High Interest: 7 Best Ways To Stash Your Cash Savings

Since 2008 the interest you earned on your cash savings had become a joke, getting to the point where you had no choice but to invest it or otherwise, you’d get no return on your money. The Bank of England had slashed the base rate in response to the Great Recession, and for most of the time since it was just 0.5% which was about the best interest rate that you could expect to earn on your savings. During Covid it was slashed even further taking it just shy of 0%.

But times are changing, and interest rates are now rising, which wrongly might put a smile on the faces of some people with savings. They don’t understand how much worse off they’ll really be when rates rise.

The Bank of England meets roughly once every six weeks to vote on the base rate. They’ve raised it in the last 4 consecutive meetings, and it now sits at 1% – a 13-year high! It’s also expected to continue rising because as you will know inflation is soaring. According to Sky News, markets expect the interest rate to hit 1.25% later this year, going up to 1.5% by mid-2023 – and there’s a chance it could go even higher.

In this post we’re going to be looking at some of the best places to stash your cash in this age of high inflation and rising interest rates.  We’ll discuss some of the pros and cons of each of these, look at when you should hold cash and help you to decide on whether you should be doing more with it such as paying down debts or investing. Let’s check it out…

Alternatively Watch The YouTube Video > > >

Rising Interest Rates Is Bad News

When interest rates were slashed savers were effectively being punished for stockpiling cash. The intention of low interest rates is to force savers to spend their money and consequently boost the economy.

Although interest rates were low over the last decade, so was inflation, so the buying power of your money was only being eroded at a snail’s pace. For example, if the interest you earned was 0.5% and inflation was 2%, then your real return is minus 1.5%.

This is bad but it still allows you to hold cash for years without losing significant buying power. However, this negative real return completely destroyed cash as a means to grow wealth. Unfortunately, although this is a basic concept most of the British public don’t understand this and still continue to save, rather than invest. All they see is the headline interest rate and their bank depositing interest into their accounts monthly.

With rising interest rates you’d be forgiven for thinking this was good news for savers, but the problem is that real interest rates (that’s after deducting inflation) are getting worse, far worse! Inflation is predicted to peak above 10% in the fourth quarter of 2022 meaning you’ll be earning a negative real return of around 8.5%, assuming the interest you earn is 1.5%.

In a single year this is a terrible blow to saver’s cash but if this continues for longer, people’s cash will be wiped out in real terms. It’s now more important than ever to ask the question, should you be doing more with what savings you have? This could be paying down debts or investing in something that gives your money a fighting chance.

Another and probably more obvious reason why rising interest rates is bad is that it means the cost of borrowing goes up. We’re betting the majority of the people you know have some form of debt – and probably a lot of it.

A small hike in your mortgage rate would add hundreds of pounds to your monthly payment. For example, a mortgage of £300k, over 25 years, costing 2% has a monthly payment of £1,272. If that interest rises to 4% the monthly payment increases by more than £300 a month (to £1,583)!

Best (& Worst) Ways To Stash Your Cash Savings

The following list is not ranked best to worst because the best place to stash your cash depends on what you’re holding cash for.

#1 – Easy Access Savings and Cash ISAs

Since the Personal Savings Allowance was introduced there’s been little difference between a normal savings account and a Cash ISA, hence why we’ve grouped them together. Basic rate taxpayers can earn £1,000 interest each year before paying tax and higher earners can earn £500. So, with interest rates still fairly low, the decision will likely boil down to whichever pays the highest interest.

At time of writing the best rates are from Chase Bank which pays 1.5% on their easy access savings account and Marcus by Goldman Sachs pays 1% on its Cash ISA. There’s no point mentioning any more because this info will probably be out of date within weeks, especially if the Bank of England base rate continues to climb. See here for best rates.

The important part here is that you can access your money whenever you need, which is required if it’s an emergency fund. On that note, we would avoid any account that stipulates rules such as limiting the number of withdrawals or forces you to give notice to withdraw.

#2 – Fixed Savings Accounts and Cash ISAs

With fixed savings you can’t withdraw your money until the end of the term, which will make them useless for most people. The main reason to have cash in the first place is for emergencies but it’s no good if it’s locked away.

1 or 2-year fixes might be useful for a short-term savings goal, and these tend to have relatively impressive headline grabbing interest rates. There’s a bunch currently paying around 2.5%.

But some fixed accounts lock your money away for 5-years, and barely give any additional interest despite the lack of access. With such a long time horizon, we think investing would be a better use of your cash.

See here for best rates.

#3 – Premium Bonds

Premium Bonds are the nation’s favourite savings product with a whopping £117 billion saved in them. Until recently Premium Bonds were paying the best interest rate at 1% overall but most people would earn less and sometimes nothing at all.

Premium Bonds are essentially a giant lottery and the more bonds you own the higher your chances of winning. Money Saving Expert crunched the numbers and found that someone with average luck and who had £10,000 worth of bonds would earn 0.75%.

With interest rates on the rise across the board and other savings products now offering more, the reasons to buy Premium Bonds are getting smaller. But all that could change if they raise the prize pool, so let’s see what happens.

#4 – Cash Lifetime ISA

Cash Lifetime ISAs are the go-to savings product for first-time homebuyers. The interest rates available are not great but you get that 25% government boost. But whatever you do, don’t use a Cash Lifetime ISA for your retirement savings. As the decades go by, due to inflation your retirement money will be worth diddly squat.

See here for best rates.

#5 – Regular Savings Accounts

This type of savings accounts is a joke these days; they used to be far more generous! The banks try and draw you in by offering what seems like a headline grabbing high interest rate (often 3-5%) but attach a load of conditions.

The main drawback is usually a ridiculously low monthly deposit limit in the region of £200. There’s no point earning 3% if it’s on a tiny sum of money. And secondly, you’ll usually only earn interest for 12 months, so by the time you’ve slowly drip-fed a meaningful amount of money in, the offer expires. Regular Savings Accounts are probably not worth your time.

See here for best rates.

#6 – Buy Gold & Silver

Buying power of £100 relative to gold, over time

Government money such as the British pound or the US dollar lose value over time due to inflation. Over the last 50 years the British pound has lost around 93% of its purchasing power according to officialdata.org. £100 in 1972 is worth less than £7 in today’s money.

Saving your money and earning some interest on it will limit the loss of purchasing power slightly but during my adult life I don’t recall any year when interest earned was greater than inflation. Therefore, holding cash is a hidden raid on your wealth. 

One potential way to preserve that value over the long term is by holding gold and silver instead – which is the original money and has a positive record going back thousands of years.

Gold price, over time

This chart shows the price of gold in pounds sterling for about 50 years. Although the growth in value is not a straight line there is huge appreciation over time, which is in stark contrast to the declining value of the pound which the previous chart showed.

By the way, new customers can get some free silver and cash when they open a BullionVault account when they follow the link here. BullionVault is the world’s largest online investment gold service. T&Cs apply.

#7 – Money Market Funds

You’ve probably heard of the term but you probably don’t know too much about what money market funds are. A money market fund is a very low-risk investment that gives you a place to hold rather than grow your savings, while aiming to give you a slightly higher return than cash.

They do this by buying short-term debt from governments, banks and companies with strong balance sheets and high credit ratings. You will earn a small amount of interest, all while the capital value of your money stays stable, in theory.

I personally invest in these types of funds when I have money just sitting idle in my investment account. This is because most investment platforms pay zero interest on your cash balance, and a money market fund is a way of at least earning something on your cash.

I invest in the Xtrackers GBP Overnight Rate Swap ETF (ticker XSTR) but if you’re looking for an open-ended fund, then there’s also the Vanguard Sterling Short-Term Money Market Fund.

How Much Cash Should You Have?

The amount of cash you should have is specific to your unique circumstances but if you’re working in a relatively secure job (if there is such a thing), then a general rule of thumb is that you want 6 months of your normal monthly expenses in accessible cash – this is your emergency fund. And that assumes you have no bad debts.

You might also have some additional cash if you have a short-term savings goal, say you’re getting married next year, or you intend to buy a house in 2 years’ time. You shouldn’t invest for short-term goals because you can’t afford the market crashing when you need the money.

For any long-term savings these should be invested because this is the only way to grow it and at the very least you want to avoid that nasty inflation chopping away at it. If you’ve stopped working due to, say, retirement, then you might want up to 2 years’ worth of cash with the rest invested. This should be enough cash to avoid having to sell investments during a downturn.

You Should Invest Or Pay Down Debts

If you agree with me that holding cash is detrimental to your wealth, you will likely want to invest, or else pay down your debts. It’s scary how many people sit on a big pile of cash and continue to pay interest on their mortgage and other debts. This is the sort of behaviour you can only get away with when interest rates are low, like they have been in recent years.

When interest rates are low, I personally choose to invest spare cash (even going as far as to borrow to invest) but as interest rates creep upwards there becomes a point when the risk overshadows the potential returns.

If the expected market return is 8% and the debt costs 2%, then I aim to profit from the difference. However, say the interest rate you were paying rises to 6%, there is little profit to be made but an awful lot of risk. If interest rates rose over 8%, for me, it would be madness to invest if I had debts.

During much of the 70s and 80s interest rates were in excess of 10%, so this is a perfect example of when I would stop investing, stop hoarding cash, and pay down as much debt as I could.

What Are you doing with your spare cash? Join the conversation in the comments below.

Written by Andy


Featured image credit: ullrich/Shutterstock.com

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Has Dave Ramsey Lost The Plot On House Deposits?

House prices continue to soar ever higher. The average property price rose by 10.9% over the year, meaning the average home in the UK cost £277,000, which is £27,000 higher than last year, according to figures from the ONS.

Compounding the problem for wannabe homeowners is rising rents. The Guardian reported that the average advertised rent outside of London is 10.8% higher than a year ago. Property website Rightmove said it was “the most competitive rental market ever recorded.”

This got me thinking – how can anyone afford to buy a house and what is the best way to save for a house deposit? Well, it’s certainly not easy. The average age of a first-time buyer in the UK is 34 years old and this is 6 years older than the average age of a first-time buyer in 2007.

Dave Ramsey is a well-respected and popular finance guru over in the US; some might say he’s the US equivalent of Martin Lewis. In this post we’re going to examine his views on how to save for a house deposit, including how much to put down for a deposit, what to cut from your spending, how to earn more, and where saving for a house fits within his 7 baby steps for mastering money.

Whilst we think Dave Ramsey overall has an excellent message, there are many things we disagree on and much of what he says doesn’t translate over here in the UK, despite legions of UK fans hanging on to his every word. This is going to be an interesting one. Let’s check it out…

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Alternatively Watch The YouTube Video > > >

The State Of The Housing Market

If you were thinking that everyone else seems to be on the property ladder but you’re not, then know that you’re in good company because the reality is quite different. One in three of the millennial generation, born between the mid-1980s and the mid-1990s, are expected to never own their own home, according to the Guardian.

The FT stated that in early 2021, the average house deposit for a first-time buyer reached almost £68,000, which was around £18,000 more than in 2019. That’s deposit inflation of 36% in just 2 years.

How Much Should You Spend On A House?

Dave says you want a 15-year fixed-rate mortgage where the payments are no more than 25% of your monthly take-home pay. In fact, that 25% should include all your housing costs such as property taxes, which is essentially the US equivalent of our council tax. So as a couple if you earned £4,000 after tax, then your total housing costs would be no more than £1,000 a month.

He goes on to say that “the reason your mortgage payment should never be more than 25% of your monthly take-home pay is because you’ll have plenty of breathing room in your budget to tackle other financial goals—and keeps your house from owning you.”

Straight off the bat we have multiple problems with this. Firstly, we don’t know what the US mortgage market is like, but we checked a big mortgage comparison site in the UK and there seemed to be only one lender offering 15-year fixes, which was way more expensive than a typical 2-year deal. At time of writing a 2-year fix might cost 2% a year, whereas fixing for 15 years would cost around 3.7% a year.

