Financial Tips 2018: How to get ahead on taxes, savings and insurance

It's 2018 and now’s the time to get your finances in order.

To help you and your family make all the right money moves next year, here’s a financial game plan that could help you grow your 401(k), avoid financial ruin and adjust to the new tax rules signed into law by President Trump.

Just as a New Year’s resolution to get fit can fail if you don’t hit the gym, getting ahead financially is tough if you don’t set up a plan and stick to it, says Dana Anspach, founder and CEO of Sensible Money, a wealth management firm in Scottsdale, Ariz.

Doing an annual financial check-up, she stresses, is only worthwhile if you use it as a jumping off point to “build good habits.”

“It’s figuring out the baby steps you can take that moves you and your money in the right direction,” Anspach says. “Every family should put together a playbook for the year.”

Here are steps to take to get you on the road to financial success.

Start with the Basics

Insurance isn’t sexy. In fact, it’s boring. It’s viewed by many Americans as just another bill, not an investment.

But insurance is the foundation of any financial plan, as it protects people from catastrophic losses that can wipe them out. Jan. 1 is the time to make sure your family has enough life insurance to pay for the kids’ college, keep current on the mortgage and fund other living costs in the event you or another breadwinner in the family dies, causing a loss of income.

“Check all of your insurance coverage,” especially if your life has undergone changes, such as having a child, advises Carla Dearing, CEO and founder of Sum180, an online financial wellness company in Louisville, Kentucky.

That means making sure your house, car, health and life is adequately insured against events that could put your family in financial peril.

Other basics not to overlook are making sure your will and estate plan are updated and all your financial accounts have the proper beneficiaries, adds Steve Janachowski, CEO of Brouwer & Janachowski, a wealth management firm in Mill Valley, California.

Tax Plan Tune-Up

The new tax law means most Americans’ tax bills will change. Some will pay more and many will pay less. Many longstanding deductions, such as home mortgage interest and state and local taxes have been cut or eliminated.

Uncertainty, as a result, is high.

“It’s important to understand what the new tax bill means to you,” says Paul Jacobs, chief investment officer at Palisades Hudson Financial Group in Stamford, Connecticut.

Taxpayers should analyze how to best take advantage of any benefits they receive. Perhaps more important, figure out how to minimize financial damage caused by changes to the tax code that reduce take-home pay or make owning a home more expensive.

For example, homeowners in coastal states where housing is expensive and taxes are high might need to rethink their real estate holdings after losing key deductions. Under the new tax law, the deduction for mortgage interest has been capped at $750,000, down from $1 million, and deductions for state and local taxes have been capped at $10,000. These changes could mean owning a home in 2018 and beyond will be more expensive.

While moving from your current home is a big decision that should not be taken lightly, “it may make sense to revisit where you live,” Jacobs says.

People living in high-cost states that are either approaching retirement, in line for a new job in another state or who aren’t happy where they're living now, “might want to consider moving to a low-tax state, such as Florida,” he says.

Simpler moves include reducing the money withheld from your paycheck for taxes if you’re getting a cut, or boosting your withholding if you expect to pay more in taxes.

It also makes financial sense to direct some or all of your tax windfall to your retirement account, or 529 college savings account, which can now be used to pay for private school from elementary school onward, adds Peter Mallouk, chief investment officer at Creative Planning in Kansas City, Kansas.

“Save the extra money before you get used to spending it,” Mallouk says.

401(K) Check-up

With employer-paid pensions no longer the major source of retirement income, personal savings accounts such as 401(k) s and IRAs need annual tune-ups to ensure they're building wealth efficiently.

And given that many Americans have some of their retirement savings invested in the stock market – which has been going up for nearly nine years and posted a 19.4% gain in 2017 – now’s a good time to review these accounts to make sure they are properly diversified and not too risky, says Scott Kubie, chief investment officer at Carson Group, an Omaha-based investment firm.

Many investors’ portfolios today may be more risky than they think. A portfolio that once had 60% in stocks and 40% in bonds, for example, may now have a stock weighting of 70% or more.

“I encourage people to look at their holdings and make sure they are not overexposed to risk that they are not prepared to handle,” Kubie says.

To reduce risk, investors should rebalance their portfolios, or get back to their initial asset mix of, say, 60% stocks and 40% bonds, he says.

One way to do that is to sell assets that have performed well and redirect the money into investments that haven't done as well. If investors don’t want to sell what they currently own, they can get their portfolio back in whack by directing future contributions into the part of their portfolio that originally represented a bigger slice of their overall investment pie.

Another tactic is to invest some cash in overseas stock markets, rather than focus exclusively on U.S. markets, Kubie adds.  “Make sure you have some international exposure,” he says.

And now that the government has reduced the number of deductions available to tax-payers, the 401(k) is emerging as a key vehicle to shelter income from taxes. A dual income family, for example, that earns $100,000 per year and takes advantage of the pre-tax 401(k) contribution limit of $18,500 could slash their taxable income by $37,000.

