About This Book 2

Foolish Assumptions 3

Icons Used in This Book 3

Beyond the Book 4

Where to Go from Here 4

Part 1: Getting Started with Personal Finance 5

Chapter 1: Embracing Financial Literacy 7

Understanding Everything Financial Literacy Includes 8

Starting with the basics: Budgeting and transaction accounts 9

Making your money work for you: Investing 9

Protecting your income and assets: Insurance 9

Talking Money at Home 10

Identifying Unreliable Sources of Information 11

Understanding the dangers of free financial content online 11

Recognising the dangers of following financial gurus (and celebrities) 12

Publishers pandering to advertisers 13

Developing Good Financial Habits 14

Chapter 2: Establishing a Financial Foundation 15

Understanding Your Cash Flow 16

Uncovering where your money goes 16

Sizing up your income 17

Using Different Accounts 18

Current accounts 19

Savings accounts 20

Investment accounts 21

Budgeting to Boost Your Savings 22

Understanding and Improving Your Credit Score 23

Deciphering how lenders use credit reports and scores 23

Obtaining your credit reports 24

Chapter 3: Establishing and Achieving Goals 27

Creating Your Own Definition of Wealth 28

Acknowledging what money can’t buy 28

Managing the balancing act 29

Prioritising Your Savings Goals 30

Knowing what’s most important to you 31

Valuing pensions 31

Building Emergency Reserves 33

Saving to Buy a Home or Business 34

Funding Kids’ Educational Expenses 34

Saving for Big Purchases 35

Preparing for Planned Borrowing 35

Preparing for Retirement/Financial Independence 36

Figuring out what you need for retirement/financial independence 38

Understanding retirement building blocks 39

Crunching numbers for your retirement 42

Making up for lost time 43

Part 2: Spending Less, Saving More 45

Chapter 4: Managing Where Your Money Goes 47

Examining Overspending 48

Having access to credit 48

Misusing credit cards 49

Taking out car loans 49

Spending to feel good 50

Assessing Your Spending 52

Tracking spending the “low-tech” way 52

Tracking your spending on websites and apps 55

Chapter 5: Reducing Your Spending 57

The Keys to Successful Spending 57

Living within your means 58

Looking for the best value 58

Making credit cards work for you when you’re shopping 60

Avoiding rent-to-own 60

Smarter Spending 61

Managing food costs 62

Saving on shelter 64

Cutting transportation costs 66

Lowering your energy costs 68

Controlling clothing costs 69

Repaying your debt 70

Making space for fun and recreation 70

Lowering your phone bills 71

Curtailing personal-care costs 72

Chapter 6: Understanding Types of Borrowing 75

Choosing Carefully When You Really Must Borrow 76

Knowing why people typically borrow 76

Making sure you have a plan to repay 77

Understanding why debt consolidation is usually bad news 77

Exploring Types of Borrowing 78

Credit cards 79

Buy now, pay later 80

Secured versus unsecured loans 81

Overdrafts 82

Payday loans and why you should avoid them 82

Cost comparison for borrowing options 83

Chapter 7: Dealing with Debt 85

Using Savings to Reduce Your Consumer Debt 86

Understanding how you gain 86

Debt snowball or debt avalanche? 87

Decreasing Debt When You Lack Savings 87

Reducing your credit card’s interest rate 87

Understanding credit-card terms and conditions 88

Cutting up your credit cards 89

Paying off student loans 90

Exploring Solutions to Debt Problems 91

Sorting it yourself 91

Understanding debt management plans (DMPs) 92

Understanding Debt Relief Orders (DROs) 93

Understanding Individual Voluntary Arrangements (IVAs) 93

Declaring bankruptcy 94

Comparing debt solutions 95

Finding Reputable and Free Sources of Debt Support 97

Stopping the Spending/Consumer Debt Cycle 97

Resisting the credit temptation 98

Identifying and treating a compulsion 99

Chapter 8: Maximising Your Savings 101

Working Out How Much to Save 102

Regular savings versus lump sums 102

Earning the most interest possible 102

Saving for Short-Term Goals 103

Saving for Longer-Term Goals 104

Understanding How Inflation Eats Your Savings 105

Saver Mike’s inflation battle 105

Paying tax on your savings 106

Making the most of ISAs 107

Part 3: Building Wealth Through Investing 109

Chapter 9: Managing and Reducing Your Tax 111

Understanding the Tax You Pay 112

Focusing on your total tax 112

Recognising the importance of your marginal tax rate 113

