Stop! Start overpaying your mortgage with your savings

Stop! Start overpaying your mortgage with your savings

You may have heard some people talk about overpaying their mortgage – but what does that mean? As a renter, I could probably afford to overpay on a mortgage if I had one due to the high cost of renting. But would it be worth it?

Because you’re paying your lender off more quickly, the interest you owe on your mortgage also reduces. Over the long term, this will probably have a dramatic effect on your finances as well as reducing your mortgage term. Of course, there’s the added bonus that the more of the mortgage you pay, the more of your home you actually own. If you ever want to remortgage, this equity is likely to give you access to the best rate deals.

Because the base rate has fallen so dramatically in recent years, many borrowers have been able to overpay simply by keeping up their usual monthly mortgage payment.

So, in general overpaying on your mortgage with any savings you may have is a great way to use that money. However there is one glaringly obvious downside – if you use your savings to overpay your mortgage, you can’t get that money back. So if you were ever to need savings in the future, you wouldn’t have the option to use the money you had paid to your mortgage.

Some mortgage lenders will actually let you borrow back the money you have overpaid or make under payments providing you have an overpayment buffer – but make sure you check this thoroughly before considering your overpayments.

In summary, I think it’s best to stick to one rule – only overpay what you can afford.

How to Combat Vampire Energy

How to Combat Vampire Energy

The word vampire conjures up images of fangs, black capes and stocking your homes with crucifixes and garlic. The stereotype that should be attributed to vampires is stealing money from your wallet. The modern vampire is stealing energy through your electrical sockets, the term ‘vampire’ energy or sometimes referred to as ‘phantom’ energy is the power used when a device is not ‘off’ but on ‘standby’. A lot of people think this is solved by simply turning your television off by the power button rather than with the remote, however it’s much more likely that your phone charger which isn’t charging anything is why your electrical bill is so high. Vampire energy has been estimated to be around 10% of the electrical energy used by a typical household, so by metaphorically ‘staking’ this vampire energy you could save up to 10% on your bill. So how do we do this?

Catch the Vampire

The best way to catch this vampire energy is to track it. A plug-in meter, such as the Kill-a-Watt meter, will enable you to hunt down the worst offenders. Some equipment uses a lot of energy because it’s old or inefficient, appliances like refrigerators which have to be 24/7 could be pouring money down the drain if it’s an old model. Replacing these will save money in the long run and it’s a good investment. Whilst you may not find any big discoveries if you’re technology is up to date, you can still find out what’s the biggest energy drain in your house, if you leave your phone charger plugged in all day then you can figure out how much that’s actually costing you. An energy meter can make you more aware of your consumption and make you think about how you could make a change.

Access the Danger

Once you’ve caught the vampire energy, you should be able to figure out how much it’s costing you in electricity bills. If you’re energy usage is actually quite low, it may not be a problem with vampire energy, you might just be paying too much for electricity. Depending on what tariff you’re on or who provides your energy, you may be getting overcharged, Energy Helpline can help you figure out how much money you should be paying.

Kill the Vampire

Killing vampire energy is easy once you’ve caught it and accessed it. If you have old microwaves or fridges, it’s likely that they are draining lots of energy, the only way to deal with that is to metaphorically kill it but actually kill it by chucking it out. If you find that your energy is being drained by chargers or consoles then a simple power strip or extension cord makes it easier to turn everything off without going round and turning electronics off individually. If you appliances that are rarely used but are always on standby, then unplug them, it may a bit more effort when you eventually want to use them but your wallet will thank you.

So get out there and slay some vampires!

How to invest in precious metals

This is the 2nd in Guest Posts from my Canadian buddy Joe who is seriously clued up on trading in metals, specializing in silver trading. We met in Australia and he has shared his passion for finance with me for years, even if our homelands are now 1000’s miles apart. Money talks…

How to invest in precious metals

There are several ways to investing in precious metals.  There is always own the physical metal.  Put it in storage and pay the fee and you know the metal exists for when there is a rainy day.

Owning mining stocks can be a big plus or minus depending on how they turn out.  If you invest in juniors they are especially volatile but the payout could be huge.  I would do minimum risk.  Only invest in what you’re willing to lose.  Make sure you to a lot of research such as look up the team that runs the operation.  Make sure they are turning a profit (which is tough in this market). Even though they may be big players (Barrick gold or Gold Corp), read there press releases.  These two big guys have lost mines and barrick took a $10 billion dollar right down earlier this year.  Juniors are where I would look with a few dollars and just sit back and hope it pans out.  The big guys generally won’t pay out like the juniors.

