Hi Heather,
 
My husband and I want to buy a house, how can we go about improving our credit score?
 
Chrissy
 
Hi Chrissy,
 
This is an awesome question. I think lots of people come up against this issue at one point or another. Before I get into the detail, straight off the bat I’ll tell you what you don’t need to do, you don’t need to get a credit card. You can build excellent credit without a credit card despite what people say about needing a credit card to build a credit record and strong credit score. Now that I’ve got that off my chest let’s start from the beginning?
 
Firstly, what is a credit score and what’s it trying to achieve?
 
A credit score is a number that’s designed to be an indicator of your creditworthiness. This means that the credit score gives lenders an indication of how good you are at paying your debts and how likely you are to default and not pay them. Lenders only want to lend to people that are likely to repay that money and the credit score is an indicator of your likelihood to repay.
 
Your credit score is built up using all the information a credit reference agency has collected about you over time especially over the last 6 years; information older than 6 years usually doesn’t weigh into your score.
 
The credit reference agencies that you might have heard about are:

• Experian and
• Equifax

They are the household names – but there are lesser known agencies or associates of agencies that you can use; these are:

• Credit Karma – which uses TransUnion data,
• ClearScorev– which uses Experian data, and
• CheckMyFile – which uses data from 4 credit reference agency – Experian, Equifax, Crediva and TransUnion.

 
You can also go directly to Transunion or Crediva to get a credit report from but they don’t give you a score directly – they only do so via CreditKarma and checkmyfile, respectively.
 
If you want to improve your credit score you need to know what your current score is so you can track it. You can’t improve something if you haven’t measured. Credit scores work in the following way:

• CheckMyFile (score out of 1,000, free for a month then £15/month).
• Experian: score out of 999, free for a month then £15/month
• Equifax: score out of 700, free for a month then £8/month
• Credit Karma: score out of 850, free for life), and
• ClearScore: score out of 700, free for a life.

If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.

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Hi Heather,
 
Based on the things you told us about investing, my husband and I started putting £125 per month each into our SIPP pension. I hope this isn’t a silly question but what are these savings for? When can we expect to start spending that money and should we try to spend it in specific ways or on specific things? Both my husband and I are 30, we don’t plan on having children and our jobs have fixed pension benefits.

​Thanks 
Flora
 
Dear Flora,
 
That’s a great question. While everyone has a different value system, there are two main reasons that I strongly recommend that people put money into a self-invested pension plan or SIPP a) flexibility and b) security including funds to help pay a mortgage off early.
 
A SIPP can be better than a stocks and shares ISA, in some cases, because you effectively pay less tax and because you can’t use the money until you are about 58 so it forces you to save.
 
Let’s talk about each reason in turn:
 
The first reason: is flexibility over when to retire
 
In the past, a lot of work-based pensions (aka defined benefit pension plans) used to allow early retirement from between the ages of 55 and 60, most of these type of scheme are being completely phased out and are instead being linked to the state retirement age which for you is currently expected to be 68. There is talk of moving this to age 70, so this is a future possibility.
 
Whatever happens, the funds that you build up in your SIPP can be taken from 10 years before the state retirement age. This means if the state retirement age moves to 70 you will still be able to use money that’s sitting in your SIPP from the age of 60.
 
If you and your husband are putting £125 each into a SIPP then when you are 55 years old, you and your husband’s combined pot of savings would be worth £135,000 if the pot of money only grows fast enough to keep up with inflation of about 3%; if you get growth equivalent to the average stock market return of 7% then you would have £250,000 at the age of 55 and if you get an average stock market return of 10% you would have £410,000 saved up.
 
At age 60 the figures would be £180,000 @ 3%, £375,000 @ 7% and £700,000 @ 10%.
 
These sort of returns aren’t cuckoo. According thebalance.com, “the S&P 500 Index, delivered its worst twenty-year return of 6.4% a year over the twenty years ending in May 1979. The best twenty-year return of 18% a year occurred over the twenty years ending in March 2000.”
 
Various sources suggest the S&P 500 has returned 10% before inflation if you buy and hold the money you invest into it. But of course, it’s useful to remember that this past success doesn’t guarantee that future returns will be as good.
 
Right now you would struggle to find a bank account that gives you an interest rate of 1.5%.
 
Back to flexibility on when you retire, however, unless you believe the US has no room for growth, then this total of £250/month you are saving could amount to a lot of money over a 25 to 30 year period and this would allow you to retire with a decent income well before the state retirement age.
 
If your mortgage is fully paid off by the time you retire then your cost of living could be low enough that even a modest growth in the SIPP would provide a comfortable income before your state pensions and work-place pensions kick in.
 
 
The second reason: to save the money is the added security from having extra retirement income
 
Having money in a SIPP means you can top up your retirement income.
 
Having the SIPP would mean you have 5 sources of income:

• two state pensions – yours and your husand’s – (keep in mind that we have no idea how the level of state pensions could change over time);
• your workplace pension;
• your husband’s workplace pension; AND
• the SIPP.

 
If the pension income from your jobs is lower than your final salary having access to extra funds will mean you can more or less maintain your lifestyle. This will be especially important if one person lives a lot longer than the other.
 
There is one special feature that the SIPP has but all the other 4 pensions do not: and that’s the fact that if you or your husband dies the state pension stops coming through and the work-place pension either stops completely or is massively reduced. However, whatever money is outstanding in the SIPP would fully transfer to the spouse without penalty.
 
