Owning a car: The extra expenses

by Magical Penny on December 6, 2016

CarPurchasing a car requires a substantial monetary outlay. Ranging from £5,995 for a new Dacia Sandero to £3.77 million for a new Koenigsegg CCXR Trevita, cars are on the low end of the price and the high end of the price scale are not cheap.

When considering whether or not purchasing a car is affordable, the cost of running a car on the road is usually forgotten about. Below is a list of extra expenses that you will encounter if you purchase a car.

Car insurance

Trying to find cheap car insurance is almost impossible task in 2016. Over the past twelve months, the average cost of annual car insurance rose by 13.5% to an astounding £788 per anun. For younger drivers under the age of 25, the average price of car insurance is a frankly ridiculous £1,831 in the United Kingdom. This yearly fee which allows you to legally drive your car on the roads, is something which every person looking to purchase a new car should look into. Utilise websites such as Go Compare, Money Supermarket or Confused in order to find out how much a car will cost someone in your age bracket to insure.

Car tax

Depending on how CO2 efficient and how old a car is, car tax can either be extremely cheap or ludicrously expensive. Cars like a 2015 Volkswagen Polo, which has Bluemotion stop-start technology costs a measly £20 to tax for a full year; while cars which emit over 255g/km of CO2 can cost a driver over £1,000 in its first year being taxed, and £500 in each year following. It is essential that ensure you check which tax rate band the car you are considering buying falls into before purchasing.  

Refuelling

The cost of fuel is something which is very rarely considering by people when they consider purchasing a car. However, depending how often you drive your car, consistently refuelling can be a financial burden. If you commute to and from work between Monday and Friday, then utilise your car for leisure at the weekend, running costs could amount to over £50 per week. That is an astonishing 10 per cent of how much an average household spends per week.  

My first ever car My first ever car

Car maintenance costs

No car that money can buy is perfect. At some point, you are going to have mechanical faults that will need to be fixed and your car will need to be serviced on multiple occasions. Mechanic fees can be ludicrously expensive, so ensure that you purchasing a car with a long warranty, or utilize websites such as whocanfixmycar.com to find the cheapest mechanics in your area.

Car cleaning costs

Particularly during the winter months – when roads are lined with salt – keeping your car squeaky clean can be tricky and also quite expensive. Drive-through car washes are obviously more expensive than cleaning your car at home, however purchasing cleaning utensils that will not damage your car will also cost a substantial amount of money.

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Where do I earn a good return on my savings?

by Magical Penny on December 2, 2016

investingIt’s fair to say that the world has changed a lot since the financial crash nearly a decade ago, and it has affected families across the board in the UK. Bailing the bankers out has left plenty of bitter resentment among ordinary people, and it is what makes the difficulties facing those trying to save money these days all the more infuriating.

Perhaps the last bastion of hope to fall was the hugely popular Santander 123 account, which, after formerly offering a return of 3 per cent on all savings below £20,000, slashed its rate in half last month. It means that pickings are now pretty slim out there in terms of where to safely leave your money. Here are some of the best remaining options.

Er, Santander 123?

Depressingly, even after the dramatic cut Santander have inflicted on savers, the 123 account is still one of the best options out there. That’s because, in addition to the ‘good’ rates of interest on offer, you can also earn 3 per cent cashback on bills such as TV, mobile and internet, while additional cashback can be earned on things like council tax, water, and even mortgages or home insurance if they are sourced through Santander. There is a £5 monthly fee, but the interest and cashback will knock that out the park. In addition, you can hold two of these accounts, provided the second is a joint account.

Nationwide FlexDirect

The FlexDirect account from Nationwide offers a pretty quick win, with an impressive 5 per cent return on your first £2,500 saved for 12 months, with it tapering off to 1 per cent thereafter. You don’t even have to have any direct debits set up either, so there’s no harm in simply opening one of these as an extra.

investing for the futureNew savings bond

At the recent Autumn Statement, Chancellor Philip Hammond revealed that, from next year, Brits would be able to earn a rate of 2.2 per cent via a new savings bond known as the Investment Guaranteed Growth Bond. This product will be offered by National Savings and Investments (NS&I), and will provide this headline rate of return over a three-year period on an investment of up to £3,000.

Peer-to-peer lending

Amid the gloomy climate for savers and investors, one alternative which has grown increasingly popular is that of peer-to-peer lending, whereby you lend your money directly to those in need of a personal loan via an online platform (ie: it eliminates the middleman such as banks or building societies). This option is presented as a midpoint between savings and investments in terms of risk and reward, given that capital is at risk and there is no Financial Services Compensation Scheme cover if the platform goes bust (or if the borrower defaults). That said, platforms typically have measures in place to counter these risks, and the new ISA wrapper it has been afforded will likely add to the appeal.

sell buy smallBecome a switcher

This option requires a bit of effort, and might not appeal to everyone. But the reality is that banks are desperate to lure customers, and they offer good rewards for doing so. Halifax, First Direct and TSB all offer an initial bonus of £100 with specific current accounts, while M&S offer the same amount in compensation – albeit through a gift card. There are stories of people making up to £800 in bonuses in the space of two years by serially switching account provider. This is obviously an extreme example, but given that there is almost zero hassle for the consumer in switching these days – as per legislation passed in the previous parliament – making a change is something worth considering.

The best of a bad situation

The truth is that the days of getting 5 per cent or more on your money just for putting it away – as was the case not that long ago – are long gone, and it seems that the tough times for savers aren’t about to go away. All we can do is keep our eyes open and ears to the ground, and be open-minded enough to seize on any good-value opportunities that come our way. In such a climate, it is the best way to make your money work efficiently for you.

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Grow Your Wealth With A Business In Financial Services

by Magical Penny on December 2, 2016

door to your dreamsFor those looking to improve their financial position, starting a business in the financial services industry might be the answer. This is an industry which is bound to be lucrative for anyone wanting to start their own business.

Of course, starting and running a business is much easier said than done.

There is a lot to consider, and a lot to take on board, if you want the business to be as successful as possible. As long as you have a keen eye for detail, and you are willing to put in a lot of hard work, there is no reason your business can’t be a huge success. And when it is, you will find that your own personal wealth is much greater as a result. Truly, this is one of the best ways to grow your pennies. If you are keen on giving it a go, then bear the following in mind to make the most of it.

Research Similar Businesses

There is no such thing as a business operating within a vacuum. If you want to know how to successfully run a business in the financial services, then you need to watch others and how they do things. You can learn a surprising amount by researching similar businesses. What’s more, you might also discover some of the things they are doing which are not so effective. Often, business is a case of learning from other businesses’ failures, and this is a good example of where that is the case. There is another main reason that you should carry out this kind of research, which is that you are much more likely to be able to know what niches are being covered and where there is still a gap for you. If you can find a gap for your business to move into at this early stage, then you will be much more likely to get the business off to a good start.


Plan It Welltoday is soon the past, the future is forever

Something which all business owners can be agreed on is that success in business is reliant upon proper planning.

Planning is often what makes the difference between success and failure clear.

If you are unsure how to plan out a business, there are plenty of template business plans online which should help you. In a general sense, however, you should be aware that a business plan marks out exactly what you expect to do at least within the first year of business. You should endeavour to be as detailed as possible here, and to make sure that you cover every possibility. Planning is what ensures that you know what your business is doing, and how it is going to do it. The main thing is that you sit down and spend as long on it as possible. This alone makes a huge difference to how successfully the business operates, and so how well it is likely to do in the future.

Hire Those Who Are Passionate

It goes without saying that your business will need a great core team of people to get going. However, knowing how to find those people and what qualities to look for is something else altogether. Above all, you should generally look for people who are really passionate about whatever it is that you are doing. Ultimately, going for people who have a lot of experience in financial services is always going to be a good idea. But if there is not the passion there to back it up, then you might want to reconsider. It is passion, above all, that drives a company forward, and it is worth bearing that in mind during the recruitment process. However you approach the hiring process, however, you should be sure to choose your core team carefully. They are the ones who will actually be looking after your business, so it is vital that you choose them well.

Choose Your Tech Well

All modern businesses rely upon their technology at least a little. This is something which any business owner knows too well. But when you are just starting out in business, it can sometimes be surprising just how important the technology actually turns out to be. This is something that you should try to prepare yourself for, as it can be shocking. When you are setting up, be sure to choose your technology as cleverly as possible. You want to make sure you have equipment that is going to serve you as well as possible. Otherwise, it might mean that your daily processes are not as polished as they can be, and this can cause some significant issues in the daily running of the business. What’s more, it is vital that you get proper financial services it support. You never know when something might go wrong with your technology, and you need to be able to fix it as soon as possible, so you can get your business back up and running.

Be non-negotiable on some goals to keep pushing upGrow Your Capital

Regular readers of this blog will know that it is all about helping you grow your pennies. Well, the same applies to business. You need to make sure that you are constantly raising capital to work with in your business. Otherwise, you just won’t have that safety net that you need when something goes wrong or the market takes a sudden downswing. It is much more difficult to be successful in business if you do not have the financial impetus to do so. Make sure you are constantly working on ways to grow your capital – otherwise, it might cause some severe problems further down the line.

