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Infographic: I understood very little about Tax until now

10/20/2020

 
Tax is part of our lives whether we want it or not. It touches our income, contributes to our society, our healthcare, education, roads and more.
​
In this post, I spend some time looking at the UK tax rules to find out which benefits we could use to grow and protect our money. I put my basic findings in an infographic to make it simple [Scroll down to view].

So let's learn about tax so we no longer label it as highly-confusing and downgrade it to somewhat confusing (a much better space to be in).
[Quick definitions] 
  • TAX: is a payment made to the government which comes from income or things you inherit, buy or sell.
  • ​TAX RELIEF: is money you get back. It reduces the overall tax you pay.

The Tax Web

Throughout this research, I found that Tax is actually not hard to understand on its own. The confusion comes when you have to consider all parts. Take this example: 

You have an income over the personal allowance threshold whilst saving for a pension and a home which your family will support you with a deposit. 

I call this the web because to understand your tax position, you need to understand the Tax rules for income, pension, stamp duty tax and gifts.  No wonder you and I shun this topic...but to our own wealth demise.

Did you know that if you make a loss when you sell your home, shares in an ISA, or a personal possession worth £6,000 you can get a tax relief? Imagine that getting paid when you lose. These are the kinds of helpful money tips I want to know about (I've added much more below).

Get Clarity
If you work for an employer, your income tax is typically handled by your company. If you are self employed, you'll file paperwork on your own or via an accountant/certified tax advisor to pay the appropriate tax and claim relief. Anyone can reach out to an accountant or tax advisor on tax matters.

Before we move on, one question. What tax rate payer are you? If you don't know the answer, keep reading to find out.

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Reasons you should know a little something about tax
  • You earn money
  • You own a business
  • You will get an inheritance, plan to leave an inheritance
  • You donate
  • You want to reduce your tax bill
  • If you make or plan to make 6 figures
  • You made a loss when you sold an asset
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What Tax Rate Payer are you?
  • Possible Answers: 0%, 20%, 40% or 45%
 
​Your income determines how much tax you pay. The UK uses a progressive tax system, where the more you earn the more you pay in tax. So, if you earn up to £12,500 per year, you'll pay £0 tax.

​On the other hand, the highest income earners pay up to 45% of their income in tax. This can be very difficult to accept which is why many people look at ways to legally reduce their tax bill by using some  of the options outlined in the infographic such as increasing payments to their pension, using ISAs to prevent being taxed again or not taking out dividend income for a given tax year (deferring it). Some others flee the UK to low tax rate countries. Just know that your tax solution or option is unique to your personal circumstance.

Find out what tax rate payer your are here.
TIP
Use income calculators to see the breakdown of your Tax, National Insurance and Pension.

More tips & resources

  • If you make more than £183 per week, you will pay National Insurance (NI). ​Click here to find out how much NI you'll pay per year.
  • Learn more about your Personal Allowance.
  • If you make more than £100,000, your personal allowance goes down by £1 for every £2 you make over this 100k. Kirkrice gives advice on how to work around the loss of personal allowance to keep more of your money.
  • If you make more than £125,000, you loose all of your personal allowance.
  • Learn about Tax relief with EIS, SEIS and VCT.
  • You pay no Inheritance Tax if 7 years or more has passed between when you received the gift and when the person giving passes on. Find out how much is tax free here.
  • You pay no Capital Gains tax if you sell your main residential home or give your assets away to Charity.
  • If you make a loss on an asset you sell (Shares in an ISA, EIS, 2nd Property), you can get a tax relief. You can also use this method to reduce your Capital Gains tax if it is more than £12,300.
  • You can get £6 a week tax free from employers (£312 per year) for working from home (especially during Covid-19). Alternatively and depending on your tax rate, you can get a tax relief up to £2.40 per week (£124.8). You do not have to provide any evidence to make the claim. Click here for more details.
  • Pay no stamp duty land tax when you purchase a home of £500,000.
  • Learn about VAT too.
  • if you are a low income earner, you can get 20% tax relief if you save up to £2,880 into your pension in each tax year. Read more​.
Remember this:
In a given tax year you can save £72,300+ tax free!
20,000 (ISA) + 40,000 (Pension) + 12,300 (Capital Gains Tax Free allowance) = £72,300
Get Tax Advice
  • UK rules on Money and Tax 
  • Tax Aid
  • Citizens Advice
  • Income Tax
  • DO THIS: HRMC - check your tax code and National Insurance record.
  • Get in touch with a Chartered Accountant who can guide you on self assessment and Tax 