Just to be clear, I will make that point twice: a work-place pension either dies with the person and at that point the spouse receives nothing or, from that point, the spouse gets a heavily reduced benefit – usually 50% of one-third of the amount that was being received before their spouse died.
 
A LOT OF PEOPLE forget this about SIPPs and other defined contribution pensions. I won’t go into the differences between defined benefit and defined contribution pension plans here but if someone is interested go to themoneyspot.co.uk and leave me a voicemail with your request.
 
Finally, when can you expect to start spending that money and should you try to spend it in specific ways or on specific things?
 
Technically, the plan is that you will never have to spend the capital but can just spend the growth.
 
If the fund is worth £250,000 when you start drawing from it and you are earning a 10% return per year at that point, then you could just withdraw the 10% (i.e. £25,000) or less and spend that.
 
If your withdrawal rate is lower than the growth rate of the fund then your retirement would continue to grow even as you take money out.
 
Note that some research suggests that the ideal withdrawal rate to maximise the likelihood that the money will never run out is 4%. But given you have pension income from your jobs in addition to the state retirement and you’re not worried about passing wealth on to children you could be more aggressive than this.
 
As for how you spend that money, well that is up to you and is a great problem to have. Having more money doesn’t only mean more holidays, it also means you can buy private health insurance which might be a necessity to avoid NHS waiting lists at a time when health problems are more likely. This would give you a lot of peace of mind.
 
Ability to pay mortgage off early
 
One thing worth adding, is a note that once you can withdraw money from your SIPP you are allowed to take 25% out as a tax-free lump sum. If your household had £250,000 saved up, you could take £62,500 out in one go which could be used to clear all or most of your mortgage.
 
You would then be allowed to take the rest out as an income or you could buy an annuity – with an annuity you essentially buy a fixed income which keeps being paid to you for the rest of your life.
 
I wouldn’t recommend an annuity for you given you have two fixed pensions coming in already, you don’t need the extra security and annuities don’t tend to be worth the money now that interest rates are so low. What you could do instead of buying an annuity is withdraw what you need from the SIPP every year. You would pay taxes based only on what you take out and could manage the withdrawals to minimise the tax bill.
 
I hope this helps.
 
Heather

Hi Heather,
 
I want to earn extra income, however I work as a nurse in the NHS which takes up my time, do you have any suggestions on any investment that can make money. I am also interested in the stock market but don’t know where to start.
 
I am interested in both generating extra monthly cash flow now and increasing the amount of money I have in retirement.
 
Denise.
 
Hi Denise,
 
Thanks for this question. I love it because I have two nurses in my immediate family, my mother-in-law was a nurse for a long time and my cousin is still one now.

​The, “how can I make a little extra cash now” question is one I asked myself quite recently because I wanted to put extra cash into our household ISAs. There are a few things you can do to boost your cash now:

1. Work a few more shifts every month (and look for higher paid jobs).
2. Do some extra work in another field.
3. Invest in or produce products that make cash.
4. Teach
5. Invest in property.

1. Working extra shifts / locum shifts  

My mother-in-law says this is not a great idea because being a nurse is hard enough work, as it is. I agree that it is very demanding work but one of the great features of working at the front line of medical services is that you can actually make more money by working more hours, even temporarily. Some jobs don’t offer opportunities to earn more by working more, you’re paid a fixed annual salary and that’s it - no overtime. Overtime either goes uncompensated or is compensated as time back in lieu.
 
You can sign up to a locum agency and do the same type of work for higher pay on your free days.
 
If you want to really juice up your income you can even look at things like working a 4-day week in your regular NHS job (your NHS pension would therefore be lower) and work for a locum agency on the 5th  day. The advantage with this strategy is that you will boost your income without working more hours because the hourly rate is higher as a locum nurse. If the extra income is invested wisely it could more than make up for the lower NHS pension.
 
Also, keep your eyes open for higher paying promotions.

2. Do some extra work in another field.  

If you have another skill that you can monetise you can look into doing extra work in that field. So ask yourself, "what other skills do I have?" I'll give you an example from my own life:
 
In my early 20s when I worked in banking the bonuses were not good one year and to make some extra money I slipped flyers into doors offering massages (for women only) at my house for £25/half-hour. I had someone sign up that very day. I had done a course in therapeutic massage at London College of Massage for fun and when I needed it, that skill helped me boost my income. I didn’t do it for long but it showed me that if I wanted to earn more money I could monetise other skills in my free time.
 
There are some things you can do that don’t even need a new skill such as babysitting. You could sign up at childcare.co.uk or sitters.co.uk and your credentials as a nurse would be very attractive to people that needed a babysitter for nights out or weekends. You haven’t said whether or not you have childcare responsibilities of your own so I don’t know if this is possible for you.
 
If you have skills that you can monetise online then list yourself on freelance websites like upwork or fiverr. There is a wide range of professions people hire for on these sites. I have used these sites myself to buy all manner of things including artwork, copy, copy editing and even voiceovers! Imagine that, all you’d need as a voice over artist is a microphone that records your voice clearly. Some people make serious money side-gigging on these sites.
 
These first two options are not completely aligned with your question as you asked for “investments that you can make” but I decided to add them to give a fuller answer.

3. Invest in or produce products that make cash.  

Investing in something necessarily involves parting with money in the hope that you’ll earn even more money. You haven’t said how much money you have to invest so here are a few options.
 
Can you make something that people would be interested in buying that you can sell on etsy, eBay, amazon or Facebook marketplace?
 
