Personal Finance

Your personal finance questions and concerns answered by the experts

We brought together two very experienced money experts (with over 60 years of experience between them), to help you make sense of things and feel more confident and capable of making good money-related decisions during Coronavirus.

Jason Butler and Fanny Snaith hosted a live webinar and covered a range of money-related issues including:

  • How to develop mental resilience to cope with financial stress so you don’t get overwhelmed
  • A simple framework for thinking about your financial position to help you decide on your priorities
  • Actions, tips and ideas that might help you maximise your financial wellbeing

To watch the full session back and see what questions came from the viewers, head over to the Crowdcast recording here. You can also check out highlights on our blog here.

Below are follow-up answers to all of the questions asked during the live event, kindly written by Jason and Fanny:

Questions about investing and the stock-market:

Question(s):

  • Is there any point when I should close my stocks and shares ISA? I am riding things out so far (as selling means ensuring I make a loss), but it's hard when every day it just goes further down...
  • I want to know if this is the right time to buy ISA stocks or if it is better to put it into Instant Access ISA savings
  • Any advice you can share about stocks and shares / investments would be very useful!
  • If you have money and can afford to, would it be a good idea to buy stocks now?
  • Is now a good time to invest in index funds?
  • Is now a good time to invest in equities? What are good easy- to-read sources to follow to get a good indication of when market bottoms-out?

Jason:

Historically equities (shares) have rewarded patient investors very well, but as we’ve seen over the past 4 weeks, they can be very volatile and suffer periodic downturns. If your time horizon is at least TEN YEARS, and you have faith in capitalism to continue to innovate and deliver the goods and services that we all need (and those that we don’t know we need yet!), then I would invest in a diversified fund of index funds, with a decent allocation to shares, depending on your own risk profile. 

Warren Buffett said  “The stock market is designed to transfer money from the active to the patient.” You need to be very patient. My recent blog Back to the Future explains more

If you invest monthly then this means you buy more shares when markets have fallen, so that over the very long term the average cost of the shares should be less than the average value over the time you’ve been saving.

I’ve provided a few charts below from the Barclays Capital Equity Gilt Study to show the historic situation.

 


Fanny:

My view is to do this:

  1. Make a map of your money (budget).  Make sure every penny is accounted for.  
  2. Have a minimum 3-6 months in a cash buffer.  Better 6-12.  Get the best interest rate you can.  The comparison sites will give you the best rate at time of looking.
  3. If you are still earning, and have a 6-12 month cash buffer then you COULD consider investing.  As long as you are prepared to leave it in there “long term” - I don’t know, and nor does anyone else know what long term means.  I have always been told 5 years by my IFA - in reality that has been ok - but this is different.

Re speculation - e.g. trading etc.  I would be very cautious here and, personally I would call it gambling.  Trading, Forex etc is not easy.  If it was everyone would be doing it.  Most traders, if they go in live at or near the beginning, tend to lose quite a bit of money.  The ads that tell you that you can make a quick buck with little work - take a lot of time to consider whether they are true.  Especially if they are asking you to part with money to “learn in 3 months”.  The experienced traders I know insist that it takes about a year to learn strategies properly and back test etc.  In a nutshell - speculation should only be done with money that you are prepared to lose.

Cash Isa - well the interest rates are SO LOW and we are now allowed to earn £1k interest before paying income tax on it.   So, savings accounts etc are likely to be the best bet.  Shop around and search online.

Q: I have been offered a new job with bit of more money in a smaller company than I am in currently. I am unsure if I should accept/change to the new job in this current situation.

Jason:

It depends on your personal circumstances and your view on the future prospects for the new company compared to your existing employer. 

If you have a sensible emergency fund (easily accessible cash), your living costs are relatively low and your skills are sufficient to enable you to find employment if the new company goes bust or lets you go in the future, then you can probably accept higher risk of the new job than if that is not the case.  

The new company might be smaller than your current one but if it has raised a lot of working capital and is involved in a high growth sector, it might not be as risky as you think. 

Fanny:

What does your heart tell you to do?  What feels right?  How long have you been with your current company?  What are the reasons for staying?  What are the reasons for leaving? If you were to be made redundant what are the benefits from either company?  What are your goals long term?  Which job moves you towards your goals Think of as many questions as you can and feel into the answers.  There is no crystal ball.  Jason’s comments add value too.

