Never borrow on loans or expensive credit cards for consumer goods or things that decrease in value

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

As the weekend kicks in, you may be planning to go shopping for an expensive item or something for the house. The Money Tips Daily tip for today is:

Never borrow on loans or expensive credit cards for consumer goods or things that decrease in value.

I’m  not saying don’t use a credit card, which gives you additional consumer protection in the event of a problem or the company going out of business before you receive ordered goods. Consumers who ordered beds on their credit cards from Warren Evans, which went bust in the last week, should receive a refund from the card company, whilst those who paid with a debit card or in cash have little chance of seeing their money again.  

Using a credit card is fine provided you pay off the balance before interest is charged. If not, the effects of high interest rates on credit cards and personal loans will hold you back financially for years and even the rest of your life as long as you keep practising this form borrowing.

Paying the minimum amount back each month will also take years to pay off the balance in full, so make higher payments via you bank or pay off lump sums to clear the debt. 

Consumer goods borrowing is not the same as borrowing to buy assets, such as a rental or buy-to-let property, which can produce cash flow to pay the mortgage interest and gives you an ongoing residual income, as well as a potential increase in value over time. You may be able refinance and pull out all of your money and enjoy perpetual unlimited returns on your investment for years to come!

I would recommend having a plan to clear off the balance on your cards. However, if you cannot pay off your balance immediately and need more time, you could consider an interest free balance transfer, although keep an eye on the upfront fees, which can be as high as 3%. 

If you do need to borrow, look for cheaper options such as credit unions.

That’s all for now, have a great weekend and happy shopping! Watch those signs saying “Fast Credit”, which should say: “Fast DEBT”!

Check out my episode "Money Tip Review you Mortgage" on Anchor! https://anchor.fm/charles-kelly/episodes/Money-Tip-Review-you-Mortgage-e12g2i

See also: 

How to Make Money Online Without a Website or Inventing Your Own Product

2 Tips to Save and Make You Money

Model the Rich and Successful

Money Tips Daily - How to SLASH Your Tax Bill Legally

Hello and welcome to Money Tips Daily, this is Money Kelly bringing you money tips to help save and make you more money!

Mitigate Your Tax Liability, Legally!

If you are listening to this in real time, today is the 21st of February and for many of us in the UK the end of the tax or fiscal year on 5 April is fast approaching. Other countries may vary but the principle is the same, use every available legal tax saving method to reduce and mitigate the amount of tax you pay.

Here in the UK, the next few weeks will present your last opportunity to use up your tax free allowances in savings schemes like ISA and Pensions.

There are different types of ISA’s and pensions, and the right choice for you will depend on your own particular financial circumstances. You should seek financial advice from an independent financial advisor, as there are other tax saving investment schemes which require specialist advice.

The amount you can put into these schemes varies from year to year and what the Chancellor decides in the budget. In general, the maximum thresholds usually increase because the government wants to encourage us to save.

For the 2017/18 tax year, you can invest up to £20,000 into a Cash ISA or a Stocks and Shares ISA.

The cash ISA is similar to a bank account which pays interest, but unlike a normal account, there is no tax deduction as long as your money stays within the tax-free ISA “wrapper”. Many savers do not realise that the interest in their savings is taxed.

When I worked in the bank many years ago, some customers would have hundreds of thousands of pounds tied up in accounts which not only paid a low interest rates, but were also taxed.

By simply moving their money into ISA’s they could avoid taxes forever on their savings and earn more money on their savings, as interest rates were higher in the ISA accounts. Remember that banks have a habit of churning accounts and reducing the interest rate on those accounts making them effectively obsolete.

Unfortunately, many of them would say “no, I’m happy where it is” and refuse to move their money!

If you had invested the maximum allowable amount each year into ISA’s or similar accounts since they were introduced you would now have over £1,000,000 in a tax free wrapper.

The Stocks and Shares ISA allows you to invest in shares or funds which invest in the stock market on your behalf. These funds can go up or down and obviously carry more risk than a cash ISA. If you already own shares, it makes sense to shelter them in an ISA wrapper to avoid tax on dividends and CGT or capital gains tax.

Companies like Hargreaves Lansdown offer this ISA service and has a good online platform.

You can invest in an ISA by making regular monthly contributions or a single lump sum each year.

Check out the best deals online (e.g. at moneysavingexperts.co.uk or similar comparison sites) and now is the time to start shopping around rather than leaving it until the last minute and risk losing out.

In addition to the ISA allowance, all UK basic rate tax payers can now earn up to £1000 a year in interest without paying tax on it. With base lending rates standing at .5% as I write, you’d need quite a lot of money on deposit to earn £1000 of interest on your savings. Assuming a savings rate of .25%, you would have to have £400,000 on deposit in order to earn £1000 in interest.

Pensions are more complex and the right plan for you will depend on your circumstances, for instance, your tax status, age and whether you are employed, self employed or a company director.

Bonus tip. Get into the habit of saving a percentage of your income no matter how small to start with. The sooner you start saving the better, as compound interest (interest on interest) will work in your favour. Albert Einstein described compound interest as one of the greatest forces on Earth.

Acton. See an independent financial adviser and do your own research online. If you are self employed, talk to your accountant before the end of the tax year not after when it might be too late to claim allowances against your profits.

See also: 

How to Make Money Online Without a Website or Inventing Your Own Product

2 Tips to Save and Make You Money