Establish Services & Build Trust

Finally, you will need to establish what services you are actually offering, and at what rates. You need to have these clearly marked out somewhere, so that potential clients know exactly what you offer. This is an important part of building trust with your client base – something which you should put a lot of effort into. The more trust people have in you, the soon your business will grow.

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Over One Million Young Brits Risk Credit Chaos By Skipping Bills

by Magical Penny on December 1, 2016

It can sometimes be hard to pay all your bills on time. In fact according to recent research, 1.2 million aged 18-34 year old have skipped a bill payment.

cautionOther facts from the research include:

  • 31% of young people have been rejected for either a mortgage, store card, personal loan, mobile phone contract or car finance
  • 62% of the UK feel more should be done to explain the impact of a missed bill
  • The average unpaid bill is just £7.60, which is enough to have a mortgage application rejected

New research reveals that 1.2 million Millennials (18-34) have ignored a payment such as the last month of a phone contract or a household bill. Nearly a third (31%) of this age group has been rejected for a financial product such as a mortgage or store card because they have defaulted on a repayment.

This is despite the average outstanding amount being less than £8 (£7.60).

Defaulting on any payment – big or small – can cause difficulties in the future because of the negative impact it has on someone’s credit score.

HTC Desire PhonePhone contracts are the most readily ignored bills.

16% of young people admit to ignoring the last payment of a contract, this figure is three times higher than the proportion of older people who admitted they had done this.

A lack of knowledge could be the route of the issue: 62% of the UK population don’t feel informed about the repercussions of missing a payment and this number rises to 70% amongst the Millennial generation.

The most common reason people gave for missing a payment was that they already thought the final payment had been paid (27%) but almost a quarter thought it didn’t matter (23.4%).

 

CEO and ClearScore founder Justin Basini comments:

“Missing a minor payment may seem harmless at the time, but it can come back to haunt you.

The consequences of defaulting on a payment – even it’s just a small amount – can be huge. A lender will take into account the information in your credit report before giving you a mortgage or a credit card. This isn’t just about how much you owe or earn, but more importantly how you have managed your credit in the past.

 Unless it’s a bank or credit card firm, organisations aren’t legally required to let you know you’re about to default on a payment. The onus is therefore on us to keep track of what we owe to whom. If you’re not sure whether there could be an unpaid bill lingering, arm yourself against the disproportionate punishment of being rejected for credit by checking your credit report online for free.”

Thankfully, ClearScore enables users to find their credit scores for free. They provide plenty of information on how to do this on their website along with a range of tips on how to improve it.

Ultimately I hope this post inspires you to not miss a bill again. Instead, get organised – there’s already many things to get stressed about – don’t let financial dis-organisation add more stress in your life – a possible New Year resolution perhaps?

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Get A Grip On Your Spending

by Magical Penny on December 1, 2016

They say that money makes the world go round, and they are not wrong. In fact, it often feels like you have to spend money to get anywhere in this life. But what happens when you spending spirals out of control? Well, you have to stop and take stock of where all that money is going and work out how you can spend in a much more sensible way. Read on for some more advice.

Using credit cardsCash or card

There are several tricks that you can do to keep onto of your spending. Some people get out there spending money allowance for the week in cash, and then when it’s gone, it’s gone. They don’t allow themselves anymore until the start of the next week.

However, for some people, cash can create a problem. As all that loose change in your wallet seems like nothing, when it actually adds up to a significant amount of money. It can be really easily to spend it on little inconsequential things and before your know it… poof! It’s all gone! So it is better for people like this to empty out their wallets, whenever they get home into a change savings jar!

Is a loan a good idea?

It might seem like when you’re trying to keep a hold on your spending, a loan isn’t the best of ideas. But this isn’t always the case. In fact, a loan can often help you out of a sticky situation that could end up costing you more money in the long run.

For example, you may need to secure a loan if your car breaks down. Then you can get it fixed properly by a reputable dealer, so it won’t break on you again, a few weeks down the line.

Another factor you should consider when getting a loan is the type you are applying for. You can choose from bank loans, secured personal loans or instant payday loans. Always read the fine print to ensure you know which one is best for your situation.

Ultimately a loan must be paid back and it can get expensive so if you do decide this route, go in with your eyes open about the cost.

Make it relevant

One thing about getting a grip on your spending is that it can be easy to get off track. It can start with just little things like an extra bag of sweet while you are doing the shopping. Or stopping off at your local coffee shop to commiserate yourself with a frappuccino, because you have had a bad day. Then bam! Before you know it you’re back into your old spending ways again, and you are getting further and further away from your financial goals.

