Ten Steps to Taking Control of Your Money
By: Jasmine Birtles, MoneyMagpie.com
05 May 2010 Tell a Friend
Everyone wants our money and it's getting harder to find places to put it that will help it grow and keep us warm in our old age! But there are some simple principles you can follow year-on-year which will help you make the most of the money you have and stop you being conned into losing it.
1. Get out of debt
Credit card debt, overdrafts and loans, particularly secured ones, need to be paid off before you do anything else. You can never build up wealth for yourself or your family while you are losing money each month in interest payments on debts.
Switch your debts to cheaper versions, particularly 0% credit cards if your credit rating is good enough for you to get them, and make sacrifices now in order to pay your debts off as fast as possible. The quicker you pay them off the quicker you will be able to start saving and making money.
2. Make sure you have a savings safety net and some liquid cash for investing
There's no point investing for the future if you haven't get enough 'liquid' cash saved up to dip into for short-term expenses. This means you need to have enough money in a savings account to keep you and your family going for a few months if everything went pear-shaped. Work out how much you need to spend each month to keep the roof over your heads and food in your mouths, multiply that amount by three and put that money aside in an account that you do not touch unless there's an emergency.
3. Pay off your mortgage
One of the safest and most tax-efficient investments you can make is to pay off your mortgage early. It's a tax-free investment because any money you overpay into your mortgage saves you the full amount of interest, unlike savings accounts that will tax you on the interest you pay.
Look at the figures: On a 100,000 GBP repayment mortgage at 5% interest, over 25 years your monthly payments would be 584.59 GBP and the total amount of interest you would pay would be 75,377 GBP. However, if you reduced the payment term to 15 years, your monthly payments would be 790.79 GBP but the total amount of interest you would pay over that time would be just 42,342.20 GBP, a saving of 33,034.80 GBP. (source Savills)
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