How to actually be good with money

Has your cash usually evaporated a week after payday? We’ve all been there. Here’s how to make it last a little longer this year…

it’s 2020, and you’ve told yourself it’s time to get your act together when it comes to your money situation. But financial stability can sometimes feel totally out of reach – and no, it’s not because we’re eating too many avocados, thank you very much. Knowing how to use the income you do have will help you get closer to the things you really want – from bagging that first flat to building up a cushion in your savings account (yes, really). Here’s how to make a plan you’ll actually stick to…

I want to buy a flat...

Here’s a reality check: the average price of a home in the UK is around £230,000, so if you’re starting from zero, you’re unlikely to be able to get on the property ladder this year. But don’t worry – there are plenty of options you can look into now to make it a reality in 2021…

Lifetime ISA

If you’re aged 18 to 39, you can open a Lifetime ISA (which stands for individual savings account, FYI) and use it to save for your first home, as long as it costs under £450,000 (LOL – that should be easy).

You can stash up to £4,000 into a Lifetime ISA every tax year until you’re 50, and the government will pay you a 25% bonus directly into the account four to eight weeks later – if you put in the maximum £4,000, then that’s a £1,000 bonus per tax year. If you were to open a Lifetime ISA this year and put in two deposits of £4,000 – one in 2020 (before the tax year ends on 5th April) and one in the 2020-2021 tax year – that’s a potential £2,000 bonus.

Low deposit

If you’re eyeing up a property, first you’ll need to work out how much of a deposit you have. The absolute minimum is 5% of the property price – for a property worth

£230,000, this would be £11,500 – but the higher your deposit, the lower the monthly mortgage repayments will be. The maximum you can borrow for a mortgage is usually five times your annual salary. Use the mortgage calculator at Moneyadviceservice.org.uk to work out how much your monthly repayments would be.

Shared ownership

Shared ownership schemes allow you to buy between 25% and 75% of a property, and pay reduced rent on the rest. You buy the part you own with a combination of a deposit (minimum 5%) and a mortgage. The schemes can be used to buy newbuild homes or resale ones from housing associations. You can buy a bigger share of the property when you can afford it.

Help To Buy: Equity Loan

This government scheme is a good option when buying a new-build home in full (ie not renting a portion of it, as you would with shared ownership). You can borrow 20% of the property’s cost (up to £600,000) from the government (or up to 40% if you’re buying in London), and it’ll be interest-free for the first five years. To make up the remaining 80%, you’ll have to stump up a 5% deposit and get a 75% mortgage. Find out more at Helptobuy.gov.uk.

I want to spend smarter…

Not sure where that last pay packet went? Try this: after paying your rent and bills, transfer the money you have left over from your usual bank account to a Bó “spending account”.

Bó (Wearebo.co.uk) launches in January 2020 and is designed to help you work out a budget for your disposable income. It analyses your spending and gives you advice on how to reduce it, with itemised breakdowns and instant balance updates. You can track your spending via a map, so if you’re spending too much money in one place, you can change your habits.

If you have several bank accounts and struggle to keep track of them all, apps such as Yolt (Yolt.com) and Moneydashboard (Moneydashboard.com) allow you to see everything in one place.

I Want to start investing …

Investment service Hargreaves Lansdown estimates that if you started investing just £10 a month, it could be worth £1,763 in 10 years’ time. If you leave it in a savings account for the same length of time, it would be worth just £1,249 because interest rates are so low. If you have a pension through your job, you’re already investing – workplace pensions are held in investment funds.

If you’ve never invested before, a good place to start is a stocks and shares ISA, which invests your money. Many online investment services offer this type of account, and the Gov.uk website has a list of authorised ISA providers. Everyone currently has a £20,000 tax-free ISA allowance, meaning any gains you make from it can’t be taxed.

Technology has turned us all into Wall Street wolves. Apps such as Wealthify (Wealthify.com) and Evestor (Evestor.co.uk) let you begin investing with just £1, Moola (Moo.la) needs a minimum monthly commitment of £50 and Nutmeg (Nutmeg.com) requires an initial £500 lump sum. Meanwhile, Moneybox (Moneyboxapp.com) links to your bank account, rounds up your transactions to the nearest pound and invests the difference for you.

Try to leave your money alone for as long as you can (ideally a minimum of five years). You will see its value go up and down. This is normal – the longer you leave it, the more chance it will have to grow. Don’t panic and take the money out if the value dips dramatically.

I want to save £2,000…

You’ve ditched the lattes and cut down on Ubers, so why is your savings account still empty? You don’t need to make a lot of sacrifices – the key is to be strategic. Just follow these steps: 1

To save £2,000 in a year, you need to put away £167 a month. Start by setting up a monthly automated transfer of £100 from your current account to your savings account on the day you’re paid. 2 Download the Chip app (Getchip.uk), which links to your bank account and uses artificial intelligence to work out what it thinks you can afford to save by looking at your transactions, then moves it into your savings for you. Chip says the average auto save is £20 per month. 3 Then, save a further £20 per month by bringing lunch to work one day per week, saving around £5 each time. 4 Finally, open a Monzo account (Monzo.com) and activate the Coin Jar feature – it rounds up your transactions and moves the difference to a savings pot. If you spend £2.10 on a coffee every day, 90p will be transferred to your savings. That’s £27 every 30 days. Et voilà: £167 saved in a month. Now, that wasn’t too painful after all, was it?

I want to quit my job and go travelling...

Ready to ditch your 9-5 and see the world? Er, of course you are. But whether you plan to go backpacking or want five-star luxury, you’ll need money. Work out how much cash you’ll need for travel, food, accommodation and entertainment each month you’re away. If you need £5,000 in total, for example, you should save £417 a month for 12 months before you quit.

To help with this, you could top up your income with a side hustle – this could be anything from photography to dog walking. “The tax-free trading allowance is £1,000 – if you earn under this amount in the tax year outside of your official job, you won’t need to pay tax or even register with HMRC,” explains Faye Watts, co-founder of FUSE Accountants. “If you start to earn more, set yourself up as a sole trader by filling in a CFW1 form on Gov.uk to register with HMRC as self-employed.”

If you need advice about saving for a trip, talk to the Barclays Money Mentors (Barclays.co.uk) – they offer free 45-minute mentoring sessions via video or phone, or at a branch, regardless of whether you bank with them or not. You can chat to them about pretty much anything cash-related – except maybe “How can I win the Lottery?” ◆