Make a few samples of what you want to sell and list them on all these sites. I ran a product business myself for almost 6 years mostly using Amazon so I would recommend that you:

1. Try several marketplaces to see where your product sells best – in my experience, eBay and Amazon seem to attract very different types of people – I haven’t tried any other marketplace. I personally sold most of my products on Amazon in the US and sent the products there so Amazon could fulfil them for me.
2. Have a look at my course on “Product: How To Start A Product-Based Business” – I have set it up to be completely free for the next three days only. This is enough time to go through all the videos.
3. Don’t produce too much before you see how well the product sells.
4. Avoid buying expensive machinery before you have seen evidence that your business has potential to make a decent return for you.

I would never discourage anyone from starting a business but having experienced it, I would tell you that it is very hard work. It involves a lot of long hours and is nothing like as glamorous as our culture makes being an “entrepreneur” sound. A business could consume absolutely every free moment you have – evenings and weekends. And all that time might not even produce a profit. Investing in a business comes with a lot of risk – stats vary depending on source, however, 80% to 90% of businesses fail in under 3 years.

4. Teach  

Could you make money teaching something online? You could create a course and list it on Udemy, Teachable or another similar site. This would take some time to produce well, in the first instance, then you would need to spend some money on marketing your course but you could keep the costs very low.

Alternatively if you want to teach a GCSE or A-Level subject (High school level) or even a university course level, you can sign up to places like tutorful (previously, tutora). 

5. Invest in property.  
​
If you have enough for at least a 25% deposit then it may be worth looking into property investment. Because interest costs on buy-to-let property are no longer fully tax deductible, (that means, you can’t subtract the interest payment from the rent you receive before calculating your tax bill), property is not as attractive an investment as it used to be. That said, if you can buy a place with cash, or if the property produces a high enough profit to clear the mortgage within a reasonable amount of time (I personally target 10 to 15 years) then it could be worth doing.
 
Overall, the option you go for will depend on your risk tolerance and the amount of cash you have to invest. If you are relatively risk averse and don’t have cash to invest then working more to earn more will be more attractive. If you can tolerate some risk and do have some spare cash saved up, then investing in property will provide you with medium risk while investing in a business will be the higher risk option.

If you’re looking to boost future income then you have two main options:

1. You can invest in property or
2. You can invest in the stock market - and, of course, you can do a bit of both.

 
Property investing we've already talked about.
 
The stock market provides a good return over long periods of time; most investment advisors would suggest an investment horizon of 5 years or more. Putting money into the stock market in the hopes of a good return in a year or less is gambling rather than investing, that's why I didn't offer it as an option when we were thinking through how to "boost income now".

The most tax efficient options for investing the stock market are investing via an ISA or a SIPP. ISA are individual savings accounts and SIPPs are self-invest pension plans, they are a type of personal pension.
 
If you invest the money via a SIPP then you won’t have access to that money until you are between 55 and 58 years old. The exact age will depend on your age and has been set at the state retirement age minus 10 years.
 
The SIPP is a good option because for every £100 you put in, HMRC pay back £25 of tax and this saving is automatic. It is claimed by the SIPP provider and is shown on your investment account. The maximum you can put into a pension a year is £40,000 or your salary whichever is lower. So, if you earn £30,000/year you can put up to £30,000 into your pension without getting a tax charge. If you earn more than £40,000/year and haven’t reached the lifetime allowance of £1.055m, you can put up to £40,000 into your pension without getting a tax charge/penalty.

I will be writing several blogs on investing over the next few months that should hopefully build your confidence to make the move. In the meanwhile, you might find this useful: What platform should you use for investing and what should you invest in.

I hope this is helpful.

Have a question?
 
If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.

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• Download the latest Life Planner now:​

Once you have decided on an investment strategy for yourself or for your children you need to decide where to invest and what to invest in.
 
WHICH PLATFORM TO USE FOR INVESTING
 
Choose a platform that has the lowest fees for the highest convenience. Fees change over time but when I was deciding on a platform I found these articles:

• Moneywise.co.uk - Our guide to the best investment platforms for beginners
• moneysavingexpert.com - Find the best ISA or investment platform
• investorschronicle.co.uk - The cheapest DIY platforms on which to hold your Isa
• comparefundplatforms

 
In the end, I chose iWeb for myself and Hargreaves Lansdown for the children’s investments.
 
Why iWeb?
 
I chose iWeb because annual fees are zero (after a £25 account opening fee) and you only pay £5 per transaction.
 
As I only transact once a month (on pay day), our annual household fees are £60 and if you consider that I only transact on either my account or my husband’s account in any given month, then we are only paying £30/year per account. More than fair.
 
The main problem with iWeb is that they don’t do junior ISA and you can’t automate investing. I don’t mind manually investing for my and my husband’s ISAs because we invest different amounts in different funds each month.
 
Why Hargreaves Lansdown?
 
They do junior ISAs, they have a good app and you can fully automate all your investing – their customer service is also pretty good; if you call you will get through to a human pretty quickly.
 
Ultimately, I don’t expect the children’s ISAs or pensions to have a value greater than £100,000 before they’re adults so a platform with a percentage fee will tend to be cheaper than one with a fixed fee.
 
When they’re older I’ll advise them to move to a cheaper platform.
 
Which platform will work best for you?
 
Unless you’re an investment buff that actually enjoys making monthly investment decisions, I recommend you choose a platform that allows automation, possibly Halifax share dealing or Cavendish; one of my friends recommends Fidelity.
 