Understanding the 60 percent tax trap 114

Defining taxable income 114

Analysing recent tax law changes 115

Making the Most of Your Tax-Free Allowances 116

Paying into a pension 117

Deducting self-employment expenses 117

Salary sacrifice schemes 119

Contributing to charities 119

Tax-Friendly Investing 120

Using ISAs to save and invest tax free 120

Dividend, savings, and capital gains tax allowances 121

Backing young companies for tax breaks with EIS and VCTs 122

Estate Planning 122

Managing inheritance tax 122

Wills, living wills, and powers of attorney 124

Where to Go for Help with Tax 125

Obtaining HMRC assistance 125

Finding an accountant 126

Deciding whether you need a financial adviser 126

Looking for tax resources online 126

Dealing with a Tax Investigation 127

Chapter 10: Considering Important Investment Concepts 129

Establishing Your Goals 129

Understanding the Primary Investments 130

Looking at lending investments 130

Exploring ownership investments 132

Shunning Gambling and “Get-Rich-Quick” Vehicles 132

Forsaking futures, options, and other derivatives 132

Ditching day trading 133

Sidestepping get-rich-quick schemes 134

Understanding Investment Returns 134

Sizing Investment Risks 135

Comparing the risks of stocks and bonds 136

Focusing on the risks you can control 137

Discovering low-risk, high-return investments 138

Diversifying Your Investments 138

Spreading the wealth: Asset allocation 139

Allocating money for the long term 140

Sticking with your allocations: Don’t trade 141

Investing lump sums via pound cost averaging 142

Leaving You with Some Final Advice 143

Chapter 11: Understanding Your Investment Choices 145

Slow and Steady Investment: Bonds 145

Building Wealth with Ownership Vehicles 147

Selecting stocks 147

Investing in individual stocks 148

Investing internationally in stocks 149

Owning shares in your employer 150

Investing in funds 150

Generating wealth with property 152

Investing in small business 156

Off the Beaten Path: Investment Odds and Ends 159

Precious metals 159

Bitcoin, Ethereum, and other cryptocurrencies 160

Collectibles (including NFTs) 162

Peer-to-peer lending and crowdfunding 163

Avoiding scams 163

Chapter 12: Investing in Funds 165

Understanding the Benefits of Funds and ETFs 165

Exploring Various Fund Types 167

Fund structures 167

Bond funds 168

Equity funds 169

Mixing bonds and equities: Balanced funds 170

Global funds 170

Index funds 171

Specialty (sector) funds 172

Socially responsible and ESG investing 173

Learning How to Invest in Funds 174

Online investment platforms 174

Apps 174

Stockbrokers 174

Financial advisers 175

Choosing a Managed Portfolio or Going DIY 175

Selecting the Best Funds 176

Understanding fund literature 176

Keeping costs low 177

Adding up how much investing costs 177

Evaluating historic performance 179

Determining your needs and goals 179

Deciphering Your Fund’s Performance 180

Dividends 180

Share price changes 181

Evaluating and selling your funds 181

Chapter 13: Investing for Retirement 183

Why Invest in Pensions 183

Free money from the government 184

Free money from your employer 184

Are pensions safe? 185

Looking at Types of Pensions 185

Workplace pensions 185

Self-employed pensions 186

Defined contribution pensions 187

Defined benefit pensions 187

How much money do I need? 187

Understanding the State Pension 187

Plugging gaps in your National Insurance record 188

Annuities explained 188

Allocating Your Money in Pensions 189

Prioritising pension contributions 190

Setting up a pension 190

Allocating money when your employer selects the investment options 190

Allocating money in plans you design 192

Transferring Pensions 194

Consolidating small pension pots 195

Moving money from an employer’s plan 195

Taking money out of pensions 195

Understanding drawdown 196

Exploring pension alternatives 197

Chapter 14: Investing for Children 199

Investing for Children versus Saving in Cash 199

Exploring Ways to Invest for Children 200

Understanding Junior ISAs and Child Trust Funds 201

Deciding whether to invest for a child through your own ISA 201

Considering pensions for children 202

Estimating University Costs 204

Working Out the Student Finance System 205

Strategising to Pay for Educational Expenses 206

Estimating university costs 206

Setting realistic savings goals 207

Tips for getting loans, grants, and scholarships 207