Q: My wife and I have accepted an offer to sell our house and are close to finding a new house (which is a new build) in another part of the country. Personally, I'd like to proceed to complete on both the sale and purchase by the end of July, but would appreciate your thoughts!

Jason:

Buying a property is as much an emotional as it is a practical decision. The government has advised people to pause or defer any purchase of residential property for the time being, while the COVID-19 restrictions are in place. The key problem is finding a removal firm who will move your furniture and possessions, due to the risk of infection. 

If you could overcome the removal logotics, you could proceed with selling your existing home and buy a new build property but be prepared for your buyer to renegotiate the price they will pay. Whether or not your buyer asks for a lower price I would suggest you offer any developer for a discount of at least 25% off the asking price as a) they have a gross profit margin or about 30% and b) they will be keen to turn their stock into cash at this difficult time. 

Moving out of rented property and in with relatives to save money makes a lot of sense in the current situation. As long as neither you nor the relatives you will live with are symptomatic or in a vulnerable group, there is no reason you can’t make the journey from your old rented property to your relatives if this is done to alleviate financial hardship.

Q: My tenants are both self employed and can't afford the rent. Is there any support for Landlords?

Jason:

Landlords can request a 3 month mortgage payment holiday on any borrowing they have on the property, although interest will still be charged. This will enable you to be able to afford to offer your tenants a 3 month payment holiday. Your tenants will still be liable for the rent and you can agree the basis on which it will be repaid (including additional costs you have incurred). There is now a 3 month moratorium on taking legal action against tenants so it’s in your interests to come to an arrangement with your tenants. In any case make sure that that they have applied to DWP for Universal Credit (UC), which can include a housing component, and also to their local authority for any entitlement to Discretionary Housing Payment to top up any shortfall in rent not met by UC.    

Fanny:

My only comment to add would be to keep the communication open and honest as much as you can and try to work together to come to the best arrangement.  Landlords need good tenants as much as tenants need good landlords. A drop in rent is better than a void for weeks/months.

 

Q: How do you take emotion out of investing and money thoughts?

Jason:

Have a look at my recent blog - Back to the Future - and imagine that you had 100% of your capital invested in equities (highly unlikely) at the end of 1972 and that you bailed out of the stockmarket at the end of 1974. Then just look at what happened over the subsequent years and think how you would feel if that really happened to you. You can’t control what happens to stockmarkets or the economy, but you can control how you respond. Doing nothing is usually wise. If you are in any doubt consult a regulated financial adviser.

Fanny:

Money is emotional and I don’t think you will ever take the emotion out - better to work with it and learn to manage it.  I work with eight money types - eight characters who all think and behave very differently with money.  We have each and everyone of them within us - it just depends on which one or one’s are taking the leading role in our money lives.   The eight money types I work with when coaching my clients are brilliant at helping understand and controlling emotions.  They are the Innocent, Victim, Warrior, Martyr, Fool, Creator/Artist, Tyrant and Magician.  Each of the types carry different emotions and have different behaviours.  A steady, informed trader will demonstrate the traits and thoughts of a money Magician and Warrior.  Someone who throws money about without due diligence and thinks very much of today will have an active Fool.  The person who feels that money is not important and that it is more important to be authentic and not succumb to the materialistic world will have the Creator Artist in the starring role.  

The first step is to be conscious of your emotions and how they play out.  The next step is taking every step you can to keep a view of self trust, faith in yourself and balance generally.  To know when to take action and when not to.  The traits of the Magician and Warrior.  I have a money type quiz on my website  and then offer a 30m free call to chat over the results.  Would be happy to do that for you.

Q: With furloughed workers monthly grant being capped at £2500, in reality what would this be as net take home pay. My employer pays 7% pension. Also should I reduce salary sacrifice AVC to maximise the take home pay?

Jason:

Based on 2019/20 tax rates and assuming you are not a Scottish taxpayer and no other tax related factors apply, £2,500 gross pay would lead to £1,995 take home pay. At £2,000 (being 80% of £2,500) the take home pay would be £1,655. Your employer may well be prepared to make up the difference between the 80% subsidised by the government and your pre-furloughed salary. 

Try to avoid reducing or stopping your personal pension contributions, particularly if this would affect any contributions being paid by your employer. Your personal contributions also attract tax relief and those contributions made in the earlier years of your working life make the most return.

Q: If I'm put on furlough from my job, can I take up a second job say delivering home shopping without affecting the 80% job retention payment from my main job? This 2nd job would just be to make up the shortfall and be temp. Thanks

Jason:

The guidance notes state that as long as you are not carrying out work for the employer that has Furloughed you, you are free to do other paid work. 