For children, transact within a junior ISA. For yourself or partner, an adult ISA. If you can invest more than the annual limit then use the ISAs first before transacting via a taxable account.
 
WHAT SHOULD YOU INVEST IN?
 
Unless you have a lot of time to research different companies, I would only invest in low-cost (passive), well-diversified mutual funds such as an S&P500 tracker or a FTSE100 tracker. Passive means the fund is not actively managed, it just follows the stock market so your return is essentially the average market return.
 
Research suggests that actively managed funds (ones where a ‘clever’ manager stock picks) generally underperform the market in the long-run.
 
My long-run strategy is to have 70-80% of my money in (safe) passive funds and 20-30% in actively managed funds. ETFs? I don’t do ETFs – I think funds make more sense.
 
Over to you.
 
Have a question?
 
If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.

• Related blog post: How to save and invest for your children
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Hi Heather

I just had my first baby. I'm 31 and married. Do you have any tips for how I can think about saving and investing for my baby? 

Thanks,
Diana

Hey Diana,

This is an awesome time to be asking me this question. I also started planning for my first baby as soon as he was born.

You will be at an advantage if you start saving and investing for your children as soon as they are born. You will need to balance what you can afford with what you want to achieve for them. Firstly, what’s the goal? What are you saving for?

1. University?
2. To cushion their retirement (and reduce your inheritance tax bill)?
3. To help them with their first home?

 
1. UNIVERSITY
 
University costs c.£60,000 in tuition and living costs for a 3 year course at the moment - £10,000 for tuition and books, £10,000 for living – living costs can be higher or lower depending on whether you live at home, etc..
 
£60,000 is a huge amount of money and this cost is likely to rise in the future but it makes the maths too complicated to think about possible cost increases.
 
Option 1 for university savings
 
If you can save £20,000 in a tax-free account like a stocks and shares ISA by the time your child is 5 years old, then you can stop putting money aside and this money will have a reasonable chance of growing to £60,000 by the time your child is 18 years old.
 
How could you save this £4,000 per year? Perhaps you could target saving a round amount like £250 per month (equivalent to just over £30/week each for a two-income family) and because this sums to £3,000 a year, at the end of the financial year you’d hustle to throw that extra £1,000 into the ISA before the financial year closes on 5 April. Or, if you can afford it, you could just save £335/month and you would save just over £4,000/year.
 
Option 2 for university savings
 
£4,000 is likely more than most can afford. The alternative is to save £100/month until age 18 which most people can afford even on the median household disposable income of £29,400 (2019). It’s equivalent to about £12.50/week each for a two-income family).
 
Which option is better?
 
I would say option 1 trumps option 2 because you give the money the best chance of growing. Equity markets are volatile in the short-run so by saving the money early you give the money a better chance of reaching your goal. That said, something is a lot better than nothing: small savings add up to large amounts over time. Your savings may be lower than you would like to target but you will still help your children avoid the full scourge of student debt.
 
These are the results under each option:

​Caveats on saving through a Junior ISA:
 
When you save the money through a Junior ISA, that money will be theirs when they hit 18 and you might not be able to control how they spend it.
 
However, putting it into the Junior ISA means you won’t be tempted to spend it yourself because once the money goes in, it can’t be withdrawn until your child is 18.
 
How can you avoid the Junior ISA so you have more control over the money?

1. If you don’t plan to use the full amount of your own ISA allowance, currently set at £20,000/year, a great option would be to save an additional £4,000 into there.
2. If you are using your full ISA allowance or at least more than £16,000 of your £20,000 allowance then you can save the money into a regular taxable investment account.

 
Plan b. is a good option because you could end up not having to pay tax anyway:
 
The capital gains tax allowance in 2019-20 is £12,000. That is, you have to make a capital gain (the profit on your investment) bigger than this to pay the tax. If you save the £4,000 across two investment accounts - £2,000 in an investment account with your name and £2,000 in an investment account with your spouse’s name then when your child is 18 you can sell enough stock each year to keep the capital gain below the capital gains tax allowance.
 
The risk however is that this threshold could fall or be completely removed in which case you would end up paying more capital gains tax on the sale. It’s still a sensible option, despite this risk.
 
2. RETIREMENT
 
If you followed option 1 for university savings, at age 5 you’ll have stopped doing that and might find that you have some spare money to open a retirement account.
 
Your children will not have access to this money until they are 57 to 60 but if life hasn’t worked this will be a great cushion for them.
 
The beauty of investing in a retirement account is that for every £1 you put in the government puts in an extra 100/80. That is, if you want to save £100/month you only need to put £80 into the account. If you do invest £100 it will be £125/month with the government top up. For kids you can put a maximum of £2,880/year (£240/month) which equals £3,600/year.
 
This is the result if you choose to save £100/month indefinitely into your child’s Self-Invested Pension Plan or SIPP starting from when they are 5-years old:

​You notice that the extra £25 from the government makes a real difference. By saving through the pension, based on a 7% return, on 7-Jan-2025 the investments are worth £9,269 rather than only £7,444 without the government top-up.
 
Don’t save into a child’s retirement account unless you have the cash flow and are meeting your own goals, e.g. paying enough into your own retirement, paying off your mortgage early and ideally, are debt free yourself (apart from the mortgage).
 
Some will be able to afford the full £240/month from birth, the rest of us have to work out what is realistic, that is why I personally opted for the £100/month from age 5. This decision will change with a change in your fortunes.
 
