Tips for the years of living expensively
The second part of a series on financial planning through the stages of life
Sunday 22 October 1995
The 30s and 40s are in-between years, in financial as well as other terms. For many, expenditure is likely to peak at some point in these two decades, particularly if you start a family. At the same time, it is important to start to save for future commitments, whether school fees or your own retirement.
Whatever your personal circumstances, financial planning is crucial in managing these opposing spend and save pressures. The sooner you start planning, the better you will be prepared for life's inevitable financial surprises.
Apart from pensions, the other key areas are:
q An emergency fund. Keeping a reasonable amount of money in an instant- access bank or building society savings account is a useful buffer against sudden unexpected calls on your cash.
q Cutting short-term borrowing costs. Most credit and store cards are prohibitively expensive to borrow on. So is the typical high-street bank overdraft. Switching any debt that is likely to roll over for a few months or more to a personal loan will produce immediate savings. And moving to a bank account with an overdraft that charges interest only, offered by the likes of First Direct and Abbey National, will save money every time you go into the red.
q Consider remortgaging. If you have already got a mortgage, work out whether it is worth switching it to capitalise on the current fierce competition between lenders.
If the monthly saving on the new loan outweighs the costs of switching within a reasonably short time (a year or so, say), it is probably worth doing. And now is a "fantastic time to remortgage to a fixed-rate or discounted deal", advises Ian Darby at London- based mortgage broker John Charcol.
Good deals highlighted by Mr Darby include Britannia Building Society's five-year 7.24 per cent fixed rate (compared to a typical 7.99 per cent variable mortgage rate) and a raft of two-year, fixed-rate deals at around the 4.99 per cent mark. But watch out for redemption penalties - most two-year fixed deals now commit you to keeping your mortgage with that lender for five years, or facing charges of up to three months' interest. The risk is that you get locked into a high variable rate after the fixed deal is over.
q Protect your family. If you have children, it is essential to check that you and your partner have adequate life insurance to cope financially should either of you die. Check the amount of cover you have from your employer and any private insurance policies and, if needs be, top it up. As a rule of thumb, the life insurance industry recommends cover of up to 10 times salary, although few people want, or can afford, to buy this much insurance. The table shows some of the cheapest rates for straightforward term insurance policies (which pay out a lump sum if you die during a set term).
q Protect your income. Recent severe cuts in the state invalidity benefit have left everyone far more vulnerable to the risk of getting into serious financial straits should they be unable to work for a long period because of illness.
Insurance policies pay a monthly income, tax-free for the first year on personal but not company-organised plans, if you cannot work because of illness. They are far from perfect - both the cost and the extent of the cover leave much to be desired. But the protection offered is important.
Premiums vary according to your occupation, but they are invariably lower the younger you buy. As an example, a typical Friends Provident policy for an office worker, paying pounds 1,000 a month benefit, would cost pounds 27.15 a month if you took it out aged 25; pounds 34.28 a month if 35; and pounds 48.08 a month if 45.
q Check your car and house insurance. See whether you can get a better deal when these policies come up for renewal. It is easy to unwittingly have the wrong level of buildings or contents cover, leaving you either with a shortfall should you have to claim or paying over the odds on premiums.
q Save for the medium to long term. If you can afford to do this, make the most of tax-efficient investments. Tessas are in effect five-year building society savings accounts that offer tax-free interest on investments of up to pounds 9,000. If you want an investment that also offers the prospect of capital growth, both unit and investment trusts are ways of investing in a pool of shares. You can put up to pounds 6,000 a year into either type of investment fund via a personal equity plan, which means that both your income and any capital growth are tax-free.
q Save for school fees. If you want private schools, you must prepare for a huge bill - the latest estimate is pounds 100,000 for a child born today.
q Check your tax coding. If you are married, make sure you are claiming the married couple's (tax-free) allowance.
q Make a will. This may seem an unnecessarily gloomy note to end on, but if you die intestate, it can create huge problems for your family.
Good and bad deals on life insurance
Insurer Couple aged 35 Couple aged 45
premium (pounds ) premium (pounds )
Cheap Legal & General 24.49 57.47
Scottish Widows 25.75 57.65
Scottish Provident 26.46 57.69
Costliest Clerical Medical 41.30 94.70
NPI 50.53 97.42
Scottish Life 52.10 119.50
The monthly premiums shown are for a 15-year policy providing pounds 100,000 of cover for a couple who are non-smokers. Rates correct as at 17 October. Source: Premier Investment Group.
- 1 Isis 'jihadi bride' claims forced sex with Yazidi girls is never rape because Koran condones it
- 2 Eurovision 2015 winner: Sweden beats Russia and Italy to take the title from Conchita Wurst
- 3 Purity balls: Girls in the US making virginity pledges as fathers vow to 'protect purity'
- 4 Mother 'will allow son's circumcision in return for release from prison'
- 5 Female Muay Thai champion hustles coaches to give them a beating
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof