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Aug 20

8 Money Questions You Should Know the Answers To

Reading Time: 6 mins

At MoneyMagpie, we’re always receiving loads of money questions and queries from our readers! We love being able to help you out with all your finance-related worries. We’ve compiled a list of key money questions you should know the answers to. It covers things from dealing with debt to investing in the stock market. We’ve got you covered with a range of tips and starting points to help you become more financially stable.

Here’s the 8 money questions to ask yourself!

Am I Financially Prepared for an Emergency?

One of the first money questions to ask yourself is if you're prepared for emergency spending

If 2020 has taught us anything it’s the importance of being prepared for an emergency! It’s hard to know exactly what you will need until the time comes, but 3 – 6 months of necessary spending is a good guide. You need the money to be in an easily accessible savings account, ready for when you need it.

However, it’s a fine line between having enough and putting too much in there. Interest rates on savings accounts are shockingly low at the moment. In fact, interest rates are lower than the rate of inflation, so if you over-inflate your emergency fund, your money will slowly be losing value instead.

As well as having an emergency fund, do you have an asset you could borrow against if you had to? It’s not always as an ideal solution, but it can save you from the larger cost of getting a personal loan or using high-interest credit cards.

Do I Spend More Than I Earn?

You may think you don’t, but there are a shocking number of Brits who regularly spend more than they earn. According to research by the Office for National Statistics, on average each UK household spent £900 more than they received in income in 2017 alone. The problem for many people is that they’re simply unaware of how much they’re spending!

Due to cards and contactless, it is so easy to lose track of how much you’ve spent. The best way is to create a regular habit of checking your bank statements and monitoring where your money goes. Take some time to sit down with your accounts and face reality. How much do you actually earn? Once all your living costs have been taken out, how much do you have left? Create a budget and stick to it! Your finances dictate the lifestyle you can afford to have, not the other way around.

what is My credit card balance? (and what are the interest rates on it?)

Credit cards are great when they’re used properly, but they have made it far too easy for us to overspend without a second thought! Only purchase something on a credit card if you know you’ll have the funds at the end of the month to pay it off. However, life sometimes does throw surprises our way. There may be a month when, for some reason, you might not be able to pay the balance off in full. In preparation for this, make sure you’re aware of your credit card interest rates, how much it’ll cost you, and always use the card with the lowest APR if you might not be able to pay the full sum.

Remember to monitor you balance carefully to make sure you’re staying on top of payments. Find out more on how to use credit cards to build your credit score here.

how much debt do I have? And How to Pay It Off

Debt can be overwhelming and if you don’t stay on top of it it can easily spiral. When asked, a lot of people tend to underestimate how much debt they really have by 25%. UK citizens actually owed £1.6 billion in debt at the end of January 2020. While the average debt total (including mortgages) per adult was £31,845, higher than the average annual income.

Prioritise your debts by paying off the ones with the highest interest rates first, or think about applying for a debt consolidation loan. Check out our article How to Stop Debt Overwhelming You for more information, and see what MoneyMagpie founder, Jasmine, has to say about paying off debt below:

Am I Paying More For Anything Than I Need to Be?

Recurring expenses are something that we don’t think about often. They just come out of our account automatically without us ever paying much real attention to them. Meaning plenty of us are left paying for products and subscriptions long after we still need them, simply because we forget to cancel.

Go through your accounts carefully and question every expense. If you’re not using something anymore, or not using it enough – cancel! You’ll obviously still have things you’ll need to continue paying for, like insurance. But it’s always worth negotiating with your provider to try and get a better deal. Never simply auto renew a policy – you can almost always get it cheaper.

What Happens to a Mortgage If You Split?

Sadly, many people who do get mortgages together, whether friends or partners, do end up going separate ways. Knowing your options in advance can help you to prepare for the worst case scenario, as managing a mortgage in a break up is no small feat.

The key thing to remember is you’re both liable for all repayments. A mortgage provider doesn’t care about your personal life, so just because your partner is no longer paying their share it doesn’t mean they’ll let you only pay half. If you fall behind on repayments it will negatively impact both your credit scores.

