By: Jasmine Birtles, MoneyMagpie.com
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)
4. Spread your bets
To be safe you must spread your money across different asset classes (shares, property, cash, bonds and so on). Don't put all your eggs in one basket. Nothing in investing is certain. No one has a crystal ball and no one can tell you what is going to happen in the future. Nothing, no investment, not even houses, is as safe as houses. You cannot rely on any one asset class to create a nice pot of money from which you can receive a decent income later on.
5. Be regular
As in bodily functions so in saving and investing, it's a good idea to be regular! Even if you have only a small amount of money left over each month, in the long-run it's much better to set up a standing order from your bank account into an investment each month so that the money is put away before you even see it. GBP
6. Get informed and think for yourself
Managing your money is like eating healthily. You don't need to be a qualified nutritionist to know how to eat healthily but you do need to know basic facts about a healthy diet. It's the same with managing your money. Spend a little time each week picking up money information from this site, from your weekend newspapers and by reading Beat the Banks to get a clear idea of how to run your own investments.
7. Invest in cheap, simple products you understand
It is possible to make sensible money in the stock market if you invest for the long-term and make sure you only put your cash in simple products that have low charges. The two main products that fall into this category are Index-tracking funds (also known as 'Trackers') and Exchange-traded funds (ETFs).
8. Cut down the tax
Make sure you use all the tax-avoiding methods available each year. ISAs, pensions, National Savings&Investments products and certain specialist investment funds don't attract tax and are all worth considering. That said it's important to look at the total net profit first and not just go for something because it's tax-free.
9. Protect your family's money
If you have a family or other dependents make sure you have enough life insurance to keep them going if you weren't around. This is one area where you mustn't scrimp. Make sure that the mortgage would be paid and they would be supported if you weren't around.
10. Change investments as your life changes
Your investment needs change as you get older. When you're in your twenties, thirties and even forties you can afford to put money into riskier products that should give you good returns in the long run. As you get older, though, it's better to shift some of your money into more stable products that are safer but don't make so much money.
Jasmine Birtles' new book, Beat the Banks (Vermilion, 7.99 GBP) is published on 13th May but you can get 30% off plus a free audio version of the book, three free ebooks and a free eguide by pre-ordering the book on Moneymagpie.com. Go to this page and register for the deal.