Chapter 15: Investing in Property: Your Home and Beyond 209

Deciding Whether to Buy or Rent 210

Assessing your timeline 210

Determining what you can afford 210

Calculating how much you can borrow 211

Comparing owning versus renting costs 212

Considering the long-term costs of renting 213

Recognising advantages to renting 214

Financing Your Home 214

Understanding the two major types of mortgage 215

Choosing between fixed- and variable-rate mortgages 216

How willing and able are you to take on financial risk? 216

Avoiding the house deposit blues 217

Considering a 30- to 40-year mortgage 219

Deciding whether to overpay your mortgage 219

Finding the best lender 220

Increasing your approval chances 222

Finding the Right Property 223

Casting a broad net 223

Finding out actual sale prices 224

Researching the area 224

Working with estate agents 224

Presenting yourself as a serious buyer 225

Making an Offer 225

Negotiating 101 226

Getting a survey 226

Appointing a conveyancer 227

Planning for stamp duty and other costs 228

After Your Purchase 228

Remortgaging 228

Considering equity release 229

Selling your house 229

Chapter 16: Working with Financial Planners 231

Surveying Your Financial Management Options 231

Doing nothing 232

Doing it yourself 232

Hiring financial help 232

Deciding Whether to Hire a Financial Planner 234

How a good financial adviser can help 235

Why advisers aren’t for everyone 236

Finding a Good Financial Planner 236

Soliciting personal referrals 237

Seeking advisers through associations 237

Interviewing Financial Advisers: Asking the Right Questions 238

How and what do you charge? 238

Do you also perform tax or legal services? 238

What work and educational experience qualifies you to be a financial planner? 239

Can you provide references from clients with needs similar to mine? 239

Will you provide specific strategies and product recommendations that I can implement on my own if I choose? 240

Learning from Others’ Mistakes 240

Part 4: Insurance: Protecting What You Have 241

Chapter 17: The Three Laws of Buying Insurance 243

Law I: Insure for the Big Stuff; Don’t Sweat the Small Stuff 244

Buy insurance to cover financial catastrophes 244

Take the highest excess you can afford 246

Avoid small-potato policies 246

Law II: Buy Broad Coverage 248

Law III: Shop Around and Buy Direct 250

Finding policies with comparison sites 250

Using insurance brokers or financial advisers 250

Looking at employer and other group plans 251

Dealing with Insurance Problems 251

Knowing what to do if you’re denied cover 251

Getting your due on claims 253

Chapter 18: Insurance on You: Life, Income, and Health 257

Providing for Your Loved Ones: Life Insurance 258

Determining how much life insurance to buy 258

Comparing the types of life insurance 260

Buying term insurance 261

Preparing for the Unpredictable: Income Protection Insurance 263

Understanding income protection insurance 263

Getting to grips with critical illness cover 264

Deciding whether you need cover 265

Determining how much cover you need 266

Identifying other features you need in income protection insurance 266

Deciding where to buy income protection insurance 267

Getting the Care You Need: Health Insurance 267

Choosing the best health plan 268

Buying health insurance 269

Chapter 19: Covering Your Assets 271

Insuring Your Home 271

Buildings insurance: The cost to rebuild 272

Special discounts 272

Contents insurance: For your things 273

Personal liability insurance: Cover for when others are harmed 274

The excess: Your cost with a claim 274

Buying buildings and contents insurance 274

Car Insurance 101 275

Third-party only 275

Third-party, fire, and theft 275

Fully comprehensive 276

Uninsured driver cover 276

Insuring Your Pets 277

The main types of pet insurance policy 277

Ways to save on pet insurance 278

Part 5: the Part of Tens 279

Chapter 20: Survival Guide for Ten Life Changes 281

Starting Out: Your First Job 282

Changing Jobs or Careers 283

Getting Married 285

Buying a Home 286

Having Children 287

Starting a Small Business 289

Caring for Ageing Parents 290

Divorcing 291

Receiving a Windfall 293

Retiring 294

Chapter 21: Ten Free Resources 297

MoneyHelper 297

Pension Wise 298

Citizens Advice 298

FCA ScamSmart 298

Gov.UK 298

StepChange 299

MoneySavingExpert 299

The Open University 299

Which? 300

Boring Money 300

Glossary 301

Index 311