The options you have are:

  • Sell the house – Pay off whatever remains of your mortgage and split the rest of the money. If you’re in negative equity (when the value of your house falls below your mortgage balance), then you’ll have to divide the outstanding debt between you.
  • Buy the other partner out – If you can afford to, one of you could buy out the other. However, you will have to prove to your lender that you can afford to continue the repayments on your own.
  • Keep a stake in the property – Buying a proportion of your partner’s stake is an option if you can’t afford to buy their whole share. This way, one of you would own most of the property but the other could keep a stake in the home. They’d also be entitled to a percentage of the value if the house is sold at a later date.

Find out more about how to handle this situation in the video below:

Check out How to Prepare for a Post-Lockdown Divorce for more details, too.

Should I be Investing on the Stock Market?

This is one of the money questions we hear a lot, and the simple answer is yes. Everyone who can afford to do so should be investing – even if it’s just £10 a month. Really, investing is the best way to save for the long term. Interest rates on savings accounts are shockingly low so investing is the only real way to see a return on your money.

To a beginner, the stock market can seem overwhelming and rather daunting. How do you get started, or even know what to do? Read 7 Investment Tips for Stock Market Beginners for all the help you’ll need on making the first step.

Is Paying for a Warranty Worth it?

You’ve bought something nice and new and you want to protect it – that’s completely fair. The trouble is, a lot of warranties don’t actually give you that much for your money. In some cases you might get a couple of extra years, but we’ve found cases where an extended warranty cost over half the price of the product itself. And you may never end up using the warranty!

Instead, if you have contents insurance, check whether your items will be covered on that policy. What’s the excess? It’s often cheaper than the cost of a warranty. It’s always worthwhile checking as there’s no point paying to cover the same thing twice.

Also, if you are considering paying extra for a warranty check with the manufacturer and retailer first. Many manufacturers guarantee their products for a minimum of 12 months, with some up to 2 or 3 years and plenty of retailers often have their own guarantees as well.

Jasmine tells you what she thinks about paying for warranties in the video below.

More Money Questions

If you have even more money questions, why not head over to our messageboards where you can ask away and also find plenty of help from fellow readers.

Or check out one of our detailed articles answering different questions below:

 

*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.

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CAROLINE PRITCHARD
CAROLINE PRITCHARD
6 years ago

What is the best way to pay off small chunks of your mortgage each year without facing a penalty?

Jasmine
Admin
Jasmine
6 years ago

Essentially you need to know first how much you are allowed by your mortgage company to pay off each year. Generally it’s about 10% of the remaining capital that you can pay off each year without facing a penalty. So here are some ways: – if it’s easy for you to pay your mortgage each month, ask your mortgage company to increase the payments every month up to the limit of 10% – if you make extra money here and there, with bonuses or similar, put a bit in every time you get paid extra, up to the 10% limit… Read more »

David Prince
David Prince
6 years ago

Can I get a mortgage now I am 65

Jasmine
Admin
Jasmine
6 years ago
Reply to  David Prince

Happily, because of the ageing population, mortgage companies have extended the length of time that we can have mortgages. However, it’s not an easy ask so I have spoken to David Hollingworth at London & Country about it. This is what he says: “Even though things have got tougher for older borrowers, it is possible to get a mortgage at 65. Lenders will want you to show that there is adequate income to cover the mortgage borrowing not only now but that it will be sustainable. Where most lenders will restrict things is the term that they will offer and… Read more »

Carys Jones
Carys Jones
6 years ago

I have saved up enough to pay off a large chunk of my student loan from 10 years ago, is it worth doing this or continuing to keep the money in savings? A small amount is deducted from my wage each month but it will take many more years to pay off the loan at this rate!

Jasmine
Admin
Jasmine
6 years ago
Reply to  Carys Jones

Good for you getting that cash together!

I think that if I were you, as the rate on your loan is so low, you would be better off using that money as a deposit on a house or even investing it for long-term gains in a stocks and shares ISA.

If you’re worried about it, you could, instead, put the money in a peer-to-peer lending account so that it makes money over the next few years but you can get hold of it (with some notice) if you decide you want to pay off the loan after all.

claire woods
claire woods
6 years ago

How do I make extra money using my computer and the internet?

Jasmine
Admin
Jasmine
6 years ago
Reply to  claire woods

Ah, now, as you know, we’re very good at coming up with ways to make extra cash, including ways to make money online.