To be fair, although this seems like a huge difference, 3.7% might turn out to be cheap considering the expected direction of interest rates right now, but first-time buyers need every upfront cost saving they can get their hands on.

Plus, we would never encourage anyone to lock themselves into a deal for more than 2 years, let alone 15. The fact is that relationships breakdown often forcing you to sell the house; the person you love right now could be impossible to live with in a few years’ time. The UK divorce rate is estimated at 42% and almost half of these breakups tend to happen in the first decade of marriage, when you’re buying that first house together. Our bet is that the number of breakups outside of marriage is even higher.

The problem is that mortgage fixes always come with horrendous early repayment charges. In this case it would be 5% in the first 5 years. That would be a £15,000 penalty if the mortgage outstanding was £300,000. These might be incurred if you had to sell the property. You can often avoid these if you move the mortgage to another house, but you must stick with the same provider, limiting your options.

Also, Dave is also saying that the mortgage should be paid off in full by the end of this 15-year fix. But let’s not forget to mention that a 15-year mortgage term is ridiculously short for a first-time buyer – almost laughable. Most people in the UK can’t even get on the property ladder with 30-year terms, which have more affordable monthly repayments.

With house prices surging, one of the only levers to pull is to extend the mortgage length in order to reduce monthly payments. It’s a must! In this example (Debt: £250,000, Interest: 3.5%) monthly mortgage repayments would be £665 more based on a 15 vs a 30-year mortgage term (£1,788 vs £1,123).

Another point Dave misses is that even if you want a short mortgage term (some of you will) it’s often better to get the longest mortgage term you can get and make overpayments (make sure you get a mortgage that allows this without penalties).

If you get a short term, you are contractually obliged to make those payments, whereas overpayments are optional.  If you default on your mortgage you run the risk of having your home repossessed. Life will throw a lot of curve balls, so there’s no need to tie your hands for the same end result.

How Big Should Your House Deposit Be?

Dave recommends a 20% deposit as it gets you out of paying for private mortgage insurance. However, as this seems to be a US specific insurance, it doesn’t apply to us in the UK. Nevertheless, he says if you can’t do 20%, that’s okay but don’t go any lower than 10% – otherwise you’ll be stuck paying extra in interest and fees, putting you further in debt for decades!

Our views on mortgage debt, especially cheap mortgage debt differs from what Dave believes. He considers mortgage debt to be a necessary evil, but when interest rates are low, we consider mortgages to be an incredible wealth building tool.

If you can earn 8% in the stock market on average but only pay 2% on your mortgage, then over time your wealth could be hundreds of thousands of pounds higher by choosing to pay as little as you can on the mortgage and investing this instead.

This doesn’t mean put down the lowest deposit possible though. Due to banks giving preferential rates to those with more equity, we previously calculated that the optimal deposit size or house equity was somewhere between 10-25%, and anything over this was wasting an opportunity to invest with dirt cheap money.

It’s important to note that the optimal mortgage deposit size depends on your specific circumstances and prevailing interest rates. If you want the full explanation of how we worked this out so you can calculate it for yourself, we go into some detail in these videos (here and here), so these will be worth watching next.

Because mortgage debt is long-term – it can be up to 40 years – this is enough time for any stock investments to ride out any bad years. Dave Ramsey must believe this to a certain degree because even he recommends paying 15% of your household income into retirement savings before paying down the mortgage early.

How Long Should It Take To Save A Deposit?

Dave says it should take no more than 2 years to save a deposit. Again, this might be reasonable in the US – we don’t know – but in the UK we can’t imagine many people being able to do it in 2 years. As we said earlier, the average age of a first-time buyer in the UK is 34, and we think most people will start actively saving from their mid-twenties. The fact of the matter is you will need tens of thousands of pounds which for most people will take several years.

Where Should You Save The Money For A House Deposit?

Dave’s recommendation is a US specific product called a money market savings account but in the UK that would just be savings account. And we agree. If you can save for the deposit in a few years, then stash the cash in an easy access savings account, Premium Bonds, or a Cash Lifetime ISA if the house price will be below £450,000. You can’t risk losing your home purchase by investing the cash and seeing it fall in value.

We know that inflation is killing that cash while it sits there. But we think this is one occasion where we wouldn’t be happy to wait a decade for the stock market to recover if it halved in value right before we wanted to purchase a home.

The exception might be if, realistically, you know it will take many years to save for. When the dream of buying your own home is looking at least 5 to 10 years away, then you might think about investing in the stock market instead, perhaps with some bonds to reduce portfolio volatility.

Streamline Your Budget

This is Dave’s fancy way of saying, “cut all joy from your life and live like a pauper”. Some ideas from Dave include taking a break from the gym, stop eating out, and stop buying clothes, amongst other things. Apparently, these alone could save you in the region of £450 a month.

Yes, you probably could make some savings, but this sounds like a massive exaggeration for most cash strapped people who are likely already watching what they spend like a hawk.

Some expenses might even help you save money elsewhere; Netflix is cheap and could alleviate boredom, so you don’t go out and spend even more. Same with the gym. If you’re spending 4 days a week working out, at least you’re not going elsewhere and having more money escape from your pocket.

We definitely agree there should be cuts where possible – just remember you might be saving for many years, so make sure you’re still living a life worth living.

Temporarily Pause Your Retirement Savings

In a surprising twist Dave says it’s okay to temporarily pause your retirement savings. Just make sure this is only a one-to-two-year detour, not a five-year pause! This means that Dave Ramsey’s 7 Baby Steps is really more like 8 steps, with saving for a house deposit slotting in as the new number 4.

We would tend to agree with cutting down on the retirement savings if the timeframe was short, except we would always take advantage of any employer matched pension contributions. Most employers will only match 3% to 5% so whatever you save into your employer pension shouldn’t be too much of a drain on your house deposit savings. But as this matched contribution is effectively free money you don’t want to miss out on this.

Boost Your Income

If you’re familiar with Dave Ramsey you’re probably anticipating that he will say, “get a 2nd job, like delivering pizza during the night!”. And Dave does not disappoint.

Never mind that Americans already work on average 47 hours a week, Dave now wants you to take the graveyard shift at Dominoes. Sleeping and some recovery time is obviously seen as a luxury at Ramsey Manor.

Here in the UK maybe there’s a little more scope for some extra work – the average hours worked comes in at 42 hours a week, but unless it’s a hobby you’ve managed to monetise, we wouldn’t want to do this at all. Going gazelle intense as Dave would say might be a short-term solution for someone drowning in debt but it’s a tall order for someone who just wants to own a home.

As for what second job you should take, not to worry, Dave has some suggestions. Apparently, if you like driving, get a second job with Uber. Because as we all know, cruising down a nice open country road is the same as ferrying drunks around in the back of your cab at 2am in the morning.

For those of you who don’t mind working all hours, then don’t let us stop you. We ourselves effectively had a second job while we got the Money Unshackled YouTube channel off the ground, but this was a hobby at the start.

Perhaps a better money-making option is to double down on your existing job. Can you get a payrise or a promotion, or do some paid overtime? At least this way the extra effort will help boost your primary income and your reputation with the boss, which could have longer lasting effects.

Cut The Extras And Save Even More

Dave has already slashed your day-to-day budget but evidently that wasn’t enough. Now, you must skip the summer vacation as well. He might be on to something, but we’d first look to see if you can still go on holiday but find somewhere cheaper. You don’t need to spend several grand going to Disneyland Florida when you can go to Tenerife for a fraction of the price and still have a wicked time.

Dave also says to sell some stuff. I bet most people will think this is a waste of time or their stuff isn’t worth jack, but I’ve been clearing out loads of clutter and have already made around £2,000 with more stuff to go. By the time it’s all gone I reckon I will have made £3,000. A couple could have double this!

How realistic are Dave Ramsey’s tips on saving for a house deposit? Helpful or out of touch? Join the conversation in the comments below.

Written by Andy


Featured image credit: YouTube

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Starling Bank Current Account Review – The Best UK Bank?

In this post we’re reviewing the Starling Bank Personal Current account. I’ve been using Starling for several months now and overall I’m very happy, but that’s not to say there hasn’t been any issues at all.

In this review of Starling we’ll look at the key features, what makes it so good, the few areas that make it not so good, and finally look at the cost. Hopefully by the end of this video you’ll know whether you want to start banking with Starling Bank.

Just so you know, this is a totally independent review and we’re not being paid by Starling in any way. Here at Money Unshackled we do everything we can to bring you the best customer offers on financial products, so if we do ever get a Starling welcome bonus or any other such offer, we will of course put it on the Money Unshackled Offers page, so that’ll be worth checking out first.

Right now there are thousands of pounds worth of other offers up for grabs like multiple free shares, discounts on investing services, and hundreds of pounds of free cash. Now, with that said, let’s check out Starling…

Alternatively Watch The YouTube Video > > >

What Is Starling Bank?

There is an old adage that an Englishman is more likely to change his wife than his bank account, and research carried by YouGov found that this may have been based on truth, with most Brits sticking with their current account for decades. 35% of people have had the same current account for over 20 years.

Not that long ago there was little point in changing your bank account. They all did exactly the same thing and there was no differentiation between them. But in recent years this has all changed with massive disruption being driven by the so-called challenger banks, of which Starling is at the forefront. Now there is every reason to change your bank.

Starling Bank is an award-winning, fully-licensed and regulated bank and in their own words, it’s built to give people a fairer, smarter and more human alternative to the banks of the past. They offer a range of accounts including personal, business, and accounts for children. You will of course be protected by the Financial Services Compensation Scheme, which protects up to £85,000 of your cash.

Starling was founded in 2014 and were voted Best British Bank in 2018, 2019, 2020 and 2021. They are also rated as Excellent on Trustpilot and has seen 2.7 million customer accounts opened.

Starling Bank Key Features & What We Like

It’s Completely Digital – Starling has been built for use on the go. There are no bank branches, and you can do everything from within the app. They do also offer a very clean and tidy website version for logging in from a computer, but we found there was no real reason to use this. In fact, I had never even logged in to the website until it came to doing this review. The app can handle it all.

And you don’t need one of those annoying card readers that so many other banks continue to impose on us.

Instant Notifications – Now this is a feature that I absolutely love. Whenever you make a payment or have money enter your account you get an immediate notification – and I mean it’s fast. Say I’m making a purchase online using my Starling card. Before the retailer’s confirmation page has even confirmed the order my phone is vibrating saying money has left my account.

One benefit of this is the fight against fraud. If money ever leaves your account without your authorisation, you’ll know immediately and can respond within seconds.

Categorised Spending Insights – All your spending within your main account is automatically categorised, so you can quickly see how much you’re spending in any given month on groceries, on transport, on bills, and so on.

There is no need to download transactions to a spreadsheet, which barely anyone ever does anyway because who has the time, nor do you need to use an external budgeting app. Starling makes monitoring your spending almost as easy as it can get.

The app ranks the categories in order of importance (that is highest cost to lowest), shows the percentage of your spend for each category as a percentage of the total, and allows you to drill into each category so you can see which retailers you’re spending all your money at.

For people who already budget like this, Starling will make your life easier, but for those who have never budgeted before, Starling’s categories will revolutionise your spending.

Spaces And Bills Manager – Okay, so the name isn’t the best. In truth, just saying the word “Spaces” makes me cringe. Monzo’s Pots gets the accolade for the best name, but the idea itself is a game changer. Within your main account you can set up multiple Saving Spaces. Say you wanted to save for a holiday, you could setup a virtual piggy bank and automatically (or manually) transfer a sum of money into the Space.

A nice gesture from Starling is that they won’t charge overdraft fees if the sum of the money in your Spaces plus your main balance is positive. For example, if you are £200 into your arranged overdraft in your main account, but you have £300 in one of your Saving Spaces then your overall net balance will be £100 and you will not be charged any fees for being in your arranged overdraft.

Moreover, these Spaces are much better than just a standard savings account because towards the end of 2021, Starling introduced what they call Bills Manager. This new feature allows you to pay Direct Debits or standing orders directly from each Saving Space.