“People should try to max out their 401(k),” says Janachowski. “It’s a no brainer.”

What investors should not do is try to time the market, or get out just because some pundits say the market is pricey and is due for a fall, he adds. “Start early and save consistently,” says Janachowski, adding that he believes corporate earnings and stocks will benefit from the cut in the corporate tax rate to 21% from 35%.

Home Affordability Check

With fewer deductions, housing isn’t as financially friendly to homeowners, especially in New Jersey and California and other pricey, high-tax states along either coast. Now’s a good time to see if the house you're living in or the new house you're eyeing or the second home you've been dreaming about is still affordable, says Janachowski.

While the reduction in home-related deductions won’t impact most Americans, it could cause financial pain to those it does affect.

“It will be harder to afford housing because the government isn’t subsidizing it as much,” says Janachowski. “Does it mean you shouldn’t own a home or buy a home? No. A house isn’t only an investment; it is a place to live. But it could hit the second-home market and keep people from moving up to bigger homes.”


Do not be oversmart with your money

In trying to be smart with our money, sometimes we damage our long-term financial future. Here are some such common mistakes, and how to go about avoiding them.

We all intend to do the right thing with our money but sometimes our decisions and actions harm, rather than benefit, our financial situation. Typically this happens when you are in a hurry, or have not thought it through or not tailored a financial action to your specific situation. Here are some common situations where the end result may not be what you wanted, if you don’t take the trouble to do it right.

A budget too tight

You decide to streamline income and expenses to increase savings. But you overdo things and create a budget that may be designed to fail. The typical errors are to overlook tracking the expenses for a few months, so that you don’t know where you spend and don’t know your level of expense for each category of expense. Without this information, you could fail to allocate adequate resources for your expenses. These errors can derail your budget. A very tight budget, to save more, could prove to be unsustainable so that you may not be able to live with it. This would cause your budget to collapse, leading to your savings targets not being met.

If you are not used to living by a budget, ease yourself into it. Start by imposing broad upper limits. At this stage the focus should be on developing the discipline to account for expenses and to limit them. Once that happens, the next stage would be cutting the expenses, in a realistic manner. Don’t get discouraged if you slip a few times. You will learn with experience.

Going long term too early

You realize the importance of accumulating funds for long-term goals and start putting all your savings into provident fund or other long-term investments. This would be a good decision if you have taken care of liquidity and have an emergency fund. Long-term products typically have restrictions on withdrawals. Growth-oriented investments, such as equity, have volatile values that may mean that you incur a loss if you had to redeem them at short notice.

Thus, providing for long-term goals is good if you have made provisions for immediate liquidity needs. Build an emergency fund and invest for short- and medium-term needs along with long-term goals. This will ensure that your long-term goals are not put at risk by a need that was overlooked.

Saying no to debt altogether

You may think that you are protecting your finances by staying away from debt completely. But it may not be so. You may need to take on some debt to meet goals like buying a house. You could choose to stay on rent, but that comes with the risk of inflation pushing rentals beyond your means. A mortgage would also come with tax benefits, which would lower the cost of debt.

Having some amount of debt also means that you can demonstrate responsible debt behavior to get a good credit score, lack of which can result in higher costs if you need a loan urgently.

However, include credit and debt into your finances with discretion. Use debt to leverage your finances. Use facilities like credit cards for regular expenses, to built a credit history.

Penny wise pound foolish

Very often, we focus on one aspect of a decision and ignore its larger impact. Very often we end up cutting costs by cutting corners. For example, if you buy a durable good that is cheap but of poorer quality, you could end up paying more due to frequent replacements. There are also decisions you may consider clever now, but which could cost you dear later. These could include: avoiding insurance, believing that premiums are a waste of money; not maintaining an emergency fund believing that keeping funds in liquid but low-earning products is under-utilization of money; adopting a do-it-yourself approach, believing that paying an adviser is a waste of money. Not to forget: holding all your funds in low-risk products that earn low returns, ignoring the impact of inflation. 

Standing guarantee for others

Be sure of financial standing of the person for whom you are standing guarantee in a loan or giving an add-on credit card to. This act of kindness can damage your own finances. You would be responsible for the repayment if a primary borrower defaults on the payment. You could be saddled with repaying a loan that you neither benefited from nor can bear the burden of. Your credit score will be affected by this loan, and you may even find it difficult to access credit when you need it. Excessive spending on an add-on credit card too will strain your finances, apart from affecting your credit history and score.

Keep in mind the consequences to your own financial situation before you seek to offer financial assistance to others. Consider if the primary borrower can service the loan herself without difficulty. Give due consideration to your own ability to bear the stress if the obligation passes to you. Similarly, to protect your finances, consider the option of footing the family member’s credit card bill up to a reasonable amount instead of giving an add-on credit card. The person is then liable for all actions and omissions on the credit card and your responsibility is limited to the amount you have offered to foot.

