Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
Financial New Year’s resolutions
Did you make any New Year’s resolutions this year? If so, have you already broken them? If you have, I’m sure you’re not the only one! But maybe you were a bit too ambitious – or a little too vague in your goals. Research shows that you’re more likely to succeed if you set specific goals. So, for example, rather than saying you want to be debt free, it’s better to set a goal for repaying a certain amount in six months.
Here are some financial goals for 2017 and a few tips on how to reach them.
- Switch your expensive debt. If you owe money on credit cards where you’re paying interest (so not 0% balance transfer deals), aim to switch it. Move your debt to a 0% balance transfer card, if you can.
SAVVY TIP: Don’t necessarily go for the card with the longest balance transfer period, but look at the balance transfer fee as well. Some cards will let you transfer your overdraft as well as money you owe on your credit card. You normally can’t transfer a balance from a card that’s issued by the same provider, or one that’s part of the same group.
- Pay off credit card debt. If you can’t get a balance transfer credit card, set a realistic goal to pay off your credit card debt and set yourself mini goals along the way. So, aim to pay off a certain amount after three months, and set another goal for six months.
SAVVY TIP: Even paying a little more will make a big difference. The one thing you should never do is to only pay off the minimum on your credit card. If you do, it could take you over 17 years to pay off a £1,000 balance on a credit card charging 18.9% interest. The minimum payment would be £25 a month, initially, but if you pay an extra £25 every month, you’ll be debt free in less than three years.¹
- Start to save. There’s no getting away from the fact that interest rates are absolutely appalling at the moment! But there is still a reason to save. Why bother? If you have some money in the bank if you need it, you won’t have to try and borrow in a hurry. Most people also find it reassuring to have some cash for unexpected expenses. To get started, set up a standing order so that a regular amount goes from your current account to a savings account.
SAVVY TIP: If you think you’ll be tempted to dip into your savings, opt for a savings account where you have to give a few weeks’ notice if you want to take money out. Don’t worry, you’ll be able to get it if you need to – you’ll just lose a bit of interest.
- Sign up for your workplace pension. If you haven’t already started saving for your retirement, don’t delay it any longer. If you don’t have any money put aside for your retirement, you’ll have to live on the state pension (currently around £155 a week). If you haven’t already been automatically enrolled into your employer’s pension (basically, plonked into it without you having to do anything!), you probably will be soon.
SAVVY TIP: Think carefully about opting out of a workplace pension as you’ll miss out on money for your pension from your employer and the government.
- Shop around for home, car, travel and pet insurance. You don’t need me to tell you that insurance companies don’t seem to get the idea of loyalty and you’re unlikely to be rewarded with lower premiums for staying with the same company. But if you’re shopping around, don’t just buy the cheapest policy.
SAVVY TIP: Some things I’d look for when buying home insurance are the level of cover you get if you need to move out of your home (alternative accommodation), how much ‘trace and access’ cover you have (this pays out if you need to – for example – rip your kitchen units out to find the source of a water leak) and whether the policy will replace the whole lot if you damage one item from a set (such as sofa and chairs) and you can’t find a replacement to match.
Personal loans cheaper than a mortgage?
Several loan providers have reduced the interest rates on their loans, with one charging less than 3% on loans between £7,500 and £20,000. That’s less than you’d pay on a mortgage standard variable rate, which is typically between 3.69% and 4.95%. Mortgages are normally much cheaper than personal loans because the loan is secured against your home – so if you can’t repay it – the mortgage lender could repossess your home.
With a personal loan you’ll only get these low rates on bigger loans. If you want to borrow less than £7,500 you’ll generally pay a higher interest rate (and with some banks it could be over 18% if you borrow just a few thousand pounds).
Don’t borrow money you don’t need but if you’re planning some work on your house or want to replace your car, a low cost loan may be worth considering.
The benefit of taking out a loan when interest rates are low is that, unlike with credit cards, the rate is fixed throughout the length of the loan. In addition, you can overpay your loan with low extra charges.
SAVVY TIP: The rules say that you can overpay up to an extra £8,000 a year and the most you’ll be charged by way of a ‘penalty’ is 1% of the amount you’re overpaying.
Your rights to return
How did you fare on the Christmas present front? Did you get exactly what you’d hoped for or did Santa get it horribly wrong? If so, fear not! There are plenty of options.
- See if you can return it. You don’t have a legal right in law to return something because you don’t like it, but most shops will let you change your mind. It can be trickier if it’s a present if you don’t have a receipt or gift receipt. If you can return your unwanted Christmas presents, you may get a gift card or credit note, rather than a cash refund.
- Try selling it. eBay is the obvious place to sell unwanted presents online, but there are other options such as Amazon Marketplace, Depop and Preloved.
- Give it to charity. Many charity shops will be only too happy to take your unwanted presents, but check if you want to donate something like a gadget or electrical item. Smaller charities may also take items to sell in fund-raising auctions or to use as raffle prizes.
- Regift, if you dare! Regifting means passing on an unwanted present to someone else. Some people think this is just fine, others are horrified by the idea. If you’re going to do it, only regift decent presents (don’t try and pass your unwanted tat onto someone else!) and be careful who you give it to. Oh, and check that there are no incriminating gift tags attached…!
Zero-hours workers earn less
New research shows that zero-hours workers earn £1,000 less a year on average than workers who are on a permanent contract. Research by the Resolution Foundation found that people on zero-hours contracts have a ‘pay penalty’ of 93p an hour.²
But what exactly is a zero-hours contract?
- It’s a contract where you’re not guaranteed any work but you don’t have to guarantee you’ll be available when your employer wants you.
- You shouldn’t be penalised for not accepting work, although there’s evidence – from a government survey – that some workers are.
- Your rights depend on your employment status. You may be working on a freelance basis or you could be classed as a ‘worker’, which gives you some extra rights.
- Depending on the hours you work, you may be eligible to join your employer’s pension scheme – but it’s not guaranteed.
SAVVY TIP: One obvious downside of a zero-hours contract is that you are very unlikely to be able to get a mortgage on your own. It’s also much harder to budget for fixed expenses such as your rent or energy bills.