Videos on Taxes

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Want a chance to win £1 million? gamble without losing - Let’s talk premium bonds

6/20/2020

 
Premium bonds is a savings product backed by the U.K. government that allows you to save and enter the chance to win prizes with up to £1 million instead of earning interest.
 What you need to know
  • Start investing at £25 per month
  • Your money is 100% secure
  • Each month you enter into a raffle to win prizes worth £25 to 1 million tax free
  • You will not earn any interest (prizes are used instead). It might be better to use an savings account with interest rates 
  • You can always withdraw you money
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I recently found out about premium bonds whilst reading a money diary entry on Refinery29.co.uk. The diary entry said she put away £50k in premium bonds- this piqued my interest and I quickly visited NS&I to learn more.

How do Premium bonds work?
Premium bonds allows you to save monthly, it’s fully secure which means the risk of losing your money is very very low. Instead of paying monthly or annual interest to participants the equivalent interest amount is shared as prizes. 

Each month a prize draw takes places and you can find out if you win. The odds are 24500 to 1- not a very high chance but the more you save, you more chances you get. In addition, whatever you win is tax free and your money can with withdrawn at anytime.
Can premium bonds grow my money?
If you are the person that has  always wanted to gamble without the risk- this might be for you. 

Pros
  • You can withdraw your money anytime
  • With luck, you can win a few prizes. The minimum you win is £25
Cons
  • Your money never grows and falls behind inflation 


How to register for Premium bonds 
  1. Go to NS&I to open a Premium Bonds account( you can make a lump sum payment of a monthly payment)
  2. (Optional) Set up a direct debit 
  3. Download the app to track progress 
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How I plan to use Premium Bonds
Having assessed the pros and cons, I’ve decided to allocate a minimum of £25 a month into this savings product. This is a very, very low risk strategy and since I won’t be losing my principal (the money I put in monthly) I am happy to let it it be my - I hope I get LAS VEGAS lucky magic growth pot’.
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COVID-19 has reminded me that my health and finances are VERY important

4/19/2020

 

Over the past weeks, two things continue to dominate the news: health and the economy. This pandemic has highlighted how important and fragile these two aspects of our lives are.

I am now left asking two questions:
1. What can I do to better invest in my health?
2. What can I do to create a financial safety-net for myself and for others?

In this blog, I look forward and explore ways we can invest in our health with the same vigour as we do our finances. 

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Because we feel good, we can easily neglect to check on our health
Apart from the regular advice to eat better and exercise, one thing we can do moving forward is to get an annual health check. In my view this is particularly important if you have a pre-existing condition, a family history of an illness or are past the age of say 35+. Many of us may think that we need private healthcare to get this but this is not the case. Last year, I used Wowcher to get a £120 health check for a family member with a pre-existing condition to make sure everything was fine. The report was detailed and highlighted some known and unknown problems in a clear PDF. This provided some peace of mind for the whole family. The NHS also provides health checks, although you have to be 40+ to qualify. Also factor in health checks for specific areas (breast checks, kidney checks etc), depending on your medical history. 

Apart from our financial investment, we should have a health saving pot that is allocated to getting needed health care. We are not only responsible for ourselves but also our friends and family and it is important that we remind and help others to invest in their health as well.

In the UK, we are lucky that we can get free health services. On a couple of occasions I forgot, or dismissed the need to complete my General Practitioner (GP) checks or vaccines - not a good idea. I got a chance to get a health check via work and the GP told me that we all should contact our GP if something does not feel right. The earlier the better.

The NHS does not cover everything however, special services like dentistry, dermatology, physical therapy can all incur supplemental charges. Again a money pot can really save you here. This is especially true if you have children who may specifically require services like braces, paediatric assessments etc. If you want services beyond the NHS, you can shop around to get the best health insurance for yourself where you can pay a monthly fee to get covered. Look at what health services are covered before you make a decision. Many people think they need a job that offers private insurance, but self pay can be as low as £15, and may actually turn out cheaper than paying out of pocket per visit.

One more thing, if you have a family and a serious pre-existing conditions/family history of health problems, consider getting life insurance to protect your loved ones.

5 ways you can invest in your health:
  1. Open a health savings pot
  2. Get annual check ups
  3. Talk to your GP about what health services you should get
  4. Plan for health services for children
  5. Get private health or life insurance (if you need it, if your employer offers this as a perk, see what services are covered
As part of our financial investment, we should have a health saving pot that is allocated to getting a health check.
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Health is Wealth

6 ways to create financial safety nets to weather unprecedented storms

Last year I explored the definition and steps that lead to financial vulnerability - last week, I read an article that sums up how this happens ' first gradually and then suddenly'.  In the news today, we see many stories of people who have been forced to lose their jobs particularly those in the gig economy and retail industries. This has been particularly difficult for women, many of who are employed in these sectors.  For the lucky ones who qualify for the government support, they can still earn up to 80% of their income. But even still, a 20% pay cut can leave people in very tough conditions.

Nonetheless, without this government support, I shudder to think of how life can be.  Here are a few things I think we can do:

1. It is very important to Build and Sustain an emergency fund. 
A emergency fund is a saving account where you save enough to cover your expenses for a period of time if you are unable to work. Everyone should have an emergency fund. Start with saving 1 month worth of expenses then aim for at least 3 months, then 6 months. An emergency fund allows you to build the foundation to have something to tap into when things get really tough. If you are able to take this one step further, build a curve ball account to cover the day-to-day expenses that WILL arise.

2. Consider insurance to cover income loss in the event you get  ill or lose your job.
This way, if your income stops, you can get covered for up to 24 months until you are able to get back on your feet. Like other forms of insurance, you pay a monthly amount and if anything goes wrong, you get an income paid to you no matter what.

3. Consider getting mortgage insurance to reduce the risk of losing your home
If you own a home, your mortgage is likely to be your largest monthly expense. In the event that your are unable to keep up with your payments, a mortgage insurance makes sure that you are covered. 


4. Have a pension pot
I cannot imagine how retirees with low or no pension are supporting themselves in this pandemic. We can be short sighted in these times and forget that we will live a long life. When we  retire, our pension pot will become the core income source to weather storms like these. Making sure you are building a sizeable pension pot for when you are older is a constant goal for us all.

5. Invest in the stock market

You are not going out, eating out or going on vacation. With the world on lockdown, the stock market is feeling the effects making some stocks/share and funds are cheaper. If you’ve got spare change, this is a great time to get stocks cheap. With interest rates getting lower (I saw one lender providing a 0.05% on savings), the stock market is one place where you can get a good return in the long run.

6. Negotiate the interest payments on your debts
We know that there are good and bad ways to handle debts. If you are paying high interest on your debts, this might be a good opportunity to negotiate low rates with your provider. I have seen many articles of companies announcing support to their customers in this unprecedented time. Reach out and see what they can do to make you life easier for the long term.
All in all, I hope we can do our very best to give ourselves and our loved ones the strongest chance of living a healthy life. Remember health is wealth!

What other things are you doing to invest in your health and finances?
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You don't want to miss this GAME CHANGING way to save for expected expenses

3/14/2020

 
Companies like Revolut and Monzo have these two neat features that have made it easy for me to set up my curve ball savings account. Using one account, I am now able to split my expected expenses (such as travel, phone replacement, transport, beauty service)  into different pots. PLUS I get interest payments.
 Read more about  why you must have a curve ball account
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Curveball accounts help you manage the WHEN and IF it comes!
The problems I was having
Up till now, I used one savings account to save for curveball expenses. This account did not let me split my expenses and so I set up my automatic savings to hold it all in one go. if I wanted to split expenses into a savings account, I would need multiple savings accounts to track each of my curveballs. 

For me this was too much overhead. I don’t want too many savings account to track and maintain.
​​
Saving pots with Monzo and Vaults with Revolut 
My new curveball best friends are these saving pots and vault features from monzo and revolut.
​
Why I like them
  1. I already have an existing account with these companies and so I do not need another account number
  2. I can open as many pots as I want (I opened 6)
  3. I earn interest on my savings
  4. I can set savings goals
  5. It’s all neatly tracked on the app
  6. I can set up recurring payments and top up as I wish

6 benefits! I am abuzz. At this time, I decided to go with Monzo saving pots because Revoluts saving vaults is only available to members with a Metal card which is available at £12.99 a month. At the time of wring this article, the Revolut interest rate is  higher than Monzo'.

If you have a Revolut Metal Card, watch the video below to see how to set up your Vault 

How I have set mine up 
  1. I decided how much I want to allocate to curveballs from my income. Watch how to budget
  2. I set up savings pot on the Monzo app with a recurring date for monthly payment 
  3. I set up a standing order from my bank account to Monzo (Note if Monzo is your current account, this step does not apply)

Now I can track all my curveballs in one place and this has significantly made it easy for me to be on top of things. If I want to save for another thing maybe a trip next year, I can set up the a new travel pot and start saving so it does have to be a worry.

Watch the vido below to Learn more about Monzo

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12+ guilt free ways I cut my spending to save more

1/19/2020

 
If you are looking for super smart ways to pay less for things you need, this post is for you. I have and continue to look out for easy ways to reduce my spending allowing me to save more guilt free.  Keep reading to see the tips I use to cheer up my finances!
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Cheer up your finances guilt free in 10 genius ways!
1. My credit card pays me for spending
If you have a credit card, get or swap to credit card that provide cash back on expenses. I have cards that provide 0.5% on all spending and if I pay with contactless,  I get 1% . So for every £100 I spend, I get back up to £1. Sometimes, the bank has deals with retailers who provide more than 1% cash back. This may sound like a small amount but it does add up. Since getting my credit card 2 years ago, I've gotten back around £500. Remember to read terms and conditions and to payback your credit card in full.

2. S
witch providers and get cash back
Many companies want you as a customer and will pay you to get your attention. Look out for ads from utilities companies, banks etc. who will pay you if you for instance to switch from BT to EE as your telephone provider or from British Gas to Utility point for your electricity and energy. Before doing this, check how long you have to stick with the company and use this approach to get the cheapest prices for your needs. I negotiated and have cut my monthly broadband bill by 10% for 12 months. Go further and use Cashback Apps to save even more.

3. Use companies like Quidco and Top cash back to get paid while spending
Companies like Quidco aggregate all cash backs provided by companies. Last year, I was looking for a new internet provider and a friend introduced me to Quidco. I signed up in 5 minutes and  I was able to get £65 cash for choosing my internet provider. Even better, once my transaction had been confirmed I was able to send my Quidco cash back directly to my bank account.  I always check Quidco to see if they list a retailer when I want to go shopping so I can get a cash back from Quidco and via points via my credit card (see number 1).
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Some retailers that offer cash backs via Quidco
4. Split costs with people
Anything divided by more than one is cheaper! If you use 
Netflix, Spotify, ASOS (premier delivery for £9.95 a year) split the costs with friends or family. Where possible get one account and share the costs and services. If you want to travel to exotic places, split costs like hotel, transport and more. To keep track of each person's share use apps like Splitwise where you can record all costs, include your friends and track your spending.

5. Use websites like Groupon/Wowcher/Amazon to get cheap bulk products
Since time is money, I've stopped going through the hassle of getting toilet rolls from physical stores. Plus it all get delivered to my door saving me time. I go through Quidco for all my Groupon purchases (see number 3). The same applies to Amazon, I get my long-life milk for 25p less in bulk delivered to my door. No more do I need to carry 5, 1litre liquids for the sake of enjoying my cereal.
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Bulk products advertised on Groupon

6. Travel the world and pay only £99 for flight & hotel
If you have dreams of travelling the world. It does not have to cost a fortune. A friend introduced me to Wowcher's  Mystery  £99 all inclusive holidays with flight and accommodation for over 2-3 nights covered. It works like this, you buy the Wowcher voucher and then an agent calls you to tell you which country you have been allocated (if you do not like it, you can change the dates and location with the agent). If you do not like the hotel provided in the package, you can pay a supplement to upgrade. I visited Budapest and Porto, Portugal using this method. This allowed me to meet my goal of visiting at least 2 new countries per year.

If this is not your cup of tea, in general you can always save money by booking up to 6-9 months in advance so you have something to look forward to. Also if you want a local tour in these locations, look up free walking tours to find a local guide. At the end you pay what you like - if you want.

Bonus tip: Get Air miles or AVOIS points when you travel and spend them on 'free' or cheaper hotels, flights or entertainment.
PictureTravelling does not need to be expensive. You can do it.










7. Make a Packed lunch​ for work or class
On Sundays I spend 1 hour to create my lunch for the week. I can be as simple or as elaborate as I want. This way I save up to £10 a day which amounts to £200 a month on food. If I want to treat myself I have zero guilt doing so. If you want some quick 'meal prep' ideas- check youtube for easy meals to make.

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Meal prep to save!
8. Need Free Entertainment- Yoga, Comedy, Arts?
There are so many free things to do in this world. I have gotten autographed books, visited the House of Commons, took Shorinji Kempo (Martial arts) classes, attended really good comedy events without paying a dime. I use websites like eventbrite to find free classes for yoga, arts, dance and more.

9. Scroll through Gumtree for big items (2nd hand shopping)
Since furniture does not appreciate in value. I used gumtree to get great deals on furniture. For instance, I got a really great sofa for £350 (retail was £1200) and it was used for only 2 years. I also got my armchair for £50 with free delivery! Using gumtree saved me hundreds of pounds. If you find something you like, go with a friend to see the product before you buy. Also remember to haggle to reduce the price on offer.