A great way to minimise this risk is to make why you are getting your spending under control relevant to you. Maybe you are doing it so you can save for a house? Maybe you want to set a good example for your kids when they go to university? Whatever the reason grab a picture that symbolizes this to you and put it in your wallet. Then every time you are tempted to overspend, look at the picture first. This should help you keep your resolve.

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Introducing Money Life LIVE – A Magical Penny Event and Meetup

by Magical Penny on November 29, 2016

Guys, I’ve got a huge announcement.
I’m putting on my first ever event!

It’s for anyone who wants to get more clarity on their financial situation, and get fired up to take it to the next level in 2017.

mll-logo-i

Money LifeLIVE is a full-day life-changing event happening in central York on Saturday 14th January 2017.

Through conversations, presentations and question and answer sessions with experts, you will gain clarity on your money and your life. Most of us have had money troubles some time in our live. Some never get to fix them in their lifetimes, driving them to lead lives of desperation, their potential unfulfilled, and their contribution to the world, lacking.  

In 1 day, gain clarity on what matters in your life, and learn how to optimise your financial life, together with a community committed to creating a life they dreamed.

Spend a Saturday with sought-after experts in life planning and financial advice

I haven’t seen anything like it in the UK before. It’s a conference that will provide access to information typically reserved for private clients with large budgets.

 We’re designing an experience unlike any other.

It’s not a sales seminar.

I won’t be selling you fancy investment strategies or offer trading tips.

But equally it’s not going to be a “woo woo” event that’s all inspiration but no practical information. Yes, you will feel energised and inspired but there is substance to back it up from qualified professionals. You will leave with pages of notes and practical information to take steps forward in your life.

There are some events I’ve been to that only lasted a day or a weekend, but they’ve had a huge impact in my life.

That is my intention for this event too.

 You will leave this event feeling what it’s like to go from sleepwalking through your life to actually being alive.

 Plus, there’s going to be some surprises too. Because surprises are fun.

It’s going to be a life-changing experience.

  • Do you wish you had the resources to visit any part of the world you wanted?
  • Do you wake up every morning not knowing if you are doing the right things to move you closer to a better life?
  • Does money bring you anxiety and worry? Are you concerned with paying bills and managing expenses?
  • Do you wish you knew others who were as ambitious as you to improve your lot in life?
  • Do you ever feel overwhelmed by all the choices you can make when it comes to saving and investing your hard-earned savings?
  • Are you worried you won’t have enough saved to retire earlier than 70 years old?
  • Do you feel you have to compromise your dreams as you try to get through the day-to-day.
  • Do you always feel too busy to plan for the future because you are facing challenges in the present?

 If your answer to any of these questions is YES, then this might be the most important event you attend in 2017.

So where are you on your financial journey?

Do you have debt?

Get inspired and hear practical tips from Maria Nedeva, money blogger from The Money Principle. Having Maria speak at Money Life LIVE is a real coup for the event. She will bring her unique energy and tell her story of paying off £100,000 of consumer debt in less than 3 years.

Do you want more financial wellness in your life?

Chris Budd is a financial planner, business coach and author of The Financial Wellbeing Book. Chris has a fantastic gift of communication and will be sharing insights from his many years of working with clients to discover what is truly important to them and then devising a plan to get there.

Chris will be speaking on the principles of financial wellbeing – helping you to work out how to improve your finances and create plans based around increasing your happiness.

The insights from this talk alone will be worth the price of admission and we’re thrilled Chris is joining us for Money Life LIVE.

Chris walks the walk he talks, so get ready to make lots of notes to take action on for a happier life.

Do you need to fix your financial behaviour?

Then you need to hear what Andrew Hart has to say. He’s a Financial Life Planner and financial adviser who helps families every day to live their dream lives. He will be talking about human misjudgment and financial success at Money Life LIVE and I’m sure you will finish the session with new insights. You will also have a chance to contribute to a valuable question and answer session afterwards.

Do you mystified by financial jargon?

Then you could benefit hugely from Victor Sacks’ talk. On a mission to de-mystify the financial services arena, Victor is aiming to strip away the technical jargon. He’s a perfect fit for Money Life LIVE to help you gain deeper understanding on the important mechanics of financial planning.

Do you want to earn more money?

Then Emma Drew’s talk will be right up your street! She has an inspiring story of how she found little ways to earn more money and eventually managed to earn over £100,000 ‘on the side’ that allowed her to quit her day job!

She blogs at EmmaDrew.info about practical ways to not only save money, but to make extra money.

Are you super organised and in control? You still should come!

OK, can you answer these questions?:

  • Do you know where all your pensions are?
  • Do you know what your investments are actually invested in?
  • Are your pension and investments it invested appropriately for where you are at in life now?
  • And are you even saving enough?
  • Or too much?
  • What are you even saving for?
  • Could money going into a pension be better allocated to meet some of your other life goals?

