should excite them.

As your children get older, over 14 years of age from example, there will be many opportunities to have specific discussions around money. Some may relate to the costs of higher education or how to sensibly use credit and debit cards. I will not be able to cover them all in this post.

How have your discussions with your children about money been? Were there any areas they struggled with? Let me know how in the comments section below.

If you have enjoyed this post you will also like the following posts:

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

I hope you have found this information useful. Thank you for reading.

Best regards,

Mike