Q: The pound has fallen a lot in the last couple of weeks (~ -20%). Do you think it will relax again and if yes, how much time needs to pass?

Jason:

I have absolutely no idea what will happen to the pound and trying to time currencies is just as hard as trying to time stock markets. That being said Sterling has staged a strong recovery against other major currencies over the past few days. Whether that continues is anyone’s guess. If you need to buy foriegn currency or an overseas asset, now might be as good a time as any. 

Fanny: Totally agree with Jason.  If you are interested in currencies, a good idea is to start tracking them daily so that you can become familiar with their rises and falls.  A bit like you might do if you are thinking of buying a property - researching the area over time prior to the purchase.


Questions on the housing market:

  • Your views on what will happen to house prices in the short term? Transaction volume has massively reduced recently - will we see a correction this year?
  • I’m looking to purchase a Shared Ownership property using a Lifetime ISA this year. What effect do you think the pandemic will have on the UK housing market?
  • Will banks be more keen to accept mortgage applications? I was planning to buy my first property this year via either Shared Ownership/Shared Equity scheme. Should I hold off or make next steps now?

Jason:

No one knows exactly what impact the virus will have on the UK residential property market but I doubt it will be good. One recent commentator suggested that prices overall could fall 10% this year. However, this will mask significant variations, with some properties falling much more or less than this amount. 

New build properties offered under the various Help to Buy arrangements are typically sold at a 30% premium to used properties that are not able to access such support.  Although with shared ownership the government takes on a % of any capital losses you are still liable for the remaining loss, if the property falls in value over the coming years. 

Therefore, if you are still keen to buy this year then I would suggest making an offer of about 70% of the current asking price and be prepared to walk away if the developer won’t play ball. Remember that the developer will want to turn their stock into cash asap. You are in a strong position.  

The number of mortgage deals at higher loan to values (LTVs) have reduced over the past few weeks and when competition reduces terms rarely get better. That being said, lenders are still prepared to make mortgage offers and there is still lots of choice in the lower LTV deals.  

Q: I would like to know what I can do regarding the drop in valuation of my current and former pension schemes.

Jason:

The simple answer is not much. Current prices reflect current information and if you sell out now you’ll miss any eventual recovery, whenever that happens. After falling nearly 40% markets in the first three weeks of March, last week they recovered some of those losses. This recent Guardian article gives more context.   

If your time horizon is long (20 years +), including the period when you’ll be drawing down your pension pots to fund your lifestyle, then you have time to let the magic of compound interest (money making more money) do its work. 

My recent blog Back to the Future also gives you some more context.   

Fanny:

Age related of course - if you are young… shut your eyes and wait for a bit before looking again, if you need your money very soon - talk to your IFA.  


Q: We are midway through a building project and have borrowed on our mortgage. Work is halfway there, shall we plough on?

Jason:

This will depend on your personal situation. If your income is secure, you have a sufficient emergency fund and you can get tradespeople to turn up to continue to work on the project safely, then finishing the project probably makes sense. Otherwise putting it on pause might be the best way forward.  

Q: 2 questions from me please. 1) why? Why are you doing this and helping people, what’s driving you to take action ? (Thank you - immensely grateful) 2) Is now a good time to invest in the stock market if you diligently do your research and have savings that you could afford to lose if something went wrong? Thank you

Jason:

I earn my living speaking, writing and researching personal financial wellbeing and I am hired by employers and financial related companies to provide independent insight and commentary to their employees and customers respectively. This is based on 30 years’ experience (including the first 25 years as a personal financial adviser) working in financial planning, two Chartered Fellowships and five books.       

Whether now is the right time to invest in the stock market is anyone’s guess. It depends on your objectives and risk profile. If you are aiming to build financial capital to fund your life after paid work, and as such have a 30-70 year time period (as most people will, including the period when they will be drawing down money to live), then stockmarkets, which have historically generated much higher long term compound returns than other asset classes, are about 1/3rd cheaper than they were a month ago.  If you invest in a low cost, globally diversified index fund, the chances of you experiencing a total loss of capital are extremely low. The circumstances in which you would experience a total loss of capital in such a fund would suggest we would have far more serious problems to worry about than just that.

Fanny:

Hi, I am doing the webcast for Money Dashboard because I am a big fan.  I gave the first webcast for Money Dashboard in March 2019 after me contacting them saying that I loved their product.  