 At our core we all need reassurance that what we are doing in our financial lives is the right thing to do. But how can we know if we are doing the right thing if we haven’t defined what the right thing is because…

 A large proportion of the clients I help in my day job walk into a financial planning meeting because they have been prompted by an impending life change, most commonly because they are approaching retirement and need to decide what to do with the pensions and investments they have accumulated over a lifetime.

 As financial planners we are gifted a rare opportunity to hear the hopes and dreams, fears and concerns of others. We all have these thoughts in our minds but the financial planning process draws out these thoughts  into the open. And as they are articulated and documented, the hopes and dreams of our clients become one more step nearer to coming into existence, and the fears and concerns become less scary.

 If you’ve never sat down to formulate a financial plan, life can feel a bit like a never-ending treadmill and it can seem like it’s moving faster and faster.

 Life doesn’t have to be this way.

And you don’t have to wait until retirement to develop a plan. In fact, the sooner you start, the more impactful the process can be.

Coming to Money Life LIVE is a great first step to getting more clarity about what you want out of life and how your money can help achieve it.

 

How much does this day cost? 

Let’s talk about money.

 I’m going to be up-front with you. I’m undercharging for this conference.

 This conference should be far more expensive, especially with the caliber of work that we’ll be doing.

 I’ve carefully selected the speakers. They are hand picked and sought-after experts in their fields. If they were being paid their hourly rate the event would be considerably more.

 My original plan was to do this conference once every year. Now I’m not even sure if I’ll ever do this conference again. That’s why I’m really pouring my heart and soul into make it THE event to attend in 2017. I really believe in this work. I believe in the work so much that I left my research job and gave up thousands of pounds to make a career change so I could do the work required to change lives through real financial planning.

 Not investment tips on some website

Not links to money-saving coupons.

Real financial and life planning.

 And as this is the first event of its kind, I’m not about huge profit margins. I’m not doing this for some big personal payday. I’m doing this because I know what a powerful legacy this event will have in the lives of those of you who are coming to attend.

 I’ve seen some ‘make money’ conferences and investment seminars cost £1000 for a 3 day event. That works out to be £333 a day. Considering what we’re covering in one day and what you’ll leave with at the end of the day, £333 would be a bargain. 

But you won’t pay that.

 To try and learn everything on your own, you’d spend years. Just trying to find the best resources would take months. But in a single day in January, we’ll get you pretty far along with a plan developed for your future.

 To work with all of the experts one-on-one who are here to work with, you’d pay thousands.

 To go to other conferences (if you can find them) that don’t touch anything as deep as what will be covered here, you’d spend more money.

 It’s not just a day in a hotel conference suit, but it’s a day for yourself to craft a life you know you are destined to live.

 And none of those other options allow you to connect with so any other people doing the same work that you’ll be doing.

 On top of that, you’ll be added to an exclusive Facebook group to stay in contact with your community of Money Life LIVE attendees from all over the country. This will be your space to stay accountable, ask more questions, and keep in touch after the conference has ended.

The Cost for Money Life LIVE is….

 If you were to pay for intensive one-on-one coaching or financial advice programs with the speakers, you’d pay thousand of pounds.

 If you were to spend your life trying to figure it out on your own means, through books and the internet, you’d spend hundreds of pounds and years of your life would pass you by as you searched.

 This is the first Money Life LIVE. And because of that, you won’t pay the thousands of pounds you’d have to spend for all of the one-on-one attention with the speakers.

 You don’t pay £1000, you won’t pay £333.

Not £1000

 Not £333

 Not £100

 Not £89.

You’ll only pay £50. Or £45 each if you come as a couple.

Reserve my spot now!

 

Can you bring a friend for a reduced cost?

 Please do encourage your partner and friends to come along. We’ve priced the tickets super-competitively but we have included a slightly cheaper options for couples – because when you’re in a relationship it is so important you are both on the same page when planning your life and you should only really come to this event together as a pair.

What makes this conference different from other personal development conferences?

 Most conferences are about speakers either selling you on expensive programs or only providing inspiration rather than the cold hard facts of what you need to do to take the next step.

 Are we just going to listen to speakers the whole time? What are we going to do?

 No, the speakers will be teaching you things, but you will be expected to take notes and will be encouraged and given time to commit your thoughts and ideas to paper. There’s something magical about getting your hopes, dreams and plans out of your head and onto paper. They become closer to becoming real and you can develop a plan to bring them into reality.

