Many of us long to be rich, but assume it will never happen unless we win the lottery one day.
But building up a fortune is not magic — rich people do not belong to an elite money-making club that is closed to the rest of us.
The truth is that many well-off individuals are simply people who have worked hard, made some sensible decisions and benefited from a smattering of good luck.
And the good news is, it’s never too late to start growing your wealth. You might not end up a millionaire, but you can still increase your fortune — no matter what stage of life you’re at — and build a nest egg for the future of the next generation.
Today — and all next week in a brilliant series of pullouts — the rich (and sometimes famous) will offer their tips for success and share innovative ideas on how to boost your family fortunes
That’s why the Mail is today launching this How To Get Rich series, drawing on the experiences of those who have done it to help teach you how to nurture your finances.
Today — and all next week in a brilliant series of pullouts — the rich (and sometimes famous) will offer their tips for success and share innovative ideas on how to boost your family fortunes.
On Monday, TV property guru Phil Spencer will explain how you could add as much as £40,000 to the value of your home with a budget of just £4,000.
We will also feature ordinary, yet entrepreneurial, homeowners who are using their properties to earn thousands of pounds a year in extra income.
On Tuesday, Dragons’ Den star Deborah Meaden will share her tips for enjoying a luxury life in your later years.
From launching a new business venture to making money from your hobbies, there is no reason why you can’t pocket extra cash — even in retirement.
Wednesday’s pullout is about learning to invest like the pros. Top City fund managers, such as Nick Train and Terry Smith, give their advice on how to find the best returns for your nest egg and warn of the pitfalls to watch out for. On Thursday, a host of savvy spenders will teach you how to make thousands simply by tweaking your everyday shopping habits.
And on Friday, we will explain how you can use your new-found wealth to help your children and grandchildren.
Today, though, we start with some basic get-rich tips and aspirational stories from those who have done it. And who better to launch our How To Get Rich series than a woman from an ordinary background who became one of the best-known fund managers in the City, and acquired a multi-million-pound personal fortune in the process?
Your first investment should be YOURSELF: So says City superstar Helena Morrissey, the mum of nine who looks after £5BILLION
Dame Helena Morrissey is a passionate believer that anyone can make a financial success of their lives, no matter who they are or where they’re from
Dame Helena Morrissey is a passionate believer that anyone can make a financial success of their lives, no matter who they are or where they’re from.
Her philosophy is that you, too, can become well-off if you work hard to cultivate good money habits, are thoughtful about your finances and are not scared to take some calculated risks.
Now head of personal investing at Legal & General, she is arguably the most successful female fund manager in the Square Mile and oversees £5 billion of investors’ cash.
As well as having one of the smartest financial brains of her generation, the 53-year-old also looks after nine children aged from ten to 24 and manages her own finances.
Helena says the keys to wealth are deceptively simple: you don’t need any special knowledge or genius, or even to have a pile of money to start off with.
And she is a particular evangelist for women taking control of their own finances.
Follow the Morrissey-On-Money method and you could end up far better off.
SPEAK UP FOR YOURSELF
Helena’s background is relatively modest — both her parents were teachers and she went to a state school, Bishop Luffa secondary, in Chichester.
She met her husband, Richard, 56, who stays at home to look after the children, when they were both students at Cambridge, where she studied philosophy.
‘I don’t want to make out I came from an impoverished background, it was just a normal, middle-class family,’ she says.
‘I knew when I left university I needed to earn my own way.’
A career in law was ruled out because it would have meant more years of study when she needed to earn money, so instead she ‘fell into the City’.
Encouragingly for mere mortals, she says she is living proof that you don’t need esoteric mathematical skills to succeed as an investor — you just need an open mind, a willingness to be observant and a desire to question received wisdom.
‘Studying philosophy was more handy than you might imagine for money management,’ she says. ‘It teaches you how to think and how to sweep away assumptions and not to be lazy about your analysis.’
As a young married couple, she and Richard sometimes struggled financially, and that propelled her to earn more.
‘I wasn’t motivated by money to start with, but then I realised the power having some money would give me,’ she says.