You might typically use this to pay all your regular fixed monthly bills, which is exactly what I do. At the start of the month you can automatically transfer enough money into one or more of your Saving Spaces from your main account, and through the month all your bills can be taken from these, making budgeting super easy. With all your bills now being handled from a ring-fenced Saving Space, everything that’s left in your main account is for discretionary spending.

No Fees Overseas – One of our bugbears is when companies take advantage of their customers. And many banks see holidaymakers as ripe for the taking, charging rip-off foreign exchange fees and charges because they know they likely won’t switch their bank account just for this. Money Saving Expert calls them ‘the debit cards from hell’.

For financially savvy people there are ways around this such as by getting a special travel credit card. But for most people applying for a credit card just for a 2-week holiday is too much bother.

Decent banks like Starling have a done away with nasty fees. They won’t charge you for adding money to your card, withdrawing cash from an ATM abroad, or spending transactions on your card. You get the real exchange rate provided by Mastercard.

It’s also worth noting that when shopping online some websites price their services in a foreign currency like US dollars, so with Starling you can rest assured that you’re paying what you expect.

Round-Ups – This is a feature we would personally never use as we think saving should be intentional and planned, but we accept that many people like the service. Roundups will automatically round your spending up to the nearest quid and put that spare change in a Space. We tested it on Starling for the purpose of this review and it works well. As soon as the transaction takes place the change is instantly taken and put aside.

Connected Card – If you need someone to spend on your behalf such as a childminder, a carer, or even just a friend – maybe you’re disabled, and someone does your shopping for you – you can give them a card that is assigned to one of your Spaces. This is capped at £200, so you’re always in control.

Starling state that this is currently free but the fact that they even mention the word ‘currently’ sounds like they are leaving the door open to charge for this feature in future – let’s hope we’re wrong.

This is not a feature I have had to use myself, but we think it’s a fantastic innovation. There are many more great features that we’ve yet to mention but in the interest of keeping this review short and concise, let us now move on to:

What We Don’t Like

Very Low Interest – Talking of interest, Starling pays a measly 0.05% at the time of making this video and this is something that they obviously don’t display prominently on their site as they do with their other great features. Most banks pay zero interest on current accounts, so we can’t complain too much. However, that also means that your savings in your Spaces also earn just 0.05%, whereas other banks will usually pay closer to the Bank Of England’s base rate for their savings accounts.

Recurring Payments And Card Payments Cannot Be Spent From A Saving Space – This has to be the biggest drawback and we’re being very harsh but it kind of reduces the usefulness of the Saving Spaces. Many companies like Netflix and Spotify bill you monthly by charging your long card number – this is known as a recurring payment.

Annoyingly there is no way to have the money taken from a Saving Space. The same is true whenever you use the long card number over the internet or for a purchase in a retail store, so as it stands, for some transactions they must still come from your main account.

Backdated Transactions – For a few months I was having 1 monthly payment from my mobile network being backdated to a prior month. For example, an October payment would appear in my July transactions, then the November payment would also appear in July. This was shocking as you can’t just have transactions appear in the past as how often do you check your banking history? – never!

Starling blamed my mobile network and said it was an issue with the way the payment was being processed by Voxi, my network provider. Either way, this was not an issue I had ever come across before and I would expect Starling to have some sort of error handling in place to prevent this. Having said all this, it was eventually resolved, and it doesn’t happen anymore – for me at least.

Failed Transfers Don’t Repeat – Our final complaint is that automatic transfers between your main account and a Space that fails due to lack of funds are not re-attempted later in the day, nor is the timing adjusted for bank holidays.

For example, say you have £1,000 sent on a monthly basis from your main balance to a Space for your bills but first you’re relying on your salary to arrive in your main account. Due to a bank holiday or even a weekend your main account has not received this money, so the automatic transfer to your Bills Space fails. Unless you are vigilant your bills will start bouncing as there is no money within this Space.

How Much Does A Starling Bank Personal Account Cost?

All the features we’ve discussed so far, incredibly, are free. This might be the most feature-packed banking app there is that doesn’t charge for most of what they offer.

For many people they will never need to pay a dime to Starling but there are some other features that they do charge for. Oddly they charge £2 per month for a child’s account that is linked to yours. It’s a cool feature to offer but it doesn’t seem logical or fair to charge for children’s banking.

I can’t say we’re experts on child accounts, but Ben’s (MU Co-founder) daughter’s bank account is with Santander and is fee-free and we suspect most other banks would be too.

What is probably Starling’s biggest money spinner is the interest charged on overdrafts – but having said this, they seem quite reasonable compared to the rest of the market. They charge interest rates of 15%, 25% and 35%. Presumably the higher risk you are considered to be, the more they will charge.

One feature we didn’t mention earlier is international money transfers. We suspect most people will never need this but it’s very handy if you do. For this they charge just 0.4% plus a flat fee depending on the currency. This can be as low as 30p.

So, that wraps up the review! Let us know down in the comments what you like and dislike about Starling, and if you’re still unsure, feel free to ask us any questions. We do our best to answer as many as we can.

Written by Andy


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10X Your Money: 10X Your Life!

I want to kick off this post by telling you a short story. I must have been around 11 years old, and my family and I were on holiday in North Cyprus, which is a relatively poor country. We had taken a hire car and on a remote mountain road in the middle of nowhere we had found a restaurant to grab a bite to eat.

We placed our order with the waiter and then he scurried off towards the kitchen. A moment later one of the members of staff was seen jumping into his car and speeding off down the dusty road.

A while later the guy returned with a big shopping bag in hand. It turns out whatever we had ordered they didn’t have in stock, but rather than just refusing the order – and sneering, “sorry we’re out of chips” – as they would in most UK restaurants, they bent over backwards to satisfy what was in their mind a wealthy customer. This is a perfect example of how those with money get treated better in life.

In this post we’re talking about some of the many ways money enhances your quality of life. Now, let’s check it out…

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Money Makes You Live Longer

Is money the elixir of life that we’ve all been looking for? The richer you are, the longer you live – that is a fact. Data from the ONS shows that life expectancy at birth of males living in England’s most deprived areas was 74.1 years, whereas it was 83.5 years in the least deprived, a gap of 9.4 years. A different study found that the life expectancy gap between England’s richest and poorest neighbourhoods has widened since 2001.

Economists have warned of wealth inequality rising in Great Britain, so presumably the life expectancy between rich and poor will also continue to widen.

The wealthiest 10% of households owned 43% of all the wealth in Britain between April 2018 to March 2020, according to data from the ONS. In contrast, the entire bottom half of the population held only 9%.

But rich people don’t just live longer. They also get more healthy years. Wealthy men and women generally have eight to nine more years of “disability-free” life after age 50 than poor people do, according to a study of English and American adults.

The study analysed how well various factors including education, social class and wealth predicted how long a person would live before they could no longer carry out activities such as getting out of bed or cooking for themselves — the study’s definition of being “disability-free” and “healthy.”

Everything paled in comparison with wealth! Though education level and social class had some effect, neither was found to be nearly as significant as wealth.

You Are Not Ugly, You Are Just Poor

Before & After memes!

Money seems to possess a magical power that can make you better looking. Take these memes for example. Billionaire Jeff Bezos was a dorky nerd in the ‘90s. Fast-forward to 2017 and he looks more like the Terminator. A similar transformation appears to have happened to Elon Musk. Not only did he found PayPal, Space X, Tesla, and become a billionaire, he clearly has developed a hair growth formula.

Now, some of these extreme transformations might exaggerate the message. No doubt that these were probably the worst and best photos that could be found but even in more normal walks of life, it’s obvious that money can make you better looking and healthier.

In a Guardian article, the author wrote, “It’s simply harder to eat well when you are poor… healthy food is often prohibitively expensive, less healthy options are relatively as cheap as, well, chips. When parents have to find the cheapest food available for their family, it’s nearly always going to be less likely to be fresh; and more likely to be highly calorific (therefore “filling”).”

The next health advantage money buys is access to luxury gyms, health clubs, and personal trainers. None of this is required at all to maintain basic fitness but if you’ve got the money, it significantly helps. The extreme levels of fitness and good looks that most people can only dream of are not obtained by just a quick run round the block.

A personal trainer will push your limits, and crucially keep you motivated. According to PureGym, an average session of 45 minutes will cost up to £65. And a membership to a David Lloyd Gym will set you back over £1,000 a year.

You don’t even need to put in any hard work as long as you have the money. A good dentist can change your smile, swapping crooked gnashers for a set of poker straight, blindingly bright teeth. They don’t call it a ‘Hollywood smile’ for nothing

I had laser eye surgery several years ago, costing nearly £2,000, and the improvement to my life was amazing. I was tired of constantly having to put contacts in when I was doing sport or going out. I was about to travel to Southeast Asia and the thought of swimming, canoeing, and white water rafting while battling with contact lenses was the final straw. Without money, none of this is possible.

Wealth Gives You Options Now & In The Future

For us, a life feeling trapped is not an enjoyable one. Money gives you options. You can quit jobs, chase passions, enjoy hobbies, start businesses, retire early, travel, work part time, and so much more.

Without wealth, you need to constantly work to survive. Passive income is that annoying buzz word that is overused but the reality is that if you build assets that pay you without the need to put in your own time and sweat, you can free up your schedule. The passive income I have from rental properties means I’m never overly stressed about needing to work long hours.

Most of us spend about third of our lives at work, so working a job you hate is no way to live. Those people who have no money have no options.

If they have a nasty boss or the work is torture, there’s very little they can do. And as for starting a business, how is someone on the bread line ever meant to do this? It’s practically impossible. A business needs months, if not years to start turning a profit. A pile of cash gives you and your business the breathing space that is needed.

Even a little money can give you your independence. According to a study commissioned by the Debt Advisory Centre, nearly one in five people have remained in a romantic relationship because financial worries have prevented them from leaving.

Of those who have stayed in relationships for longer than they wanted to, one in five did so for up to three months but the majority stayed together for far longer. A shocking 24% of these respondents remained with their partners for more than three years after things went stale.

Moreover, a lack of good finances could make you dependent on the state, which is no way we would ever want to live. State benefits are always going to be measly and very few people would voluntarily choose to live on state handouts alone.

You might hope that the state pension would be more generous considering you have paid into the system all your life, but you’d be wrong. If you have a full National Insurance record you will only get a little over £9,000 a year. This is not enough to live on, so make sure you are building your own freedom fund, as we call it.

Live Worry Free

41% of Brits don’t have enough savings to live for a month without income, a third of Brits have less than £600 in savings, and 9% of Brits have no savings at all.

Worrying about money can make your mental health worse. Financial difficulties are a common cause of stress and anxiety, and stigma around debt can mean that people struggle to ask for help and may become isolated.

According to a recent American survey, 77% of people report feeling anxious about their financial situation. 58% feel that their finances control their lives, and 52% have difficulty controlling their money-related worries. They are most worried about their financial future with 68% worrying about not having enough money to retire.

Get Away With Murder

There seems to be a different set of rules for those with money. If what you hear is true, Wayne Rooney has had a string of affairs with prostitutes over the years, but Coleen Rooney has forgiven him saying she chose not to leave him partly for the sake of their boys. We’ll let you speculate what else convinced her not to give him the boot. Pun intended.

Back in 1995, OJ Simpson, American football star and actor, was acquitted of all criminal charges relating to the murders of his ex-wife, Nicole Brown Simpson, and her friend, Ron Goldman – even though he almost certainly did it.

OJ had so much money that he was able to put together an impeccable group of defence lawyers, who were nicknamed the Dream Team. It has been estimated that the defence cost Simpson somewhere between $3-6,000,000, the most costly murder defence expense to date.

It appears you can get away with murder: “as along as long as you’ve got the cash, to pay for Cochran”, as Good Charlotte once said. And just to caveat all this, we obviously do not condone any crime.

Invest In Your Future

We, as well as you guys reading, are probably a little different to the average person. Most people have a high time preference meaning they favour having stuff sooner rather than later. They want immediate gratification, whereas we as investors have a low time preference and often choose to delay gratification. We’ll sacrifice more now for a better tomorrow.

