Understanding financial jargon and keeping your bank account in check is one of the staples of being a ‘grown up’ but how many of us actually know the ins and outs of how to get the best from our hard-earned cash?
Debs Vickers, personal finance expert at moneyguru.com said,
“Never be afraid to ask questions about personal finance, you’ll be surprised to find how many other people are just as in the dark as you are! Understanding the basics of personal finance can make a significant difference to your bank account at the end of the month and allow you to save, and spend, within your limits.
We know it can be embarrassing to admit you don’t know your API from your APR or if you are having trouble getting your head around interest rates so we’ve come up with a handy cheat sheet that covers all of the personal finance facts you need to know.”
1. Understand your credit report
Did you know that your credit report is much more important than your credit score, which is simply one aspect of your credit rating? Banks check your credit report before approving you for credit cards and loans, including a mortgage or car loan and remember that every credit application you make is recorded on your credit file, whether successful or not.
2. What does APR mean
APR stands for Annual Percentage Rate, it is the amount of interest you will pay and when you have to pay it. It’s a simple way to find out which loan is best for you for example, a loan with 15% APR is more expensive than one with 10%.
3. What is statutory sick pay
While we don’t aim to have time off work due to illness, sometimes it’s unavoidable. If you are sick for over four days in a row you’re entitled to statutory sick pay which is currently £92.05 per week. It’s important to understand your current employer’s stance on how much you will be paid, to work out whether you should take out some income protection.
4. What is the qualifying age for your state pension
Whether retirement is fast approaching or many years away, it’s always wise to keep track of the qualifying age at which you are set to receive your pension. With the qualifying age gradually rising to sixty-six for men and sixty-five for women – it is yet to be understood if further increases will be seen in the years ahead. It’s never too early to think about how you are going to afford your lifestyle in your twilight years, and the more you plan ahead the more savings you’ll have to enjoy your retirement in style. Speak to your employer about your pension contribution and make sure you research the best options for topping up your pension pot.
5. Understand your credit card interest rates
It’s can be easy to frivolously use your credit card, however, it’s equally as easy to forget your interest rates. This is a quick way to rack up unwanted debt with your bank, so keep track of how much you’ve spent and when it is due to avoid surging interest rate payments. Did you know that the interest rate on a credit card can be higher than a personal loan? While missing a payment could be a quick way to incur some unexpected charges.
6. What charges might you incur when using your credit or debit card aboard
Holidays can be expensive enough without incurring charges for transaction fees aboard. It’s advised to use a travel money card where the risk of card charges are taken away. Typically using your credit card in an overseas country will impose a foreign usage charge of up to 2.99%. While, debit cards do not escape additional charges when withdrawing money aboard as you will commonly be charged both a conversion and transaction fee.
7. Why it’s important to keep track of your direct debits
While direct debits remove the risk of forgetting to pay, it can be easy to forget when multiple payments are due out of your bank account leaving you hard stretched during different periods of the month. It’s best to keep track of all direct debits leaving your account so you can budget accordingly, this will also make it easier to see where you can make savings by cancelling payments for services that you no longer need (we’re looking at you unused gym membership…).
8. How best to save your money
It’s simple to keep tabs on your current account, but how many people truly know how many savings they possess? Whether it is tied up in savings accounts, ISAs or bonds, it’s strongly advised to work out the total value of your savings. This will help you factor in which saving methods work best for you. Comparing different providers of savings accounts can prove to be a financially astute move with some banks currently offering 5 percent interest on your savings tax-free.
Visit MoneyGuru.com’s Wisdom page for the latest financial information and top tips to help you spend and save wisely.