‘Interest rates were very high, we had an albatross of a mortgage and our first child. The maths of paying the mortgage and the nursery didn’t add up. That made me very hungry to get more pay.’
Which leads us to her next key ‘money moment’: when she learned that she would have to speak up to win pay rises. And she urges other women to do the same (see box below).
Early on in her career, she was passed over for promotion. ‘I was told it was because I had a baby. It became a really pivotal moment. It made me realise that, if I felt I was worth more, then I had to stand up for myself.’
Helena’s ten top tips for a richer future
Make sure you understand your financial position and know where you are in terms of savings, debts and investments.
Any expensive debt needs to be addressed before investing. Some employers have loan schemes that are cheaper than payday loans. They may also offer share savings schemes, discounts in shops and other financial benefits for staff.
STICK TO YOUR PLAN
Some goals were forced upon me when I was younger because I didn’t have enough money to pay the mortgage. It was a huge motivation to get a better-paid job.
We had real financial struggles at the beginning and they went on for years. Work out a plan and don’t be disheartened by challenges.
You might think it’s prudent to keep your savings in cash but, with interest rates so low, after inflation you are guaranteed to lose money.
Women are more likely to do this than men because we are more nervous about losses. You can’t have returns without risk and to be rich you must consider share investments.
If I had £10,000 in my hand right now, I would put it in the stock market. We’ve had a roller-coaster ride, but this is the time to hold your nerve.
If you had invested £10,000 into Legal & General UK 100 Index Trust (accumulation class) ten years ago, you would have £21,698 today*.
GET A MONEY MENTOR
I was lucky to learn from people like Stewart Newton [founder of investment firm Newton].
He taught me that if you are thoughtful, the best decisions are ones you maybe feel a little uncomfortable making.
Your mentor doesn’t have to be an expert or someone working in finance; there is someone in everyone’s life who always seems to have plenty of money.
You can learn from them.
If you are aiming for promotions and better pay, remember that people, however brilliant, rarely shoot up the ladder in one go.
It is about what they do every day, the incremental decisions and actions they have taken over a long period. Similarly with money: a few small things, such as investing every month over a long time, can make wealth accumulate.
Don’t try to get rich quickly, try to get rich slowly.
Compounding — when you earn interest or dividends, re-invest them, and then start making earnings on the earnings — is amazing.
Just leave it to accumulate and compounding will work its magic. For example, if you had invested £10,000 in the L&G Growth Trust (accumulation class), which reinvests the dividends, ten years ago, you would now have £23,610 thanks to compounding*.
ANYONE CAN INVEST
An ordinary person can get rich through investing. You don’t have to be wealthy or a genius — you can start at around £20 a month, which many people can afford if they skip two coffees a week.
Just dip a toe in. You don’t have to have millions to start with.
In the UK, we have a problematic culture of not talking about money — especially when you compare us with the U.S., where everyone is much more open about how much they make, how they invest and how they find bargains.
We have broken taboos about discussing cancer, mental health and depression, for example, but not about money.
In this country, people are sheepish about being rich, yet want to have an economy which encourages entrepreneurship.
If you are a parent, talk to your children about money. It is a part of their general well-being to learn about finances.
THINK BEFORE BUYING
Beware of false economies. If there is a two-for-one offer, ask yourself, will you really use the items?
You can save on clothes by sharing with family or friends. I have three daughters who are all a similar size, so we share.
PAY INTO A PENSION
You get free money from your employer in pension contributions and you get tax relief. So if you are a basic-rate taxpayer and save £80 a month into a pension, it is actually worth £100.
If you are a higher earner, the same £100 pension will only cost you £60. If you are self-employed, it is really important to take out a pension.
*Past performance is no indication of future growth.
Women have a tendency to sell themselves short, she warns. ‘I had a really disappointing situation one year where my pay was basically the same as the year before, even though I had taken on much more responsibility and achieved a lot. I asked for another chat with my boss and I set it all out.
‘He said: ‘How much would you like?’ and I came up with a number I thought was a massive ask compared with what I had been given, and he said: ‘OK.’ Then I thought I should have asked for more!