13 tips to help save money if you live in London, from a financial expert

Because ‘savings’ and ‘London’ rarely ever feature in the same sentence

It’s no secret that London is home to some of the highest living costs in the world.

The median annual salary for London is £34,473, but there are many people – especially young people – living on well below this.

After rent and bills are paid, the remainders of pay packets go to food and necessities – so how are we meant to save for that big holiday or to get out feet firmly on the property ladder?

In light of Financial Capability Week this week we spoke to Andrew Johnson, Advice Manager at Money Advice Service who has revealed his 13 top tips for saving when you live in London.

1. Loose change adds up

By the end of the week, many of us have a few coins left over in pockets and purses – and even down the back of the sofa. Gather up these odd coins each week and put them in a jar. Even just a £1 a week in loose change will give you a cushion of over £50 by the end of the year. Looking after the pennies really can mean the pounds look after themselves.

2. Keep track of what you spend

Sometimes it’s hard to know where the money goes. Try keeping a spending diary for a week or two where you write down everything you spend from the smallest stick of chewing gum to filling the tank with petrol. This will help you identify items you might be able to cut back on.

3. Reconsider your smoking habit

If you smoke 15 cigarettes a day, that’s costing you almost £2,000 a year. If you’d like to kick the habit and boost your savings into the bargain, get the NHS on your side. Use the NHS cost of smoking calculator to help you give up smoking.

4. Make sure you’re getting the best deal on your bills

Shop around for the best deals for your phone, internet and fuel bills and review your suppliers every year to see if you’re still getting a good deal.

5. It’s all about the side-hustle

There are no simple ways to increase your income. Possible options might be take on extra work – perhaps a job you could do from home, such as child minding, or turning a hobby into a small business, selling things you make. If you have a spare room, you might think about taking in a lodger.

How to find places in your budget where you can save

6. Do up a budget

The best way to assess what you are spending and get control over your finances is to complete a budget. Our free Budget Planner puts you in control of your household spending and analyses your results to help you take control of your money. Alternatively try keeping a spending diary for a week or two where you write down everything you spend from the smallest stick of chewing gum to filling the tank with petrol. This will help you identify items you might be able to cut back on.

7. Have a goal

Having a savings goal can help determine which account is best for you. If you have more than one goal you could use different accounts for each one.

8. See if your bank offers bonus rates

Some accounts may offer a high bonus rate which is designed to tempt you in – but bonuses drop off after a certain period. If you don’t have time to keep switching, avoid accounts offering bonus rates and look for a rate that’s been more stable historically.

9. If you don’t know where to start with bank accounts, try comparison websites

Best buy tables and comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs. Not all comparison websites will give you the same results, so make sure you use more than one site before making a decision.

10. Set up a savings account

If you want to earn a bit more interest then consider a regular savings account but remember, with these types of accounts or fixed term accounts you might not be able to access your money immediately without paying a penalty.

What is the best way to create a budget?

11. Review your budget every few months

Life is unpredictable so try to review your budget and your spending if there’s a change, or at least every couple of months. You might get a pay rise, which means you can save more, or you might find your household bills increase.

12. Put time aside to manage your money (like you put time aside to go to the gym, see friends etc.)

Taking the time to manage your money better can really pay off. It can help you stay on top of your bills and save £1,000s each year.

13. Use an app to help you budget

There are also some great free budgeting apps available and your bank or building society might have an online budgeting tool that takes information directly from your transactions. Just grab as much information as you can about your income and spending (bills, bank statements…) and get started.


Want to retire wealthy? Start with your 'money personality'

Image result for Want to retire wealthy? Start with your 'money personality' FILED UNDERPERSONAL FINANCE  AT OCT 2

For those seeking ways to build wealth (or just to get rich quick), there’s no shortage of advice out there.

Personal finance sites abound online, and self-styled radio talk show experts dispense wisdom with varying degrees of accuracy.

But one study found that your fundamental attitudes about money can be a predictor of your ability to accumulate wealth.

The study, published in the Journal of Financial Planning, looked at the correlation between certain behaviors and four “money scripts” — or, put another way, four money personalities.

And, spoiler alert: Only one of the four money scripts is particularly conducive to getting wealthy.

But Tom Murphy, a certified financial planner and CEO of Murphy and Sylvest, said the good news is, like anything, once you recognize that you look at money a certain way, you can take steps to change.

“Recognizing why you are doing what you’re doing is strongly correlated with changing it,” he said. “Lots of times, once people understand their money personality, how they deal with money, they can actually go in and change their behavior.”

Murphy said that money beliefs shaped by childhood trauma are, of course, much harder to overcome.

Nevertheless, parents who are conscious about the way they talk about money to their children — even in tough times — can help teach fundamental lessons about saving.

“Here’s how you teach the right lesson: When the child wants something, you tell them that’s fine, but they have to use their own money, and in two weeks, when it’s broken ... then they don’t have it anymore,” Murphy said. “Give the child the opportunity to make a bad decision.”