Options are another route to take.  Options are bets that the price will go up or down from today and you make the difference on either way your bet.  You can also sell options saying you don’t think a share or stock will drop to a certain level and collect a couple dollars while you sit on the stock.  Be prepared to pay up if your bet goes sour.

There are also futures contracts and exchanges.  Good luck on that one.  Anyone who has followed this market can see it’s extremely volatile.  Most trading done on the COMEX market is settled in cash.  When you travel east Shanghai has just set up an exchange and they settle their contracts with physical gold.  The COMEX still dictates the prices worldwide as they are much bigger than the Shanghai exchange but this is an interesting area to keep your interest in.  They are only about a year in.

ETFs are another one that people seem to dabble in.  They are good as they play on a variety of stocks (kind of like a mutual fund) or some are on the bullion themselves, but they are way more liquid.  You can buy and sell them much easier than owning stocks or bullion.  Usually there is a small fee tied to them so look into that before getting into it.

Finally we have mutual funds.  Mutual funds take in the sector and a manager breaks down the weighing of the shares to their discretion and trades on behalf of the parameters set out by the fund.  You pay into these funds and there usually are minimums to pay and should find out if there open ended or close ended.  Open ended means the funds can keep growing where as a close ended means there are only so many shares (capital) available for the fund.  Also beware of the exiting fees related to these.  There are penalties for leaving early or just plain leaving at all.  Read all the fine print on these bad boys before you sign up.

What is Money???

This is a Guest Post from my Canadian buddy Joe who is seriously clued up on trading in metals, specializing in silver trading. We met in Australia and his knowledge of this industry astounded me.

So what is money?

Gold is flying from west to east as we speak.  Over 50% of the world’s currency is in US dollars and they are involved in over 60% of world’s trades to settle differences; the petro dollar being the main one.  This is why all commodities are price in dollars.   Much of the world has slowly been moving away from US dollars.  Countries have been signing deals with china to trade currency for currency (for example in 2011, China and Japan signed a deal where they settle trades (Yen and Yuan) with one another, bypassing the US dollar).  This is huge because China and Japan are the world’s second and third biggest economies via GDP.  Even England recently signed a deal with China and brought over approx. 30 billion pounds worth of Yuan to settle trade differences with the Chinese.

Another major development recently is China has just surpassed the US for biggest importer of Saudi oil.  China also has a major deal with Russia, that Russia supplies much of Chinas oil needs.  China has slowly been pushing for a new world reserve currency.  They want to “de-Americanize” the world.  But China is also playing with fire as it is the biggest holder of US debt outside of the Federal Reserve.   The Chinese have been trying to spend the dollar without causing a panic.  If there is a panic on the US dollar and everyone tries to sell them at once, then the dollar would be worthless.

The US still has a while as the reserve currency as there is no other currency that can take its place at the moment.  The Chinese would love to but they don’t have a bond purchasing systems that can rival the American one.  There is not enough Yuan to do this.

Gold has been the most stabalist currency since money use 5000 years ago.  It would only make sense that the world realizes this and comes back to it.  The current system has only been around for about 40 years and has been in trouble since the get go.  No one ever really trusted it if you look at charts of gold going back.
I think we’ve seen the first leg of the gold bull market from 02 to 11.  We are now in a consolidation phase.  Gold may yet go down from here a little more.  I would be surprised to see it go down to absolute worst case scenario $1000 (I give it like a 2% chance).  But inventories at the COMEX are low as china and other Asian countries buy up everything they can.  I’ve even come across that JP Morgan bank is starting to collect gold.  If that’s true we’ve probably seen the bottom of the market.

If we add up all the debt in US dollars and what the US has in gold reserves, to pay it off gold would need to go up to 50-60k an ounce.  I think if there is a parabolic move like this in the price that simply no one will accept dollars for gold.  A country that is willing to step forward and say there currency is backed by gold or some other commodity like oil will come out on top but they will probably face the wrath of the American military.

Getting divorced? Beware the financial implications for retirement.

Beware the financial implications for retirement if you’re getting divorced

I have never been married and therefore have never been through a divorce. I know friends who have though, and I know what an emotionally draining and painful experience it can be. Unfortunately, it’s also financially draining – but did you know the financial effects can linger into retirement?

