What is a bond?

The term 'bond' has multiple meanings in the world of finance so it's important that these meanings are not confused. This article looks at the bonds that are also known as time deposits, as offered by banks and building societies in the UK.


What is a bond?
A bond, or time deposit, is akin to a savings account in which money is locked away for a fixed number of years (typically 1-5 years) and subject to a fixed rate of interest. When this fixed period ends, the bond is said to have 'matured'. 


Pros and Cons
Bonds are characteristically subject to restrictions such as:

• Penalties (usually of 6+ months of interest) for early withdrawals.
• Permitting only a single deposit, or accepting further deposits only until a particular date. 

The interest rates offered by bonds will typically be the best available. Finding the right bond is, therefore, a balancing act between the interest rate you want to gain and the restrictions you're prepared to adhere to. As a general rule, the more onerous the restrictions are, the better rate of interest you're likely to receive.


Considerations
The main question is how much money you can afford to relinquish for years at a time. Even if you are living comfortably and within your means, it's impossible to know what might be around the corner and so it is unwise to commit all of your savings into a bond.

Equally, it is all but impossible to know what will happen to interest rates over the coming years. Though it seems unlikely at the time of writing, an improvement in the economy could drive interest up and leave you with your money bound to a comparatively pitiful rate. 

It should also be borne in mind that the £85,000 government guarantee also applies to bonds. If you are considering investing more than that, be aware that you will be taking a gamble if the bank or building society were to fail.


Conclusion
Before committing your money into a time deposit, make sure that you can afford to do so while making reasonable provisions for dealing with any unforeseen problems that may arise within the term. If you're concerned that you would not be able to leave the money alone for such a term, consider putting your money in an easy access savings account instead. 

How to price compare

If we were to get the best deal for everything we buy, it's estimated that we could save an average of 25%.  Price comparing may take a little effort, but it pays dividends. This article looks at some of the most popular price-comparison tools for shopping on the web as well as some useful tips for finding the best prices on the high-street.

Net a bargain online

Price comparison websites have been popping up all over the place lately. These websites are free to use and they work by comparing prices of multiple retailers. They earn their money by referring you on to the website from which you ultimately make your purchase. 

These websites allow you to compare prices for virtually anything from car insurance to video games, and are incredibly easy to use: they work in very much the same way as a search engine like Google or Yahoo.

Popular price comparison websites include:

• Comparethemarket.com
• Moneysupermarket.com
• Mysupermarket.co.uk
• Pricerunner.co.uk
• Kelkoo.co.uk

Some of these websites provide a wide range of price-comparison options whereas others are designed exclusively for comparing particular types of products such as credit cards or supermarket groceries. 

Be warned that the search results are not always 100% accurate. There may be differences in the price or the product itself (for example, a search for The Sims 3 may link to a guide-book for the game rather than the game itself) so it is essential to double-check the necessary details with your chosen retailer.

Some retailers are exclusive to certain comparison websites, and some retailers have opted out completely. This means that certain retailers may not appear on price comparison websites even if they in-fact offer the cheapest prices. For this reason, it is always worth carrying out individual checks on retailers that you don't see listed in your price comparison search.

High-street saving

Following the recession, the high-street has become a war zone of competition between retailers. For any given product, there are likely to be at least two or three suppliers available for you to choose from along a half-mile stretch. Sometimes to get the best deals you will have to do a little legwork (literally) and check what each store has to offer before committing.

Some stores will be amicable to price-matching. Usually this is restricted to a certain distance from the store in question and excludes internet pricing; however, if you have seen a price cheaper elsewhere (even online), and can prove it, it doesn't hurt to challenge the sticker-price and ask if the store is prepared to compete. 

If you're wanting to try your hand at haggling, the best time to attempt it will be near the end of each calendar month: most stores are particularly desperate at this time to meet and exceed their sales targets.

What is a cash ISA?

An ISA or 'Individual Savings Account' is a special kind of bank account with unique tax rules.


Tax status
Savings held in a cash ISA account are subject to neither income tax nor capital gains tax. 
Despite being tax free during the lifetime of the holder, a cash ISA is still subject to Inheritance Tax in the normal way if the holder dies. 


Eligibility
You must be at least 16 years of age to open a cash ISA, and 18 years of age to hold a stocks and shares ISA (the latter is beyond the ambit of this article).


It is typically free to open a cash ISA, but individual providers may vary so be sure to ask appropriate questions. 


Making deposits
There is a limit to how much you are allowed to deposit in your cash ISA each tax year. The tax year runs from the 6th of April to the 5th of April. The deposit threshold changes from year to year but is currently at £5,640 for a cash ISA for 2012/2013. 

There is no restriction on when or how much you may withdraw, but the maximum deposit allowance is not replenished by withdrawals: if you were to deposit £5.640 one day, and withdraw £5,000 the next, you would not be permitted to make a further deposit during that tax year in spite of the fact that the ISA would be holding only £640.

You may only make deposits while you are residing in the UK. If you were to move abroad, you could still hold your ISA and existing savings would still gain interest, but you would not be permitted to make further deposits. 


Transfers
The maximum deposit allowance is personal to you, not to the account. ISAs can also usually be transferred from bank to bank without affecting your deposit allowance; however, as you are allowed to hold only one cash ISA at any given time, a transfer would mean transferring ALL of the funds and closing the existing cash ISA. Some providers may charge a fee for carrying out this transfer, so be mindful and ask questions if you're unsure. 


Other considerations
When considering whether to make a deposit into an cash ISA, be mindful of interest rates. Some ISAs pay such pitiful rates that it can sometimes be more lucrative to hold the money in a taxable account.


Conclusion
It is typically a good idea to make the most of your deposit allowance on a cash ISA, but be aware of interest rates and think about whether your money could work better for you elsewhere. 

Easy tips to lower your electric bills

With an ever growing range of electrical appliances and gadgets, we are using more electricity than ever before. If you're not careful, you're likely to get a nasty shock at the end of the month when the bill arrives.

In another article we'll look at how to price-compare for electricity providers, but this article looks at small life changes that can help to lower your electric bill.

There is a notable difference between electricity use and electricity waste. These tips will concentrate on the latter so that you can cut the costs without changing your lifestyle. You can leave the candles in the cupboard for now!

If you need to recap anything you've read, or would like a quick summary of tips, you can scroll down to the Recap section at the bottom of this article. 

Shut it off!

This one should go without saying. Entertainment devices like TVs, DVD players and games consoles can eat through power. For some of us, watching less TV is an unthinkable sacrifice, but it helps to turn these devices off when they're not in use. 

Vampire power

Take down the wreathes of garlic, they aren't going to help! 'Vampire power' is when devices and appliances leach power from the mains supply while they are on standby. Some devices can use up to 90% of the power they use when they're switched on! This is increasingly common for modern devices such as TVs, DVD players and games consoles. 

You can usually tell when a device is on standby because lights or displays (usually in red) will remain illuminated. The advantages to standby mode are that it can allow a device to start-up more quickly, or can be activated by a remote control. The disadvantages are that the device is costing you money even when it's not in use, and it can also pose a fire risk.

If you wish to save energy by eliminating vampire power, you can either unplug the device or check the user guide for instructions on how to switch it off completely. 

Lights out, all out

One of the most obvious ways of cutting down your electricity bills is to switch of electric lights when you're not in the room. While it may sound like common sense, the vast majority of people will think nothing of leaving a light on for hours at a time. A little mindfulness in this area can go a long way. 

There are also ways of saving money while the light is in use by using lower watt or energy-saving bulbs where appropriate. For further information on energy saving light bulbs, click here. 

By following these two steps, you can reduce your electricity bill without affecting how you use electricity in your home. 

Staying out of hot water

It can be incredibly expensive to heat water with electricity. Whether it's the boiler, shower, a washing machine, dishwasher, or even just an electric kettle, this is likely to form about 1/3 of your electricity bill: for this reason, it's important to consider what you can do to cut costs in this area.

If you have an electric powered boiler, consider setting it to boil only once or twice a day and remain on for a limited time. If you time things right, this should be enough to provide you with hot water when you need it most such as for washing dishes or taking baths. 

When you're in the shower, water isn't the only thing going down the drain. Although it can be tempting to lounge under the running water, you should try to keep showers to around five minutes and, if appropriate to your lifestyle, take one only every other day. 

Running a washing-machine can be expensive too, so it's worth putting a little thought into how you can run the fewest possible cycles, and what the lowest reasonable temperature is to run them at (30 degrees should be more than adequate for most washes). Depending on your lifestyle, you could try wearing things more than once to delay their return to the laundry basket. Alternatively, you could delay your wash until you have enough lights or darks to justify running a cycle. If you typically use a drier after a wash-cycle, consider hanging the clothes up to dry instead.

