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You can invest and make money for your old age. You can find safe investments and good money-making ideas if you know where to look. 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.

• Get out of debt
• Have a savings safety net
• Pay off your mortgage
• Spread your bets
• Be regular
• Get informed
• Invest in cheap, simple products
• Cut down on the tax
• Protect your family’s money
• Change your investments as you get older

1. Get out of debt

Debt is the devil when it comes to making money for yourself. It’s probably the single biggest barrier to wealth for most individuals.

Before you even start saving any non-mortgage debt needs to be paid off and paid off as fast as possible. Credit card debt, overdrafts and loans, particularly secured ones, need to be paid off as a matter of urgency. Look at our article on seven quick ways to pay off debt and our longer step-by-step guide to getting out of debt for help.

The only exceptions to this are cheap debt such as student loans and credit card debt at 0%. However, even these debts should be nagging at you until they are eradicated.

0% credit cards are fast disappearing from the market which makes it harder to switch outstanding balances at the end of the 0% period. They all now charge a substantial fee (usually about 2.5-3.5%) to switch each time which will add to your costs. So even these debts should be paid off as fast as is practical. Also, although student loans are cheap, while you still have some to pay off it can make it harder for you to get a mortgage.

2. Make sure you have a savings safety net

There is no point investing for the future if you haven’t get enough ‘liquid’ cash saved up to dip into for short-term expenses. By ‘liquid’ I mean ‘easy to get your hands on’.

This means you need to have enough money in a savings account to keep you and your family going for around three to six months if everything went pear-shaped. You can see how to do it and why you need it in this article about setting up a savings safety net. 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 (or, ideally, more) and put that money aside in an account that you do not touch unless there’s an emergency.

Once you have collected enough money for this cash cushion then you can start investing. But it’s also useful to continue with other short-term savings for major purchases such as a car or a new boiler and also to create liquid (i.e. easily accessible) funds for yourself so that you can take advantage of new, very good investments when they appear. Find the current savings account best buys with our comparison service here.

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 gives you the most wonderful freedom to be mortgage-free; 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; it is one of the safest investments you make because when you pay off your mortgage, you pay it off and that’s it.

Take note: financial advisers are not taught to tell people to pay off their mortgage. They are, however, taught to push insurance products and insurance-based investments. Coincidentally, financial advisers make no money from you paying off your mortgage or existing debt, but they DO stand to make commissions from recommending insurance products and investments. Funny that.

I love the idea of paying off your mortgage early (I paid mine off in nine years) because:

1. It gives you the most wonderful freedom (particularly if, like me, you are self-employed and have to create work each month to make the payments!)
2. It is tax-freeeeeeee – 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.
3. It is one of the safest investments you make – when you pay off your mortgage, you pay it off and that’s it. There is no uncertainty about what will happen to your money.
4. Once it’s paid you own your home outright – no longer does it belong to the bank manager.
5. The mortgage companies hate it because they lose money! And don’t we just love the upper hand?!

You can get a step-by-step guide to paying off your mortgage in double-quick time here.

To pay off your mortgage as quickly as possible you will probably need a flexible type of home-loan to do it. If you currently have a fixed mortgage the chances are you can only overpay about 10% a year. Depending on how long you have remaining on the fixed deal and how much the lender would charge you to switch out of it early, it may be worth staying with the fixed loan until the end of its term and then switching to a more flexible product. While you’re with the fixed loan you could pay off the 10% (or whatever the maximum is) and also set aside money in a savings account to pay off a lump of the mortgage as soon as you come out of the fixed term.

Look at the figures: On a £100,000 repayment mortgage at 5% interest, over 25 years your monthly payments would be £584.59 and the total amount of interest you would pay would be £75,377. However, if you reduced the payment term to 15 years, your monthly payments would be £790.79 but the total amount of interest you would pay over that time would be just £42,342.20, a saving of £33,034.80. (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.

Still, you can also choose your individual investments well. When it comes to stocks and shares, it’s generally better to invest in cheap, simple products like index-tracking funds and exchange-traded funds (ETFs). When it comes to bonds, we like bond funds that are fun as ETFs.

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.

Also, by putting money in at regular intervals you benefit from what is called ‘pound cost averaging’  which means you catch the ups and the downs of a volatile investment (like the stock market) and in the long-run this smoothes out to an average, decent return.

You could even make the most of one of those savings accounts that gives a decent return if you are willing and able to invest a certain amount of money every month. Check out the best of these ‘regular savings accounts’ here.

6. Get informed

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 fruit and vegetables, vitamins, protein, minerals etc. to work out how to have a balanced and healthy diet.

It’s the same with managing your money. You don’t need to be a qualified financial adviser but you do need to have some basic knowledge about how money works.

So spend a little time each week reading the money pages in your weekend papers (they tend to have the most money articles). Learn a bit about saving and investing on Moneymagpie and dip into my books The Money Magpie and the new one, Beat the Banks. If we spent as much time researching financial matters as we do researching the next flat screen TV to buy or which new mobile we want we would all be a whole lot richer.

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). When it comes to bonds, we like bonds that are as fun as ETFs.

These investments tend to be run by computer programmes, rather than fund managers who need a new Porsche Boxter every Christmas, and they simply track stock market indices or commodities (like oil or sugar) or even whole countries (like China or Brazil or Russia).

Don’t invest in anything you don’t understand and never invest in things just because everyone else is. That’s usually the worst time to put your money into these things. Be different. Be contrarian. Wear your pants on your head. Dress like it’s 1979. Eat cake for breakfast if you feel like it. Sell property when everyone else is buying and buy shares when everyone else is selling.

As Warren Buffet (greatest investor of all time and one of the richest men in the world) says “be fearful when others are greedy and greedy when others are fearful”. Mind you, the full quote that that phrase comes from is: “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.” So, again, the prime advice is to think for yourself.

8. Cut down the tax

Make sure you use all the tax-avoiding methods available each year. After all, why spend all that time and effort working for your pay and thinking through sensible investments just to lose a load of it in over-payment of taxes?

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. Sometimes, even with the tax incentive, the rewards are still too low to deserve investment.

See our tax section for lots more ways of protecting yourself from the HMRC!

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.

Life insurance is such an important (and potentially expensive) product that you must get as much information about it as possible before you sign on the dotted line. Read our article about life insurance and how to get the best deal.

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.

Also, when it comes to about five years before you plan to retire it is a good idea to ‘lifestyle’ your investments and start moving your money from the more volatile, ‘growth’ products (shares, property, commodities etc) to the more stable investments such as savings accounts, bonds and gilts so that you can capture the gains you have made over the years and keep it going even if you happen to retire just as markets are falling.