He gave similar advice about investing: If you manage small amounts of money as a kid, you have a better sense for how it works when you’re an adult.

“They either like it or they don’t — that’s a hugely valuable lesson to learn,” Murphy said. “And lots of people don’t learn that until their 20s or 30s.”

So which money personality do you have? Here’s how the four break down:

1.       Money avoidance: Money avoiders believe money is morally corrupting — that rich people are greedy and therefore they, themselves, don’t try to amass wealth when they get it.

2.       Money worship: Money worshippers believe that money will solve all their problems, and that their happiness and power is tied exclusively to having enough money.

3.       Money status: Those who follow the money-as-status script believe that their self-worth is equal only to their money. They tend to believe that it’s important to buy new things as a marker of status, rather than because they really need them.

4.       Money vigilance: People who are money-vigilant emphasize frugality and saving — and they’re also a little bit secretive about how much money they have.

You can probably guess which one tends to produce the most wealth over time: No. 4, or money vigilance.

But Murphy said lots of people hold a mix of these beliefs — and can exhibit combinations of unhealthy behaviors, like compulsive gambling or giving too much of your money away to charity. Even hoarding money and being unwilling to spend any can be emotionally detrimental.

Still, Murphy said that, above all, it’s important to pay attention.


Three Tips New Investors Must See

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When I first started investing, I had many questions. Fortunately, I had helpful and experienced investors around me who were able to guide me through my first steps as a stock market investor. However, others may not be so fortunate and may, as a result, be put off from investing due to fears of making a mistake.

Because of this, I thought I would answer three common questions that new investors might have.

How much should I invest in my first stock?

This may be the first question that many new investors might have. In reality, there is no simple answer to this question. It depends on a multitude of factors such as your risk appetite, portfolio size, and investment strategy.

Having said that, I believe that all investors should still follow a few rules of thumb before making a decision on this.

First, our investment size should be large enough such that the commission charges do not exceed 1%.

For instance, investors should try not to make a transaction below $1000 while using brokerages that charge a minimum of $10 per transaction. Overlooking the effects of these transaction fees could be detrimental to our overall portfolio returns.

Second, investors should diversify their portfolio adequately and each stock should ideally not exceed 10% of your entire portfolio. This is to ensure that any bad investments cannot overly affect your total portfolio returns.

Where can I get stock ideas?

Recently, I wrote an article on three good ways we can screen for stocks. Firstly, by screening for stocks those are undervalued or trading at low premiums. Investors can also take a top-down approach and seek out growing industries, before narrowing their options to specific companies within that industry.

Finally, and maybe the best option for new investors would be to use a stock recommendation service that provides monthly new stock picks for investors. It is important to choose a reasonably priced stock recommendation service that has a long history of beating the market.

Should I actively manage my own portfolio or use professionals?

Before deciding whether to manage your own portfolio, it is important that we understand our own investment capabilities.

Investing requires patience, good control of emotions, and an understanding of businesses and stocks. New investors who are looking for above average returns and have the confidence and knowledge on stocks should consider managing their own portfolio. This is because we can have better control over our finances and can avoid paying hefty management fees.

Unfortunately, there are also often numerous retail investors who over-estimate their capabilities or are prone to investing mistakes due to greed and fear. This has led to retail investors underperforming the index by a considerable amount.

For instance, between 1990-2000, the S&P 500 index returned 7.81% annually. On the contrary, retail investors averaged only 3.49%. If you fear that you are unable to make good investment decisions due to poor control of emotions, seeking a professional for help may be your best option.

The Foolish bottom line

New investors will unsurprisingly have many questions before they start investing. Hopefully, this article adds a little bit of insight for new investors who are just starting out on their investment journey.


Saving money made simple for pensioners

SAVING MONEY: John Scarborough says people should grow as much food as they can, and that lettuce, silverbeet and herbs are good crops to start with.OLD age pensioners are the salt of the earth.

Most soldier on, without complaints.

They are not whingers.

Most went through hard times where seeking second-hand goods were a habit as there was no money to buy anything brand new.

They survived to become great, unheralded, true blue Australians.

Luckily in those days, the only drugs were tobacco and alcohol, not the "killers" we see on the streets today.

Now, on small pensions, they must learn how to top up those empty pockets.

Below are some tips and information that could work for you.

Be determined, be lucky.


Catalogues

First of all, don't regard the shopping catalogues that are shoved into your letterbox as junk mail. Far from it. They are valuable and your guide to cheaper shopping. We study them; make our lists and do our thrice-weekly shopping trip - what we call our "big shop".

Because the big supermarkets are grouped together, it is not physically exhausting to visit each one, if your object is to save money.

It's not a wise thing to limit all you’re shopping to one supermarket.

With the fierce competition at present with the half-price specials they offer, study each catalogue carefully and mark off the items that interest you and will benefit your pocket. Relax with a cup of tea or coffee, and a nice digestive biscuit. Be at peace but alert. If a supermarket offers you a regularly used item at half price but it's a big quantity, talk to a friend or a relative and go halves.

With these half-price specials, you are buying two for the price of one, therefore not increasing your spending.

Shopping Lists

Now write down your shopping list and set out for the shops.

Remember, if you have a certain day for your shopping and your pension is not paid the same day, you can ask Centrelink to change the day you receive the pension.

For example, we changed our pension day from a Thursday to Wednesday, to suit us.

Take it easy at the shops. Sit down in the air-conditioning, have a cup of tea or coffee and relax. Remember, this day you are saving money. Don't rush, be calm and save.

Buying Meat

Buying meat at a supermarket is not a wise option. The only advantage to you, the shopper, is that it's in the same place you buy your groceries.

The supermarket meat packages are eye-catching as they concentrate on a price point. A single piece of meat, in a small tray, could be, say, $7 but when you look at the price per kilo, it is sky high, (pop a Valium)

If you are curious, visit your local butcher and compare the price, you will be surprised.

We shop at a local butcher in Burnett St, Bundaberg, where you can buy a couple of kilos of pork spare ribs for just under $10 a kilo.

We mention shops as a guide. We do not gain financially from this. It's your choice. The same meat in a supermarket could be pushing to $20 a kilo.

We remember a time when breast of lamb, a fatty cut, was so cheap. Now one supermarket advertises this as lamb riblets. The price we are not sure on, but it must be $10 a kilo or more.

Once upon a time dog bones were free, a gesture of goodwill, from the butcher to his regular customer.

Fruit and Veg

The same principle applies to fruit and vegetables.

We shop at a greengrocer where they sell a lot of local produce, bought from nearby farmers.

Prices are very cheap on bucket lots but don't be surprised by a couple of duds.

Look at the price and save.

Shalom markets, on a Sunday morning, are where you can get bargains on fresh produce. I reckon many stallholders are farmers themselves.

But this market, besides being cheap, has a variety of goods on offer.

We buy our bread from Coles at $3 a loaf. It's an Italian-style Pane de Casa, which, when toasted with two free-range eggs, is a trip to paradise at breakfast each morning. That's our indulgence.


Weekly Menu

We find it essential to make a weekly menu.

You are able to see what you plan to eat each day, so shop for those ingredients.

If you're not making casseroles or stews, you won't need carrots, for example. Leaving carrots in the fridge for too long will make them soft.

Keep to your shopping list; don't be tempted to buy items not on your list. Also, if you make shepherd's pie or bolognaise sauce and you are only a couple or single, buy twice enough meat.

The extra portions that you make can be put in the fridge for the next day. Heated and served, it often tastes better as the sauce/pie is rested. Most importantly you have an evening off from cooking.

TV Shows

TV programs like Masterchef and MKR are okay to watch but expensive to copy.

I don't think your partner would be impressed with a small portion of something exotic with a sprig of parsley on the top.

The important thing to remember is "you are what you eat".

My wife and I eat fruit, vegetables and salads each day. Fruit and veg, or fruit and salad. When you really think, these are natural and fresh and should contain all the natural ingredients and vitamins to satisfy your body.

I know fresh and natural have sustained my body and possibly made me look a bit younger for my age. I don't need expensive anti-ageing cream, I get mine in an apple or similar.

Remember, an apple a day keeps the doctor away, and the dentist at bay.

Payments

Pensioners receive their pension every fortnight, which means there are 26 pensions in a year.

Now, instead of spending your pension every two weeks, spend it every three weeks.

Therefore, in your mind, you receive 17 pensions.

Okay, still with me?

Because it's become three weeks, that should become your main shopping day.

Obviously you will have to top up with the basics, such as milk and bread, and perhaps a beer in between main shopping days.

You will need determination to get it to work for you, otherwise be lackadaisical and you will fail.

Now because you are only using your new 17 pensions, you have what we call "nine free pensions" (your 26 fortnightly pensions have become 17 three-weekly pensions.

With those nine free pensions you can put money aside for rent, rates, power bills and holidays, which you deserve.

Also splurge on a new dress, a new took box, whatever.

We managed to save money, once the system was working, for a cruise to New Zealand. With the extra though, it's important to "kill" those big bills quickly.

But be careful with your money.

It will take a bit of time getting used to changing that fortnightly pension into a pension you start spending every three weeks.

It works very well for our household, a married couple. It's all about being strict with you and then enjoying the benefits of those nine extra pensions.


Other Ways to Save

Look at other ways to save money. Look at growing vegetables in pots if you yearn for that "younger look" and want to eat fresh. Good starters are lettuce, silverbeet and herbs if you're an inventive cook.

An herb assortment relates to your cooking requirements, so easy starters are parsley and basil.

With lettuce you buy a punnet containing, say, six seedlings. You can get those six into a big pot. Water them well, give them a nitrogen fertilizer weekly and you will harvest six lovely lettuce.