‘Companies can always come up with a rationale for paying women less. Some women are so pleased to be offered the job they don’t insist on being paid the same as a man.’
IT PAYS TO SET GOALS AND BE FOCUSED
Helena is brilliant at handling other people’s money, but is she equally as good at managing her own finances?
‘I do have to discipline myself,’ she says. ‘My first piece of advice to anyone who wants to make more of their money is to set aside some time to understand their position to make sure they are not blindsided.
‘I spend one Sunday afternoon a month going over my finances. I make sure I am on top of all the school fees, pensions, bills and check that there is nothing coming up that could create a problem. I have to steel myself to do it, but I enjoy it once I’ve got on top of it.’
Helena recommends filing information straightaway, so you know where all your savings, mortgage, insurance and pensions documents are when you need them.
‘I have spreadsheets, but a lot of information comes in on paper. I have learned the hard way to have a set of boxes and files, so when a letter comes in, I put it in the right box straightaway.
‘Make sure you know where all the documents are, either physically or online. For instance, your insurance — where is that stuff? You don’t want to be hunting for it in an emergency. I used to leave things to the last minute and it just added to the stress. If you do things every month, it is not a large amount of work.’
She also says it is worth meeting a professional financial adviser from time to time: ‘Every now and again I book an appointment with an old-fashioned bank manager and we go through everything.’
And we should take time to reflect on our financial goals; in other words, don’t just daydream, think about why you want to be richer, then write down your ideas and goals.
Women in particular, she says, are more likely to invest successfully if they have a specific reason for doing so.
‘I think we all have an emotional relationship with money. I have always been more afraid of losing it than determined to make lots. I feel the need for security, so it’s worth having a goal in mind. Research shows women are more likely to invest with a specific target in mind, such as paying off a mortgage or children’s education. Men are more motivated by just making money.’
Another big message she has for women is: don’t rely on a man, however rich or financially astute he might seem to be.
‘I have had some women come to me and say they delegate it all to their husband, even though they are superstars in their field. But what if something goes wrong with the marriage?
‘Beyoncé has this great quote that money gives men the power to run things, and we shouldn’t give that away.’
TAKE TIME TO BE A LITTLE SELFISH
To be successful financially, and in life, says Helena, you have to invest in yourself.
‘My best investment has been in myself. That sounds kind of selfish, but it isn’t.
‘You do have to invest in yourself to grow and develop to be more valuable and useful, whether that is by going to networking events, to the gym to invest in your fitness, or in learning new skills. If you don’t invest in yourself, how can you be a good parent, how can you be good in your career?
‘It is not just about me, me, me — it is about doing the best for my family and those around me.
‘This is where we women have gone wrong. Men have been doing it for years.
‘You don’t need to do anything dramatic. My whole life has been about doing little things every day that add up to something bigger.’
Investing for growth is key to building up and protecting your wealth. So where has Helena put her own money?
A chunk, she says, is in L&G’s Future World GIRL fund (Gender in Leadership UK Index).
It invests in companies that take gender equality seriously and have also promoted talented women.
That’s not token feminism — it makes financial sense. She and her colleagues believe diversity at the top produces better financial performance. Outside of the stock market, property has been one of her best investments, though she concedes largely this has been down to good fortune.
Helena, Richard and the younger children live in a big house in Notting Hill. It’s a desirable area of London where prices have shot up in the past 30 years, turning scores of homeowners into bricks-and-mortar millionaires.
‘My generation has been lucky with property, but it is much harder now for young people,’ she says. Even so, she believes that property is still a valuable asset to hold if you can.
It all sounds a bit too good to be true. Just to reassure the rest of us, surely she can own up to some financial failings?
‘I love big parties. My parents were always careful about waste, so you rebel in your own way.
‘My worst money habit?’ she says with a laugh. ‘Probably shoes.’
If we can make millions, then so can you! Who better to learn from then five top entrepreneurs who are now a roaring success
What makes a typical millionaire? The answer is there is no such thing. Some are from wealthy families and have been inspired by their parents’ success to set up businesses of their own.
