Pearls & Perils



This is a question I’m frequently asked, and my answer is usually the same. There are a lot of conflicting opinions online that suggest that if you are in debt, you should solely focus on clearing your debt and postpone saving until you are debt free. While I understand the logic behind this, I believe that focusing all of your efforts on clearing your debt and having no savings or reserves in place can leave you susceptible to falling into further debt in the event of an emergency.


Over the last year I’ve coached over 100 people, a pattern I’ve found amongst some of my clients who are in debt was that prior to getting into debt they either had no savings or a minimal amount- when a need arose, they did not have sufficient funds to cover it and resorted to credit cards and loans.


In my opinion if you are currently in debt you should focus on clearing your debt but also aim to build up an emergency fund that you can utilise should an urgent need arise. This would provide you with an added level of security and peace of mind. I’d suggest working towards saving up 1 months’ worth of your expenses in an easy access savings account as a starting point. Once you’ve cleared your debt or reduced it significantly you can then decide whether to continue to build your emergency fund to cover 3 months’ worth of your expenses and so on.


If you live in the UK and are struggling with debt you can access free debt advise via the following charities: 1) Stepchange: https://www.stepchange.org/

2) Debt advise foundation: https://www.debtadvicefoundation.org/

3) National debtline: https://www.nationaldebtline.org/


If you’re ready to break bad finance habits, change your mindset when it comes to money and learn how to effectively manage your finances book in a Finance 101 one to one session.


Your Finance P.T



Saving money with Honey


Honey is a coupon app designed to save you money when shopping online. The app is only available as a browser extension, it is compatible with popular web browsers such as Chrome, Firefox, Edge, Safari, and Opera.


The app removes the grafting of searching online for discount codes ( I know I have lol) by searching for coupon codes on your behalf once you arrive at check out. If multiple coupon codes are found honey, honey will apply the best deals to your cart.


Honey covers a range of stores for clothing stores to utility providers there is an extensive list of stores that you can search from through the app.


Not only can you save money through using the app but you can also receive honey 'gold points' through the rewards scheme, which are essentially points that are accrued every time you make a qualifying purchase. Once you accrue 1400 gold points you can redeem your points for a £10 voucher to use at one of the Honey gold stores.


You can also collect 500 honey gold points when you refer friends using your referral code. The app is free to download and does not cost anything to utilise the service.


If you are still wondering does the extension actually work? Yes it does. I've had the browser extension for about 2 years now( I don't often shop online) BUT there are occasions when I have shopped online and have received discounts using the honey app.


The app does not always have coupons available on all online purchases but on most occasions it does.


If you like the sound of the app and want to give it a try download it via my referral link: joinhoney.com/ref/pson80t


If you are some one who is quite concerned about privacy I'd recommend checking out their privacy policy before you download the extension as Honey does use a range of cookies to provide the service.


Note: this post is not sponsored by honey but is my honest review and experience.


Have you ever used they honey extension or another browser extension if so what was your experience? Let me know in the comments.


Your Finance P.T



Let's talk ISAs


An ISA is a type of saving account that allows you to save tax-free, each year has a maximum saving limit that can be deposited into ISA accounts. For the 2021 to 2022 tax year the maximum saving deposit limit is £20,000. This means that any interest or profit gained within an ISA account is not subject to capital gains tax.


There are 5 different types of ISA accounts:

1. Cash ISAs

2. Lifetime ISAs 'LISA' (the Help to buy ISA is no longer accessible to new users)

3. Stocks and shares ISAs

4. Innovative finance ISAs 'IFISA'

5. Junior ISAs 'JISA' (has replaced the government Child trust fund scheme)


You can deposit money across one of each kind of ISA but be mindful that the £20,000 limit is not applied per ISA account but is your total ISA allowance for the tax year.


Example:

Cash ISA: £5,000

Lifetime ISA: £4,000

Stocks and shares ISA: £11,000

Total: £20,000


How to open an ISA:

You must be a resident in the UK or a Crown servant to open an ISA account. You can open an ISA account with a range of financial service providers such as a Bank, building society, credit union, stock brokers and other financial institutions you can make comparisons online to see which provider is best for you.



Cash ISA: There are different types of Cash ISAs available on the market ranging from:

1. Easy access account: you can withdraw your cash whenever you want without a penalty.

2. Notice account: you need to give a specific amount of days’ notice to withdraw your cash.

3. Fixed rate account: tend to offer higher interest rates than easy access and notice accounts but if you withdraw your cash, you may be subject to an interest penalty.