Sharing assets after the breakdown of arrange is a complicated process. Agreeing ‘who gets what’ and assessing monetary value of possessions is a difficult task at the best of times. But how do you decide what happens to the pension fund?

According to Prudential, divorce reduces the average expected retirement income by around £2,600 a year. Why?

Firstly, there are financial implications of dealing with pension savings. The pension fund is often the biggest asset a couple have, and in a divorce pensions cane dealt with in 3 ways;

Pension sharing provides a clean break as the ex-spouses pension fund is separated from the members fund.

Attachment orders – where the ex-spouse is entitled to part of a members pension fund, but the ex spouse doesn’t have a fund of their own

Offsetting- this is where the value of the pension is offset against other assets. For example, one party gets the pension fund and the other gets the house.

It’s understandable to me that a pension fund might not be the first consideration when getting a divorce. The emotional strain, possible custody battles and legal fees take precedence and pension funds can seem a long way down the line. Don’t forget them though – they can be one of the most valuable things you never knew you owned.

What’s that? I’ve used 3 million kilowatt hours?

3 million kilowatt hours? You’re Joking!

Finally, the first step to energy market reforms has begun. Ofgem, the energy regulator, has come up with new ways to make the world of energy ‘simpler, cleaner and fairer’ for the likes of you and I.

To me, it seems a pretty poor state of affairs when energy companies need to be told how to run their businesses. However, I’ve been on the receiving end of enough jargon filled bills to welcome the change.

Under the new regulations, energy companies must ensure that they compete all operations in a ‘fair, honest and transparent manner’ at all times. They must also provide clear and concise information to customers, using jargon free language which is easy to understand. Finally, energy companies must make it easy for customers to contact them in the event of a complaint or problem.

If energy companies fail to adhere to the new rules, Ofgem has the power to levy a fine of up to 10% of a supplier’s annual turnover.

Ofgems’ plans will take a while to implement due to the complex changes with energy suppliers licenses, but the full process should reach completion by the end of June 2014.

While I certainly welcome this change, it’s not going to bring the cost of my energy down – prices have risen by 30% in the last three years. So it looks like I’ll still be cold this winter – but at least I will have a bill I can understand.

The Advantages of ECN in FOREX Trading

 The world of Foreign Exchange Trading (FOREX) is complex enough, but the introduction of Electronic Communications Networks (ECN) has added another tier to the world of currency dealing.


 ECN trading has been around since 1999, though in those days it was called Currenex. One of the main advantages of an ECN Forex broker is that the trader has direct access to banks and hedgefunds and any other Forex players. This means that the broker earns money through commissions and the success of its traders. A brokerage house that doesn’t use an ECN platform can sometimes be seen to be actually gambling against its traders.

The ECN system is transparent and it is allows deal to be placed on single click execution. This type of trading is best suited to experienced traders. Quite simply, ECN takes out the middleman and allows traders to deal directly with the major market players.

 ECN advantages

 Experienced traders who have access to ECN brokers claim that you can get better bid/ask offers as you will have access to a diverse number of sources. The fact that your broker will pass on your order directly to a bank or other traders will work to your advantage.

On the downside, some of these trading platforms are difficult to use if you’re inexperienced, they are not always user friendly. They can prove to be expensive, as you will have to pay a commission on every transaction. You will, though, have access to additional liquidity as you’ll be able to raise liquidity directly with some of the major banking houses, including Goldman Sachs, RBS and all the other famous tier 1 institutions.

Another major ECN advantage is that the trader can have greater access to credit options, if needed.

 Market makers

 The market maker quite literally makes the market, they will set the bid/ask price and they will buy and sell to traders and from traders.   One of the main disadvantages of using market makers over an ECN system is that the market maker will always set currency exchange rates to their own advantage. Market makers generate the difference between the bid and the asking price, the spread, and this is why some of these brokers will be seen to delay an order or even gamble against a trader.

An ECN platform allows a trader to assess the best prices from other market makers and then trade accordingly in their own best interests. There are certain benefits for a trader to use a market maker, however, there is less price volatility than those experienced on ECN platforms and their software platforms can be easier to use. It’s harder to use  ‘scalping’ as a practice if you use a market maker. Scalping can be compared to the activities of ticket touts who corner the market in a certain product, and then resell the tickets to an investor at a far higher price as a result of their activities. Scalping is perfectly legal and allows traders to make small gains on a series of very fast trades but the speed of these transactions is more favourable for those who use an ECN platform.