Others come from normal backgrounds and worked in other jobs for years before daring to take the leap.
Many start small, running side- businesses or investing in one or two modest properties to see how they get on. But there are also those who are more willing to take a risk and throw themselves in the deep end.
The fact is that anyone from any walk of life can make money by setting up their own business. Here, five self-made millionaires share their best nuggets of wisdom for those looking to get started.
Anne Boden, 59, is founder and chief executive of digital bank Starling
FIRST, LOOK AFTER YOUR MONEY
Anne Boden, 59, is founder and chief executive of digital bank Starling. She lives in Regent’s Park, London, and Buckinghamshire. Her new book, The Money Revolution: Easy Ways To Manage Your Finances In A Digital World, is out next month.
From an early age, growing up in Swansea, I was taught always to look after money. My father worked in the steelworks and my mother in a department store, so while we were not rich, we were always frugal.
At 11, I ran the school bank. I always wanted a job ‘with a briefcase’. I studied chemistry and computer science at university, but my mother encouraged me to ‘get a safe job’, so I applied for a Lloyds bank trainee scheme.
Moving to London aged 21, learning about the finance markets and working behind the counter at a branch —something a lot of chief executives have never done — was very exciting.
My first salary was £6,000 a year and I saved like mad to afford my first property — a tiny flat in London which cost me £17,500.
I continued working through the ranks — changing my job every five years to keep moving, including a stint in Zurich — but my attitude to money stayed the same.
As my salary grew, I would always save and even today I can tell you exactly what I am spending. My biggest luxury was getting a cleaner.
It was after the financial crash in 2008, when I saw how much heartache the banks had caused, that I decided something had to change.
I set up Starling, a digital bank which uses new technology to help its customers. We allow people to categorise their spending, offer security features whereby they can control their card spending and they can pay with their phones. We won Best British Bank in 2018 and 2019.
Anne’s top tips
1 Check your credit score and stay on top of it. It has nothing to do with how wealthy you are, it’s about how you handle debt and keep on top of payments.
2 Set a savings goal. At Starling, we have a tool in which you can upload a photograph of something you want. Then every time you spend, you can shift some money into an account to save for your goal.
3 Invest. Whether it’s in a pension, a property or shares. Start off with a small, regular amount. There are many online companies now such as Moola, Nutmeg, WealthSimple and Moneyfarm, which all make investing simple.
Hellen Ward, 51, is MD of her husband celebrity hairdresser Richard Ward’s Chelsea salon and Metrospa and promotes products such as detangling brush Tangle Angel
FROM HAIRDRESSER TO FASHION GURU
Hellen Ward, 51, is MD of her husband celebrity hairdresser Richard Ward’s Chelsea salon and Metrospa and promotes products such as detangling brush Tangle Angel. She is founder of fashion, accessories and jewellery brand Azulara, has two children — Elysia, 18, and Oliver, 15 — and lives in London and Ibiza.
I had a childhood of two halves. In the first half, growing up in Hayling Island, Hants, my sister and I had an idyllic, privileged life with a swimming pool in the garden and a Mercedes on the drive. But after my parents divorced, money was tight.
I got my first job in the corner shop at 14 and I’d always worked after school in my mother’s salon. I did a hairdressing apprenticeship under a Youth Training Scheme at 16 rather than continue with formal education.
I think the insecurity of going from being a ‘have’ to a ‘not have’ in my formative years led to a desire to create financial security.
My friends, television presenter Nicki Chapman and media guru Ali Sharman, call me ‘the hardest-working woman in London’.
I’m so happy to be launching Femhany with them (an empowerment programme for women.)
Hellen’s top tips
1 Find your niche. If you can’t find a product you need, there’s a clue right there. But don’t hang around . . .
2 Recognise the tipping point. The salon business is 27 years old, but could have gone bust in the first six months. Have the courage to hang on.
3 Listen to customers! I overheard a salon client saying she was buying two Tangle Angels — one for her, one for her dog — and the seed was planted for Pet Angel.