If you're heavily reliant on a dishwasher, consider saving all the day's washing for just one cycle on the evening. After all, running just one cycle on your dishwasher costs around 15p. This might not sound much, but if you run two cycles a day you'd be looking at a bill of £109 per year for the dishwasher alone! If you only have a few bits and pieces to wash, there is always the sink.

When you're using an electric kettle, you should only boil the amount of water you need. Not only will this help you save electricity, but the kettle will boil faster. After all, why spend extra on boiling water that's only going to go cold again in the kettle?

Keeping cool

Fridges and freezers work most efficiently when they are full (but not so full as to completely block the air circulation). If you have empty space in your fridge or freezer, consider filling them with balls of newspaper or other such items. 

Allow hot foods to cool before placing them in the fridge. If you put hot food in the fridge then it will be forced to work at full power to keep the temperature stable. 

Defrost things in the fridge. Not only will the food be defrosted safely, but it will help keep your fridge cold so that it doesn't have to work as hard.

Any liquids you have in the fridge should be covered as liquid vapors can add to the compressor's workload.

Vacuum your freezer's condenser coils (behind or beneath the unit) about every three months. Dust build-up in this area can lead to a 25% drop in efficiency.

Staying warm

If your home uses an electric heating system or an electric fire, keeping use to a minimum is essential if you're going to keep your bills down. A reduction of just a few degrees on your thermostat can equate to savings of 5% and upwards!

If you're still cold, consider wearing an extra layer of clothing or sitting with a blanket (though not an electric one!). 

Buy what's efficient

If you're considering replacing any of your appliances, be mindful of energy efficiency. Such energy efficient items may cost more in beginning, but the overall savings will reimburse you for the extra outlay several times over. 

Misc

Last but certainly not least are the miscellaneous tips that didn't really seem to fit anywhere else.

• Be quick when you're opening the oven door, or the door of the fridge or freezer. The longer the doors are open, the greater the change in temperature, and the harder the appliance will have to work to get things back to how they were.
• Use LCD as opposed to CRT monitors. LCD monitors are almost twice as efficient.
• Use a laptop instead of a desktop computer. Laptops use significantly less power. 
  
  
  

Recap

If you're serious about saving on your electricity bill:

1. Switch off any electrical items when they're not in use.
2. Don't allow your items to lounge in standby mode.
3. Switch off lights when you're not in the room.
4. Replace inefficient or high-wattage light bulbs with lower watt and energy efficient alternatives.
5. Set your boiler to come on only at key times of the day and to remain on for a minimal period.
6. Take fewer showers and don't dawdle! 
7. Run fewer and cooler cycles on your washing machine.
8. Hang up your clothes to dry instead of using a tumble drier. 
9. Run fewer dishwasher cycles.
10. When using a kettle, only boil the water you need.
11. Fill empty space in fridges and freezers with balls of newspaper.
12. Let food cool before placing it in the fridge.
13. Defrost frozen food-stuffs in the fridge.
14. Keep refrigerated liquids covered.
15. Vacuum your freezer's condenser coils. 
16. Turn the thermostat down. 
17. If you're cold, wear a sweater!
18. Buy energy-efficient appliances where you can. 
19. Don't keep oven and freezer doors open for too long.
20. Use LCD monitors instead of CRTs.
21. Use a laptop instead of a desktop computer where possible.

Brighten your finances with energy saving light bulbs

Energy bills are some of the biggest recurring household expenses, so knowing how to save money in this area is crucial to a brighter financial future.

This article looks at energy efficient light bulbs: now there's a bright idea! 


Advantages
Energy saving light-bulbs can help you cut your electricity bills and they're incredibly cheap to buy. Some electricity companies even offer the bulbs for free as part of an environmental policy. 

On average, it's estimated that you will save over £3/$4.50 per year for every energy efficient light-bulb you fit (in a high-use area of your home). This may not seem like much, but given the cheap availability of the bulbs and the overall ease of use there are few reasons not to make the switch.

On top of the savings, you'd also be doing your bit to support the environment in a way that would have virtually no impact on your lifestyle.