 In that way, this conference is experiential. You will be getting things done. You’ll be confronting your fears and dreams head on. And not only will you walk away a person with more integrity and purpose, you’ll walk away with the knowledge and tools to continue taking action in your life.

 How old do you need to be to attend?

 Attendees must be 18 or older, but you will probably get the most value out of the conference if you are over 25 with a bit of life experience under your belt. There is no upper age limit either but you will likely get most value out of the conference if you are under 70 years old.

Is there a Facebook group for attendees to connect beforehand?

Yes, it’s a secret group, and you’ll be added by the group moderator. Once you’ve bought your ticket, we will add you to the group.

You’re still not sure? 

 Trust your instincts and your heart.

That’s how i’ve made the big decisions in my own life for the past 4 years since I began on this journey into financial planning, and it’s served me very well.

 They say we only use about 10% of the intelligence we have in our brains. I believe that’s because the other 90% lies in our bodies. I know you can feel how badly you want clarity and your life to be in control.

 Imagine finally having that feeling of control with a clear sense of purpose, and waking up everyday happy and excited.

 Imagine walking back into your life feeling a foot taller with a plan in your pocket for taking your life to the next level.

 It’s time to step up, reserve your spot and to make the move to get your life moving towards the life you were born to live.

 Thanks for reading this far. I know that was a lot to read, but since this will be a brand new event I wanted to make sure I clearly communicated how important this conference will be for you.

 I can’t wait to meet you and see you there in January. Let’s make 2017 the best year ever.

What will happen to your life in a year from now if I  don’t come to Money Life LIVE?

 I don’t know. I can only ask you:

Will your life still be in the same? Same lack of direction? Will your pensions be languishing in some forgotten corner, performing poorly? Will your family be unprotected should the worst happen to you because protection was too complicated?

Will you be still worrying about money not having a good reason for waking up in the morning?

 Will your life be worse because you’re on a downward spiral already?

 I really don’t want that to happen to you. And I know you don’t want it either.

Can you be a volunteer?

 We will be recruiting a handful of volunteers to help with the day. To apply for this role you must be willing to help out for the full day, 8.30am for a briefing to 5pm when conference comes to a close. Email adam AT magicalpenny.com to apply.

 Reserve Your Spot now!

 

 

 

 

 

 

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Paying off Student Loans

by Magical Penny on November 22, 2016

When it comes to growing your pennies, debt is a major hurdle for most people. Simply put, having personal debt costs you money that could otherwise allow you to grow your pennies.

However, debt is often unavoidable for most of us as it allows us to buy what we need today in exchange for a promise (and obligation) to pay it back tomorrow. After all, not many of us have enough to pay for a car, or a higher education, or a house, when we are beginning our adult lives.

It is important to remember though, that debt comes at a price –the interest we must pay for the privilege of using money that does not belong to us. The price of debt can make it very difficult to grow your pennies over the long term so Magical Penny’s Debt category explores various forms of debt, the false assumptions and beliefs, and the many pit-falls surrounding the use of credit.

 

Paying off Your Student Loans

In America, student loans are often huge due to the cost of tuition and it is the goal of many recent graduates to pay off their loans as their first financial priority. One of the first steps that can help with the process is researching refinance student loan consolidation. Doing so can bring all the loans together to make it more manageable and in some cases, with a cheaper interest rate, saving money over time.

Thankfully, being based in the UK I didn’t have lots of student loans with different providers – I only had 1 with the National Student Loan Company.

 

Student Loans in the UK

For many of us the first real debt we acquire is in the form of student loans. Compared with the US and other countries, student loans in the UK are a relatively new invention. Before 1998, the Education Act of 1962 made it a legal requirement for the local education authorities of the UK to pay for tuition and a maintenance grant. That’s right: university was free! (and remains so in Scotland).

As student numbers rose, the case was made in Parliament that this was not sustainable and tuition fees were introduced in 1998. They have been increasing ever since; from £1000 up to the current level of a maximum of £3225 a year.

Most of us going to university will have had dealings with the government’s non-departmental body, The Student Loans Company. It was formed in 1990 to help with additional ‘maintenance loans’ and only helped a few students at first but it has since become the only way that most of us can afford to go to university.

Bad debt? Good debt?

Whilst the accepted wisdom is that debt should be eliminated as quickly as possible, the student loans in the UK are possibly an exception to this mighty personal finance rule.

Debt is rightly vilified by most people because:

  1. It costs you money in the form of interest
  2. It adds ‘risk’ to your life. –if you cannot pay your debt payments for any reason you risk losing other possessions, adding further stress to your situation.

