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Your Money > Family Finances Articles > The golden rules...
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By Richard Evans
At times of financial crisis we could all do with some simple rules to guide us through the turmoil - and to keep in the back of our minds for the future. So Yahoo! asked some of Britain's foremost money experts for their golden financial rules. Some captured a key truth in a short sentence, others went into more detail. But either way their advice should stand you in good stead - now and for the years ahead. Mark Dampier, head of research, Hargreaves Lansdown "It's not the return ON your investment but the return OF your investment that should be foremost in your mind. "Always have some 'rainy day' money set aside for emergencies. Keep it in an easy-access account and aim for the equivalent of three to six months' salary." Ray Boulger, mortgage analyst, John Charcol "Never overcommit yourself. Just because a lender is prepared to lend you a certain amount of money, it doesn't mean you should borrow it. Two people on the same income can have two radically different lifestyles, so one might be able to afford repayments where the other couldn't. And if you commit to a mortgage deal on the basis that another good deal will be there when that one ends, you are taking a gamble. Use a flexible mortgage to build up a cost-free repayment reserve by overpaying - if you get into trouble you can borrow this money back and avoid going into arrears." "If you are a first-time buyer hoping to get on to the property ladder, there is no reason to rush into the market now - you will be able to buy no more expensively, or perhaps more cheaply, later. So don't allow yourself to bid prices up. In a soft property market there are fewer sellers, but there are always some people who have to sell. Do your research on prices in the area where you want to buy and sooner or later you will find a forced seller you can get a bargain from." James Jones, Experian "Check your credit report before you apply to borrow money. Lenders use your report to help decide whether to lend to you. They can also use it to set the interest rate you will pay. As a result, checking your credit report and ironing out any problems before lenders put it under the microscope can pay handsome dividends later." Emma Parker, Financial Ombudsman Service "Work out a detailed budget. What can you afford to spend? Can you save or pay anything off? Do a financial detox - look at non-essential items that you could cut out for a month. If you can't afford something, don't buy it. Highlight each month's savings and put up a running tally in a place where you will see it - it might spur you on. "If you run into problems, try to nip them in the bud. Speak to your mortgage lender or credit provider early on and explain your difficulties; they should treat you positively and sympathetically. If this doesn't resolve things you could contact the free Financial Ombudsman Service or one of the many free debt-counselling services. "If you want to complain about a financial product, think about the things you unhappy with. Once you are sure what the issues are, the business will be too. Gather all relevant documents together before you make contact. When you do, stay calm and polite and keep it brief. Say what you are not happy with and what you want the business to do to resolve the problem. Take the complaint higher if the company doesn't investigate properly." Darius McDermott, financial adviser, Chelsea Financial Services "Don't crystallise losses on investments by selling in a downturn if you're investing for the long term - they will probably recover sooner or later if you hang on. Your investments should reflect your tolerance of risk and be balanced and diversified: have a mixture of different asset types that won't rise and fall together. For example, shares, bonds, property and gold are unlikely all to fall at the same time." Brian Brown, analyst, Defaqto "Never, ever miss a mortgage payment - this is your primary credit reference factor and you should protect it above all others. Once a month, give EastEnders a miss and instead use the time to review your finances. And hold an annual MoT for your money - list all the products you own, make sure they are the right ones for you and see if there are any that need to be replaced, improved or scrapped. "Don't ever buy a financial product purely on price. Spend a few minutes looking at what you are getting for your money before you make a decision. This is particularly true in the insurance world. "And never leave post unopened." Malcolm Hurlston, founder, Consumer Credit Counselling Service "Don't just rely on experts - be an empowered consumer and take your life into your own hands. Risk is good: it makes the rich richer and can help you too if you strike the right balance." Tom McPhail, head of pensions research, Hargreaves Lansdown "If you want a decent retirement, then basically you need to do just three things: start early (age 22 is good, earlier if you can); save lots (10 per cent of your income should be a minimum, 15 per cent is better, 20 per cent is good); invest in equities (UK income funds are fine, but don't be afraid to invest in emerging markets too, particularly when you are young). "Review your pension at least once a year, checking your contribution rates and investment choices. The more you put in, in terms of attention and interest, the more you are likely to get out. Take advantage of the tax breaks - especially if you are a higher-rate taxpayer. Save regularly rather than in lump sums; this way you automatically buy more when prices are low, helping to smooth out fluctuations in the market. "Don't underestimate how long you will live; most people do. You will probably be retired for at least 20 years." Matt Morris, insurance adviser, LifeSearch "Many people take out insurance with their bank or mortgage provider, but this is often a mistake. They are usually expensive products that do not offer the same level of cover that can be found on the wider market. An independent financial adviser can search the whole market. "The cost of life cover has fallen by more than 40 per cent in the past five years, so it is possible that you could save money by switching now. Act early, as premiums are more expensive the older you are when you take out the policy. And quit smoking: a lower premium is not certain, as it also depends on age and health, but there is a very good chance that it will fall. "Consider family income benefit. It works the same way as a life policy except that it pays out a regular income from the point of claim until the end of the policy, rather than a lump sum." Useful links: |
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