4 Nothing runs itself. Having a business is like having a baby that never grows up.
Rick Gannon, 47, is founder of New Era Property Solutions, which rents out homes and business premises
ALWAYS HAVE A GOAL TO AIM FOR
Rick Gannon, 47, is founder of New Era Property Solutions, which rents out homes and business premises. He lives with wife Lorraine, 43, a partner in the company, and their children, Ben, 14, and Charlotte, ten, in Worcestershire.
I’ve always had an entrepreneurial streak. As a child, I mucked out at the local farm and sold bags of horse manure to gardeners at £1 a bag, and I had at window cleaning round at 13. But being a police officer was one of my dreams and I joined the force at 31. I did it for 13 years, but I knew I didn’t want to do it for ever.
It was something my son, Ben, said in 2012 that prompted the change. Ben has quadriplegic cerebral palsy and was upset he would never be able to play football like his mates. That night I discussed with Lorraine what we could do.
We decided I should take a break from the police — where my monthly net salary was £1,800 — to invest in property. We bought our first property for £177,000 with an £80,000 investment from family, plus a £100,000 mortgage. We did it up as a multiple let. We had no savings and only Lorraine’s consultancy business to support us, so it was a risk. But it paid off. Within four months I had replaced my police salary and we went from there. Today, we have around 120 tenants and a property portfolio worth more than £4 million.
For me, the best thing is knowing that my children will be ok. It has allowed us to set up a wheelchair football club for disabled children — so Ben gets to play football after all.
Rick’s top tips
1 Invest in your own education. Local colleges or universities are excellent places for courses. The most useful book I read was The One Thing by Gary Keller, which teaches us that multi-tasking is a great way of doing several things badly!
2 Surround yourself with like-minded individuals. We become the average of the people we spend most of our time with.
3 Network, network and network some more. Whichever field of business you’re in, there will be a group. Try social media such as Facebook.
4 Do one thing each day that will move you towards your goal.
Angela Middleton MBE, 56, is a careers and recruitment entrepreneur and CEO of MiddletonMurray Group. She lives in London and has two children
I GET UP AT 4.30AM TO RUN MY FIRM
Angela Middleton MBE, 56, is a careers and recruitment entrepreneur and CEO of MiddletonMurray Group. She lives in London and has two children.
Growing up in a working-class household where my father was a manual worker, it was drummed into me that I had to work hard in school for a better life. Getting good grades meant I was able to step onto the corporate ladder with BP and later Barclays.
I worked my way up over 20 years and enjoyed some of the finer things in life — a lovely house, Ferraris and world travel. I was on a very good salary when I left Barclays, but I’ve never been someone who need all their ducks in a row before they take a leap of faith.
When I was looking for premises for my new firm, I offered to pay a whole year up front with savings. I remember my husband at the time saying: ‘Are you sure?’ At our last valuation, the company was valued at £30 million.
Don’t let anyone tell you that running a successful business is easy. My alarm goes off at 4.30am, I have coffee and try to meditate and then look at emails and social media before walking to the gym 40 minutes away to do an hour’s workout before the office.
I always tell people never to assume having lots of ‘things’ will make them happy. Your physical and mental health is more important.
Angela’s top tips
1 Visualise where you would like to be in ten years’ time and then work towards that.
2 Find a niche. What kind of business do you want, what will your financial model be, who is your audience?
3 Don’t think small. I hear so many women in particular say things like: ‘I just want to start a little catering business.’ But it could be huge!’
4 Trust your gut. Do you really think this idea can fly?
How to ask for a pay rise
The fastest way to ensure an immediate boost of wealth is to ask your employer for a pay rise. Easy to say, but not so easy to do, as few of us want to confront our bosses.
Helena Morrissey says: ‘When it comes to asking for a pay rise, I don’t think anyone likes that conversation or relishes it. Women are even more embarrassed than men. But it is a really normal conversation. Rehearse it, write yourself a script. What is there to lose? They can’t fire you, and they might take you more seriously.’