1) Firstly, take a look at our article on making money with online surveys here https://www.moneymagpie.com/article/online-surveys-easy-cash-for-paid-surveys

2) Then think about making money by blogging https://www.moneymagpie.com/article/how-to-make-money-from-a-blog

3) We have lots of ways to Make Money Online here https://www.moneymagpie.com/make_money_categories/make-money-online so check that out

4) Do you have office skills? Perhaps you could be a Virtual Assistant. Find out here how to do it https://www.moneymagpie.com/article/make-25-an-hour-as-a-virtual-assistant

Let us know how you do!

Caireen Fleming
Caireen Fleming
6 years ago

What is the best saving/investment option. Approx 3-5 years, low risk. Looking to invest approx £10,000.

Jasmine
Admin
Jasmine
6 years ago

Coo this is a tricky one! The thing is that if you’re looking to put money away for 3-5 years, that’s pretty short-term. For short-term saving (and it is saving rather than investing if it’s less than 5 years) you’re going to need low-risk products. The problem with low-risk is that the return tends to be poor. At the moment it’s REALLY poor. The best you’re going to get is with a Cash ISA, ideally fixed rate. Take a look here for the best current rates – maybe go for a 3-year fix. There are 5-year fixes but they’re still… Read more »

Claire W
Claire W
6 years ago

As a fairly light mobile phone user is it better for me to get an iPhone on a contract or buy the phone and use pay as you go?

Jasmine
Admin
Jasmine
6 years ago
Reply to  Claire W

If you’re a light user then it’s probably best to buy one – even get one secondhand or reconditioned on eBay or Amazon or similar – and get a pay-as-you-go contract. GiffGaff is pretty cheap so check them out.

Make sure your phone is insured though – just add it to your home contents insurance – so that you can get the money back if it’s lost and stolen.

The useful thing about buying the phone is that you can resell it later.

rupert summerton
rupert summerton
6 years ago

Im saving up to buy a property , is it better to buy as I have 5% deposit or save 10% and get a better interest rate on mortgage .

Jasmine
Admin
Jasmine
6 years ago

Good question Rupert – it’s a tricky one as it depends on a few factors. 1) What is happening to house prices in your area? If they are generally flat or only going up very slightly then you would be better off waiting and putting together more money so that you can get a cheaper mortgage. 2) Have you spoken to a mortgage advisor to find out what rates you could get even on a 95% mortgage? There are more of them now so it’s possible that the difference between the price of a 90% mortgage and a 95% mortgage… Read more »

Christine Goodall
Christine Goodall
6 years ago

I would like to ask a question. What happens if you still owe money on your mortgage when you retire at age 67. I am still a few years off it, but not that many and it is worrying me.
thank you if you can give me an answer

Jasmine
Admin
Jasmine
6 years ago

Hi Christine, this is quite a complicated subject so I have asked David Hollingworth of London & Country Mortgages to give you an answer. This is what he says: “It’s important that you check when the mortgage term will come to an end. That may well tie in with your anticipated retirement age but not necessarily. The other thing to clarify is whether you have a repayment mortgage or an interest only mortgage. If the mortgage is repayment then your monthly payments will cover the interest and also reduce the capital balance. The mortgage payments will be tailored to repay… Read more »

Ian Beckham
Ian Beckham
6 years ago

These articles are useful for everyone, as often the question that someone asks, is relevent to other people. The question that I would like to ask is – What National Insurance payments are needed to ensure that a given year qualifies to be counted towards your pension entitlement and whether paying into a company pension, means that as you pay a lower NI contribution, you may not get a full state pension.

Jasmine
Admin
Jasmine
6 years ago
Reply to  Ian Beckham

You need 30 years of NI payments to qualify for the State Pension. There’s a handy page here https://www.gov.uk/state-pension/eligibility which gives you the gen. on this. You can potentially ‘buy’ some missed NI years so if you think you may not have paid enough years then do get in touch with the DWP and ask them if you are missing some years and how you can pay for them.

Sarah Bates
Sarah Bates
6 years ago

Buy your holiday gift vouchers from people who are selling them on Gumtree. I saved ££££ this year doing this.

Jasmine
Admin
Jasmine
6 years ago
Reply to  Sarah Bates

That’s a really good idea. Nice one!!!

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