Disadvantages
Energy-saving light-bulbs start out quite dim when they are first lit and gradually brighten once they are left on for a while. For most rooms in this house this won't be a problem, but such bulbs may be unsuitable where high visibility is important such as a study, workshop or kitchen. 

Energy efficient light-bulbs are only suitable for typical light-fixtures. They are incompatible with dimmer switches and may be too large for dainty bedside lamps and the like. 


Conclusion
Energy saving light-bulbs are one of many ways to skim the fat from your electricity bill without spending your life in the dark. Plus, you'd be doing your bit for the planet!

Freecycling

Freecycling is the new trend, and it looks like it's here to stay.


What is freecycling?
There's an old saying that goes: "One man's trash is another man's treasure." It is in this concept that the heart of freecycling beats. Instead of resigning otherwise perfectly functional items to the rubbish heap, freecycling websites allow people to list their throwaway items and invite others to take them free of charge. Certain websites also allow members to post wanted ads for items they are hoping to come by. 


Is it worth it?
Not only does freecycling give you an opportunity to get something for nothing, but it also allows you to dispose of items that are still useful and in a way that's environmentally friendly. Charities are becoming increasingly picky about the kind of items that they will collect, but if the item is useful at all then there is a chance that it'll be just what someone is looking for.

As you might expect, the quality and condition of the items available will vary massively. While the websites allow freecyclers to comment on the condition of an item, they aren't always honest and are often just looking for someone to take the items off their hands.


What kinds of items are available?
Freecycling extends to all kinds of items from old office equipment and furnishings to musical instruments. You never know what you're going to come across on a freecycle website, which makes it all the more fun. One of the common traits of items listed is that they are bulky or otherwise difficult to transport, and the duty of providing that transport will be on the collector! 


How do I grab an offer?
Most freecycle websites have a system whereby you can contact the offeror (the person making the offer) to express your interest. The offeror then has the discretion to accept or refuse your offer. While many items are offered on a first-come-first-served basis, it is a good idea to be polite and explain to the offeror why he should choose you in-particular to be the item's new owner. 


Where can I get involved?
Freecycle websites are popping up all over the place, but the most popular communities are:

• Freecycle
• Freegle 
  
  

Conclusion

Freecycling can be a great way of obtaining and disposing of all kinds of items. Have fun and pick up a bargain, but be safe!

Finding alternatives to 0870 numbers

Sometimes, finding low rate numbers for commercial companies can be pain. When using mobile phones especially, the cost of using these numbers can be extortionate. If all you can find is 0870, 0840 or 0845 numbers, visit SayNoTo0870.com where you'll find a directory of free or low-cost alternative numbers for the company or service that you are trying to reach.

Penny's Security Tips #4

Getting the cheapest mobile deals

One of the major expenses of the 21st century is that of mobile phone contracts. It's not unusual to pay upwards of 40 pounds a month. If you're willing to make a few compromises or make one or two phone-calls to the right people you can have the sound of money ringing in your pockets.

Mobile phones are an important part of modern living and it's difficult for many of us to imagine life without one, but with contracts costing an average of 240 pounds a year it's important to make sure you're the one calling the shots and that you're not paying for more than you need.


Shop around
The mobile phone industry is a highly competitive market and there are deals to be had. It's worth taking the time to price-compare between at least three different providers. While looking for the best price be sure to take into account the duration of the contract as well as the allowances.

Think carefully before tying yourself down to a long term contract. Contracts for 24 months or more are not uncommon, and once you've entered the agreement it will be difficult to escape from without incurring a financial penalty. Some crystal ball gazing is required: you'll need to think about your long-term financial prospects and whether or not you can comfortably afford the contract you're considering, even if your circumstances were to change. 


Sim only deals
The cheapest deals available are contracts on a 'sim only' basis: in other words, the phone's not included. As one example, Virgin Media offer a sim-card with 100 minutes and unlimited texts for just 5 pounds month you're an existing customer for their tv and broadband, or 7.99 if you're not.

There are a multitude of deals available of the 'sim only' variety offering varying allowances of talk-time minutes, texts, and internet data. Be realistic about how much of each allowance you're going to need, but be careful not to go too low: the charges for exceeding any given allowance can be extortionate.

A survey carried out recently revealed that 1 in 5 iPhone owners are in debt. Indeed, the newest bit of kit is always a temptation and it's one that you may have to avoid. If you're on a 'sim only' contract, there is no shiny new phone included, so you have two choices:

• Buy an unlocked phone; or
• continue using your existing phone with your new sim-card (you may need to get it unlocked).
  