Regarding this webcast - there are many people who are frightened and worried about the current situation.  I specialise in mindset and teaching practical money skills and, in my opinion, there has never been a better time for people to get to grips with their money and learn how to feel better about it too.   I have been a money coach for 5 years now, coaching 121 and couples. I now provide an affordable 12 week interactive online course called Loving Me Loving My Money, which is designed to help people conquer their money fears and gain money skills in a group setting.

I am committed to helping the world better understand the meaning and purpose of money in our lives.  I believe that talking about money – discovering and challenging our belief systems about money, can only make us and the world engage better with the wonderful tool and resource money is meant to be.   

Current figures show that we, in the UK, are paying £139m per day on credit card and personal loan interest.   That is nearly £50.8b!   My big mission is to see this decrease by half due to increased financial education and mindset work.


Q: I was beginning a divorce by selecting a solicitor and mediator. Now I am locked in at home with him and two children. It’s challenging to stay with him but isn’t it worth continuing the divorce proceedings right now. I believe I’ll be better off financially after the divorce.

Jason:

I’m sorry to hear your predicament. If it were me I’d continue with divorce proceedings but be prepared to wait to conclude the financial settlement later this year or early next, when the current peak of the crisis passes and people can view properties etc.. If you put proceedings on hold you’ll not be ready to move when things start returning to normal. Your current situation isn’t ideal but other people have worse circumstances, so unfortunately you’ll just have to grit your teeth and struggle on. You might find useful the advice in this blog from a lady in a similar situation to you.  

Fanny:

Tough call and a great answer from Jason.  I think it is easy to look at the situation factually and wouldn’t life be great if we could simply do just this?   I think you might consider carefully your feelings and those of the children.  If you believe you will be better off financially after the divorce and the situation is tenable then fine.  If, however, the situation becomes really tricky and it would be better for you to live under two roofs rather than one, is there not another option?  Does living separately affect the divorce proceedings?  

Q: Is there a savings account that pays interest that I can pay my salary into?

Jason:

If you receive Universal Credit you can open a Help to Save account and save up to £50 per month for between 2-4 years. You’ll receive a bonus from the government of 50% on your highest balance after 2 years and again on any additional amounts saved in years 3 and 4. This must be done via a direct debit unless your employer offers access to the Help to Save account via salary deduction through Salary Finance. Salary Finance also allows employees to pay into a standard savings account with Yorkshire Building Society.

Q: Planning on buying a used car in August for around £8,000, part financed. Should I stick with this plan or put my deposit towards an emergency fund? Job security is good, fortunately...

Jason:

It makes no sense to borrow money to buy a depreciating asset like a used car. If you don’t need to buy a car and your emergency fund isn’t sufficient, then put the money you have and the monthly amount you won’t now be paying in monthly loan payments into your emergency fund. If you do need to buy a car and you have enough in your emergency fund then buy a car outright with the money you have and save up to be able to buy a better one. You’ll lose less money on the one you buy now, and retain flexibility to direct monthly amounts into longer term investments once your savings are at a high enough level.   

Fanny:

Yes!

Q: I have got 5 different pension funds from my previous employments. Is it possible to combine it in one pension fund?

Jason:

Yes. If you are in a current workplace scheme compare the costs and fund choices in that plan with those that apply to plans available in the open market. Be aware that if you transfer a pension plan when you know you are in ill health, the transferred plan value might be included in your estate for inheritance tax purposes if you die within two years of the transfer.   

Questions about pensions and risk profiles:

  • All my pension funds have dropped in value what can I do and shall I combine them into one scheme?
  • Should an investor change their pension investment risk profile from medium to low risk and back again after covid 19 to reduce volatility?

Jason:

Your risk profile should influence your investment strategy, not what is happening with investment markets on a day to day basis. If you are still saving regularly towards your pension pot and your time horizon is at least 20 years (including the period when you will need to draw upon financial capital) then when markets fall in value you buy more units/shares for each contribution and you should rejoice! 

Your risk profile is determined by your time horizon, your capacity to change future spending from your financial capacity in the light of temporary but sometimes severe market falls, your need to make returns to meet your lifestyle and other spending goals and your faith in capitalism to deliver reasonable returns from equity investment.   

Severe market falls are usually followed by equally extreme market recoveries, but trying to work out when these will happen  is all but impossible to do. You could be lucky but history suggests you won't.

My recent blog Back to the Future might give you some useful context. 