They'll cost you about 50c each. In the shops you'll pay up to $2 a lettuce, but yours is fresh from the pot and chemical free.

Another good tip is put all your gold loose change in a moneybox. Open it in December and have a very merry Christmas.

Another is, if you are a couple, open separate bank accounts away from your usual joint accounts. Use it to put the odd $5 or more into this account.

Just let it grow, don't use it.

Open the account with someone like Bendigo Bank, it's fee-free. In no time you have $100 or more, enough to take your "old dutch" out for dinner.


Health

Now a reminder to your health providers at the end of the telephone line.

The Home Doctor phone number is 13 55 66. If you have an illness of just feel crook, remember this is a free service. It's bulk-billed to Medicare, so you do not need money and they come to you.

If your mind fails you at times, like the writer, keep your scripts with your chemist. They oversee your health for free. They supply you with blister packs containing your medicines. If you are sick, many will deliver to your door.

Also remember chemists are professionals. If you occasionally question your doctor's view, medicines, the chemist is a good bloke or lady (better not say sheila) to talk to. Also they have a sense of humour, like mine.

You come out with a grin on your face. A laugh a day is a good target.

That's all folks. We hope you succeed. It took us a bit of time getting used to it, but we made it work to our benefit.

Now it's natural for us to think of 17 pensions a year and nine free ones.

Good luck.


Five money tips to give your children before they start university

In the coming weeks, hundreds of thousands of excited 18-year-olds will be heading to university. It is daunting for both the new generation of undergraduates and their parents.

University will be a long list of firsts – and many of these will involve money. Having a bank account with an overdraft (and very likely the offer of a credit card, too) will be just the start. There will be rental contracts and deposits, student loan borrowing and, for some, the eye-opening experience of doing a grocery shop.

What is the most useful financial advice a parent or grandparent can impart? Here are five suggestions.

Basic planning

Many 18-year-olds will never have budgeted properly in their lives, and having to meet essential food, housing and other costs could come as a shock.

Helen Saxon, the chief money analyst at moneysavingexpert.com, said: “They’ll need to sit down – and maybe parents can help in these remaining weeks – and work out how much cash they’ll have coming in, including their student loan, anything parents are giving them and any earned income from work.

“If parents impart one tip to their son or daughter, make it this: don’t spend everything at the outset. They may want to join every university society, but unless they’ll be doing paid work during term the money they have at the outset needs to last.”

Ms. Saxon said it would be helpful to plan their spending in terms of weeks or months. It’s important to point out that spending on socialising is fine – and a big part of university life – but it needs to be affordable.

The allure of an overdraft

A student bank account with a 0pc overdraft can be an incredibly useful safety net. But the dangers of an overdraft – which can seem like free money – are obvious.

Ms. Saxon said treating the overdraft as a “buffer” rather than accessible funds is imperative. “That overdraft is a safety net, and needs to last all year,” she added. “While 0pc overdrafts are useful and should help with cash-flow, they should not be treated as available funds. An overdraft is a loan that must be repaid.”

Telegraph Money’s favorite student current accounts are the Santander 123 account, which pays 3pc interest on balances between £300 and £2,000, and Nationwide FlexStudent, which has an overdraft rising to £3,000 by your third year and pays 1pc on credit.

The HSBC student account is great for freebies – it comes with a £60 Amazon voucher and a year’s free membership to Amazon Prime, but pays only 1.5pc on credit balances.

Credit cards

Unless their parents are wealthy and generous, most students will have cash crises at university – and a credit card could seem the answer. It’s incredibly important, however, to make sure borrowers understand that credit isn’t interest-free in the same way as a student overdraft.

Highly organized borrowers can make use of credit cards and, by paying them off soon enough, avoid costs while benefiting from the perks – but that’s a steep ask of a student.

The HSBC Student Visa Credit Card, connected to the student account (see above) provides up to £500 of credit with an interest rate of 18.9pc. It also offers cashback on some purchases, and the chance to win NFL tickets.

The Nectar Low Rate Credit Card, offered by Sainsbury’s, has an interest rate of just 5.94pc with a credit limit of £1,200. The student can collect Nectar points too, which could help them save on the weekly shop.

Understand your student loan

Getting to grips with this controversial and complex arrangement now could help indebted graduates down the line.

In the post-2012 student loans system, those graduates earning less than £21,000 (the threshold for repayments) are charged interest at RPI, currently 3.1pc. Those earning more than £41,000 are charged RPI plus 3pc – so 6.1pc – with a sliding scale in between.

Bizarrely, the maximum possible interest applies to the debt while they are studying, meaning that it will do nothing but grow. Student debt is cancelled after 30 years of repayment, so for many the size of the ultimate borrowing will not be relevant.

Safeguard your credit rating

Numbers disclosed by Telegraph Money last month showed that the typical student has a credit score 15pc lower than the national average.