Her advice is to go in with facts, not with emotion. Work out why you think you deserve a pay rise. Go over your original job description and note any extra responsibilities you’ve taken on.
Be realistic in how much you ask for, but always overshoot a little as they will try to negotiate you down. Use job advertisements to work out what people in similar roles are being paid elsewhere.
Pick your timing carefully, first thing on a Monday or last thing on a Friday probably won’t go down too well — schedule a meeting when they are not too busy.
And always have a back-up plan — perhaps you could negotiate a car allowance, extra holiday or a day each week where you can work from home.
TAKE A RISK TO BUILD A BUSINESS
Adam Kamani, 29 — son of billionaire boohoo.com fashion website founder Mahmud Kamani — founded the Kamani Property Group, which develops luxury homes and offices. He and wife Charlotte, 29, who works with him, live in Manchester.
Although my father is successful, I was taught never to take money for granted. I had part-time jobs as a kid and we were never spoilt. Dad was always teaching me and my siblings how to get on in business.
I went to university, but knew that my heart wasn’t in it and wanted to be part of the family business. I learned so much simply by sitting in on meetings. Dad taught me you should never be afraid of asking something if you don’t understand.
After a few years in fashion, I wanted to break out on my own and property has become a passion. It can be daunting going into business on your own and you’ve got to be prepared to have a few doors slammed in your face. But believe in your idea 100 pc.
It’s important to make mistakes. I let my heart rule my head on one of the first properties we bought because I was so excited about the purchase. We spent far too long doing it up to my taste when we should simply have done what was most commercially viable. But I’ve never done it again.
Adam’s top tips
1 Don’t be afraid to ask questions. Too often people sit in meetings and pretend to know what’s being said.
2 Every successful business has its ups and downs. When something isn’t working, take a risk to change it.
3 Skip buying coffee for a week and use the money to buy a book or attend a seminar. There’s a great book called The Execution Factor by Kim Perell. The idea is you don’t need a high IQ or even a great idea.
4 Use the internet to learn. I follow lots of news sites, business and property blogs such as Forbes.com. Use business networking site LinkedIn — it’s good for business connections.
From Money Mail’s master of making your cash work harder… 12 simple steps to saving a fortune
The time has come to put a spring in your finances. I’m going to take you through some straightforward steps to buff up your money so it works harder for you.
Let’s not pretend you can do this with no effort. You’ll need to invest time — and that’s possibly your most valuable asset. But if you give up one day to make a start, then you could reap the rewards all year.
Start by making lists: there’s the pleasure of creating a clear picture of what you wish to achieve, then the joy of crossing off each item.
Note down every area of your finances you want to go over, such as your bank account, credit cards, mortgage, phones, energy, other bills and everyday spending. There are also the positives such as salary, savings, investments and pension.
You’ll need to gather the paperwork for these and ensure you have your online passwords to hand. Also, start a calendar or set up electronic reminders on your phone. You’re not going to be able to do everything in one go, so you need to set up a system that will nudge you when changes can be made.
BE A SAVVY SPENDER
If YOUR finances are out of control, you’re spending too much and something will have to give.
It may be that gym membership you never use. It may mean walking more instead using Uber. Or it could mean being less generous and standing fewer rounds at the pub. Go through your credit card and bank statements, but also consider where you’ve been spending odd bits of cash.
Controlling your spending doesn’t mean staying in and being miserable. Instead, become a savvy spender. Use apps such as Giftcloud and Vouchercloud to find restaurants and shops offering money off. Sign up to restaurant and shop mailing lists if they offer discounts.
FOCUS ON YOUR DEBTS
The idea of starting regular saving may give you a warm glow, but there is little point if you owe money.
Your debts are likely to be costing you far more in interest then you will ever earn on a savings account, where the top interest rates are about 1.5 pc. So your strategy should be to look at how much interest you are paying on each debt and tackle the most expensive first. The one exception to the debts-first strategy is an employer-sponsored pension scheme. The free money from your employer and the tax relief you’ll receive make a pension the wise investor’s no-brainer.