Q: I have two low cost flights and Norwegian Air won't refund my money. It wishes to give me cash points. I think it might go out of business so I am not keen. These tickets cost me around £1000.

Jason:

If your flights have been cancelled then you are entitled to a full cash refund. Which? Has a useful travel website that explains your consumer rights. 

Q: Are the government grants for self employed help for Covid-19 taxable?

Jason:

Yes they are taxable.

Q: I have lost my self employed income and have to claim universal credit, can you advise me about better ways to get loans? would it be interest free credit cards? credit union? I'm not used to interest rates and don’t normally use credit cards at all, so its new territory for me

Jason:

You could claim an advance on your UC claim. You’ll have to repay it from your eventual benefits, but it might reduce the need to borrow elsewhere or as much. 

Before you borrow money from a lender, is there a family member who you could potentially borrow from? Make it clear that you are prepared to pay fair interest (but much less than you might pay a bank or loan provider), agree a proper repayment schedule, and clearly document the arrangement.

If borrowing from family isn’t an option, then approach your bank and ask what they can offer by way of overdraft, credit card or a loan. Some banks offer some overdraft interest free, and introductory rates on cards. If your credit score is good, you might be able to take a loan for under 5% APR.   

Q: My wife has lost her job so we can not afford to pay off our debts and loans etc could we apply for ttp or dmp to help us concentrate on the lowest debt to start the snowball effect?

Jason:

The most efficient way to repay expensive unsecured debt is to repay the most expensive debt first. The snowball method is suitable when you have persistent unsecured debts that you’ve tried to repay but have been unsuccessful, and you need a more psychologically supportive approach. 

Fanny:

Sense says pay off the most expensive debt first. Sometimes there is a debt that you just don’t want to see anymore which needs to go first.  You can use the Snowball Debt Destroyer sheet to play around with the figures to see the impact of the order which you pay the debts off.  Also, find out if you can negotiate any of the interest rates down with the lender?  Can you switch to a 0% card (make sure you pay it all off before the rate ends).  Re TPP or DMP - look at the Step Change website first - so many variables to give a proper answer here.

Questions about government support for the self-employed:

  • As self employed for less than a year (1st April 2019) is there another way of government support apart from Universal Credit, since the 80% scheme doesn't apply?
  • What do you suggest for a self employed person earning over £50k, so not entitled to the 80% grant from Gov?

Jason:

If your savings and investments are below £16,000 apply for Universal Credit (UC). Also find out what, if any, help your local authority can provide in terms of community charge reduction, discretionary housing payment (only if you are in receipt of UC) or welfare support.  

Subject to normal underwriting criteria and assessment, you could apply to your bank for a loan with a term of up to 6 years, under the Corona Virus Business Interruption Loan Scheme. The government will pay all interest and any fees for the first 12 months, although you will have to meet all monthly repayments. Some banks have asked borrowers to give personal guarantees on these loans. You should resist this if your bank asks you for this because the government guarantees 80% of the loan in the event that you defaulted.     

Q: What was the Mindset book you recommended?

Jason:

Mindset: Changing the way you think to fulfil your potential by Dr Carol Dweck 

Fanny:

Great book - I would also recommend Money Magic by Deborah Price - the CEO of the Money Coaching Institute.

Q: I’m due to buy out my ex on our mortgages home as part of a divorce this year. Will being furloughed affect my eligibility to take on all of the mortgage? It’s already fairly close on affordability criteria.

Jason:

It might do, but each lender has its own criteria. If your lower furloughed salary would prohibit you buying out your partner, you might wish or need to defer finalising the settlement until things normalise. I know this isn’t ideal but we are in uncharted territory.

Q: Please can you recommend top 3 good books to become money savvy and educated to start on the journey for financial independence?

Jason:

I have read well over 400 personal finance books and it’s so difficult to choose just three. Excluding heavy duty reference and research related financial books, and my own books, the following three books are certainly well worth reading as they are easy to read and practical:

- The Simple Path To Wealth: Your road map to financial independence and a rich, free life by J L Collins

- How to Think about Money: Make smarter financial choices and squeeze more happiness out of your cash by Jonathan Clements

- The Geometry of Wealth: How to shape a life of money and meaning  by Brian Portnoy


Fanny:

- Money Magic - Deborah Price - CEO Money Coaching Institute

- The Money Chimp - Andrew Priestley

- Think and Grow Rich - Napoleon Hill


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Sean

Growth Manager