3. HELPING YOUR KIDS BUY A HOME
 
This is where the decisions get a little tricky. Some people will be able to afford funding university, helping their children get ahead with retirement savings and help with a deposit on a home without compromising their lifestyle at all but the rest of us need to make choices.
 
Private school vs. saving for a home
 
What will make the biggest difference to your children: a private education or getting onto the property ladder?
 
If you can afford one or the other but not both, then you might follow the route of private primary school followed by state secondary school (grammar/comprehensive). In this case you’d direct all the money you would have spent on a private secondary school education on saving for a home. In some cases this might mean your child starts life with a mortgage free home.
 
If you save £15,000/year (£1,250/month) from age 11 until age 21 (10 years of saving) and it grows at an average rate of 7%, how much money would your child have at 21? About £220,00 – increasing to £260,000 if the average return over that period is 10%.
 
This is not small money to most of us.
 
You could use every last cent on a private education when at the end of the day the thing that helps your child follow a life of fulfilment is being relatively debt free.
 
If you decide to go for a state education throughout and save £1,000/month (£12,000/year) from age 5 (when you are done with university saving) until age 21 (16 years of saving) and it grows at an average rate of 7%, how much money would your child have at 21? About £355,000 – increasing to £475,000 if the average return over that period is 10%, wow. Forget the children, you could be doing this for yourself!
 
If you have already made the decision to send your children to a private primary school and they are thriving, you are unlikely to reverse that decision. If I you are seeing these numbers before making a decision, you might well make a very different decision…
 
Not thinking about private education, anyway?
 
If private school is not a consideration for you, then the best choice might be to save as much as you can towards your own ISA allowance of £20,000/year (£40,000/year in a two parent home), in addition to whatever you save towards your pension (I recommend 10-15%) and when the time comes you can decide whether you can contribute towards university or a first home or both.
 
The best gift you can give your kids is possibly to be independent in old age so they don’t have to worry about taking care of you. You can boot strap them onto the property ladder by letting them live at home rent free – so that they can save more for their deposit. Even without cash gifts, you will be giving your children a competitive advantage by teaching them how to handle money at an early age.
 
Starting to invest
 
Next, you need to consider what platform to use for investing and what to investing in?

If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.

• ​Join my private Facebook group on Personal Finance
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I’m on a crusade: five years from now I want to be able to say none of my close friends own a credit card – yes, you heard right, if you consider yourself to be a close friend of mine I want your credit card balance, by the time I hit 40, to be zero and for you to have closed those credit card accounts.
 
Moreover, if you consider yourself a close friend of mine, I want you to promise never to own a credit card again your life.
 
And another thing, if you are a close friend of mine, I want you to avoid consumer debt like the plague for non-essentials like laptops, clothes and electronic items.
 
Debt should, by and large, only be taken for investment purposes, like investing in buy-to-let properties. If you can’t pay cash, you don’t really need to be getting a new kitchen or bathroom for your house! However, if you did that, I could forgive you.
 
I’m a horrible person to have as a close friend, aren’t I?
 
My credit card situation
 
I don't own a credit card. I haven't used one for over 10 years because when I owned one, I realised I always spent more than I normally would, not more than I earned, but more than I normally would. 

My issues with credit cards
 
I hate credit cards. If there is one vehicle out there that keeps people enslaved to lenders, it's the credit card.
 
£5,000 can turn into over £10,000 in three short years if you’re only paying the minimum monthly payment.
 
And that debt increases at an increasing rate – heard of the “miracle of compound interest”? Well if a consistent 7% rate of return can increase your wealth in untold ways, over many years, imagine what a credit card rate of 25-30% can do to your levels of debt?
 
Many, many years ago it wasn't possible to book a holiday on a debit card on some websites (that is how I ended up getting one) but now you can use debit cards for absolutely any type of purchase...I think.
 
Have I mentioned that I hate credit cards?
 
​The usual excuse for credit cards – it offers me better protection on purchases

Not necessarily so.

Debit cards offer many of the protections too via a voluntary scheme called chargeback. When Monarch Airlines went bankrupt in 2018, I had a holiday booked through my Natwest debit card and I received all my money back from Natwest via chargeback. There were no hassles in doing so either.
 
Within less than a day of Monarch's bankruptcy, Natwest had a link on it’s home page telling people what to do if they were affected. It took under 5 minutes for me to fill a form in and with a couple of weeks I had received a letter notifying me that the money had been refunded to my bank account.

Credit cards do offer more protections but ONLY for items costing £100 or more. According to the Money Advice Service, "the £100 minimum amount applies to each item or set of items you buy, as opposed to the total bill. For example, if you bought a dress and jacket that weren’t part of a suit, with each one costing less than £100, you wouldn’t qualify for the consumer protection under section 75."

​Huh?...

I don't know about you but except for hotel bills, when I am on holiday I don't buy any items that cost £100+ which means all those items would not be more protected. And if you're scared from fraud and other card scams, use cash only.

Another excuse for credit cards – I do it for the points or miles

So, if you spend £10,000 you get £500 worth of benefits?
 
For most people it’s a false economy. You end up spending more over time than the points or miles are worth – trust me on this.
 
There are very few people frugal enough to win one over the credit card company. Most of us will never win.
 
The best thing you can do for yourself is to shun credit cards. I consider myself highly intelligent and relatively frugal but I will be the first to concede that I will never even attempt to think I’m smarter than a credit card’s psychology department.
 
They win. Give them back their credit card!