CONTROL YOUR CREDIT CARDS
RICHARD BRANSON: It’s never too late to start a venture you’ll love
My advice to people who are starting out as an entrepreneur is to find what you love, get out there, and don’t be afraid to ask for help.
My biggest tip is to start small, but think big. It’s important not to lose sight of the wider picture, even when going about the day-to-day of running a business.
It is never too late to start a business, and retirement is a great time to give it a shot. If you’ve retired after decades of experience in the workplace, and are considering starting a company, good news — you have a head start.
1 Do what you love. You already have enough experience to know what you like doing, so you’re in the perfect position to try to channel that passion into a business idea. You now have the time to pour your focus into your start-up, and if you are having fun and enjoying yourself, it won’t feel as much like you’ve gone back to work.
2 Get out there. Building a network can be tricky for new entrepreneurs, so you really do have to get out of your comfort zone and make those connections. Meet lots of people and be on a mission to learn as much as you can — this research will help you to come up with ideas, understand your market and manage risk.
3 Don’t be afraid to ask for help. The more years you have under your belt, the more you realise that things come and go and everyone has ups and downs — and that we all need a little help sometimes.
Of course, any worthwhile challenge is not going to be easy, but it’s satisfying turning an idea into a reality. I might be 68-years-young, but I have no intention of slowing down. The opportunity to take on new challenges is what gives me energy and the drive to get up in the morning.
Why don’t you give it a go?
Credit cards are an expensive way to borrow with interest rates of about 20 pc, but because the interest is charged monthly you can be fooled into thinking they are cheap.
Multiply the interest charge on your latest bill by 12. If you owe £3,000 on a credit card, you are likely to be paying £50 a month in interest or £600 a year.
Every pound you pay in interest to the bank is a pound you don’t have for things you enjoy. The simple solution is to transfer what you owe to a card offering an interest-free borrowing and pay back gradually.
But credit cards won’t accept everyone. So what then? The temptation may be to pay a little off each card every month, but that is playing into the banks’ hands, as it means you keep paying interest to each lender.
Instead, what you should do is concentrate on clearing the debt on one card while paying the minimum on others. Once you have a debt-free card, you can keep it for new spending and clear that in full every month to avoid paying interest while reducing the balance on another card.
Another thing to remember is that credit card interest is added every day. So if you pay the bill as soon as you receive it or as soon as your salary goes into your account, you’ll reduce the amount of interest charged on the next bill.
MONTHLY BILLS TRAP
Most of us squander hundreds of pounds every year on technology, whether it be phone, broadband, TV or music subscriptions. These wily companies have lured us into paying monthly, knowing it looks so much cheaper than the annual cost.
That £66-a-month phone is really costing you £792; the £90 TV subscription is really £1,080.
The golden rule with tech companies is to negotiate every time your contract is up for renewal.
I’ve got a monthly discount of £26.50 on my BT broadband and TV contract, so that’s worth £477 over the 18-month contract.
Comparison site Is My Bill Fair says that TalkTalk, BT and Sky are most likely to negotiate and leave their customer happy, while Virgin Media was least likely.
MAKE TIME TO SHOP AROUND
Many of us fail to shop around because we get taken by surprise when regular bills crop up. I’ll plead guilty to doing this for years with my house insurance.
Every March we’d get a reminder; but every March I’d have my head buried in preparation for the Budget, writing about the end of the tax year or some other such time-critical thing.
Mrs H is equally busy, so we would simply renew and decide to tackle it next year.
When this year’s bill came in at well over £700, I decided it was time for action, but was still daunted by the prospect of facing stacks of questions on comparison websites. So I cheated and went directly to a firm that doesn’t appear on these websites.
I opted for the top-of-the-range policy to avoid hassles and the quote came in at just over £300.
So the Hazell family holiday fund has been topped up with an unexpected £400.
But the key thing is if you know when to expect a bill, you can make time to shop around for a better option.
The same strategy should apply to car insurance, travel insurance and energy bills.
For gas and electricity, go online if you can at a comparison site such as Energyhelpline, Whichswitch or uSwitch or ask a relative to help.