Investing in stocks, funds, property, and so on are all investments in your future. The more money you earn, the easier it is to invest more. However, there are many stories of ordinary people becoming millionaires by the time they retire simply by living below their means, investing in the stock market – often through a pension and an ISA – and being super patient.

Another way to invest in your future is by becoming educated. If you have some money behind you, you can invest in your education and learn new skills, which leads to better and more highly paid work. Unfortunately, so many people are firefighting just to pay their monthly bills that they have no money to reinvest in their education. How many books do you think the average person reads? We’re guessing not many, whereas 85% of wealthy people (including self-made millionaires) read two or more books per month. Bill Gates reads roughly 50 books per year.

Buy The Best Things

This point probably doesn’t need saying but money can buy you much better stuff. In some cases, it’s just perceived benefit, but many products and services are genuinely better. And in the case of safety equipment, it might save your life.

By way of example, consider braking distances of budget versus premium tyres. A recent test undertaken by Continental tyres showed that wet braking distance was over five metres longer when the vehicle was using budget tyres compared to premium tyres. Money spent on your car may save your life.

What You Need To Do

It’s evident that money is super important, so we all need to make sure we have plenty of it in our lives. This website is dedicated to helping you grow and invest your money, so make sure you’re subscribed. If you’re new to thinking about your future, make sure you’re putting as much money as you can into Pensions and Stocks & Shares ISAs, and continuously look for ways to save and earn more.

How would more money improve your life? Join the conversation in the comments below.


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Exposed: Completely Pointless Money Tips, Tricks, Hacks, Products & Habits

There’s a lot of financial content out there on the internet, TV, in newspapers and in magazines. Some of this content is extremely useful….and some, not so much! Then, we have businesses who are imagining up gimmicky financial products in an attempt to part you from your cash.

In this post we’re going to expose many of the pointless money tips, tricks, hacks, products and habits that are not helping you to become rich, even though common wisdom says that they have a positive effect on your wallet.

Please chip in down in the comments and give your opinions on all of these – we’re sure there will be many more that we don’t cover, so tell us what else you think is pointless too. Now, let’s check it out…

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#1 – Save A Penny A Day Savings Challenge

Just thinking about this pointless savings technique winds me right up. If you don’t know what it is it’s a savings technique that rears its ugly head at the very end and beginning of every year. It involves saving 1p on 1 January, then 2p on 2 January, then 3p on 3 January and so on.

Each day, you put aside what you saved the day before, plus a penny more – right the way up to £3.65 saved on the last day of December. It’s supposed to make saving feel easy. Do this for a full year and you’ll have a grand total of £667.95.

So, what’s the problem and why is it pointless? First off, if you’re skint and you’re using this technique to try and save without noticing, you’ll eventually run out of steam.

'Save A Penny A Day' savings challenge over 1 year

Each month gets harder and harder. January starts at £4.96 saved and December ends with £108.50.

You potentially could have saved a lot more in the beginning of the year but because of some stupid challenge you chose not to. Then, in the later months – which are typically more expensive due to Christmas and higher gas bills – you are expected to save significantly more, which you may not be able to. And, if you could save more towards the end of the challenge, why would you not at the start?

Our second beef with this nonsense is the practicality of it. Are you literally expected to transfer a sum of money each day into your savings account? Who can be bothered with that administrative ball-ache?

And thirdly, saving and budgeting is meant to be intentional. You should know how much you can afford to save each month before the month begins. The ‘pay yourself first’ budgeting technique – which works – has already handled your savings.

#2 – Round-Ups

This is another pointless savings technique, which we’ve criticised before but apparently is quite popular with young people.

There are a number of apps that offer this gimmicky service. Whenever you spend on your card, your purchases are rounded up to the nearest pound, and the spare change will be siphoned off and added to your savings or investment account. Again, it is supposedly a way to save without noticing.

As before, a good budget has already determined what you can save for the month, so if you’re doing this on top of a budget we have news for you – your budget sucks!

Another reason it’s pointless is because the spare change is not taken instantly. The apps tend to collect every week or couple of weeks, so you’ll have random amounts being deducted when you’re not expecting it, which is no way to control your money.

What’s more, realistically you’re going to save barely any money at all unless you have a serious spending problem. Most items you buy are priced ending in 99p or 95p, so you could literally be saving pennies on each transaction. Have you ever heard of a rich man who made his money via round-ups? No, we haven’t either.

If you want to save money, then save money intentionally, and save big. It’s counter intuitive to link spending and saving in this manner. Before we move on, we want to say that if you refuse to save intentionally, then please do carry on using both of these pointless savings techniques because they are at least better than nothing… but only just.

#3 – Credit Card Points

We both love reading books on personal finance and investing on the off chance we might learn something new or get a new perspective. Recently I’ve been reading the UK version of the book ‘I Will Teach You To Be Rich’ and the opening chapter about credit cards made me mad. The author was banging on about getting credit card points, which here in the UK is almost non-existent. A few years back you could earn a few percent cashback but today, you’ll be lucky to get 0.5%, which just isn’t worth the hassle.

The highest paying cards are Amex, which are not accepted everywhere in the UK, which means your spending needs to be split over multiple cards making budgeting more painful than it needs to be. The reason you earn points in the first place is because the card providers have calculated that you will spend more. They’re not charities and don’t give away money for nothing.

#4 – Chase The High Interest Savings Account

Back in the day when I was younger and the interest on savings accounts and Cash ISAs was actually good, I used to take the time to move my money around to the account which paid the best interest or at least make sure I was earning a competitive rate.

Today though, what’s the point? The top cash ISAs currently pay around 0.6%, which means if you have £10,000 in savings, you’ll earn a miserly £60 in an entire year. The interest you earn on your cash savings is almost irrelevant anyway. The bulk of your money should be invested in the stock market, property, or wherever else you feel will provide a decent return.

The amount you hold in cash should be a small emergency fund and whatever you have put aside for irregular or non-monthly expenses such as savings for a holiday or Christmas.

Far better we think, to accept the likely measly interest paid by the same bank that you use for your current account, and here’s why:

  • Instant Access – you can shift money at a moment’s notice, which is vital when it’s your emergency fund. Nothing infuriates me more than when I send money to different banks and the money is lost in the ether for a day or two. Show me the money!
  • In One Place – When your savings and current account are together with the same bank you can easily monitor it all at the same time, in one app, which is super convenient. Personal finance is complicated enough without having to login to yet another app.

To boil it down, with interest rates as low as they are, choosing a savings account should really come down to choosing the best current account for you, and taking whatever easy-access savings account is offered by that same bank.

#5 – Life Insurance If No Dependants Or Family

We believe that insurance is usually a waste of money if you can afford the consequences easily or if there are no consequences.  So, in the case of Life Insurance, which is designed to pay out a sum of money upon your death, if you don’t have dependants, then it’s pointless taking out a policy.

The primary reason for Life Insurance is to ensure your spouse or children are financially taken care of in the unfortunate event of you dying prematurely. You may also have retired or sick parents who rely on your financial support for care and survival. In these cases, Life Insurance is of vital importance.

However, if you’re young and single with none of the responsibilities mentioned, then Life Insurance is likely to be totally pointless for you. If your situation changes, then you can get it then.

For those of you watching with dependants, then Life Insurance is likely to be critical. Visit our Life Insurance page to learn more and get a quote from our preferred partner.

#6 – Turning Plugs Off At The Wall

China’s power stations and factories are spewing out millions of tonnes of toxic gas and fumes, but Dorris thinks she’s saving the world by turning off her appliances at the wall. She thinks that standby light is causing global warming and she’ll also save a small fortune in energy bills.

Sorry Dorris, that just isn’t true. The Energy Saving Trust estimates that you could be paying around £35 a year for devices you’re not actually using. In the usual media hysteria, every article I’ve seen thinks this is enough justification to convince you to switch everything off when you’re not using it. That’s not even 10p a day making the entire exercise completely pointless.

Moreover, many devices such as TV’s, which are likely to be the worst offenders for energy usage in standby, are programmed to carry out software updates at night, so leave them plugged in for goodness’ sake.

#7 – Ethical Investing

We know, we know, we must be monsters. First, we’re saying leave your TV on standby and now we’re saying ethical investing is pointless. What evil will we say next? Well hear us out.

Ethical investing has grown in popularity in recent years and there are now many ETFs or funds badged with an ethical sounding name and objective. But everything is not what it seems.

Due to the surge in popularity for ethical funds it is being claimed that fund managers are taking shortcuts in order to meet this demand, which has led to some potentially less ethical funds being mis-labelled. Apparently, the underlying investments of the so-called ethical funds are actually little different from similar mainstream funds that are from the same fund providers.

One such case involves Vanguard, which runs the £389 million fund SRI European Stock. This fund is designed to mirror an index comprising 614 listed European companies, while excluding companies in the index which do not meet socially responsible criteria. Just 25 of 614 companies have been screened out. That still leaves an abundance of stocks in the SRI European Stock fund that most investors would expect to be routinely excluded from green ethical funds.

For example, still included are alcohol companies (the likes of Heineken and Carlsberg); gambling businesses (Entain and Evolution); mining giants (Rio Tinto and Anglo American); and oil producers such as BP and Shell. It even includes building supplies company Kingspan, criticised in the Grenfell Tower inquiry.

If socially responsible investing matters to you, then you should go back and re-evaluate your fund selections, because the name seems to matter little. Your intended ethical investing to date may have been pointless as the fees tend to be higher and you’re not getting what you paid for!

#8 – The Lifetime ISA

The Lifetime ISA is in some cases a very useful savings product but under certain circumstances if you’re not careful it can be not only pointless… but damaging to your money goals.

The Lifetime ISA is designed for two purposes: first-time home buyers and retirement savers. But if you’re one of these, don’t just assume a Lifetime ISA will help you.

The reason why it’s pointless for some first-time buyers is because it has a limit of £450k on the purchase price of the property. In many areas of the country that is way too low; you don’t get much home in London on that kind of budget for example.

Also, because of the cost of moving home – particularly due to excessive stamp duty – and the trend of starting families later, some people choose to skip the typical cheap starter home and buy a larger family home as their first house.

In these situations, your first property may exceed the £450k limit on the Lifetime ISA but now you can only access the money by incurring a massive financial penalty, which is ridiculous.

The problem is amplified because the limit is not tied to inflation or increasing house prices and they tend to rise fast. There is every chance that when you first start saving for your first home the house you desire is say £300k but by the time you are ready to buy – say in 10 years’ time – the house could easily exceed the limit. A £300k house growing 5% for 10 years would be worth £489k.

So, if you’re using a Lifetime ISA consider very carefully whether it’s fit for your needs.

What other money tips, tricks, hacks, products and habits are totally pointless? Join the conversation in the comments below.

Written by Andy


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The Truth – Why You Can’t Afford To Buy A Home

It seems that every government policy to help first‑time buyers get onto the housing ladder has in fact pushed up house prices even more! The average price of a property in the UK jumped by 10% to £253,000 over the year to December 2021. And that’s just the average. Try living in London, where poky properties passing as legal homes average over £500,000.

Swathes of twenty and thirtysomethings can’t get on the property ladder, and the disparity between house prices and wages may make your low salary seem like it’s the fundamental problem. House prices after all are 65 times higher than what they were in 1970, while wages are only 36 times higher.

It’s more complicated than that, as we’ll show, but this certainly doesn’t help.

A 10% deposit for the average house is now nearly as much as the average pre-tax salary. And since house prices grew by £24,000 this year, you would need to have saved £2,000 a month just to keep up, assuming you’re already at the borrowing limit for your salary level set by the mortgage lenders.

Industry guidelines say that mortgages should not be larger than 4.5 times a borrower’s income, so as prices rocket, your deposit has to cover the full amount of the price growth as the banks won’t lend you any more cash. But there has to be some kind of a limit to how much you can borrow, for simple affordability reasons, so it’s not the bank’s fault that you can’t afford a house. Something else is going on.

As a wannabe homeowner, you wouldn’t be blamed for thinking that the housing wealth of others is being protected above and beyond your need to get on the ladder.

As an investor in property following this closely, I’m inclined to agree with you! Why is it that the many government policies for helping first-time buyers never seem to actually… help? And are they in fact just making it worse? Let’s check it out!

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#1 – Scrapping The Stress Test

This first one’s not the government’s fault, but the devolved Bank of England’s. They have confirmed plans to scrap the rate rise stress test for mortgage borrowers, making it easier for you to get a bigger loan. The test checks if borrowers could still afford the mortgage in the event of an interest rate rise of 3%.

It’s great news for people looking to buy right now, since removing this restriction would make it easier for borrowers to take out larger mortgages, helping those who were stopped from buying a house by this rule.

But it’s terrible news for those still saving up for a deposit. That’s because mortgage experts have warned that bigger mortgages would also send house prices even higher than they are already.

Simple market forces mean that when buyers have more cash at their disposal due to a bigger mortgage, sellers will put up their prices to match.

#2 – Help To Buy

Now we turn to the government’s flagship policy to help first-time buyers: the Help to Buy equity loan. This has allowed homebuyers to borrow up to 20% (or 40% in London) of the cost of a new build property from the government, reducing the size of the mortgage needed. Users of the scheme could also get away with having a deposit of just 5%.

Lower mortgage, lower deposit. Sounds good in theory, but there were effectively no limits on the amount of money that builders could make from the scheme, and the ticket price of new builds went up accordingly. New builds already have a premium built into the price, so you have to wonder whether this type of scheme really helps first-time buyers onto the property ladder.

Plus, a study from the National Audit Office found that the scheme mainly supports buyers who do not need the money, and crucially, has helped to inflate already high property prices.

As a side note, we must point out that there’s no equivalent help for people who currently do not own a home but have in the past. People who’ve broken up with partners for instance might be in the same or a worse situation financially as a first-time buyer and in the same age bracket but get zero help back onto the housing ladder.

#3 – The Stamp Duty Holiday

This next one’s on Rishi – it’s clear that the stamp duty holiday during the pandemic, which meant there was no stamp duty on properties up to £500,000, helped to push house prices to new records, and they never went down again once the holiday was ended.

This one must be particularly irritating to first-time buyers because they already pay no stamp duty on houses worth up to £300,000, so this policy only helped existing homeowners, while pushing up market prices for everyone.

Existing homeowners had the chance to save up to £15,000, while the market for everyone has risen by £24,000 in the last year alone.

#4 – Lifetime ISAs

In what is perhaps the best policy idea so far, the government’s introduction of a Lifetime ISA gets less and less helpful as house prices rise. The Lifetime ISA gives a 25% bonus on savings for a house deposit, but stupidly it has an arbitrary cap meaning you can only use it on properties worth £450,000 or less.

The insane part of this cap is that the benefits aren’t even pro-rated! If you buy a house worth £451,000, you cannot use the Lifetime ISA at all – you lose your built-up 25% bonus, and you have to pay a penalty to access your money! That limit, by the way, has stayed the same since it was introduced in 2017. If it had risen with house prices, it would now be £549,000.

If you live in an area where house prices are around £400,000, there’s every chance that they could have risen to the cap of £450,000 by the time you’re ready to buy a year or so from now, completely scuppering your chances of buying if you’re saving within a Lifetime ISA.

We could tell you to move somewhere cheaper, but how far should you be expected to move out of the cities? Londoners will be living in the Scottish Highlands before much longer.

#5 – Planning Law Shake Ups Cancelled

What home buyers really need from the government is not another tweak, or tool, but for it to build some more goddamn houses. In 2021 the government was gearing up, finally, for a major overhaul of the planning system, the biggest barrier to home building.

But… the plans were abandoned after the Tories lost a by-election, since the affluent voters in the area who failed to vote Tory were unhappy with houses being built in their area.

#6 – Low Interest Rates

This next one’s on the Bank of England, but it wasn’t really their fault, given the circumstances. Between 2007 and 2009, given the financial world was burning around them, the Bank lowered interest rates from 5.75% to 0.5%.

This helped to fix the economy but caused house prices to rocket. What really matters with house buying, aside from the initial deposit, is the affordability of the monthly payments.

A £600k house with a 10% deposit might require a mortgage payment of £2,000 a month when the base rate is at 0.25%, whereas in 2007 that house could have been worth just £320k and still have cost you the same in terms of your monthly budget when the base rate was 5.75%. When rates were lowered, simple market forces ensured that the prices of houses, which are in limited supply, rose in line with monthly affordability.

#7 – Brexit

This next one is a mixed bag of good and bad news for aspiring home buyers. Let’s start with the good news.

The irony of Brexit is that Londoners who were most in favour of open borders immigration will be the ones who benefit the most by a fall in house prices if the population size of the UK were to decrease or even if growth slows, which is more likely.

In the UK, in the 10 years leading up to the 2008 financial crisis, house prices tripled. That’s largely because for every 4 new people that entered the economy through population growth and immigration, only 3 new houses were built. Simple supply and demand.

Brexit is also believed to be a major factor involved in the recent pay rises seen across the UK – a double edged sword, because house prices can rise further still if some people are being paid more highly. But if you did get a significant pay rise this year, you might be better able to save for a deposit.

If, however, you’re one of the unlucky people who did not get a pay rise in the last year, houses will still have risen slightly due to those who did now being able to afford a bigger mortgage, but your wage still sucks. As we said, a mixed bag.

#8 – Lockdowns

While a dwindling number of people still think the lengthy lockdowns didn’t cause any harm, there’s no doubting that this government policy had a seismic impact on the housing market.

Home workers, cooped up all day, probably already realised that their houses were too small to live in comfortably… but were forced to confront this reality when they were stuck in it 24/7. The demand for spacious family houses has skyrocketed. It’s no longer just about supply of housing, but also a matter of quality, and space.

#9 – Stamp Duty For Pensioners

We hate stamp duty in general and have moaned about it often on this channel because it’s a transaction tax that interferes with what should be a free-flowing housing market. If there’s one area where stamp duty is holding back the property market the most, it’s when it’s charged to pensioners.

As we just discussed, people now care more than ever before about the quality and size of their home. But a huge chunk of the 4-or-more bed family homes are in the hands of older couples whose kids have long since grown up and flown the nest.

If these people could be incentivised to downsize and give up their huge houses so that a young family could move in instead, it would vastly increase the supply of quality family homes and bring prices down.

However, the government actively disincentivises pensioners from moving home, because if they did, they’d be instantly whacked with a huge stamp duty tax to pay. An older couple moving from a £500k 4-bed house to a £400k 3-bed house would have to pay stamp duty of £10,000! No wonder they don’t downsize.

Reasons To Be Cheerful

It’s not all bad news for aspiring homeowners. Thanks to the tax rises and energy price increases heading our way in April, we’re all about to made poorer… great news for house prices!

Ironically, when everyone has less cash, house prices go down to meet what the most well-off savers can afford to pay. The cost of living crisis might actually precede a slight fall in house prices. Yay…

There’s also the prospect of further interest rate rises this year, which will increase your mortgage interest but… it will also lower everyone’s affordability calculations and hence the amount the banks will lend, and therefore lower the maximum market prices that properties can be sold at. Silver linings, eh?

Do you own, or are you still saving up? How hard has it been for you? Join the conversation in the comments below!

Written by Ben


Featured image credit: William Barton/Shutterstock.com

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

10 Pain-Free Ways To Shield Against The Rising Cost Of Living

2022 has been dubbed the ‘year of the squeeze’. Households will reportedly be almost £3,000 out of pocket, with a perfect storm of rising costs due to hit in April. That’s when National Insurance is going up. It’s also when the crippling new energy price cap takes effect, with energy bills set to soar by 54%. And around two-thirds of English councils plan to hike council tax in April too, by up to 3%. All this against a general backdrop of runaway inflation, now threatening to rise above 7% according to the Bank of England’s latest forecasts.

It seems that everything is stacked against you. But what can you do to fight back and shield yourself against the rising cost of living, other than the usual unhelpful advice of cutting back on Netflix and Starbucks lattes?

There’s no silver bullet, but we’ve done a roundup of 10 pain-free actions you can take to improve your situation during the months ahead without having to cut all the fun out of life, and hopefully help you make it through the worst of the crunch.

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#1 – Cut Your National Insurance Payments

Your employer might offer you the option of salary sacrifice as part of their pension scheme. This can increase your pension size, lower the tax you pay, and can even increase your take home pay. If you choose to take up the option, you and your employer will agree to reduce your salary, and your employer will then pay the difference into your pension, along with their contribution to the scheme.

As you’re effectively earning a lower salary, both you and your employer pay lower National Insurance contributions, thereby reducing the sting of Boris’s new tax hike, and this often makes your take-home pay higher.

Better still, a good employer might pay part or all of their NI saving into your pension too (although they don’t have to do this).

#2 – Don’t Fix Your Heating Bills

The energy bills price cap is going up by 54% from 1st April 2022, meaning anyone on a variable tariff is about to see their bills increase by more than half what they currently are. There’s no escape to be found by fixing your tariff either. MoneySavingExpert’s Martin Lewis has run the numbers and concluded that there are no fixed tariffs on the market that offer a lower rate than the April price cap, with the cheapest fix right now costing a ridiculous 68% more than the pre-April price cap.

Your only shield here is to avoid fixed contracts – when your current plan ends, his advice is to do nothing and drop onto the variable rate. It’s bad, but fixing would be much worse.

What’s sad is that some of this pain could have been avoided. This is a breakdown of the average house’s energy bill. The part that’s rocketing up is in blue, the wholesale costs. But the parts the government has direct control over, and hence could scrap, are the green and pink blocks, which represent environmental and social taxes and VAT. Together these will make up 13% of your new fuel bill. Elements of these taxes and levies could have been scrapped, making for slightly more manageable bills.

#3 – Push Back On Your Employer’s “Generous Payrise”

Headlines abound about how 2022 will be a year of better pay rises than usual, but should you just sit back and gratefully accept what you’re offered?

Your employer will likely tell you that your pay rise is the ‘best ever’, or some nonsense like this. But the reality is that in 2022, UK pay rises could be just a measly one-third bigger than the 2.4% seen in 2021.

That works out at a 3.2% average pay rise in 2022. What’s the forecast inflation rate again? Oh yeah, over 7%. So the average worker is really likely to be getting a massive pay cut.

If your boss tries to pull a fast one on you, make sure he’s aware that you understand inflation and that anything less is not good enough. You’ll never get a good pay rise if you don’t ask for it.

You’ll probably have to justify your pay rise in terms of merit though, because employers don’t give good pay rises out of sympathy or even to help you keep up with the household bills. They’ll try and get away with giving you a real pay cut if they can.

Once you’ve made it through the crisis, make it your ambition to set up a freedom fund of cash large enough to cover a few months of bills, so you are empowered to walk away from jobs that treat you with disrespect.

#4 – Move Your Thermostat

A thermostat works by telling your boiler to stop burning when the room the thermostat is in reaches the right temperature. So why have your thermostat fixed to a wall in a hallway you barely use?

For those with a wireless thermostat, rather than shivering in the lounge while your hallway heats up to a toasty 25 degrees, switch off your hallway radiator and place the thermostat in the lounge instead, set around 20.

Energy experts at uSwitch suggest turning down your thermostat by just one degree centigrade could save you £80 each year on your heating bill as of January 2022– and that was before the new higher energy cap was announced, so is now closer to a saving of £125 per degree.

#5 – Use Your Car To Power Your House

We’re through the looking glass here, guys! The Times reports that you will soon be able to buy electricity at night, when it is cheap, and store it in your vehicle’s battery for use at peak times in your home.

One family trialling the new tech are expecting to save £1,200 on their household bills this year, with the technology said to become standard on new electric cars within 6-months according to Volkswagen.

You might think that people who own electric cars are the least likely to be on the breadline, but there are a lot of middle class families living well beyond their means who will have a plug-in vehicle sat in their driveway, financed by debt.