While a student loan won’t show up on a credit report, other outstanding debts do so loans and credit cards need to be managed. ClearScore, the firm behind the research, found a quarter of students have a personal loan.

A quarter of students had also admitted to defaulting on a debt – most likely a mobile phone contract – and this too can wreak havoc. Regularly spending on a credit card while paying it off can actually help a credit rating. But using it to fund their lifestyle could land them in hot water.

The easiest trap to fall into is with utility bills. Half of students reported being listed on bills alongside housemates. In most cases, providers won’t treat you as financially linked, but if you set up a joint bank account to pay bills then a default could hurt your credit rating.

Ewan Armstrong, 20, a human biosciences student at Exeter, shares his experience

I decided not to have an arranged overdraft when I started uni a year ago: I have always dreaded feeling indebted. Instead, I keep a buffer of at least £100 in my account as a self-imposed overdraft that I promise myself I will never touch.

I have friends who’ve developed the terrible habit of refusing to check their account balance. This out-of-sight, out-of-mind mindset will catch up with them in the long run. I look at my balance and account summary on the NatWest app every other day.

A recent phenomenon among students is Monzo cards. It’s a debit card but one that tells you how much you’re spending on groceries, eating out, transport or bills.

I make most of my transactions via contactless or Apple Pay on my phone. Not even needing to enter a Pin runs the risk of making it easier to spend more, and I have found myself leaving the supermarket having paid contactlessly and not knowing exactly what I’ve spent.

Even so, I think the danger of thoughtlessly paying via contactless is offset by how using cards makes it easier to track spending.

There’s a perception that students can’t or shouldn’t invest money. But without a doubt the money-related achievement I’m proudest of is finding an app called Moneybox.

It rounds your card purchases up to the nearest pound and invests the pennies into a fund depending on your stated level of risk (for example, it invests 15p after you buy an 85p coffee). It has seamlessly invested about £1 a day for me over the past year. Aside from being an easy introduction to the world of investing, finding £300 tucked away in an app is every student’s dream.


5 Money Tips to Help Your Side Hustle Succeed

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1. Maintain three to six months of savings in your account. “As a contractor or part-time worker, your income will tend to ebb and flow,” Gugliuzza says. “Having an emergency fund with enough savings to cover three to six months’ worth of your critical expenses can help ensure you can pay your bills, even during times of low employment.” Figure out what this necessary dollar amount is and make sure your bank account is ready to go before you take the full leap into the gig economy.

2. Keep a handle on your debts. As part of the gig economy, you’re still responsible for paying taxes on what you earn, and bad news: You don’t have an in-house HR or accounting department to make that happen for you. “If you’re doing contract work and don’t want taxes withheld from your pay, you’ll need to make quarterly estimated state and federal tax payments,” Gugliuzza says. You’ll save yourself a lot of stress comes tax time if you are careful to put away a portion of each payment you receive and flag it as a tax payment before you accidentally spend it. Consider reaching out to a professional now to walk you through the specifics of the tax code in the area where you live.

3. Understand how much you need to save. While you may be feeling somewhat removed from your pals who are working in more traditional jobs (go on with your bad self!), the truth is that many of your financial needs are still the same as theirs. Take some time to establish some goals for what you’ll need to save for retirement or other long-term goals. There are plenty of tools and calculators available online to help you crunch these crucial numbers on your own.

4. Investigate investment opportunities. You can still take advantage of investment opportunities, even if you’re not working in a traditional full-time job. A 529 college savings plan can help you stash away funds to further your own education (and is a good way to save for your children’s future tuition as well). You should also do your homework on IRAs, which can help you grow your retirement nest egg so you’ll be sittin’ pretty when the time comes for you to quit that side hustle life. There are a lot of misconceptions out there about IRAs — for one thing, that you need to work a corporate nine-to-five to invest in one — so be sure to do your research!

5. Seek expert advice. There’s no shame in asking for help, especially if you’re new to working in the gig economy. A financial or business adviser will be able to help you figure out what your specific goals are, and they can help you put together a plan to make them happen. An action plan like this should make it a whole lot easier for you to follow through on the other four tips — and to do it effectively.


Easy financial tips to get on track

PictureMoney is something that individuals usually need more of but frequently find in short supply.

People worry about money.... a lot. According to the YouGov poll for the Institute of Financial Planning and National Savings and Investments in Great Britain, nearly two-thirds of respondents worried about their finances, with 43 percent saying they worried about money "more often than not." Things aren't much different in the United States, where a recent survey from Lincoln Financial Group showed that 53 percent of respondents worried about having enough money for retirement.

Taking charge of personal finances may seem like a difficult undertaking, but you don't have to make drastic lifestyle changes to grow your savings. Try these tips to save more and live a more financially-conscious life.

· Keep financial records. It's hard to determine your financial standing if you do not prioritize record-keeping. Find a method that you can stick with consistently. Some people prefer old-fashioned bookkeeping with pen and paper, while others may like the convenience of software and mobile apps. Having financial matters clearly visible in black and white can show a clear picture of how much money is coming in and how much is being spent.