Important note: if you've found yourself with overwhelming levels of debt. Do not feel ashamed or embarrassed - hundreds of thousands of people are in exactly the same situation. Get support to work your way out of the situation.

*****
If you consider yourself a close friend of mine, WhatsApp me for help with writing a plan to erase credit cards from your life.

By Becky The Finance Writer

​A woman draws water from a river using an earthenware jug. As she walks back home, she realizes in horror that the jug has a crack, and that water is continually seeping out from it. It is the only jug she owns, and she knows that soon there will be no longer any water left by the time she reaches home. She can also no longer draw water with that jug, either.

That sense of hopelessness can be compared to being broke. With barely any source of income, and the daily grind of expenses weighing down on your pocket, one feels as if one can only go lower. The fear of the possibility of bankruptcy is not uncommon nowadays. Probably everyone has experienced being broke at one point in their lives. It may be as a kid, when you realize that your measly pennies are not enough to buy something from that ice cream truck, or as a student faced with payments from student loans to dorm fees to project expenses. But those situations are different. Now, with a job and the need to be financially independent, getting out of being broke is a more urgent matter.

The truth about being broke does not lie solely on unemployment. When you mention bankruptcy, one imagines losing out on a business or being unemployed. But the concept of being broke is not limited to just that. Of course, there is the fact that being unemployed or having an unstable job with little benefits contributes to a lack of daily income. It also means that you are unable to bring extra cash home. When you are broke, you barely have enough to balance for your daily necessities and payments, and extra disposable income is rarely attainable.

​In Britain a private education increases your chances of making it to the very top in media, business, politics and other careers.
 
Where I come from, Malawi, now deemed by many development league tables to be the poorest country in the world whether you go state or private isn’t even a question: a Government education is now so atrociously lacking that even those with very little money opt for a private education. It wasn’t always like this, mind you, in the 30 years between 1964 and 1994 a state education left you with skills the job market could appreciate.
 
Having come to Britain at the university level I’ve watched how education works around here with a keen interest.
 
Sometimes I’ll be watching a random show on TV and I’ll look up the presenter and I am completely gobsmacked at the number of times I discover they went to an independent secondary school. If they didn’t they usually managed to make it to Oxbridge.
 
I last did this only a couple of months ago as I enjoyed BBC’s last series of The Great British Bake Off. I googled Mel Giedroyc and Sue Perkins out of casual interest to see who they actually were – I don’t watch much TV, you see. And there it was, independent high school plus a splash of Cambridge for both…that’s where they met and became friends. That connection has obviously also paid great economic dividends. Mary Berry before you ask was independently educated too.
 
I mean, nowadays it’s almost a casual sport for me to look up presenters and other personalities that I encounter on TV and in the news. My reaction over the years has gone from “he went to independent school?!” to “Of course, he did!”
 
Paul Hollywood, on the other hand, went to a state-run community secondary school. That said, his father owned a chain of bakeries that extended all the way down the east coast from Aberdeen to Lincolnshire. This is how he got his first “big break” into baking that eventually landed him in top hotels and eventually on TV. It’s not an ordinary background by any standards.
 
It’s not today’s topic but if there’s a good substitute for independent school it’s definitely parents that are well connected in the industry that you’d like to forge a career in.
 
Please don’t take my casual observations as evidence; according to a survey reported by The Guardian, only about 7% of Britain’s population go to independent schools but they take up most of the top jobs in public life:  according to the survey 71% of top military officers were educated privately, as were 74% of top judges working in the high court; 51% of leading print journalists; 61% of the country’s top doctors (22% of doctors went to grammar schools) – that makes a total of 83% of top doctors from a selective education background; indeed, 32% of MPs having been privately educated as have almost 50% of cabinet ministers.
 
In business the proportion of independently educated CEOs has fallen from 70% in the late 1980s to 54% in the late 2000s and 34% today. That said, however, a good percentage of FTSE-100 CEOs are now non-British and those were not included in the survey.
 
Oxford and Cambridge graduates also dominate top jobs so if you can’t go independent, get your kids into Oxbridge.
 
Now, all this might seem unfair. It might look like there’s a lot of elitism and favouritism going on, however, this is probably not the case in many instances.
 
My own casual observation suggests there is a huge information- and ambition gap between a state education and a privately education.
 
When it comes to ambition a state school’s unwritten mandate appears to be to provide a good quality education to absolutely every body regardless of ability such that they ultimately leave the system employable. As far as Independent schools are concerned they’re bringing up the next generation of leaders in science, business and politics and they constantly reinforce this expectation through slogans and their teaching. The best independent schools are a microcosm of excellence. If excellence it expected of you, you’re much more like to be an outstanding achiever. Most independent schools ensure this through a highly selective admission process that allows entry only to the most able students.
 
I’ll give you a live example.
 
Recently I attended an open day at King Edward’s VI High School for Girls (KEHS). I don’t actually have a daughter so it got a little awkward when the student registering guests in asked me for my daughter’s name, when I said I don’t have one she paused and looked at me in surprise so I quickly made one up, “Write Darcy”, I said, if I had a daughter I’d probably call her Darcy.
 
By the end of my visit I wished I had a daughter just so I could vicariously enjoy life at KEHS through her. The slogan “It’s Cool To Be Clever” was pasted up somewhere in the hall. The students looked sharp and interested. A private chat with the Deputy Head revealed that they don’t have a pass mark for their entry exam. They have four streams in each year and they like to have 22 pupils per class although under exceptional circumstances they’ll take up to 24, that’s a total of 88 to 96 new pupils a year. Their strategy is to take the top 88-96 that pass their entrance exam.
 