Those lucky enough to have access to one will soon be able to take advantage of the way the UK’s energy grid works. The Times article shows how power at night might cost 22p, but the same power be worth £2.40 during peak hours in the daytime. If you can charge your battery at night, and use that power during the day, you’re paying night-rates for daytime-usage.

Even better, many employers now offer free charging for employee’s electric vehicles as part of their PR campaigns to look more green and socially responsible. Why not let your employer pay your home heating bill by charging your car battery at work?

Also, note that the actual car isn’t required here, just the battery. No doubt if this tech catches on, having a home-energy battery in your house may become the new normal.

#6 – Keep On Top Of The Cost Of Housing

Now that landlords’ maintenance and interest costs will be rising in line with inflation, rents will be too. Analysis by Zoopla has also found that renters face more significant costs than homeowners; while homeowners spend 18% of their household income on their mortgage, renters spend 31%.

Understand that your landlord needs to raise the rent to protect their own family’s household budget from inflation, but you can try to negotiate any rent rise down to maybe meet them halfway.

If you make clear that you can’t afford a big rise and will be forced to leave if one is imposed, your landlord will likely concede to a better deal assuming you’ve been a good tenant and paid previous rent on time. They don’t want a period with an empty property while a new tenant is found, nor to have to pay big finders fees to their agent for sourcing the new tenant.

If you can’t avoid having to pay higher rents, consider house-sharing with someone else in your situation for mutual benefit, slashing your rent. Might not be ideal but needs must.

Homeowners may have it rough too if interest rates are raised further by the Bank of England to try and combat inflation. Financial markets are expecting the base rate will rise to 1.5% by the end of the year. You may want to fix your mortgage now if you’re living on the brink and can’t risk your mortgage bills rising.

Perhaps the best way for a homeowner to sidestep the cost of living crisis is to bite the bullet and get a lodger, which I did myself for nearly 2 years. While you may object to someone else sharing your living space… for £400 or more rent a month, it may make the difference between financial comfort and poverty. Plus, you’re helping someone else to live affordably.

#7 – Take Advantage Of Cash Giveaways

You can get big cash rewards when you switch bank provider for your current account, as detailed on MoneySavingExpert.com, or when you sign up to investment platforms, with a full list of bonuses on the MoneyUnshackled Offers page.

There are hundreds of pounds of free money giveaways on there, all of which could come in handy in the months ahead.

#8 – Claiming The Benefits You’re Entitled To

Benefits aren’t just for the poor. Go to entitledto.co.uk and plug in your details, and it will tell you what benefits you are eligible for.

I plugged in my details and found out that I’m entitled to £21.15 a week in child benefit. Every little helps, right? It also turns out that when my child turns 3 years old, she’ll be entitled to 30-hours free childcare, worth about £100 a week.

#9 – Sell Some Junk

MU’s Andy used to roll his eyes when he heard people advise to solve your money troubles by selling your possessions. But then he tried it for himself, and is now hooked. He’s making thousands of pounds by selling his stuff that he had considered junk – Lego in his mum’s loft, an old guitar which he has no interest in playing anymore, old, outdated TV’s and unnecessary furniture, and countless other bits of clutter that he bought ages ago and no longer wants or needs. Your junk really is someone else’s treasure.

Selling your stuff can only be a temporary solution, as you’ll eventually run out of stuff to sell, but in the Year Of The Squeeze, more people than ever are looking to buy used items and that junk in the loft could be paying your gas bill.

#10 – To WFH, Or Not To WFH?

Now that jobs are becoming more flexible, with working from home a real choice for many, you might want to re-evaluate the finances of how many days you spend in the office. For many it’s a no brainer, due to the cost of the commute. Petrol prices are already at all-time highs at over £1.40 per litre, and rail fares will rise 3.8% in March (the biggest price hike for a decade).

But when you’re in the office, your employer picks up the gas and electric bill, which as we know is now becoming more significant. You should run the numbers to work out if working from home is still economical. Your energy provider will provide you with a smart meter if you ask for one, and a device showing you the cost of your energy usage during the days you work from home.

Are you worried about the cost of living crisis, or even about the effect it will have on your ability to save and invest for your future? Join the conversation in the comments below!

Written by Ben


Featured image credit: Lazy_Bear/Shutterstock.com

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

Our Take: Energy Bills To Rise By 54% / Base Rate To Hit 1.5% / Calls To Punish Success

Hello and welcome to Money Unshackled News. The headlines:

  • Energy bills to skyrocket by 54% or £693 in April for a typical bill, taking the total cost to nearly £2,000 a year.
  • Chancellor Rishi Sunak offers measly £150 rebate and mandatory loan arrangement of £200 in response to rising energy bills.
  • Bank Of England raises interest rates from 0.25% to 0.50% in an effort to tame inflation. Mortgages and loans to become more expensive.
  • Job Seekers will be forced to accept any work after just 1 month or risk having benefits cut, even if it’s outside of their field.
  • As oil prices near $100 a barrel and Shell rakes in the big bucks, some call to levy a tax on oil and gas producers.
  • The work from home tax loophole allowing people to claim up to £125 a year is set to close.
  • And finally, Bank of England governor who earns £575,000-a-year tells ordinary people to not ask for big payrises.

There’s been a lot happening in the last few weeks, so we’ve aggregated all the important money news to bring you the stuff that matters. Now, let’s check it out…

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If you’re looking for a new investment app or just fancy some free cash head over to the Money Unshackled Offers page as we bring you all the latest and greatest offers including free cash, free stocks, and discounts to various trading apps and services. You can currently get 6 months free with Nutmeg and Moneyfarm, 25% off premium stock analysis tool Stockopedia, and a free stock with Freetrade worth up to £200, plus loads more.

Energy Bills Are To Rise By A Staggering 54%

The biggest news making the headlines recently is the colossal rise in energy costs from 1 April. Energy bills are to rise by a staggering 54%, which is on top of the large rises back in October 2021. The increase to hit in April will be £693 for an average bill, taking the total cost to £1,971 for a year.

What confuses many people about these price caps is that they’re not an actual cap on your total bill. It is in fact the rates that are capped, so if you use more, you’ll pay more. Unfortunately, and something that is really annoying is that the regulator Ofgem, and the media, prefer to report on the cost of a typical bill, rather than tell us what our actual rates are.

Thankfully Money Saving Expert have produced an average rate table, but even then your region will vary slightly.

We’ve gone a step further and calculated the percentage increases for both the daily standing charges and unit rates. The findings are astonishing, and we cannot believe the mainstream media aren’t reporting this. It turns out the typical 54% increase is based on a set of assumptions that could be way off your situation. If you’re a heavy gas user, you could be in for a nasty shock with the unit rate rising by 81%.

The only consolation regarding the gas price hike is that this is taking effect initially for the summer season, so hopefully much of this damage can be limited for the time being.

However, electricity costs are being massively hiked for both the unit rate and the standing daily charge. In fact, even if you were able to reduce electricity usage – which is unlikely – your daily charge, which you’re charged regardless of usage, is being hiked by 82%.

If you think all this is bad, then make sure you’re sitting down for this next one. We know that the energy price cap will change again in October, and if wholesale prices stay where they are now, Money Saving Expert is saying there will be a further rise of about 20%, putting the total bill up to more than £2,300/year on typical use.

We are extremely concerned. Most households cannot afford these hikes and people are sadly going to die when the colder months hit. In supposedly one of the wealthiest countries in the world, nobody should have to make the choice between eating or heating. So what action is the government going to take?

Government Response To Rising Energy Bills

Back in August 2020 Chancellor Rishi Sunak was spending our money like there was no tomorrow. He couldn’t give it away quick enough. Back then, if you wanted 50% off kebab, chips and a greasy pizza, no problem – the government was paying.

Fast forward to now and he’d rather you freeze your tits off. The government think we’re all idiots.  They’ve painted black and white stripes on a horse and are calling it a zebra.

They are forcefully giving every household a £200 discount in October, which must be paid back over the next 5 years. Or in other words we’re essentially having a loan forced upon us.

There are so many issues with this scheme it’s unreal. Firstly, it assumes that bills will come down in the future but there is no evidence to suggest this will happen. Any conflict with Russia – just as an example -would send energy prices skyrocketing. If households can’t afford energy now, how will they afford it if prices increase further and they have to pay £40 extra a year for 5 years to clear that debt? Debt to cover living costs is never the answer.

Moreover, you may not even get the £200 discount, but you will still be expected to pay it back via increased energy bills. For example, a 24-year-old living with their parents wouldn’t get £200 now, but when he or she moves out next year and gets their own place, the way the mechanism works is that they will have £40 added to their annual bill regardless of the fact they never received the original discount in the first place. Unbelievable!

It’s not all bad news though: the government are helping 80% of households, who will receive a £150 rebate in their April council tax bill which will not have to be paid back. You’ll need to be in bands A-D to receive this. This is by no means perfect as there will be many cash poor people in higher bands but given the circumstances this is probably one of the fairest ways to target support to those that need it. Local authorities would also receive £150m to make discretionary payments to the neediest.

Truth be told, we broadly think people should only rely on government support in dire circumstances – even worse than what we’re experiencing now – but in the case of rising energy bills we can’t help but feel that this government and past governments are responsible, so need to provide support. Rising wholesale costs will always be a threat if we continue to rely on foreign imports of energy.

If the government hadn’t capitulated to the objections to developing more of our own oil and gas fields off Scotland, and permitting fracking, and rolled out renewable sources much faster, your finances would be in a far better situation. A country with energy independence would never be as vulnerable to energy prices as we are right now.

Interest Rates Raised To 0.5%

The Bank Of England has raised interest rates from 0.25% to 0.50% in an effort to tame inflation. It’s the first back-to-back rise since 2004, and the central bank is forecasting that inflation will increase to 7.25% in April.

Five of the nine members in the committee voted to increase the rate to 0.5% but four of the nine members wanted an even larger increase to 0.75% to get a grip on surging inflationary pressure.

The Financial Times is reporting that markets are now expecting the Bank of England to lift interest rates to at least 1% by May, and 1.5% by November. Thisismoney said the increase will add almost £1,300 a year to the cost of a typical mortgage and City analysts are warning that the rise will be a shock to those who are accustomed to cheap home loans. Rates have been at 0.5% or lower for much of the last 13 years.

About ten million British adults have never experienced base rates above 1%, according to analysis by AJ Bell.

Another action the Bank of England is taking is bringing the curtain down on its £895billion money-printing programme after almost 13 years. As the £875billion of government debt from quantitative easing gets repaid, the Bank will allow the cash to simply disappear. This will reduce the cash supply by £28billion this year and just over £70billion in total by the end of next year.

After the interest rise, Nationwide and Santander have rushed to raise mortgage rates and are the first lenders to do so, reports The Telegraph. We’ve yet to see any banks raise the rates offered on savings accounts but with more base rate hikes expected to follow, we expect banks will adjust savings rates in time – so look forward to making a few more pennies each month on your savings account while your mortgage payments skyrocket.

Job Seekers Will Be Forced To Accept Any Work After Just 1 Month Or Risk Having Benefits Cut

In news that is being heavily criticised by the likes of Labour and the Liberal Democrats, there will be a crackdown on jobseekers who claim Universal Credit. Claimants will be forced to widen their job search outside of their preferred sector of work after four weeks, rather than three months, or face sanctions that will slash their benefits if they are deemed to not be making a reasonable effort to secure a role, or if they turn down a job offer.

At some point you do need to draw the line but are they expecting a trained and specialised computer programmer to apply for jobs shovelling crap into a skip? The whole process is a total waste of time. For one, the programmer is unlikely to get the job in the first place because he is likely to be deemed underqualified for this particular role and obviously not interested, and if he did get the job, he’s equally likely to quit as soon as he lands a more suitable role. Surely, it’s better all round to allow more time to search for jobs?

Shell Rakes In The Big Bucks As Oil Approaches $100

Crude oil prices are back up to levels last seen in 2014. West Texas Intermediate and Brent crude have pushed up towards $90 a barrel. Many experts think the next stop is $100.