6 signs your debt is out of control

Warning! 6 signs your debt is out of control

We’ve all been in debt, and most of us still are. The difference is whether our debt is controlled, or whether the bailiffs are knocking at the door demanding their money back.

Speaking to friends who have been in debt, I’ve put together 6 signs that you’re struggling;

1. You’re always in your overdraft. Ok so I have an overdraft and I don’t really consider it a debt. It’s just tiding me over for the month until the next pay check. But if you’re finding you’re always at your overdraft limit, read the warning signs. Not only are you spending money which isn’t technically yours, but your bank has the ability to take away overdraft facilities if they think you’re in trouble.

2. You always use your credit card. If you’re using your credit card for more than just the big purchases and emergencies – for the weekly shopping for example – take note.

3. You hate the postman. If your post drops through the door and you immediately file it into the bin, it’s a sign that you don’t want to read anything telling you you owe money.

4. You’re behind on the big things. Rent and council tax are priority expenses. If you’re behind with either of these – you’re in trouble.

5. You take credit to pay credit. Paying off one credit card with another is a flag for your financial health.

6. You’re considering a payday loan. If you’re considering a payday loan but you’re not completely sure you can pay it back, you’re in trouble.

If any of these points apply to you, be careful. Have a look at your spending and make sure you draw up a budget and stick to it. Cut up your credit cards and try to cut back on living expenses. We all know it’s not easy, but you’ll thank me in the long run.

Holiday homes – not as fun as they appear

Holiday homes – not as fun as they appear

Right now, 5.4 million of us are considering buying abroad. Spain and the Balearics islands are the top dream destination, followed by France, Italy, Portugal, Greece, Cyprus, the Caribbean, Florida and turkey. Personally, I fancy a little pied-a-terre in Portugal.

Sounds lovely doesn’t it? A place to escape to. But be warned. Holiday homes are the biggest waste of money ever.

Did you know that the average holiday home owner visits their holiday home just twice a year? 2/3 of holiday home buyers expected to visit their dream second home far more when they purchased – but between family commitments, lack of cash and work schedules those homes in the sun stay forlorn and forgotten.

So even though I probably wouldn’t be going to my imaginary house of fun in Portugal that often, I’d still be paying for it. Aside from the purchase price, which at the moment wouldn’t be a great buy as the pound is down 20% against the euro; there are local property taxes, legal fees and mortgage admin charges.

After these hefty initial fees, factor in furnishings, maintenance, repairs, insurance, utility bills, taxes and possibly a cleaner or monthly service charge.

Despite all of this, I still dream of my place the sun. I just need to answer these questions for myself;

Do I really want to go to the same place on holiday, year in, year out? Will I have the time?
Can I afford all the costs mentioned above?
Have I visited enough to know the location of the property – how far is it to the nearest town?
Do I know a decent lawyer to handle the transaction?

Of course, if you plan to retire and spend 6 months of the year at your holiday home it makes more sense. Otherwise, think twice. The reality of a second sun drenched home may not be as beautiful as it appears.

Buying shares? Read this to find out which are gaining from the weak pound…

Buying shares? Read this to find out which are gaining from the weak pound…

I’m thinking of investing in shares this year even though I have never done so before. The pounds fall against the dollar has left companies reaping rewards and there could be further profits as the trend continues.

Investors are benefitting from a number of ways since sterling lost 7pc against the dollar in January. Of all dividends paid to FTSE companies, 42pc are paid in dollars. This means an income boost for British blue chips and a benefit for UK equity income funds.

I expect the pound to be under pressure for some time as the bank of England continues to try to stimulate recovery through low rates and ‘money printing’ quantitative easing. This in effect weakens the demand for the currency which then falls in value.

My advice is to invest in established, shareholder focused, dividend paying companies. Royal Dutch Shell and GlaxoSmithKline are two to consider.

Also in my favourites list are BP and British American Tobacco. Both are global firms where the dividend is paid in dollars.

If you want to invest in a less common name, try Spirax-Sarco engineering, Spectris and Halma – all members of the FTSE 250.

Now’s the time to buy shares – and I’m jumping in with both feet.

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