November 2011 marked a one year anniversary of my first steps into the investing world. In my final two years at university I copiously researched investing (risk tolerance, where to invest effectively for tax purposes etc) and finally decided to take the plunge three months into my first job out of university. November 2011 has also marked some important steps in progressing my finances. As I’ve mentioned in previous articles – personal finance management does not stop. You must continue to stay on top of your situation and ensure your money is making money for you whilst you sleep. Complacency and personal finance should never be said in the same sentence.
What are the three steps I’ve taken this month?
1) Investing in Zopa: Although this peer-to-peer lending site has only been around for less than 10 years I have always been interested in different forms of investing. As with all new types of investments I’ve only invested what I can afford to lose.
2) Halifax Reward Account: This is a current account that I applied for last year but was rejected due to my credit rating. Since that rejection I took out a credit card with my local bank and have paid it off in full every month (I also only spend a quarter of my limit). I was pleased to discover this month that my credit score has improved enough to get this account. This account is simple – pay in £1000 each month and get a £5 reward from Halifax (basic-rate taxpayer). You don’t even need to leave the £1000 in there. Just transfer it out after a few days and move it to a better-paying savings account. You need the discipline to put the money in each month and take it out each month too. If you go overdrawn on this account it will cancel out the £5 reward so I wouldn’t recommend this account until you’re 100% confident that you’re on top of your finances.
3) 0% credit card: Similar to action 2 I applied for a 0% credit card back in November 2010 and got rejected. These two rejections for a current account and a credit card spurred me onto action and I took out a standard credit card with my local bank. I’ve paid this credit card off in full each month to improve my credit rating. The rationale behind taking out a 0% credit card is that I will be able to spend on this card (for normal expenses) but I will only have to pay the minimum repayment amount each month – this means I will not be charged with the interest rate and can continue to build up my credit score. With the outstanding amount on the card (that I won’t need to pay off until the end of the 15 month 0% period) and put that amount into a savings account paying more than 0%. I essentially make money from the balance without paying a penny in interest. On MoneySavingExpert this is called being a Credit Card Tart. As with action 2 I would only suggest this action for those confident in managing their finances on a weekly basis at least.
With these three actions under my belt I feel that this month has been a productive personal finance month but there’s still room for more. I hope that December will be just as productive and I have a feeling it will be as I consider the following:
- Opening a First Direct current account (in order to be eligible for the 8% regular savings account)
- Increasing my pension contributions from 13% (10% covered by my firm) to 15-16%
- Increasing my contributions to my Stocks & Shares ISA (from 12% of my net salary to 18%)
- Setting up a regular savings account (which may be covered by the first bullet point)
My overall aim is to move my money into riskier investments (in line with my desired time-frame) and to ensure that any cash investments are in accounts that earn an interest rate at least in line with inflation if not 0.5-1% above inflation which is currently at 5.2% I feel this will be my biggest challenge to date.