As a beneficiary of this rise in oil prices, Shell has received criticism for its success. We should be celebrating these stories of successful UK companies, not reprimanding them. Shell posted a $19.3bn profit for 2021, up from just $4.8bn a year earlier. They also raised their dividend by 4% and are buying back shares worth $8.5bn in the first half of 2022.

The timing of this release was unfortunate. It came on the day that Ofgem hiked the energy cap by 54%, prompting calls by Labour to levy a windfall tax on oil and gas producers. We don’t recall oil companies being offered state handouts when they were struggling back in 2020 when prices collapsed. In 2020 they reported a $21.7 billion loss.

Rishi Sunak said the idea of a windfall tax sounded “superficially appealing,” but it would ultimately deter investment. We’d also like to point out that punishing Shell also punishes British pensioners, whose pensions are tied to the fate of FTSE 100 companies. Let’s hope this is the end to silly ideas about punishing success.

Work From Home Tax Loophole Allowing People To Claim Up To £125 A Year Is Set To Close

The tax loophole on working from home that has cost the exchequer about half a billion pounds over the course of the pandemic is expected to close. It had only cost the Treasury £2million a year before the pandemic. However, the cost of the scheme to the Treasury has increased over 100-fold because of homeworking since the pandemic.

The relief was introduced in 2003 as a way to help home workers with gas, heating, internet and other utility bills, and allowed people to claim up to £125 a year for working at home even if they only spent a single day away from the office in the entire year.

Claims could also be backdated, meaning anyone who has worked from home due to Covid but has not made a claim for the relief could be entitled to a two-year payout of up to £250.

You might think that something as boring as an obscure tax relief might go unnoticed by the British public, but HMRC said 4.9 million successful claims for the tax break had been made since March 2020. But sadly, it looks like its days are numbered.

Bank Of England Governor Who Earns £575,000-A-Year Tells Ordinary People To Not Ask For Big Payrises.

‘Sick joke’: Bank of England governor who earns £575,000-a-year is criticised over pay restraint call, reports Sky News. Foolish and out of touch comments were made by the Bank of England’s Andrew Bailey in an interview with the BBC.

He said workers should not demand big pay rises as the Bank battles surging inflation. If employees ask for big wage increases to match the cost of living, the Bank’s task could be made harder. He doesn’t want his job to be made harder despite his epic half a million-pound salary, but he seems unconcerned about the millions of ordinary people who will struggle to put food on the table. His theory is that employers would then pass on those higher wage costs to consumers in the form of higher prices, creating an inflationary spiral.

We on the other hand would like to say the exact opposite – that it’s your duty to go and obtain a much higher wage. Most people cannot cut back to the extent that surging inflation demands, therefore you have no choice but to go and take what is yours.

Are you worried about rising inflation? What are you doing to keep your head above water? Join the conversation in the comments below.

Written by Andy

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If You Could Only Watch 1 Video…

We’ve been producing videos on YouTube for about 4 years now and uploaded nearly 450 videos. Over that time, we’ve dished out what we hope are helpful financial tips covering investing, retirement, tax, debt, economics, business, and everything in between.

That’s a lot of content, so in this post we’ve hand selected our best ever money tips that we truly believe will make a massive positive impact on your life and wealth. Think of it as our greatest hits.

This post can only ever be a summary of these life changing points, so we’ll also provide links to some of the key videos that explain further. This particular post is a perfect demonstration of what Money Unshackled is all about, so if you’re new here and find it useful, consider subscribing to the email newsletter and YouTube channel. Now, let’s check it out…

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#1 – Avoid Dividend Tax With Synthetic ETFs

Broadly speaking Exchange Traded Funds (ETFs) come in two forms: Physical and Synthetic. Physical ETFs physically own the basket of stocks they intend to track the performance of, while Synthetic ETFs hold different assets and then swap the performance of that basket with an investment bank to achieve the desired index performance.

Synthetic ETFs are so awesome because they can be used to circumvent some country’s dividend withholding taxes, saving you a fortune and getting you to your financial goal potentially years earlier. Most notably you can avoid that horrid US dividend withholding tax, and with US stocks likely making up the bulk of your portfolio this is a game changer.

Normally any US equity ETF you invest in, like the S&P 500, would pay 15% withholding tax. In recent history the yield on the S&P 500 has been around 2%, so that’s a drag of 0.3% on your return. Doesn’t sound like much but that is huge over your lifetime.

An investor saving £500 a month for 40 years, earning 8%, ends up with a portfolio worth £1.62m. If that return becomes 7.7% due to the withholding tax, the portfolio is only worth £1.50m. £120k less.

There is also every chance that we are being conservative with those numbers. The yield on the S&P 500 in the past has been more like 4%, so that tax drag would be even more substantial at 0.6%. And, in our example we based it on a 40-year investment timespan. Realistically you will have some money invested in the market well beyond your retirement day and likely up until your deathbed.

Therefore, the more you invest and the longer you invest for the more important it becomes to avoid paying unnecessary taxes, which over time siphon off your wealth. Synthetic ETFs are awesome!

#2 – Optimising The Size Of Your Mortgage Deposit

Many people’s negative attitude towards debt means that the common financial advice is to have the biggest house deposit possible and overpay on your mortgage to rid yourself of the debt as soon as possible.

Contrary to this, other people argue the exact opposite that you should have the lowest deposit possible and do as much as you can to avoid paying down the debt. The argument is that the interest rate is so cheap you can get a better return on that money by investing it.

Both approaches are flawed. Instead of being in either of these camps we invented our own approach. We carried out an investment appraisal, thinking it might be better to target specific LTV bands to find a balance between avoiding high interest and freeing up cash to be invested elsewhere for greater return.

We crunched the numbers and found at the time of doing the video that the optimal deposit from a purely financial perspective was 10%. This an updated version of this analysis but this exercise should be carried out for your specific circumstances and the latest interest rates available to you at the time, so these figures are just a guide.

A 10% deposit currently gives you a 14% marginal return on investment over and above a 5% deposit, so it makes sense to put down at least a 10% deposit if you can. However, as you move to a 15% deposit the marginal gains on the extra deposit amount are just a 5% saving, and then just 2% as you progress to a 20% deposit. On the assumption we can earn 8% in the stock market, sitting within these bands doesn’t make financial sense for those who don’t mind a bit of risk.

With a 25% deposit there is quite a jump in the marginal benefit, so we wouldn’t give you a hard time if you chose this amount of deposit or home equity. But from that point on there is almost no marginal benefit from paying down your mortgage, so you would likely be better off investing.

#3 – Spread Betting Futures

This may well be the single biggest win for investors who are prepared to spend the time learning the ropes of this very clever but high-risk investing strategy. This is our own formulated strategy – you won’t hear this anywhere else. What we have done is create a balanced portfolio to reduce portfolio volatility, and then ramp the risk back up with leverage to earn hopefully mega returns.

The strategy involves using a spread betting account to invest in S&P 500 futures, long-term US treasury futures, and gold futures in a 60/30/10 ratio. This was specifically chosen because historically for this mix of assets the largest ever drawdown – that’s the largest fall from top to bottom – was less than 30%. Government bonds tend to move in the opposite way to stocks when stocks crash.

On the assumption that history broadly repeats itself it means we can leverage the portfolio with up to 3x leverage and never get wiped out, which is vital whenever you invest on margin. That’s a big assumption but the beauty of the strategy is you can choose the amount of leverage you use, so you could do 2x or 1.5x. You can even use no leverage.

That begs the question why would you use a spread betting account with no leverage? Spread betting is technically classed as gambling by the powers that be, so there’s no capital gains tax to pay, even though our particular strategy using indexes is no different to any other long-term investing strategy. The author of the book The Naked Trader refers to a spread betting account as a Spread ISA because of the tax benefits.

In the past a non-leveraged portfolio like this would have earned 11% annually, so with 3x leverage we would hope to get 33% less any fees. We’re not expecting quite this much going forward but even half that would be incredible!

#4 – Matched Betting

Matched Betting despite the name is a great way to make some side income with relatively little risk. On the back of some of our previous videos, we’ve had people thank us for introducing them to this great money-making technique. Some people even claim to have made several thousand pounds from it but as a minimum you should be able to make several hundred with just the welcome offers.

Matched betting is a betting technique used to profit from the free bets and incentives offered by bookmakers. Bets are placed on all outcomes of a sporting event, so a negligible amount of money is lost. You are then rewarded with a free bet. You repeat the exercise to turn that free bet into real cash you can withdraw.

There are usually over 50 different bookmakers all throwing free bets and incentives at you, so there is plenty of easy money to be made.

To do this efficiently and to maximise profits you will want to sign up to some matched betting software. These literally walk you through the entire process and serve up the best bookmaker odds. Visit this page where we have a range of exclusive offers to the leading matched betting service providers, so do check that out.

#5 – Massive ROI With Buy-To-Let Property

We talk about buy-to-let property a fair bit on this website (and on YouTube) because it has the potential to make ordinary people rich, in years rather than decades. Ben (MU co-founder) currently owns 4 buy-to let properties and he credits this investment as the single biggest factor in his wealth building journey.

The reason why buy-to-let is so effective is mainly because of the leveraged returns that are achieved by using a mortgage. We’ve substantiated these figures in some of our YouTube videos but on a high level, if your property increases in value by 4% and you only put down a 25% deposit, your return on investment from capital gains alone is 16%.

You will also earn rental profits on top that can easily push up your total return to somewhere around 20-25%. Obviously, this strategy doesn’t work if you choose a bad property. Not all properties make good investments and in a way your profits are determined by what house you buy and the price you pay.

As a property investor you need to remember to invest according to which properties do well, not necessarily the type of house you want to live in. My particular strategy is to buy terraced houses in northern city locations as they command good rental yields, have excellent demand, and are amongst the most affordable.

For those interested in investing in property, if you are prepared to spend a great deal of time learning the market and then managing your own properties you can do everything yourself, but if you want to avoid having to essentially take on a second job you could get in touch with our preferred property partner via the Find Me A Property page.

[H2] #6 – Equity Release

I put this right up there with buy-to-let property as a means to grow wealth, with one complimenting the other. In fact, my ability to buy so many properties was largely due to equity release.

Most people who own property for a long time end up with substantial amounts of equity tied up in their home that is doing nothing. A savvy investor might prefer to borrow against their home and invest that money elsewhere.

Typical mortgage rates are less than 2% and have been that way for several years now. The stock market is widely expected to return 8% a year on average, so you could profit in the tune of 6% on average per year by moving equity from your home to the stock market.

The reason why mortgages are so good for this is because it’s long-term debt that is not callable. As long as you are meeting your agreed monthly repayments the mortgage cannot be called in no matter what else is happening in the wider economy and stock market. This gives your investments time to recover if they happen to fall in the short-term.

If you could release equity of £100k and profited 6% a year, you would earn £6,000 extra a year going forwards for doing relatively little other than moving some money around and taking on some minimal financial risk. As Ben chose to invest the money from the equity release into buy-to-let property he was earning significantly more on what otherwise would have been wasted capital.

[H2] #7 – Retire Early With A Pension Bridging Strategy

We believe everyone should be working towards retiring as early as possible, but pensions put up some roadblocks as they have an age restriction on when you can start withdrawing from them. Currently this is 55, which is due to increase to 57, then 58, and who knows how high this could climb?

Many hard workers who have diligently invested wisely may have enough money or be able to save enough so they never need to work a day again. However, it’s no good if it’s all locked away in a pension.

It seems that many ordinary people save exclusively within a pension, of which some build up huge sums and yet still can’t retire early due to the aforementioned age restriction. While some other aspiring early retirees disregard pensions completely despite the huge benefits.

What we teach is to use multiple investment products including accessible accounts that allow you to retire earlier in the most tax-efficient way possible. These accessible accounts enable you to bridge the gap between your desired retirement day and the day your pension becomes available.