However, loans from the UK Student Loans Company are structured in such a way as to eliminate both these traditional negatives of debt: the interest rates on student loans are set so low that they have little ‘real’ cost compared with inflation. For loans made after 1998 there’s the added benefit that there is no risk of default (failing to pay back the loan), as you only need to pay back a set percentage of anything earned over a certain threshold. The details are different depending on when you took out the loan but the payments are almost always easily managable due to the thresholds used.

Payback of the loan is done automatically through your employer (or directly through the Student Loans Company if you’re oversees or self-employed). If you earn below the threshold you do not have to pay anything, and if you lose your job your payments stop too. Credit scores are unaffected.

For more recent students graduating around 2009 onwards if the debt if not fully paid off in 30 years it is forgiven. For earlier graduates like me (who started after 1998 but before 2006) , student loan debt is forgiven at 65 years old.

What a relief! No paying back student loans with your pension money!

The Bottom Line

This might all seem a little complex, but the bottom line is that UK Student Loan Company loans are still debt but they do not have the traditional down-sides of risk and cost. And  of course there’s benefits to receiving a higher education too but that’s a whole other post.

Personal finance is all about priorities

Do you think it’s worth paying extra payments on a student loan debt given these favourable factors? Or is saving for a house and/or learning about investing in equities a better path to take? I would argue that the latter is way to go, but remember, finance is personal.

What’s your take on student loans?

You may also find useful: Attending University without Student Loan

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The House Crowd Investor Interview

by Magical Penny on November 16, 2016

the house crowdThis is part of my The House Crowd Series, where I explore the crowd-funded property investment business.
Previous posts in the series:

Crowdfunding in Property through The House Crowd – Part 1

 

Crowdfunding in Property through The House Crowd – Part 2

 

Part 3 – Choose the Investments With The House Crowd

 

Where’s there’s muck there’s brass – Investing in Property Development with the House Crowd

This time I’ve interviewed a friend of mine, David, who has been investing with The House Crowd for a few years, even before I had heard of it. If you have any questions about The House Crowd, leave a question below or email me at adam AT MagicalPenny.com and I’ll get them answer.
Here’s David’s answers:

What attracted you to The House Crowd?

I was in my first year of university, looking for a way to save excess student loan.
I was interested in investments generally, but didn’t really know where to start.
Hours of trawling through Google results led me to a few crowdfunding sites, and The House Crowd stood out as the underlying asset for two main reasons.
  1.  Property – seemed less risky than some of the other crowdfunding offerings (personal loans, start-up companies…)
  2.  Dividend yield – seemed rather good to me at 6%. *Can be even higher dependent on project

the house crowdWhat do you look for when choosing the projects?

When I first started investing, there was only one type of project – the equity share in an underlying property, with rental payments as dividends and potential capital growth once the property is sold.
Now there are The House Crowd projects linked to developments and development bridging loans, and these tend to have a shorter and more definite term (typically 9-12 months).
Because they’re deemed higher risk, the interest is quite high too (9%+). The House Crowd performs all necessary due diligence, and I trust that they have made sensible judgements.
There is a lot of literature you can trawl through for each deal for extra peace of mind.
I suppose I ask myself
If the developer defaults, could the underlying property be sold quickly enough to return investors’ capital?
And the answer is usually ‘yes’!

houseHave you cashed out or do you reinvest?

Although it’s tempting simply to spend your dividend and interest payments, I try to retain the cash to invest in new projects.
This sort of compound return is the only way to accumulate in any meaningful way over the long term.
I imagine people with vastly greater sums with The House Crowd than me are able to draw a pretty serious income from their investments.
The government has brought in the ‘Innovative Finance ISA’, so once The House Crowd gains regulatory approval, we should all be able to access these returns completely free of tax. I think that will be enormously attractive to long term savers and investors.

Any surprises with investing with The House Crowd?

Not really – and certainly nothing negative.
I suppose the greatest surprise has been how well The House Crowd has grown and developed its offering over the five years that I’ve been involved. The company itself has had a few share issuances, and I have such faith in the idea that I’ve invested in that too. I think this type of investment will gain enormous interest, once the concept has reached this country’s mass of savers.
house mortgage UKBanks’ deposit accounts generally pay very little interest, and investment managers are often expensive and subject to high minimum investment criteria.
Property is popular and this is an accessible way to gain exposure.
The greatest surprise – I hope – is how disruptive this becomes in the investment and savings market.
Thanks David for sharing his thoughts on The House Crowd.

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Attention Millennials! Prepare Yourself For These Massive Money Woes

by Magical Penny on November 10, 2016

Money problems plague a lot of people, but, Millennials are the biggest losers in this day and age.

There are so many money woes that they’ll face and have to be prepared for. If you’re a Millennial, then this article is perfect for you. I reveal three financial problems you’ll face right now or in the future.