“So, how many took the entrance exam last year?” I asked. About 600 girls; that means only 14-16% of those that applied got in. 500+ girls got an unfortunately letter. Having the best brains ensures they get top results and it also ensures students enjoys the process. If you’re not academically gifted this sort of environment would only produce unnecessary pressure possibly leading depression and other problems; it’s certainly not for everyone.
 
KEHS offers scholarships based on merit for top achievers regardless of income with more money set aside to help reduce fees for those that genuinely can’t afford the school.
 
KEHS is one of the very top schools in the country. In the Telegraph’s 2016 GCSE league tables, out of 330 independent schools listed (including boys, girls and co-educational schools) KEHS’ GCSE results ranked 18th: 91.95% of all grades were at A or above, 73.82% of all grades were A*. That’s mind-blowingly good.
 
The boys’ school, King Edward’s School, which sits on the same grounds ranked 33rd in the same table: 87.15% of all grades were at A or above, 60.72% of all grades were A*. Again, amazing.
 
For A-levels, out of 291 schools in the league tables KEHS ranked 23rd with 74.06% of all grades at A or above. KES ranked 7th with 85.59% of all grades at A or above.
 
Keeping in mind many schools opt out of these league tables, these results put both schools very firmly in the top 5-10% nationwide. 

In addition to great academic facilities they offer lots of extracurricular activities as standard or for very little extra: a swimming pool, gym, sports facilities, music, drama and all sorts of clubs and societies.
 
What parent doesn’t want their kids to go to a school of this calibre?
 
In addition to the impressive facilities at KEHS I was won over by the humility of the students; I felt they were well-rounded, balanced kids. I once sat outside Eton after taking part in the London to Windsor bike ride and watched students coming in and out of the gate; I listened to the nature of their conversations and within 10 minutes said to my then boyfriend (now husband) “I wouldn’t want any son of mine to be like that.” I felt the kids’ confidence crossed too far into the realm of cocky. They just didn't seem normal to me or very balanced. Eton is certainly completely outside our budget but even with a full scholarship I wouldn’t want my son to go there. The pupils lacked the sort of humility I like to see in people that are privileged but fortunately there are many independent schools that manage to get the balance just right.
 
So, Who Are These 7% That Go To Fee-Paying Schools?
 
Contrary to common opinion many people that go to independent schools aren’t from an ultra-wealthy background. Most independent schools are full of people from quite ordinary backgrounds.
 
As an example, Sue Perkins’ father worked for a car dealer and her mother was a secretary; Mel Giedroyc’s father was a historian of Polish-Lithuanian descent. For the sake of completion I’ll note that her family has princely roots dating back to the 13th century. However, none of the literature I can find suggests they have old wealth anymore, that said coming from a background of achievement definitely drives one towards high performance too.
 
Most parents that send their kids to independent schools aren’t doing so because they have tonnes of cash sitting in the bank. They make huge sacrifices to afford the opportunity. Frequently one parent’s salary will be used for bills and the mortgage with the other’s wages mostly going to school fees. They pay for the schooling as they earn, sacrificing holidays and pension savings to make ends meet.
 
For many, taking kids through an independent education means driving an old Toyota Prius when your heart is crying out for the newer, sexier Audi A7, it’s living in a £250k, 3-bed terraced in the slightly less appealing part of town when you could otherwise have afforded the £400k detached.
 
It’s not all Porsches on the drive and Patek Phillipes at Christmas for most privately educated kids although some do, of course, have it all.
 
Are All Fee Paying Schools Equal?
 
No. Some obviously achieve better results that others.
 
The more selective the admission process, the better the school’s results tend to be.
 
Non-selective fee paying schools also exist. They’ll admit you provided you can afford to attend but besides impressive facilities and beautiful grounds they won’t match the academic rigour of a selective independent or even grammar school. That said, if your child isn’t academically gifted then a non-selective private school might be exactly what they need to thrive because smaller class sizes mean they’ll get much more individual attention allowing them a better chance to reach their maximum potential than in a state school with large class sizes.

This article looks into what retirement & pensions look like for the USA and for black people in particular. Skip half way down if you just want the race-based statistics but not the overall picture. 

Jim Crow laws and US-style racial segregation mean black people in America as a whole are still catching up with wealth accumulation.

This article brings together data and charts from various sources; references to all sources are listed at the bottom.

Overall, retirement statistics show a dim picture for everyone except the very affluent in America and the situation is worse for black and hispanic populations. 

• An estimated 9m older Americans are at risk of hunger and the number of hungry people over 50 has risen by 80% in a decade (Guardian, March-2015)​
• Of the 44.7 million Americans over the age of 65 in 2013, half had a total annual income of less than $20,380 (£13,271) – from all sources
• In 2013, 85% of older Americans received monthly social security benefits.
• The average annual benefit from social security for retired workers in 2013 was $15,132 (£9,852).
• According to the Social Security Administration, the national average wage in the same year was $44,888.

What proportion of an old person's income does this form?

• In 2012, 25% of people over the age of 65 received all of their income from social security
• For 60% of people over 65 who receive social security benefits it accounts for half of their total annual retirement income

"In 1983, the median white family had more than $100,000 in wealth, compared to less than $13,000 for African-American families—an eight-fold difference." (newrepublic.com) By 2013, 30 years later whites were 34% wealthier with $134k whilst black people were poorer with only $11k in wealth. 

​Hispanics were in exactly the same situation as the graph on the right shows.