  
  

The maths
If you're particularly frugal you could buy a budget phone. Manufacturers such as Alcatel produce perfectly functional handsets at very competitive prices. If, however, you want something a little more upmarket, there are a range of handsets available ranging from around 50 to 500.

Before you set your heart on a handset, it's important to look at the numbers. Let's compare a 500 phone on contract with a 500 pound phone bought for a 10p/m sim only deal:

From the calculations above, it appears that the 40 pounds per month contract is cheaper than the alternative because the initial cost of the handset has distorted the figures. If we look at the figures for 24 months you will see that the tables have turned.

As you can see from the calculations above, over a period of 24 months a contract at 40 pounds per month would cost over 200 pounds more than buying a 500 pound phone on a 10 pounds per month contract. If you extend the period to three years, you will see that the savings are even more apparent:

Of course, the disadvantage to this method - although saving a great deal of money in the long-run - is the initial expense of the phone as a single lump sum. If, however, you are realistic about what you want and need from a mobile-phone it shouldn't be difficult to find a handset that does all you need it to and falls within budget.

Haggling

Loyalty may not be quite the bargaining chip it used to be, but the vast majority of companies are still prepared to jump hurdles if it means keeping you on-side. The mobile phone industry is especially competitive which makes haggling for a better deal that little bit easier. The thing to remember is if you don't ask, you don't get. 

Remember that you can only negotiate at the beginning or end of a contract agreement - if you attempt to leave in the middle of a contract you can still be held liable for the remainder of the fees or a termination charge. 

Before you make the call, it's important that you're clear on exactly what it is that you want and at what price. Being able to refer to a similar offer advertised by a rival phone company will go a long way in strengthening your argument, but it's not essential.

When you make the call, your aim is to convince them that you are planning to leave: this will require a little acting on your part. When they ask why you want to leave - and they invariably will - tell them that you feel it is too expensive for you to continue and that you've found a better deal elsewhere.

Instead of waiting for them to make you an offer, present your suggestion. Be realistic with your figures and be prepared to negotiate down if necessary, but don't back down too easily. It's likely that they will back down to your demands, particularly if you can cite the price you are suggesting from a competitor's deals. 

If things don't go according to plan and they say that they are about to arrange cancellation, you can save face by saying "I'd like some time to think about it." and then hanging up the phone. 


Conclusion
Don't let your phone call the shots, make sure you're getting the best deal for you. Only you can decide what kind of deal is most useful, but if you want to save money you must be realistic about what you actually need. Sometimes saving money can be as simple as asking your provider to charge you less (see Haggling). 

Penny's Security Tips #3

Region tagging

Pennysitter aims to provide helpful tips and articles that are universal in the frugal world of money-savers, but when it comes to certain types of matters such as legal rights and the function of financial products, Pennysitter's knowledge is sometimes restricted to the UK.


If you see the following icon above a post, in means that some or all the article may deal with matters that are exclusive to a particular country or region such as links to third-party services and offers.

How to find cheaper train tickets

This article looks at getting the cheapest possible prices when travelling by rail.

Book Early
Wherever or whenever you're going, it's always a good idea to book your tickets in advance. Most railway networks release their cheapest tickets 12 weeks before the date of travel. From this point, the price gradually goes up and up until the date of travel. Booking 12 weeks in advance is often unrealistic, but booking so close as 2 weeks from the date of travel will usually net you a discount of between 30-60%.

Even if you intend to travel on the same day you will always save something off the on-train ticket price. As a general rule, tickets are available to collect two hours after they are booked online, so be careful to book with at least that much time to spare.

The cheapest tickets are also the most restrictive: fixed-time non-changeable and non-refundable tickets are the cheapest, while open and refundable returns tend to be more consistently expensive. When considering which is right for you, it's important to balance the savings you make with the potential risks of missing your assigned train or having to cancel. When you're booking weeks or even months in advance, there is no telling what might transpire in the interim period: electing to buy the cheapest tickets may prove to be a false economy if something goes awry.

Online booking services also take into account whether or not you have a rail-card. If you don't have one already and you don't travel often by train, a rail-card is not always a cost-effective purchase. If you have sufficient time before you're due to travel, it's worth considering if a rail-card would be a worthwhile purchase for you.

A lot of online booking services also charge a small booking fee and a fixed charge for using your credit or debit card. These additional fees are only charged once per transaction, so if you intend making several journeys then it is worth booking them in advance.

If you have time, obtain quotes from each of following websites and others to make sure that you're getting the best price:

• thetrainline.com
• redspottedhanky.co.uk
• tpexpress.co.uk 
  
  
  

PLUSBUS
If you intend to travel by bus once you arrive at your destination, check if the online booking service you're using offers a 'PLUSBUS' option. A PLUSBUS ticket functions like a day-ticket and is cheaper than buying a standard return on the bus.


Split Ticketing
If you feel up to the challenge, you can always attempt what is known as split ticketing. This is where you purchase each leg of your journey separately from station to station and, if done correctly, sometimes doesn't even require changing trains. Obscurely, this can sometimes be much cheaper than the price of a ticket from A to B, but it is tricky to achieve and takes a lot of planning.

Going down a shelf

This article looks at ditching the brand-name groceries in favour of cheaper and, often, better-value products.


The Consumer Trap
Brands are big business, and nowhere is that more apparent than in the aisles of a supermarket. But the important thing to take on board is that 'branded' doesn't necessarily mean 'better'. For example: you probably wouldn't notice the difference in cereals that were 30% (or more) cheaper just because Mr. Kellogg hasn't signed the box.

Branded products are often stocked at eye-level for instant recognition and easy accessibility. This is such a powerful consumer trap that many brand manufacturers pay supermarkets additional fees to provide them with pride-of-place on the shelves. If you want the cheaper varieties it may involve searching high and low - literally!

Further, lower-end products such as supermarket value ranges are designed to be as unappealing and as unattractive as possible. Don't let this put you off. Unless you intend to eat the packaging as well, or put it on display on your living-room wall, there are few, if any, logical reasons not to buy something just because it isn't wrapped in pretty colours.


How Does it Compare?
When shopping for food items, it is always worth checking the ingredients. Often the cheaper branded products will contain virtually the same ingredients, but sometimes the more expensive options will offer additional benefits such as being low in salt or fat, enriched with vitamins, or made with fresh produce rather than frozen. If this is the case, you will need to make a decision as to whether these additional perks make the more expensive option better value for you.

Whenever branded products become especially popular because of some notable feature or another, there are always copycats who will duplicate the product (sometimes almost exactly), market it under a slightly different name, and make the price just that little bit more attractive. This is very bad news for brands, but very good news for customers.

Take the Challenge!
When you buy certain types of products as a household staple, it is always worth road-testing cheaper variations of the same product. You may find:

• that the cheaper product isn't for you; or
• that the cheaper product is just as good, in which case you'll have reduced your average shopping bill from that point onward.
  

Anything is worth trying once... well, almost anything. For some types of products, quality can vary greatly. It's generally risky to go for generic brands of specialty items such as:

• wine, beer & spirits
• cheese & dairy
• meat
• fish
• shaving razors
  
  
  

Shop Smart
When shopping for cheaper items, also beware false economy. A false economy is an action that saves money in the short term but ends up costing considerably more in the long term. In the context of groceries, something  that appears cheap on the face of it may end up being much less so because you need to use more of it (in the case of kitchen-roll and toilet-paper etc) or it doesn't last as long (in the case of shaving razors etc).

Remember that it's the things we spend money on every day, week or month - our staples - that can have the biggest impact on our finances. Every £5 trimmed from your weekly shopping trip equals £260 per year, so it's worth at least trying to skim the fat where you can.

Guilty pleasures - smoking

Everyone has guilty pleasures, often so named because of the disproportionate effect they can have on your finances. There's nothing wrong with any of these guilty pleasures in moderation, but with small changes to your habits you can make huge changes to your bank balance.

For today's guilty pleasure we'll be looking at smoking.


Up in Smoke
Regardless of whether you think it's a good thing or a bad thing, there's no denying that smoking is an expensive habit. Cigarettes are becoming increasingly costly, and this is in no small part due to the massive taxes levied on them by HMRC.

The most effective way of saving money would be to quit smoking entirely, but this is difficult and deeply personal. If you do wish to quit but are in need of help, you can find support and guidance at http://smokefree.nhs.uk/.

You don't have to quit smoking to save money: in fact, even the smallest change to your habit can have a massive impact on your long-term savings. The following example illustrates the effect that smoking just one fewer cigarette a day can have on your income.

• Example:
• 1 fewer cigarette per day = 365 fewer cigarettes a year. 
• 365 fewer cigarettes = 18 and 1/4 fewer packets (of 20).
• 18 and 1/4 fewer packets x cost of a packet (average £6.50) = big savings (average £118)!
  
  

For a more accurate estimate of how much you are spending on cigarettes and, more importantly, how much you could be saving by making small changes to your habit, check out the NHS' Cost Calculator. The calculator also offers suggestions as to what you could do with the money instead.

It's always worth keeping a diary of how many cigarettes you are smoking per day. Even if you don't wish to stop or cut down, it is still useful to have this awareness, and nobody has to see it.


Bargaining
You can still save money by seeing cigarettes a form of currency in negotiations with yourself.

• Example:
• "Instead of smoking this packet, I'll treat myself to a box of chocolates."; or
• "I'll smoke this packet instead of going to the cinema tomorrow."
  
  

By making yourself choose between two things you want, you are still going to save money in one way or another.

No matter what you're doing to cut your daily spend, bear in mind that every pound saved means £365 a year that you can keep as financial security or for treating yourself at the end of the year.

======
N.B. If you're trying to quit or cut down, make sure you're doing so safely. Any reduction in the number of cigarettes you are smoking must be gradual, otherwise you could suffer severe side effects from withdrawal. To find out how to cut down safely, visit http://smokefree.nhs.uk/.

Penny's Security Tips #2

Savings interest 101

This article takes a basic and introductory look at savings interest. We’ll be looking at interest on loans and credit cards a little later.

What is Interest?
Interest is a sum of money that is earned on amounts held in banks and other financial institutions. It is expressed as a percentage of the overall savings figure. For example: if your account’s ‘interest rate’ is 3%, then you would receive 3 pounds for every 100 pounds you have in that account. That may not sound like a lot, but the more you save the more you earn. Getting the best rate of savings interest is about making your money to work for you.

There are two general types of interest: simple interest and compound interest.

• Simple interest is applied only to the original figure. 
• Compound interest is applied both to the original figure AND the interest that has accrued - in other words, interest on top of interest.
  

Interest is paid because banks and other financial institutions invest and lend the money that you hold with them. The ‘interest’ they pay to you for letting them do this is only a fraction of the profit they make. It is, however, virtually free of risk (for amounts below 85,000 at least).

Interest is subject to income tax unless you are tax exempt. Even if you are tax exempt, forms will need to be obtained from your bank for your account to reflect this.


Getting the Best Deal
Most current accounts pay very little interest. Online savings accounts and ISAs generally pay a little more. However, the highest rates of interest are only available from bonds.

The general rule is that the higher the rate of interest, the more numerous or onerous the catches. For example: high interest current accounts require a deposit of at least 1000 pounds per month, online savers provide limited access to your cash when you’re out and about, and most bonds require you to lock your money away for years and charge hefty fines if you withdraw before the end of the agreed period (before it ‘matures’). Finding the right interest rate is, therefore, something of a balancing act: you want the highest rate of interest possible with the fewest restrictions. 

The most common restrictions are on withdrawals, which can sometimes include interest penalties for early withdrawals. However, some accounts also restrict the number of deposits you can make as well, meaning that to get the best rates of interest you may be led to lock away more of your money than you can reasonably afford to.

Millions of people all over the country are ignorant of the often pitiful interest rates that they are receiving from their current accounts and savings accounts. Many still believe that loyalty pays, but this is no longer the case. If your bank isn’t doing you any favours, it’s time to ditch it in favour of a new account. It is now easier than ever to find the right account for you given the number of comparison websites that are popping up all over the place.


Perks
A lot of accounts feature a bonus interest period for new customers (often for the first 3, 6 or 12 months). If you elect to open such an account, it’s worth making a note on your calendar of the date when the bonus will end.

Some banks and financial institutions reward new customers with one-off cash incentives (some of which can be over 100 pounds) for opening an account and transferring direct debits to it. If such an offer catches your eye, it is very important to make sure that you will be able to satisfy the offer's criteria, and that the interest rate isn't so low/charges aren't so high as to make the cash incentive irrelevant.

Be aware that some accounts are set to pay interest into a separate elected account. This means that interest on these accounts cannot be compounded (see above).

Conclusion

Never sign up for anything without knowing what you're getting yourself into, and you should always be alert around deals that seem too good to be true. It can take time to shop around. For many this can seem like a daunting process, but it is well worth the effort.

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Opening a lot of different bank accounts can be injurious to your credit rating. Once you have left one account, be sure to close it. A long-standing bank account can also support your credit rating, so it is worth keeping at least one old account open, even if it’s left holding only a small amount.

Penny's Security Tips #1

Today Pennysitter introduces Penny's Security Tips. These tips focus on how to protect your finances whether that's by taking measures against theft, avoiding scams, or simply being alert to risks. 

Be your own accountant

How much did you spend the last time you went shopping?

If you're having difficulty answering that question, then who knows how many pennies and pounds are slipping through your fingers without notice? The key to avoiding debt is to spend less than you earn. It sounds obvious, but it is surprising how many people don't even realize how much they are spending.

If you've ever been on a diet, did you simply assume that you were losing weight, or did you weigh yourself every day? There are exceptions to every rule, but most people will answer to the latter. They say that "what gets measured gets done", and there's no better way to motivate yourself than being faced with the facts in black and white.

The first step to making your money go further is to actually know where it's going, and all you need to do that is a pen and paper. Below we'll look at different kinds of spending and how to record them.


Recurring spending
Recurring expenditure is things like mortgage payments, TV and broadband packages, utility bills, phone contracts, and even things like magazine subscriptions: the important element that defines this kind of spending is that it reoccurs from month-to-month. It does not, however, include things like shopping trips no matter how regular they might be.

The first step is to list all of the items that have an element of recurring expenditure. This can sometimes take a lot of thought if you've never considered it before, and you may be surprised by how many leeches you have on your bank account.

Once you have listed each item, write a monthly figure next to it. If the price is always consistent like, say, 20 pounds a month for a mobile phone contract, this is very easy to do. If the price is subject to change (and assuming the overall price of the service hasn't increased), you can figure out an average monthly cost by adding together the totals from previous bills (12 months or more is ideal) and then dividing it by the number of months to give you an average.


One-off spending
A one-off spend could be a single item or it could be the total cost of a single shopping trip (even if you shop there every day). Working out how much you've spent on one-off spends is very simple because, unlike recurring expenditure such as utility bills, there is no guesswork involved.

It is important to be diligent in making a note of everything you spend. If you are out and about, it can be useful to carry a pocket-notebook with you; alternatively, you could retain all of your receipts and - provided you can remember to do it - make a note of the totals once you return home.


Plastic spending
Plastic spending is spending paid for using a credit card or some other form of credit. It has the devious effect of relieving you of the cold hard reality of handing over cash. By the very nature of a card, it is very easy to lose track of how much you are spending, and it can lead to a very nasty surprise when the bill comes through at the end of the month.

As above with one-off spending, always make a note of how much you spend on your card. As an additional safety measure, it's also useful to take a note of when and where you've used your plastic to help you be aware of any fraudulent items on your bill.


Conclusion
Knowing where your money is going is essential. It'll help you to keep your head above water and give you an idea of how much you can safely spend. Furthermore, it'll give you an idea of where you can skim the fat.

Yes, it takes a little work, but if it helps you to avoid debt then it saves a great deal more work and stress later on.

The cost of pride

Pride can be a very expensive commodity. This is especially true in a society that is becoming increasingly materialistic - where we are all judged on what we have, or what we don't.

Every day we are bombarded with all manner of advertising and social laws that tell us that taking pride in ourselves and earning respect from others means buying the most expensive branded clothing, the most up-to-date technology, and the flashiest cars. Many try to live a champagne lifestyle on a lemonade budget, and this is likely one of the reasons why the average credit card debt is over 5k per household.

Friends don't let friends go into debt. The important thing to realise is that you cannot buy respect, and you shouldn't empty your bank account trying. If you need to have the newest iPhone to earn the respect of your friends, then consider that what you really need is some better friends!

Instead I invite you to take pride in something better: take pride in overcoming the advertiser's attempts at manipulation; take pride in overcoming the pressure that society instills; take pride in deciding for yourself what you want and what you need.

Going live

Today, after months of research into all manner of penny-pinching, Pennysitter is going live. In the weeks, months, and perhaps even years to come you will find money saving and income boosting tips to help you make the most of what you have, however much or however little that might be.


You're in good hands with the Pennysitter.