10. Use CEX to get cheap but durable Electronics
I don't buy new phones anymore. Why? again, they don't grow in value and in my case, Apple will be replacing them every 3 years anyway. So to significantly reduce the cost of paying for a new device, I get phones and other electronics from stores like CEX that also provide 24 months guarantee. CEX sells games, TVs, earphones, cameras etc. They also always have the latest phones as a discount and describe the condition of the product if it is in good or mint condition.
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Price of iPhones on CEX
11. Sign up for warranty on all appliances
I learnt a tough lesson with this tip. I bought a kettle last year and it started to have loose parts this year. I wanted to get it fixed and found that I forgot to sign up for the 3 year warranty which would have entitled me to a free fix or a new kettle. When buying appliances, make sure it has a warranty and most importantly activate the warranty.
12. Get a homecare plan to reduce out of pocket costs for plumbing, heating, white goods damage and more
If you want to reduce the headache of paying the sometimes large sum of fixing a broken boiler or getting a plumber to come around, consider a homecare plan. These plans are monthly payments you make such that if you need to fix these type of issues, the provider will cover the repair costs. I have seen as little ar £2.81 for oven, fridge/freezer, coooker hood and hob cover. Read ther terms before your apply.
13. Switch ON the ROUND UP feature on your app. Monzo and other money Apps have this option and I am using it to make little progress towards my goals.
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14. If you don't need it, Cancel it review your subscriptions and direct debits to services that no longer serve you.

15. Save load by paying annually: I saved 25% on my white goods insurance by choosing to pay a one off annual fee instead of making monthly payments. If this option is not presented to you, just ask.
In summary, find ways pay less or  get paid for spending!
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Use this cool method to set up your bond savings like a pro

9/6/2019

 
Recently I came across a new idea called Bond Ladder which allows investors like us to arrange our bonds in ways that provides ​flexibility with regular returns.

This can be an attractive option if:
  • You want regular income in the form of interests
  • You want to access to your money at certain intervals
  • You are happy not to touch some of your money for a while
  • You are retired​
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I am actually going to rename these bond trees as they money bloom all year round. Who doesn't like that

How a bond ladder works

Say you have £1000 to save. You can either put the whole amount into a single fixed bond for 10 years with a 2.33% return. With this option you will not be able to access any part of the £1000 for the duration of the 10 years. If you feel that this ties you down, you can also opt to create bond ladder.

With a bond ladder, you split your £1000 into different amounts  across different bonds that mature at different times which also offer varying interest rates as return.
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With your £1000 bond ladder, you get the amount you invest back at different times so the first will be £200 + interest after 6 months. You can use that amount to sort our any expenses or you can reinvest it into for example, a 6 year bond to keep the process of building your ladder and getting a guaranteed income each time.

As normal with bonds, you'll get the highest interest rate with a longer maturity period. Essentially the issuer or bond provider rewards you more the longer they hold your funds as a loan.

If you are retired or you know someone who is about to retire
A bond ladder is a good way to manage your savings or lump sum pension while you retain your capital. With a bond ladder, you are guaranteed a monthly
(if you bond provides this) income via interest payments across multiple years.
Remember

Do keep an eye out of the interests you get to ensure that you are getting the types of returns you want. You can also create bond ladders using:
  • Bond savings accounts only
  • Stock market bonds only
  • A mix of bonds savings accounts and stock market bonds

Click here to learn more about bonds. 

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Why you need the 'Oops Account'- Managing the Unexpected (curve ball)

8/6/2019

 
Recently I came across the following key words Financial Vulnerability, Financial Capability and Financial resilience. I generally attribute the words vulnerability, capability and resilience to life, emotions and an overall wellbeing.  In the articles spewing these words they explored the following how easy is it for you to weather a sudden financial storm? In other words, how ready are you to manage curve  balls. In this blog, we discuss the need for a new savings account to cover unexpected however large or small.
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Imagine this, two individuals Niya and Hurley receive an email that says you owe £450 from phone contract which you did not formally close if you do now address the cost, it will continue to increase.

Niya and Hurley's response to this curve ball event

Niya's response:  damn I should have done this, I kept putting it off.  I can resolve it in 24 hours using my own savings

Hurley's response: oh no, I'll have to borrow from Shane again and I have not paid him back and I can't ask Leo again as I still owe her as well.


Niya is less vulnerable, More capably and more resilient as she has the funds to attack the issue immediately. Hurley is highly vulnerable, less capable and less resilient as she was in an already difficult position and this new phone bill has added to her worries.