· Explore auto-withdrawal and deposit. Many financial institutions offer several services to customers that can make banking and money management easier. You can set up a savings account and have money automatically deducted from your paycheck and deposited into this account. Even small deposits add up over time. You also can arrange for automatic bill pay so you don't have to worry about accruing late fees for missed payments. Check with your bank or credit union about these types of services.

· Put a change jar in your house. Change might not be popular, but it is money. Having a jar or bucket in a location of the house where you set your wallet or purse may encourage you to save that loose change for something larger. Place loose change in the jar and watch it add up. Some banks have coin-counting machines, which can make it even easier to cash in your change.

· Sign up for shop-and-earn programs. Everyone from credit card companies to major retailers offer incentives to repeat customers. These include cash-back or other perks for a percentage of the money spent on purchases. These programs equate to built-in discounts and can help you squirrel away even more money without making a conscious effort.

· Consider investing. Investing can put your money to work in exchange for a return. There are many different types of investments available. If you are an investing novice, work with a financial planner or broker who can help you find a level of risk you are comfortable with.

· Pay off debt. The earlier you can get rid of outstanding debt, the better. Put money toward high-interest loans and credit cards so you aren't paying so much in costly interest charges. Afterward, you can start saving in earnest.

Learning to take charge of personal finances early on can set you on a course for financial stability throughout your life.


How to Invest When Market Volatility Picks Up

We are currently investing in an extremely noisy political and economic environment. While markets have remained remarkably subdued during recent times, it is inevitable that greater volatility will emerge. The question is: how should we respond?

As investors, our natural impulse when faced with arresting news or growing uncertainty is to react. Our instincts tell us to take action to protect portfolios or to profit from a particular outcome. This adrenaline fuelled ‘fight or flight’ response is deeply ingrained within us and exists for good evolutionary reasons as early humans who did not have these instincts were less likely to have decedents.

However, this impulse towards action causes a real challenge for investors.

There is an abundance of great research on this topic; however one of the most relevant was a study by Barber & Odean which shows a clear link between portfolio turnover and the results generated by individual investors.

Those portfolios in the highest quintile of turnover delivered returns more than a third lower than those in the lowest quintile of turnover. To say this simply, the impulse towards action is not beneficial to returns.

The Impulse to Action

Alongside the evolutionary impulse and incentives, action is also being encouraged by an array of behavioral biases that revolve around overconfidence, the rejection of opposing views and a preference to recall the recent past.

Most vividly, the ‘recency bias’ makes our recent experience easier to imagine than those experiences that are more distant. This leads us to believe that current trends will continue indefinitely. In contrast, the ‘law of small numbers’ is another behavioral trap that creates an expectation of mean-reversion in small sample sizes, thus encouraging investors to risk too much capital on positions designed to capture small market deviations.

In view of this, it is hardly surprising that most portfolios managers and advisers are far too active in their investment operations. We typically see this via increased costs and poor performance.

Overcoming the Impulse towards Action?

To get practical, there are several strategies to help overcome this impulse to action. The key is to prepare rather than react, as it is likely too late to address the impulse for action when it arises. For the portfolio manager or adviser to overcome the urge to make unnecessary changes to the portfolio, it is important to initiate the strategies beforehand. A good example of how to do this is provided by the story of Odysseus facing the Island of the Sirens as he returned from the Trojan War.

Our hero knew the encounter with Sirens was both inevitable and dangerous and so he prepared himself beforehand.

In this sense, the best preparation was education. Most clients are unaware of both their behavioral biases and the impact that those biases have on a portfolio. A basic education in behavioral science is therefore the first step, as investors who are aware of their biases are less likely to fall foul of them and more likely to be understanding of the adviser’s attempts to overcome them.

Second, one should ensure they have good navigation aids. Our biases create structure to our decision-making that results in predictable mistakes, much like a poorly drawn chart creates repeated navigation errors. In order to overcome this, we need to ensure that we use navigation tools that are fit for the job and enable us to overcome the inevitable obstacles in our path. One of the more popular ways is to create a core set of investment principles that are drawn from the observations of how great investors overcome their biases.

The third is to change the narrative of market movements. Much of the impulse to action comes from the type of investment data we consume and how we consume it. For example, many investors are drawn to recent past performance with an upward moving graph and green numbers. In contrast, red numbers and falling charts create a negative connotation. This naturally exposes us to loss aversion.

Avoid overhyped financial news and broker research designed to prompt action. Instead, one should be incentivised to focus on long-term prospective returns using a fundamental valuation framework.

By doing so, we change the itch to ‘buy high and sell low’ and turn it into a compulsion to ‘buy low and sell high’. Said another way, a rise in prices is viewed as a fall in prospective returns. While this helps address the recency bias, it also reduces exposure to the law of small numbers as most daily movements in asset prices appear to be vanishingly small in the context of a decade long return expectation.