Check them out, and take the advice on board too!

 

ImportantHealthcare (in the USA)

Despite the USA’s government’s best efforts, healthcare in America is still very flawed. Insurance premiums are going through the roof, and a lot of people are struggling to pay for good health care. As a Millennial, this is a real problem for you if you live America. The rising cost of healthcare means American millennials are facing a big financial problem. If this affects you, you need to ensure that you can afford good quality care when you require it. Often, very few young people think about this when they prepare their finances. You must set aside money to pay for good health insurance to get the best care possible!

British people – appreciate the NHS!

personal finance readingEducation

The cost of education seems to get higher and higher all the time. If you want to achieve your dreams of getting a good job, you may need a college degree. In fact, for a lot of professions, it’s essential that you go through years of college education. This would be fine, apart from the fact that going to college costs a lot of money. You have the tuition fees, accommodation costs – everything adds up. Many students are forced to get loans to help cover all these fees and end up in debt. Paying your way through college education is the preferred option. However, it can be really difficult to find the funds. There are loads of tips on investing in your education from sites like The Fortunate Investor. The cost of education is a serious money woe for Millennials, particularly when the country is in a period of transition. New leaders mean there’s the potential for policies to change and costs to go up and up. To prepare yourself for this money woe, ensure you plan for college way in advance.

Housing

houseBuying a house is always a cause for financial concern. Especially in a turbulent housing market where you can’t predict what will happen. Affordable housing is difficult to come by for young people nowadays. A lot of them are forced into renting properties instead. While there are many benefits to renting a property, it’s not a long-term solution. There are plenty of Millennials that may be at the stage in their life where they want to settle down. They have dreams of starting a family and need somewhere to live and call their own. It’s hard to achieve this dream when there aren’t many affordable houses on the market. My advice is to prepare yourself for this financial woe from a young age. As soon as you start work, think about saving for a house. Save up enough money for a deposit, and get your credit score in check. This ensures you’ll be eligible for a mortgage, and can purchase your first house.

If you’re prepared to face these money woes, then they won’t be as bad as you think. Preparation is key to sorting out any financial issues!

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Property Investment Headache? Here’s Something To Help

by Magical Penny on November 9, 2016

house questionSomething as complex and risky as property investment has to be taken seriously. But, when you can’t understand what half of the estate agent is saying, it makes it hard to be confident enough. To help you bust some of the jargon the professional’s use, here’s a collection of some of the harder ones.

  • Appraisal

 

An appraisal is the valuation of a property. This valuation has to be conducted by a licensed professional, as it will be used as the basis for the price at sale. You can use past appraisals from your area as a guide.

 

  • Capital Gain

 

Capital gain is the total gain you will see from an investment over a certain period. For example, if you rent a house for $200 a month, over a year your capital gain would be $2400.

 

  • Capitalization Rate

 

This refers to the gain you will see at a given rate. So, using the example above, your capitalization rate would be $200 a month. This is used to determine growth in investments when looking at past rates.

 

  • Closing

 

Closing is the process at the end of a sale when everything is full handed over from the seller to the buyer. At this point, the new owner has full rights to the property, and the sale is “closed.”

 

  • Declaration

 

If you invest in a property, you will receive a declaration. This document is the reference for everything included in your deal. So, if you own a property, the declaration would give you proof. It will also outline any fees or restrictions on the property.

 

  • Default

 

Defaulting means that you have broken the agreement in place. For example, if a tenant defaults on rent, it means that they haven’t paid in full. Be careful not to default on contracts, especially on large property.

 

  • Depreciation

 

Depreciation is the loss of value over time. This might happen to a property if it’s location becomes less desirable or if the building goes into disrepair. Depreciation is something to think about, even with new buildings. Especially for those looking for quick sales.

 

  • Due Diligence

 

This is the work that both the seller and buyer will both put in before the sale. This will include the property’s history, value, and any other important information. It will also include drawing up contracts and sales agreements.

 

  • Escrow

 

Escrow is used to ensure that both parties honor their agreement. An individual or organization that both parties trust will hold all of the money involved. This gives the seller confidence that they will receive the payment and the buyer confidence that there’s nothing to hide. The trustee will hold the funds until both parties agree that it’s ready to be released. It’s usually the estate agent who will act as the trustee.

 

  • Exchange

 

Sometimes, it’s possible to swap properties instead of selling. Investors use the 1031 exchange system to avoid taxes and save money, by swapping instead of selling. This will also save time looking for a second investment property after you’ve sold your current one.

Of course, there’s loads more. Unfortunately, it’s just too many to cover here. So, you might have to do some research. Nevertheless, hopefully, this has given you a better understand of property investment!

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