This is how people become suddenly poor 

I read this article that mentioned that the number of people who are at risk to becoming poor is actually higher than the number of poor people. I thought eh!?

The scenario above is the simple view of how poverty happens. You are less likely to be poor because you have ONE bad event. You need combination of multiple events for it to happen- like a domino effect that makes your situation more and more precarious. 

If we understand this cycle, then we know that if we can manage these multiple series on unfortunate events by having a sufficient financial cushion, we are more likely to survive it or at least come out of being poor in no time.

A key goal of WealthSquats to encourage ourselves to build financial resilience, the ability to progress with our financial goals in the face of the unexpected. It is about building a strong finical muscle. 

What are examples of curve balls
​
I found the table below from UK's MSE report where they list out all the most frequent unexpected events and it associated costs. From their report, the average amount for unexpected cost is £1545, the highest category is lending to  family/friends which amounts to £2,482.

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How am I building my resilience?

After reading this report, I promptly reviewed my finances to see how I can start to prepare myself for just in case situations.  I converted one of my saving accounts into an oops account where I make a monthly deposit.

This account is for managing any expenses and I am perfectly fine knowing that it will go to zero at some point and I will continue to top it up. I want to be part of the survey that has funds to solve problems that can be prolonged if I am unable to take action.

​It is important to note that the oops account is part of building our overall financial resilience  imagine a future where you have a robust emergency fund, a diverse asset class that includes bonds, funds, pensions and an oops account. That to me is holistic financial resilience- you are taking care of yourself today, you are prepared for tomorrow and you have a starting point to handle the unexpected.



I encourage you to open your curve ball account today and start with something however small and give yourself additional peace of mind.

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How to make sure your loved ones are cared for when life happens #Life insurance

7/6/2019

 
I have been thinking about what financial products are available to support individuals when the unexpected happens. In this post, I explore life insurance and find it can be a useful investment allowing your dependents to benefit from an additional source of income.
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The combination of your savings, investment and life insurance payments, can provide a very stable financial foundation for those you care about.


About life insurance
Life insurance is a financial product that provides your dependents with income in the event that you pass on. This is particularly important for parents with children and individuals with partners/spouses. As part of my exploration into wealth protection, I have found that life insurance allows you to continue to provide for your dependants so that they do not have a lower quality of life. Using the insurance payout, your dependents can pay mortgage payments, pay for education, manage other expenses as well as continuing to save and invest.


How to get life insurance...

With your employer
Typically, employers provide life insurance as part of employee benefits package. In this scenario your employer will ask you to identify your dependents and sometimes you can allocate the percentage that should be allocated to them. Having an employer provided life insurance package provides coverage if you pass on while you are an employee of the firm. If you move to another job, you will lose the coverage. So check the terms and conditions carefully.

On your own
If you wish to have life insurance coverage that is not dependent on your job, you can shop online from providers such as Vitality, AIG, Scottish Widows, Virgin Money and more. My research has shown that you should seek life insurance policies that is at least 12 times your annual income so if you annual income is £30,000, you should seek coverage of £360,000.

How much does life insurance cost?
The monthly cost of Life insurance varies substantially and can range from £2,50, £6,  £12,  £30. This is variation can be due to a number of factors:

1. Your age:  typically, the older you get life insurance, the more expensive it will be

2. The term of the policy: What length of coverage are you seeking, is it 25 years or unlimited?

​3. What will the policy cover: do you want mortgage cover and/or financial payments to your dependents? The more you cover, the higher the monthly costs.


4. The payment plan you choose:  Level or decreasing term

Level Term The payout will remain the same over your chosen term. So if you elected a payout of £360,000 over 25 years, your dependents will get that amount if something happens to you over the selected term.

Decreasing term: The payout decreases over the term of the policy and is typically used to cover specific debt like a mortgage. If you obtained a decreasing policy of £360,000 over 25 years, your dependents will get a higher payout at the beginning and as the 25th year approaches, the payout will approach £0.


Your own monthly payments will be advised by your insurance provider and there is also no limit to the number of life insurance policies you can purchase.

Is life insurance for you?
I like the idea of allowing my investments and savings to continue to grow and have my dependents benefit separately from life insurance payments. The combination of your savings, investment and life insurance payments, can provide a very stable financial foundation for those you care about.

 Should you get life insurance if... (my view)
Yes if,  ​you have dependents- children, a spouse or parents, it is beneficial to get life insurance. 
It Should at least be 12 times your annual income 
And is separate from your job so it follows you and does not end if you leave a job


Spread the word!
After reading this, do check if your parents have life insurance and discuss why it matters. If you know of parents or individuals with dependents, inform them as well so that they are armed with the right options and information. 



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The truths I am learning about controlling Debts

6/6/2019

 
It is year X and you owe Family 119 a loan.. Knowing that you are unable to pay back, you pledge your services and that of your entire family of 5 to repaying this debt. Family 119 agrees to this arrangement but will not tell you what type of service you will provide and for how long.

You are now age 73 and frail. The 119s now own your land, where your modest home sits (you are now a tenant) and they are also aware that you can no longer continue your services. You instruct your children to inherit your debt repayment services to the 119s. What will they do?

Luckily, Debt Bondage, as described above is illegal according to the International Labour Organisation but it provides some historical insight into how debts have been managed in the past.

Today, the 119s seem to be replaced with banks and other lending organisations. Additionally in some parts of the world, your debts can still be passed onto your dependents.
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Unsurprisingly, Debt is about affordability. Can you afford to have Debt?
So, what is your debt relationship status? Friend, it's complicated, separated?

In the UK, research by FairMoney found that typically, women own 25%  more debt that men. This reality is taking place in a world where a woman wage is statistically lower than men due to wage gaps and the increased number of women in part time jobs. One positive news is that women are more likely to speak about their debts than men showing that we have less guilt or shame about this subject.

With an open approach to discussing debt, this blog post looks at, what we can do to reshape a women's debt reality. I seek to understand the nature of debt, what it is and how to manage it to yield positive outcomes. And if you are already in a difficult debt situation, I share some views based on research on how to get address it.

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Credit Card is a type of unsecured debt
Debt is a sum of money that is owed or due to a lender. 

There are two types of debts - Secured Debt and Unsecured Debt.

Secured Debts are backed by an asset. This means that when you take on a secured debt, the lender (who is providing you with the loan) has the right to asset e.g. a car or house upon as collateral. The typical types of secured debts are mortgages and car loans. If you are unable to pay the loan taken to obtain these assets, the lender can get the asset also called a collateral. As a borrower, you are able to own the asset only when you pay off the loan in full.

Unsecured Debt are not backed by an asset and the lender does not have rights to any collateral. These debts typically have a higher interest rate and examples of this type of debts are credit card loans, student loans, medical bills, pay day loans, overdrafts etc. If you obtain one of these types of debts, the lender can get repaid if your default in a number of ways- garnish your wages, send a debt collector to retrieve the funds or find a way to get access to your asset.


The Stats
Across the Britain, Unsecured debts have increased by 50% since 2008 and make up around 30% of a typical household income. Why? these increases are attributed to public spending cuts and wage stagnation. In light of this, individuals are using debts a resource to manage their expenses. Unsecured debts are easier to access (online) and loan providers are able to typically charge higher rates and thus reap significant rewards particularly when borrowers are unable to repay them. 
​​
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Wealth builders handle debt with extreme care
Understanding Debt for Wealth Creation, Growth and Protection

From my research, I have found that people hold debt for a variety of reasons, to purchase phyiscal assets, knowlegde assets such as education via a student loan, to deal with sudden changes, build their credit score and more. Some others choose to have ZERO debts and manage their lifestyle with their own savings.

However, most wealth builders handle debt with extreme care. This is because:
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  • If it is too high incomparision to their income, it does not free up funds to make additional investments
  • It impacts their wellbeing. A debt free life is a stress free life​
  • It can impact their credit score- a representation of their ability to pay back a loan. If you have a low credit score, lenders including banks will likely charge you high interest rates to lend to you or will choose not to provide you a loan. You can check your credit score for free or for a fee using services like Experian, Equifax, Noodle or the Information Commissioner office. 

For each debt type, I share my finding what what a good behaviour looks like and also list out which bad ones to avoid.
We hold debts for a variety of reasons
Credit Card

Bad Debt Habit:  
  • Spend beyond what you can afford.  
  • Take cash out of your credit card
  • Pay only the minimum amount- this means you'll pay more than you borrowed e.g. If you borrowed 50, you can pay back 150 depending on the interest rate per lender.

Wealth building habit:  
  • For each amount you spend on your credit card, clear it (pay it back in full) every month. 
  • Get a credit card with low or zero interest rate payments 
  • Have only 1 credit card that rewards you for spending (if possible) 


Car loan
Bad Debt Habit:   
  • Buy a brand new car beyond your means and pay a large proportion of your income to pay back the loan

Wealth building habit:  
  • Buy a second hand car and pay in full using cash which you have saved this way you also avoid making monthly payment.
  • Use public transport, Walk, get a bike (if possible) 

Mortgage
Bad Debt Habit:
  • You purchased  your home and you cannot meet the monthly payments. 

Wealth building habit:  
  • Have an emergency fund that covers around 3-8 months of expenses before purchasing a home 
  • Make sure the monthly payment is equal to or less than 30% of your monthly income.  
  • Make monthly or annual overpayments to reduce the amount of interest you pay and your mortgage term.
  • Rent out spare room(s) to supplement your mortgage payment


Student loan
On average, It takes women 16 years to pay off student debts. By contrast, it takes men 11 years.​
Bad Debt Habit:
  • Get a high student loan that will take more than X number of years to pay. 

Wealth building habit:  
  • Go to a significantly cheaper university 
  • Take out low cost loans so you can start your career with very low debts.
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I am thinking of taking on (more) debts
(Discuss this in DETAIL with your loan provider )
  • Seek low interest rate debts
  • Ask for ability to pay it off early with minimal penalties
  • Make debt repayment less than 20% of your monthly income
  • Use comparison sites to consider all suppliers - family, friends, government, banks
  • AVOID pay day loans (see more below)
  • Do not take on debts for things that do not grow in value (e.g. a TV)
  • Find out what happens if you default​
I am already in debt
Not to worry, you have multiple resources avaliable to you to acheive a postive outcome. Speak to your bank or financial advisers to get more information. You can consult resources and charities that include:
  • Money Advice Service
  • Citizens Advice
  • Money Advice Trust

​Here are a few steps that may help:
  • Create a debt payment plan
  • Speak to the lender to reduce the interest rates and repayment amount(s)
  • Use the snowball method (pay off the smallest debt first)
  • Reach out to debt management charities (see above)
  • Overpay when possible
  • Stay positive


Whatever you choose, DO NOT Use Pay day Loans
Payday loans refer to loans provided by pay day lenders who lend an amount of money which borrowers typically pay back on the day they receive their monthly salary-hence the word pay day. These loans are typically  sought after as a last resort. Due to this, they typically carry very very high interest rates. These loans are unsecured and can negatively impact your credit score because they signify to the lender that you are not financially stable. This can  make it more difficult for you to get other loans e.g. a mortgage in the future.
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Clues on Taxes

3/6/2019

 
One of the wealth mantras that has always remained with me is it is not how much you make but how much you KEEP​.  ​When I heard these words the first time, it shattered my beliefs that in order for me to have wealth, I would have to make  a significantly higher income.
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Keep more of your income by understanding your tax position


Knowing that I did not need to be a millionaire before I could start investing and saving, I began to learn about ways to keep more of my current income by saving and investing wisely, controlling debt and understanding taxes. This blog will focus on taxes.

Why we pay taxes

Taxes are payments citizens/residents of a country make to their government who will typically use such funds to secure social goods like maintain public parks, provide state pensions, provide national healthcare and many more. There are different types of taxes but the one that significantly impacts your wealth goals are income taxes. 


What is your tax bracket? 

Income taxes are typically deducted from your monthly or annual pay check. Depending on where you are in the world and your occupation type, you can pay up to 70%+ taxes. If your income tax is 50% it means that 50% of your income is going to government and that amount will not be available for  you to build your wealth. The 50% that you get to keep can also be subjected to taxes on the interest earned via savings so it is very important to ensure that you are not taxed twice when planning for your financial future.

​Many individuals, use banks and tax planners to help them identify ways to legally reduce the amount of tax they pay so that they can hold more of their wealth. 



So what can you do today to protect your wealth?

1. Look through your assets classes and identify if you do pay taxes. For instance, if you are using a retail savings account that is not a cash ISA, you will be paying taxes on your savings.

2. If you get a monthly pay check,  look through your pay slip and understand how much tax you pay monthly. If you want a holistic view, visit HRMC to see how much income tax you pay annually.
 

​3. My favourite: Start using tax friendly products to safeguard your wealth

The UK government allows wealth builders to save up to £20,000 tax free in any of the three ISA wrappers available. You can save your cash, invest or use Innovative finance products.

In addition, if you invest in Private Equity companies that are covered under the EIS scheme, you can get up to 30% back from the government. You can also get similar refund using a VCT.


If you donate to charity, you can also claim a tax relief on your donations. Furthermore, if you are saving for your children, you can use the Junior SIPP or Junior ISA to protect your savings.

As you can see there are numerous opportunities for you to keep more of your income by understanding how to manage your tax situation. Most importantly, t
he size of your income is not a blocker. Remember, it is not how much you make but how much you KEEP​.

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it is not how much you make but how much you KEEP​
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