Lifetime ISA: The lifetime ISA was launched in 2017 to help people to save for their first home or towards their retirement. There is a 25% government bonus awarded to savings made in a LISA, if you saved the £4,000 maximum limit for each tax year you would be awarded a bonus total of £1,000 taking your savings to £5,000 for that tax year (this is before interest or investment growth). You can deposit a lump sum of £4,000 or you can make deposits into your account when you can.

There are two types of Lifetime ISAs:

1. Cash Lifetime ISA: similar to a Cash ISA you cannot invest money from a Cash Lifetime ISA- there is no risk to your savings.

2. Stocks & Shares Lifetime ISA: you can invest in the stock market through this ISA as with any investment your capital will be at risk you may experience fluctuations in your portfolio over time.

Please note: You can only open a lifetime ISA if you are aged 18-39 for any of the two purposes stated buying your first home or retirement once you turn 40 you can continue to deposit money into your account until you turn 50. You can only withdraw cash if you are buying your first home or you're 60 or over. If you withdraw at any other time and you face a penalty of 20%.


Stocks and shares ISA: you can invest in various financial securities such as individual stocks, bonds, funds. As with any investment your capital will be at risk you may experience fluctuations in your portfolio over time. Generally, if you are investing for a long period of time 5 years+ you may be able to ride out dips in the market.


You may have different fees to pay such as:

· Platform charge/ Admin fee: this can vary from a flat annual fee or charged at a specific percentage of the value of your funds (this can sometimes work out to be more expensive if you have a large portfolio).

· Trading fees: fees incurred when buying or selling funds, stocks, bonds etc.

· Annual management charge: this charge is imposed by the fund manager that manages the funds held within your portfolio- this is always a percentage and typically varies from 0.1%-1%+.

· Transfer fees: the cost some ISA providers charge to move your stocks and shares ISA from one provider to another.


There are benefits of investing in a Stocks and shares ISA long term as it is exempt from capital gains tax, this is a tax liable on profits made when you sell your investments that exceed a profit of the £12,300 allowance.


Interest gained on bonds within a Stocks and shares ISA is exempt from tax.

Dividend income is also exempt from tax deductions, when investing outside of an ISA you are entitled to a £2,000 tax free dividend allowance, dividend payments outside of the £2,000 allowance would be taxed.



Innovative finance: is an ISA that contains peer to peer loans meaning the provider of the account will use your money to lend to borrowers this may range from individuals, businesses or property developers.


Benefits of an IFISA are that you are paid interest for lending your money this is typically higher than interest rates offered in a savings account. Interest gained from lending through an IFISA is exempt from tax.


There are risks attached to peer to peer lending, you may lose your money if the borrower is unable to repay the loan, you can minimise risks by spreading out your investments across different borrowers to achieve a diversified portfolio. It may take a few months before you can withdraw your money.


Please note: peer-to-peer platforms are not protected by the Financial Services Compensation Scheme should they collapse.


Junior ISA: is an ISA that you can open to save, invest or do a combination of both on behalf of your child tax free. You can open a junior ISA on behalf of your child when they are aged 0-15, once they are 16 or 17 they can open the account themselves.


For the 2021/2022 tax year you can deposit a maximum of £9,000 into a JISA, this is a separate allowance to the standard £20,000 allowance for adults.

There are two types of JISAs:

1. Cash JISA: similar to a Cash ISA you cannot invest money from a Cash JISA- there is no risk to your savings.

2. Stocks and shares JISA: you can invest in the stock market through this ISA as with any investment your capital will be at risk you may experience fluctuations in your portfolio over time.


You can divide the annual £9,000 allowance between a Cash JISA and a Stocks and shares JISA allowing you to put some of your deposits into cash and invest some into stocks and shares.


Children can’t access the money stored within a JISA until they turn 18, at aged 16 the child can take control of the account but cannot withdraw any funds until they turn 18.


FAQ’s:

Can you rollover any of your unused allowance to the following tax year? No, you must save or invest by 5th April the end of the tax year for your deposit to count towards that year's allowance. Any unused allowance that you have cannot be rolled over. You will get a new allowance on 6 April each year when the next tax year starts.


Will withdrawing from your ISA affect your tax allowance? This would depend on your ISA account if your ISA is ‘flexible’, you can take out cash then put it back in during the same tax year without reducing your current year’s allowance. You can find out from the provider if your ISA is flexible.


I hope you found this ISA guide useful, if you have any questions leave me a comment below.


Your Finance P.T