Most people will want to invest in a pension because they are epic. You should get matched contributions from your employer, which is effectively free money and a 100% immediate gain. You also get tax relief, which for a basic-rate taxpayer adds 25% to your contribution, or 67% for higher-rate taxpayers. And if you’re lucky enough to have an employer using salary sacrifice you can avoid national insurance and student loan repayments.

But before you can access the pension cash you can use the likes of a Stocks and Shares ISA, buy-to-let property, and spread betting accounts to bridge the gap. You could even borrow against your home, which can be paid back with your tax-free pension lump sum when you get it.

[H2] #8 – Diversify Across Time

When we first heard this, it blew our minds and changed how we perceived risk forever. It was a concept we read about in a book called Lifecycle Investing. Essentially, due to how people come into wealth they start with relatively little when they’re young and end with a big sum at retirement age.

This uneven distribution of wealth across your lifetime means that the investor is almost completely exposed to the stock market risks at the end of their life; the market movements in those early years are largely irrelevant to your overall lifetime wealth as you have so little money invested.

The author’s proposition is for you to try and control as much of your lifetime wealth as possible as early as possible. To achieve this they recommend using 2:1 leverage and are only proposing this amount of leverage at an early stage of life. This way, investors only face the increased risk of wiping out their current investments when they are still young and will have a chance to rebuild.

The suggested path is to first leverage your investments in stocks, then reduce the leverage in the middle part of your life, and then finally move into an unleveraged stocks and bonds portfolio as you approach retirement.

We can’t say we agree with their precise strategy but the concept of diversifying across time is a game changer.

Which of these financial points has had or will have the biggest impact on your money? Join the conversation in the comments below.

Written by Andy

Links to key videos on these subjects:

Synthetic ETF (Ultimate Portfolio): https://youtu.be/xIK07tgv_14

How Big Should Your House Deposit Be: https://youtu.be/nuj456bkslU

Spread Betting Futures: https://youtu.be/1hzb_zIIdmY

Matched Betting: https://youtu.be/R6zbzk04BHI

Massive Returns With Buy-To-Let Property: https://youtu.be/gmioY5HxlDk

Equity Release: https://youtu.be/XA-an3NozVo

Pension Bridging Strategy: https://youtu.be/Nd-GUcBZFCo

Time Diversification: https://youtu.be/JpoWZ_K_iA0


Featured image credit: daniiD/Shutterstock.com

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday:

The FASTEST Way To Pay Off Debt

Normally we prefer to focus on ways to get rich but before you can begin doing this you need to pay off your bad debt first. Quite frankly, becoming wealthy for most people is nothing more than a dream because statistically speaking they’re more likely to be struggling with debt.

Let’s kick-off by first looking at some of the terrifying UK debt statistics to put the debt problem into perspective: The average total debt per UK household in October 2021 was £63,000. Total unsecured debt per UK adult was just over £3,700 and the average credit card debt per household was almost £2,100.

People in the UK have personal debt at almost £1.75 trillion, up £60 billion from the year before, which is an extra £1,136 per UK adult over the year. The problem of personal debt is only getting worse.

Beyond the numbers, the biggest debt problem of all is the changing attitudes to debt; it has wrongly become acceptable! Past generations would shy away from debt, instead choosing to save first, and then buy. Today that’s been flipped on its head and it’s far too common to spend first and work out a way to pay for it later. In a nutshell debt has been normalised.

If other people want to be burdened by debt that’s their choice, but we want you to make the decision now that enough is enough. In this post, we’re going to lay out a 7-step plan that you should follow to pay off your harmful debts as fast as possible. Now, let’s check it out…

Alternatively Watch The YouTube Video > > >

Step #1 – Understand Your Debt

First off, you need to take stock of exactly how much you owe, who you owe it to, how much interest you’re being charged, and what the minimum payment is.

Literally draw up a table, so you can tally up the total amount owed and what the total minimum monthly payment is. You should be aiming to pay more than the very minimum or otherwise you could be paying off debt until what seems like the end of time, but we’ll calculate what you can afford to pay in a moment.

Step #2 – Draw Up A Monthly Budget

You absolutely need to understand what money you earn and what exactly you spend. Start with the obvious monthly costs that stay the same month-in, month-out. The bulk of your monthly spending is likely to be fixed (or consistent) such as the rent, energy, broadband, food, petrol or bus, and so on.

Then you need identify irregular or non-monthly expenses such as Christmas, holidays, clothes, and so on, and calculate an equivalent monthly figure for all of those, which you put aside each month into a separate account and can spend when the time comes.

It is these irregular or non-monthly expenses that cause most people to blow their budgets which is what forces them to go into debt in the first place. But irregular expenses shouldn’t come as a surprise; Christmas was on the 25th of December last year, and it will be on the 25th of December this year too.

For the time being, plug in your minimum debt payments into your budget, which should give you something like this:


Income: £2,500

Fixed Bills: £1,400

Irregular Expenses (Monthly Average): £400

Minimum Debt Repayment: £400

Other Spending £200

Surplus: £100


Bear in mind we’ve heavily summarised this for simplicity. In this example, we’ve got a surplus of £100, which should also be directed to clearing off that debt.

Step #3 – Cut Out The Fat

If you’re in debt, it’s highly likely that you won’t have a surplus in your budget and will in fact have a deficit. This needs to be corrected pronto! Even those with a surplus should follow this next step to speed up your debt repayments.

You need to cut out the fat, or in other words, cut unnecessary spending. You need to go full on ninja and slash everything you don’t need.

Go through your budget with a fine-tooth comb and identify which of your spendings are necessary and which are not. Holidays, eating out, coffees at Starbucks, nights out, expensive tv subscriptions are a thing of the past. Even the stuff you identified as something you need should be scaled back if you can.

We all need a roof over our heads, but if your debt’s really bad, might you move somewhere cheaper? Can you do the food shop in Aldi instead of Waitrose? Can you catch a bus instead of driving the car?

This might sound counterintuitive, but you may want to continue with one very low-cost entertainment expense such as Netflix or your PlayStation Plus subscription. People tend to spend a lot more when they’re bored so these can entertain you for next to nothing and help to prevent you spending more elsewhere. With some of the “free” PlayStation games I’ve literally clocked up hundreds of hours of gametime – and now it’s conformed… I’m a saddo.

By this point you should have a calculated plan to pay down the debt. If the maths isn’t working out, then you need to go back and be tougher with your cuts. If that’s not possible, there are still solutions to be found in the next steps.

Step #4 – Reduce The Interest Rate

It goes without saying that you want to pay as little interest as possible on your debt as slashing the interest rate will help you pay down the debt much quicker. Assuming lenders are still willing to lend to you, it might be a good idea to transfer whatever debts you can to a 0% credit card or cards.

There is a usually a small fee of around 2% from the new credit card provider but you could lock in 0% interest for maybe 2 years depending on what cards are available to you. The transfer fee is much cheaper than the 19% APR on a typical credit card.

Moneysavingexpert.com lists all the best offers and, in many cases, they can check your eligibility before applying to prevent any damage to your credit rating.

Another option you might want to consider is a debt consolidation loan. A debt consolidation loan is a type of loan that’s used to combine all your existing debts into one pot, so your debts become much easier to manage. The rates vary significantly between providers and on your personal circumstances. Technically, a debt consolidation loan is simply a personal loan, so you’re free to do whatever you want with the cash once received from the lender, but you’d be mad if you didn’t repay your existing debts.

Another option you may have is to shift the debts to your mortgage if you have adequate equity and can pass the mortgage provider’s affordability requirements. To do this you can borrow more on your mortgage and use the cash released to pay down the other (more expensive) debt. Mortgages tend to be extremely low cost – at time of filming rates are around 2% – and are also long-term, so provide you an opportunity to not have to take drastic lifestyle changes.

However, remember that because a mortgage is a secured debt, if you fail to make your mortgage payments you will be in danger of losing your home, so this last option should be considered very carefully.

Step #5 – Pay Off The Debt

There are a few different strategies you can use to pay down debts and they tend to cause disagreements within the finance community about which method is best.

On YouTube a lot of the content is dominated by American channels, and we don’t know if it’s different over there – we see no reason why it would be – but either way this next point doesn’t seem to get mentioned. Here in the UK, the first debts you should clear are your ‘priority debts’.

Priority debts mean that if you don’t pay, you could lose your home, have your energy supply cut off, lose essential goods or go to prison. They include things like: rent and mortgage, gas and electricity, council tax, and court fines. It’s important that you still make the minimum payments on your other debts whilst you clear these.

Once your ‘priority debts’ are sorted you need to tackle your other debts. The two strategies are the debt avalanche method and the debt snowball method. Both methods require you to make minimum payments on all but one of your debts.

The mathematically best way to clear the debt is the debt avalanche method, whereby you pay as much as you can on the one with the highest interest rate. The theory is that by concentrating on the one with the nastiest interest rate you pay your total debt down quicker by avoiding additional interest.

The debt snowball method ignores the maths and tells you to you pay down the smallest debt first and work your way up from smallest to largest, regardless of the interest rate. Advocates of this strategy argue that there is a psychological benefit to clearing the quantity of creditors you owe, and we think they have a point.

So, which is best? Well, that depends on you. Personally, we would always tackle the most expensive debt first if the interest rates varied significantly. Say you have one credit card charging 40% and a loan charging 10%. The credit card is going to be spiralling out of control if it’s not dealt with urgently, whereas the loan’s interest is far more reasonable.

Another contentious point is whether you should have an emergency fund if you’re in debt. Critics of debt such as Dave Ramsey over in the US argue that you need a $1,000 starter emergency fund before tackling the debt. This would be about £700 here in the UK. Some people would even argue that you need more than this as £700 won’t save you from many disasters.

Many people might struggle emotionally with this but as long as you have access to a credit card that isn’t already maxed out, then this kind of is your emergency fund in case something substantial comes up whilst you’re clearing your other debts. It doesn’t make financial sense to be paying say 20% on a credit card if you have some cash sitting there. If an emergency arises you can pay the 20% then and only then.

Step #6 – Make More Money

Cutting back and budgeting can only go so far. No matter how many times you have sliced and diced your budget, if the maths still doesn’t work, you need to grow your income instead. In fact, even if you’re not in debt you should be thinking about how to grow your income so you can move on to further financial goals like investing and retiring early.

Can you work extra hours? Dave Ramsey would be telling you to get a 2nd and 3rd job. If your debt is particularly bad this might be something to consider. But we prefer exhausting other avenues first such as getting better paid work for the hours you currently spend working.

Speak to your boss and see if there are opportunities for a promotion or added responsibilities. This might not be achieved overnight but let the world know your intentions. Alternatively, it’s quite often the case that it’s easier to promote yourself by simply switching employer.

Or, if you want more control you should think about setting up a side hustle to bring home some extra bacon. Somebody I know restores antique furniture and sells that on Etsy. Someone else used to buy women’s shoes from car boots and resell on eBay, and someone else did wedding photography. It could literally be anything.

Our favourite side hustle we like to promote is matched betting because you can do it with no skills, and you can quite easily make hundreds of pounds or more a month tax free (the amount you make is heavily determined by how much time you put in) – enough perhaps to allow you to start saving more for your future.

Matched betting is a betting technique that covers all outcomes of a bet, which unlocks very lucrative bookies’ free offers, which is how you make the money. Whilst it involves using gambling sites, because you have covered every outcome you can’t lose as long as you follow the instructions precisely. Visit our Matched Betting page for more info and videos. There you’ll also find discounted offers for the required software.

Step #7 – Get Help

If after all this, you still can’t stop drowning in debt then it’s time to get help. Moneyhelper.org, which has replaced the Money Advice Service, has a list of free debt advice services, which we’ll link to below. From what we’ve heard on the grapevine stepchange.org is particularly good, so please do check them out if you need help.

What other tips can you give to help those trying to get out of debt? Join the conversation in the comments below.

Written by Andy


Featured image credit: SB Arts Media/Shutterstock.com

Also check out the MoneyUnshackled YouTube channel, with new videos released every Wednesday and Saturday: