Paula Hawkins |
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Paula Hawkins was deputy personal finance editor of the Times. She has worked in journalism for 10 years, writing for a variety of publications and media on a range of subjects, from money to art and science. Born and brought up in Zimbabwe, Paula moved to London in 1989 and has lived there ever since, apart from brief sojourns in Paris, Brussels and Oxford, where she studied Politics, Philosophy and Economics.
Armed with a bit of knowledge, women tend to be very good with money... but mention the word 'pensions' to most and brows quickly start to furrow with confusion. Author of The Money Goddess has put together ten top tips towards better money management, exclusively for Penguin.
Toward Better Money Management... Ten Top Tips
1. Tackle your debts first
There is little point in saving and investing money for your future if you are still paying interest on outstanding debts. There are exceptions to this rule. First, mortgage debt, which obviously cannot be cleared before you start saving; and second, your student loan. Because student loans are charged at the rate of inflation, they are the closest to free money that you are ever likely to get. Pay them off at your leisure.
2. Build up a cash buffer
Before you start dabbling in the stock market make sure that you have at least three, and preferably six, months salary saved up in case of emergencies. This fund should not be touched: it is not to be dipped into whenever you fancy a new pair of shoes or a holiday in the sun. If you have no will power, put the money into a fund with a long notice period so that you cannot get at it whenever you like.
3. Insure your life
For women with children, life insurance should be a financial priority, not a luxury. It is not as expensive as you think. Cover of a quarter of a million pounds can be had for less than £14 a month. But do shop around – premiums vary dramatically.
4. Don’t be afraid of the stock market
Yes, it is possible to lose all your money on the markets, but sensible investors are more likely to see gains, and over the long term the stock market is usually more rewarding than a savings account. Start off small, go for established funds with a good reputation, and spread your risk.
5. Diversify
The British adore property, the young are especially smitten by it, since most weren’t affected the last time the market crashed and tens of thousands lost their homes. Don’t invest all your wealth in just one asset: spread it around. Cash, shares and property all have a place in the balanced portfolio.
6. Shop around for credit
A couple of grand worth of debt on a credit card could cost you £240 in interest over 12 months on a Barclaycard or nothing at all if you choose a card with a 0 per cent offer. Your £150,000 mortgage costs you just over £1,000 a month if you pay the average standard variable rate, or £810 a month if you opt for a good fixed rate. By switching just two financial products you save more than £2,000 a year.
7. Ditch your bank manager
There is an old cliché that Britons are more likely to divorce their spouse than leave their bank and it is, unfortunately, true. The overwhelming majority of us bank with big High Street banks, many of whom continue to offer almost no interest on balances in credit and yet charge exorbitant rates if you go overdrawn. If your current account is regularly in credit, you will be wasting thousands of pounds over the course of your lifetime by leaving that money to languish in an account which pays 0.1 per cent, rather than switching it to one that gives you 5 per cent.
8. Pay less tax
Collectively, we waste more than £4 billion a year by failing to take advantage of the tax breaks we are offered. More than £400 million is wasted simply by failing to fill in self-assessment forms correctly! Make sure you use your Isa allowance if you have savings and investments, claim your tax credits if you are entitled to them, and send your tax return in on time (that’s before January 31, in case you had forgotten).
9. Make small savings
A few adjustments to your lifestyle can have a dramatic impact on your bank balance. Some adjustments are difficult – quitting smoking, for example. It is worth it, though: how else can you save £1,800 a year while reducing your risk of heart disease? Some are easier – skip the morning latte from Starbucks and save £500 a year. Cancel your gym membership and run in the park instead. Avoid fee charging cash machines, shop around for home and car insurance, make sure you’re getting the best deals for your gas, electricity and phones.
10. Know your weaknesses
If you have shopaholic tendencies, don’t carry a credit card around with you. Keep one, by all means, for emergencies, but either leave it at home or – if you are particularly weak willed – freeze it. Wrap it up in a plastic bag, pop it into a jar of water and stick it in the freezer. That way, you won’t be able to make any purchases on whim.