White Americans earn a lot more, on average, than black Americans such that by age 61 the average white person had earned $2 million over their life and the average black person $1.5 million, Hispanics were worse off with $1 million in earnings by age 61.

​Obviously, the more you earn the more you can save, earn interest and invest.

Liquid retirement savings are cash saved for retirement e.g. as a 401k.

In 2013, the average white family had $130k in liquid retirement savings, for blacks this was $19k and only $13k for hispanics.

BUT - the situation is actually worse than that, a few very rich people skew up the average number especially for whites. If you use the median, i.e. the middle person, whites only have $5k in retirement savings, blacks and Hispanics have zero.

Homeownership is one of the key ways people around the world build wealth. 

The homeownership rate amongst black Americans (43%) is 60% lower than amongst whites (69%). For a very long time black Americans were locked out of property ownership because of discriminatory laws and even now, property prices are lower in black areas than in white areas and price growth is slower (Forbes).

Debts reduce people's ability to save. 

Black Americans have higher levels of student debt, 42%, compared to 28% for whites and 16% for Hispanics. Ultimately this would be a good thing if it was leading to higher future incomes but black people also have lower graduation rates. 

This means some people get saddled with debt and don't get a degree at the end of it to boost future income.

The lower student debt amongst whites could be because more of them have parental support in paying for tuition and living costs.

Keep in mind as you read the above that not all minorities are reflected in the statistics. The Jewish community and Asians tend to have better rates of saving, wealth accumulation and lower overall poverty than whites, blacks and Hispanics.

Closing the gap in property ownership will definitely be one of the key ways black people in America will boost the retirement asset base and wealth in general. Please take a look at my property toolkit for information on how to grow a portfolio.

You might also like:
Old Age Life, Pensions And Poverty In The UK

References 
Which are the best countries in the world to grow old in? (The Guardian)
How Home Ownership Keeps Blacks Poorer Than Whites (Forbes)
The Alarming Retirement Crisis Facing Minorities in America (newrepublic.com)
Why you may retire in poverty (reuters)

​A month after two hours of free coaching from me a client messaged me to say she’d saved MWK200,000 (£200/$260) - having previously struggled to reach the end of the month cash positive - and she’d completed a long list of things I'd suggested she do to push her business forward; fabulous news given only a month had passed since we sat down. This is what happened:
 
On 24 July 2016 I was invited to speak at Blantyre’s Pitch Night in Malawi.
 
It was a fun filled event. There were three speakers including my sister, Yolanda who pitched her Montessori nursery.
 
I pitched wealth building using 10 principles we should all ideally follow to ultimately enable retirement – a much more pertinent issue in Malawi where there are no state pension plans.
 
At the end of my talk I offered a maximum of three people two hours of one-on-one coaching with me for MWK250,000 (£250/$350) and being the charitable person I am, I offered the same session for free to one lucky winner. To win all you had to do is email me 250 words explaining why you deserved a free session.
 
After that talk I was engulfed by people asking questions; I had one university kid practically attached to my butt for 10 minutes asking me tonnes of questions regarding what he needed to write to get the free session. He said he’d be sure to get his piece in as soon as possible.
 
No one took up my paid offer although one lady intimated she might. I wasn’t in the least bit surprised – self-development is not a huge thing in Malawi - If you don’t get a degree or a certificate at the end of it, most people tend not to be interested.
 
Two days later, I checked my email and only two pitches for a free session had arrived – nothing from the enthusiastic university kid, go figure. Both were good but one was definitely better.
 
I didn’t know much about the person I chose but I had a good feeling – okay, I’ll admit…I’d slapped her ass at pitch night thinking she was one of my friends from high school only to find she wasn’t. That incident, in the end, worked to her advantage because I felt a little bit guilty.
 
Anyway, long story short: I went through her personal and financial life. Two hours together passed in a flash.
 
I discovered she was naturally very ambitious and motivated, in fact, her parents were well-to-do but she was keen to make her own mark on the world. She was open and receptive to the things I shared. She was humble and extremely likeable; we got on well, I was super impressed with the things she was already achieving in her life at such a young age.
 
She took my free advice and ran with it leading to the above results.
 
Now, this is a simple example, I have a more extreme one:
 
In 2011/12 one of my friends paid £10,000 ($16,000 at the time) for a property investment course. In the 3 years after that he accumulated £3million in property including a portfolio of 10 houses in multiple occupation (HMOs) and four buy-to-lets.
 
Interestingly he spent most of his savings to do the course but he was convinced he’d get the money back. He went to one of those 2-day marketing events where they share just enough knowledge to make you want to do the full course.
 
To grow his portfolio he used other people’s money: He’d team up with someone that had lots of money but very little time, do all the work and they’d share 50-50 in the equity.
 
Now, I’m not saying go out and spend £10,000 on a property course. In fact, I am personally not interested in HMO investing but I love the way this guy looked at the cost as an investment and focused on the return.
 
Not all expenditure is an investment. Thoroughly research your idea before spending that kind of money – if there is a money back guarantee take note of when it expires and how it works.
 
If opportunities to invest in something come your way, don’t just buy the product then forget about it, so many people do this. You need to take action. The key is to give the investment 100% - learn everything you can, take the suggested action and you’ll should hopefully get your investment back.
 
Unfortunately, the exact people who need this advice are precisely the ones that don’t use it. Those already on a positive trajectory are the ones following this advice.
 
If you've had a horrible or a fantastic investment experience, please share it with a comment.