Julian Knight: My resolutions to ensure a more wealthy new year
When it comes to savings, being disloyal is good, but the same isn't true for the stock market
Saturday 04 January 2014
What was I thinking? Homemade crab apple schnapps on New Year's Eve. Rather than run a mile, I actually said yes. I think it was the sheer excitement of being excused designated driver duty that sent my defences tumbling. But the next morning, as you'd expect, I paid a very heavy price. In fact, I was in such a state that I completely forgot to make my new year's resolutions. But a few days on, my head has cleared and I have finally drawn up my belated personal finance resolutions. You may want to follow some yourself, or simply choose not take the word of a self-confessed crab apple schnapps drinker.
If you ever think of yourself as "belonging" to a certain bank, building society or insurer then I'm afraid you are ripe to be taken for a ride. From car insurance through to savings accounts and mortgages, firms are routinely only interested in prized new customers, not existing ones.
What price loyalty? A fairly hefty one from my viewpoint. Companies rely on enough existing customers not being bothered to switch around – inertia if you like – in order to cream off their profits. In short, it can cost firms hundreds of pounds to acquire a brand new customer, and that has to come from somewhere.
Remortgage as soon as possible
My mortgage deal is entering its final year and I can't wait to drop it and move elsewhere. My deal from the Yorkshire Building Society was amongst the cheapest when I took it out on a long-term fix, but the Eurozone crisis and Bank of England moves have led to rates dipping to almost unimagined levels.
Effectively, if you have plenty of equity in your property, the rates you can get right now are below inflation. This is free money. I have watched mortgage borrowers filling their boots with envy and although I have offered my current provider a deal where they shift me to a new long-term fix forgoing early repayment charge, they won't play ball, so I will just have to go elsewhere. The worry is that by the time I come out of my deal, mortgage rates will have risen again.
Don't chop and change your investments
Having preached being an active consumer and moving to the best possible deal I would like to add a note of caution when it comes to the stock market. One of the key mistakes inexperienced investors make is to churn their investments too often.
Unlike savings, current accounts or car insurance, it often pays to buy and hold. All too often investors get excited on first investing and pore over their shares reacting to every little movement. However, unless there is some very bad news, in the main, the reasons why you invest one day should be the same why you choose to hold the next.
Buying and selling shares can be expensive: on a £1,000 holding just one buy and sell can swallow up £30 – that is 3 per cent or what you could expect to earn in interest in an entire year if the money was in a best-buy individual savings account. Buy and hold, combined with periodic assessment of your holdings, is a much more sensible strategy.
What's more, don't discount shares which are designed to pay you a regular income. At the moment the dividends paid by some of the UK's biggest firms offer a far healthier return than you can find from savings accounts.
Do think about the worst-case scenario
The most likely worse-case scenario for your personal finances isn't death but incapacity or serious illness. However, very few of us take any steps to guard against the massive damage this can cause.
The first thing you should aim to do is have cash available on deposit – a lifeboat fund . Most experts reckon that having the equivalent to six months' salary available is about right, but three months should suffice. Don't forget that this cash should be instantly available.
Beyond this fund, there are useful insurance policies, such as income protection, which pays you in effect a salary if you can't work, or critical illness, which gives you a lump sum should you get cancer or have a heart attack. Generally, critical illness is quite a bit cheaper than income protection but there are exclusions to be wary of. Remember, having sound personal finances is as much about putting a financial backstop to your life as finding ways to grow your cash.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 All Blacks Aaron Cruden misses New Zealand flight after drinking session, has brilliant excuse
- 2 Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
- 3 'F*ck it, I quit': TV reporter Charlo Greene quits live on air in spectacular fashion
- 4 Alicia Keys leaks nude photo 'to create a kinder and more peaceful world'
- 5 Clothes store Joy angers mental health campaigners with Twitter exchange on bipolar disorders
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...
Day In a Page
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize