Investing for Dummies – UK. Levene Tony

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СКАЧАТЬ National Savings, now renamed National Savings & Investments. National Savings offers a number of products where you can put your money away for a set time, ranging from one to five years, and more flexible accounts are available as well. The rates are rarely chart-topping, but you have the security of the UK Treasury and Exchequer backing your decision. And for anyone who went through the misery of bust banks in 2008, that’s a great comfort blanket.

Studying How to Save without Sacrificing

      Almost everyone can save some money without sacrificing too much lifestyle. Even small amounts each day can soon mount up. Here are some initial ideas – and how much you can save each week:

      ✔ Give up smoking. A person who smokes 20 cigarettes a day will save £60 a week.

      ✔ Buy milk at the supermarket instead of using home delivery. You’ll save £6 a week.

      ✔ Take a sandwich from home instead of buying one at work. You’ll save up to £15 a week.

      ✔ Go shopping with a list and stick rigidly to it. You’ll save at least £10 a week – and probably avoid some fattening snacks as well.

      ✔ Ditch pricey cable or satellite TV stations you hardly ever watch. You’ll save £3 to £10 a week. Freeview has more channels than you can watch.

      ✔ Put every £2 coin you receive into a box. When you have £50, put the money into a special bank or building society account. I did this when I was saving for my bike. I put away over £800 without noticing it.

      ✔ Buy a copy of Sorting Out Your Finances For Dummies (published by Wiley). You’ll save yet another fortune each week!

      Think about your lifestyle and then make your own additions to the list, from saving on transportation (walk? cycle?) to checking the market for gas, electricity, mobile phones, landlines and broadband, and always using a comparison website for insurance policies. You can create big savings with some discipline – it’s the same style of discipline you need to be a winning investor.

Savings quickly mount up thanks to compound interest

      Pennies really can turn into pounds and pounds into thousands. And they can grow even faster thanks to compound interest, which is interest on interest.

      Suppose, for example, that you manage to save £10 a week and put it in the bank. That’s more than £40 a month and £520 a year. These sums can start you on an investment habit.

      Here’s how much various weekly savings would be worth after five years with a modest 2.5 per cent interest paid each year.

      ✔ £10 a week: £2,733

      ✔ £15 a week: £4,099

      ✔ £20 a week: £5,466

      ✔ £30 a week: £8,199

      ✔ £40 a week: £10,932

      ✔ £50 a week: £13,665

Looking After Your Life and Health

      None of us knows how much time we have left on this planet. The good news is that your chances of living longer have never been better. Most people nowadays are likely to live to around 77 to 82 years of age. The bad news? You can never forecast when you’re going to be hit by a bus or succumb to a mystery virus.

      So you should always make sure you have sufficient life insurance and cover to replace at least some of your income if you succumb to a serious illness or worse. Life insurance won’t replace you, but it will replace your money-earning capacity.

      Always shop around for all insurance. Look at any comparison site. You can easily pay twice as much for life cover of exactly the same amount with one company as with another. What’s the difference? Nothing. You have to die to get a payout with both, so the conditions are identical. No one wants to buy insurance – it’s not fun – but if you have to then don’t waste your cash.

      

Before buying life-insurance cover, decide how much you need. One rule of thumb is four to five times your yearly take-home pay. But also look at any death or illness benefits that come with your job. No point exists in doubling up cover unnecessarily. And know that if you have no family commitments or that your wider family will rally round if trouble occurs then life cover is just a waste of time.

      As well as life cover, you can purchase critical illness policies that pay out a lump sum if you have a serious illness, such as a heart attack or cancer, and survive for a month. A huge range of prices exist for policies with standard terms, so never, ever go for the first quote you get and be careful of exclusions. Knowing what’s covered can be a minefield so taking expert advice first is worthwhile.

      Some policies, known as income protection plans, promise to pay a monthly sum until your normal retirement age or for a shorter set period if you can’t work due to illness or injury. These policies can be expensive. Also be aware that although some policies pay out if you’re unable to do your own job due to illness, less generous ones only pay out if you can’t do any job at all.

      

Always look at all your family and personal circumstances before signing up for a policy. If you don’t really need it then don’t buy it. You could use the monthly premiums to help build up an investment nest-egg.

Paying into a Pension Plan

      Your pension plan is an investment for your future but with tax relief in the here and now. This means that, if you’re a basic-rate taxpayer, you pay £80 for each £100 that you get in investment going into the plan – a pretty good deal. If you’re a 40 per cent taxpayer then the setup is even better because you only have to pay in £60 to get £100 into your account, thanks to government tax rebates.

      

The pension picture is changing. Under a scheme known as auto-enrolment employers have to offer all those in employment a pension plan and pay in a percentage – admittedly small – of salaries up to around £45,000 a year, provided the employee contributes some earnings to the plan as well. If you don’t want to pay in from your salary, you have to make the conscious effort to opt out. And then you don’t get the employer contribution. None of this helps the self-employed.

      Those with larger sums and a do-it-yourself attitude to investment can opt for a self-invested personal pension (SIPP) where the holder gets to choose what goes in. You can start a SIPP with anything from £5,000, although £50,000 is a more normal minimum. However, on the downside, the costs can be high and if your strategy goes wrong, you have only yourself to blame.

      Chapter 14 contains loads of hints and tips on how to deal with your pension, whatever the level of involvement you want.

Taking Care of Property before Profits

      The roof over your head is probably your biggest monthly outlay, whether you rent or buy. And it’s also likely to be your biggest investment if you own your own home. So don’t begrudge what you spend on it. In the long run, your home should build up to be a worthwhile asset. (At the very worst, it’ll shelter you from the elements!)

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