BEWARE THE DOUBLE PAY TRAP
IT’S very easy to pay twice for the same insurance or service.
Many paid-for bank accounts includes mobile phone insurance. If you have this and you’re happy with the level of cover, then cancel any free-standing policy. Never buy insurance from a phone shop, as this will usually be far more expensive than free-standing policies.
The same goes for travel insurance and car breakdown cover. If your bank account includes car breakdown, then you can kiss the AA or RAC goodbye if you’re happy with what is provided.
TOP UP YOUR MORTGAGE
Most of us are pretty good at remortgaging. With fixed rates hovering a little over 1.5 pc against standard rates of more than 4 pc, the incentive to swap is strong.
But you can’t remortgage at the drop of a hat; you have to wait until your current deal ends or you will face massive penalty charges.
What you can usually do with most mortgages is pay extra each month. As the amount you owe is reduced, you will be charged less interest, which means you repay more quickly. It’s a virtuous circle.
Let’s say you have a 25-year, £150,000 mortgage at 2.5 pc. You’d be paying £673 a month. By paying an extra £100 a month you could knock more than four years off the term and crucially save £9,491 in interest.
Having said this, your mortgage is probably the cheapest borrowing you have, so you should only consider doing this if you’re not paying interest on anything else such as credit cards or a car loan.
WHY TIME IS MONEY
When it comes to investing, time can be as important as the amount of money you put in.
If you save £100 a month from age 25 and it grows by 6 pc a year, you’d have £190,767 put aside by the time you were 65.
But wait until you are 40 to start saving and you would have £67,629.
Over those missing 15 years, you’d have put just £18,000 less into your savings pot but you’d end up with £123,138 less. These amounts are so different because each year you are getting the 6 pc return on a larger and larger sum.
Let’s look at it another way. If you invested just £100 and it grew by 6 pc a year then after 40 years it would be worth £1,028.
To achieve that in 20 years you’d have to put in a £320 lump sum. So whether it’s an Isa or a pension, early starters will always have the edge.
DON’T MISS YOUR PENSION BONUS
THERE are many ways to save, but I strongly believe pensions are the most important investment you can make outside of your family home.
I say this as someone who recently turned 60 and is looking forward to reaping the benefit of more than 30 years of monthly saving. If you’re employed, you should have been automatically enrolled into your employer’s pension scheme. If you’ve opted out, then opt back in at your first opportunity. A company pension is basically a way to double your money.
When you put in £5, your employer must add £3, making £8 in total. But you’ll also get tax relief, which brings the real cost of your contribution down to £4.
So for £4 you are getting £8 in your pension. And some employers are more generous.
If you’re earning £30,000 a year — close to the national average full-time salary — then auto-enrolment will mean you could save about £159 a month into your pension, including employer contributions. If you start at 25, then by the time you are 67 you might build a fund of £344,848 if your money grew by 6 pc a year.
During that time more than £80,000 would have gone into your pension, but half of this will come from your tax relief and employer. In other words, for £40,000 of your money (that’s less than £1,000 a year) you could get £344,848 to spend in your retirement. Of course, investment growth will make a difference, but if we opt for a more modest 4.5pc a year then the fund would still reach £231,551.
GET SMART WITH BANKING APPS
Modern banks and smartphone apps can help you get a clear picture of where your money is going.
My niece is mad for Monzo, the challenger bank. She says it is set up to give a much clearer picture of how your money is flowing through your account.
Alternatives include Starling Bank, but these app-based options are not for everyone. Others include Mint, Loot and Money Dashboard. Bear in mind, though, that you’ll probably end up sharing a stack of your personal data with them.
AND IF YOU NEED IT, GET HELP
Sometimes you may need to call on expert help.
If your money is completely out of control and you don’t know how to handle the debts, then seek assistance from Citizens Advice (call 0344 111 444).
Other organisations to try are StepChange Debt Charity on (0800 138 1111) and National Debtline on (0808 808 4000).
Gambling is an increasing problem with online firms preying on those who struggle with their money. Gamblers Anonymous at gamblers anonymous.org.uk can help.