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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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WHAT DO YOU THINK?

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MARK HOPKINS
MARK HOPKINS
6 years ago

Are NS&I a good way of saving money?

Jasmine
Admin
Jasmine
6 years ago
Reply to  MARK HOPKINS

It depends who you are and which product you’re saving in. NS&I products include Premium Bonds which I’m not that impressed with (see the question further up that I answered about those) but their savings accounts don’t attract tax so they’re useful for people who tend not to pay so much tax, like older people. NS&I also offer the new Pensioner Bonds which are very good and if you qualify (i.e. you’re over 65 – NS&I products are pretty stable and secure so if that’s the important aspect for you – rather than making a really good return (other than… Read more »

James Travis
James Travis
6 years ago

How can I save and still enjoy the now?

Jasmine
Admin
Jasmine
6 years ago
Reply to  James Travis

Ooh that’s a good question – after all, this is what it’s all about…this is the balance that ideally we all need to get…saving for our futures while enjoying the now. It’s not something you need to worry about but it is a good idea to develop an habitual attitude towards your money that balances these two things. So: – Once a year or so, take a long view of your goals and your finances. What are you aiming at? Do you want to have a certain amount of money when you retire (I hope you do)? If so, how… Read more »

James Travis
James Travis
6 years ago

Good advice

Sam
Sam
6 years ago

How do you improve your credit rating?

Jasmine
Admin
Jasmine
6 years ago
Reply to  Sam

There are quite a lot of things you can do as you can see in our article here https://www.moneymagpie.com/article/how-to-clean-up-you-credit-record on how to clean up your credit record. It includes things like: – making sure you’re on the electoral roll – making sure that you pay all your bills on time every month for at least six months (that’s a particularly good one). – getting an expensive credit card that helps you build your credit – see the selection here https://www.lovemoney.com/creditcards/?site=MoneyMagpie&source=1004201#/ – checking your credit report and seeing if there is anything that is said on it that is not true.… Read more »

Petra
Petra
6 years ago

I have a couple of bank accounts abroad (Germany) which I’d like to close down. What is a good way to transfer the money to the UK without paying excessive fees?

Jasmine
Admin
Jasmine
6 years ago
Reply to  Petra

It depends how much money you have in them If there isn’t much it could be worth taking it out in cash and then shopping around on the high street to find a money-changing place that will do you a good deal. Remember you can haggle with them to get the best rate. Or, you could set up a Paypal account, get the money transferred into that and then change it into Sterling that way – although you are at the mercy of their exchange rate. You could also get the money paid into a prepaid currency card (FairFX, Lloyds,… Read more »

Aaron
Aaron
6 years ago

Keep the videos coming – money troubles can be so life destroying

Jasmine
Admin
Jasmine
6 years ago
Reply to  Aaron

Thanks – I will!

Ian Summerscales
Ian Summerscales
6 years ago

Is it fair that people like me who have never bought Payment protection Insurance, an Endowment mortgage or been opted out of SERPS should miss out on the cash windfall for those who have done all 3!!

Jasmine
Admin
Jasmine
6 years ago

Well you could say that many or most of the people who have been missold these things have lost more than the amount they have been given as compensation.

If you take compound interest into account, they might have made a lot of money over that time if they had invested in something good. Lucky you that you didn’t!

Kathryn Casbolt
Kathryn Casbolt
6 years ago

How can I get a decent savings rate but still retain easy access to my money?

Jasmine
Admin
Jasmine
6 years ago

Honestly, at the moment I don’t think it’s possible – not to get EASY access to your money anyway. The best savings rates right now are with the peer-to-peer lenders, as you can see on our savings comparison page https://www.lovemoney.com/savings/?site=MoneyMagpie&source=1004201 but the problem there is that you can’t access your money easily – you need to tie it up for a year or more. Also these products are riskier (although I like them and invest in them myself). So really, if you want easy, quick access to your money you have to go for the boringly rubbish savings accounts around… Read more »

Danielle Graves
Danielle Graves
6 years ago

Do DRO cause more problems than they solve?

Jasmine
Admin
Jasmine
6 years ago

Hmm, it depends. I’ve spoken to Mark Cowley at Christians Against Poverty (www.capuk.org) about this and he has said: “Debt Relief Orders (DROs) are one of the solutions available to people struggling with unmanageable debt situations. At CAP we find that DROs are a really helpful route to recommend to many of our clients who are otherwise unable to repay the debt that they owe, and who also cannot afford the much more expensive upfront cost of bankruptcy. The DRO route brings hope and a solution to many many people, and enables them to become debt free without many of… Read more »

Sheila Reeves
Sheila Reeves
6 years ago

Seen a lot about people making money from surveys etc – if you are really successful at these schemes do you have to register as self-employed and if so, how do you go about it to avoid any pitfalls/trouble with the tax man?

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