How you can make the most of your money

Most of us would like more money than we have, but there are ways to maximise yours through judicious savings and debt management.

Here’s our quick guide to just some of the ways you can make the most of your money.

Take action over debt

Anyone can fall into debt for any number of reasons. If you are struggling with debt, it’s helpful to know that you’re not alone and there are ways to manage it.

Taking control will help you set a path to debt-free life. Resist the urge to ignore any debt communications, whether in the form of letters or emails. It’s best to know exactly what you’re dealing with and how much you owe.

This will help you to prioritise your debt repayments. If you feel you can’t manage your debts yourself then you can get advice. The first step should be to contact your creditors, explain the situation and request that they suspend any further action while you get this advice. Most will be reasonable if they have the facts about your situation.

Contact a debt advisor

Our advice is to avoid paying for a debt management company. There is plenty of advice available for free, which will help you just as much. Start with Citizens Advice if you can, and consider other organisations such as Business Debtline (offers advice to self-employed people) National Debtline (provides email and phone advice and offer a free self-help pack) or Stepchange.

Cut your energy bills

Whether you have debt or not, a great way to save money is to take control of your utilities. Cutting your energy bills and making them more affordable and less wasteful doesn’t mean huge changes, and the small measures you take can help a lot.

Check with your provider whether you are, or could be, paying by direct debit. This can often save as much as £100. Look into switching providers, particularly if you never have before, as this can save a lot of money. Also think about insulating your home – you can save up to £140 on energy bills simply by making sure your loft is properly insulated.

On top of all these measures, you can make savings every day around the home by being conscious of your energy consumption. Take devices off standby and make sure lights are off when you don’t need them. Go easy on your heating and find other ways to keep warm. There are many ways for the whole household to save money on lighting and heating without disrupting their lifestyle.

Save water, save money

In a similar way to saving energy, if you are on a water meter then you can save money by reducing your consumption.

Not only is saving water a great way to help the environment, it’s also a great way to help yourself. If you don’t have a water meter, then find out from your provider whether you can have one installed. It’s a great way to cut your bills, particularly if you live alone.

You can switch back to being unmetered if it doesn’t work out better for you. All properties built after 1990 are automatically metered, but others may need one installed. Simple measures like washing clothes at night or turning off taps when brushing your teeth can really help save water and energy.

Trace lost money

If you have moved a few times or have changed your name, then it’s possible you have old accounts that you’ve forgotten about. Check through your finances to see whether you have any forgotten assets – it could be accounts you haven’t used in years or even savings accounts from your childhood.

The more information you can provide, the easier it will be to recover your lost accounts. However, you don’t need it all so contact your bank, building society or pension provider if you think you have a lost account and go about reclaiming what’s yours.

These are just a few ways to make your money go further. Always get advice if you think you need more help, particularly with long term debt. There is always help available.

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How you can avoid inheritance tax

There are various ways that you can deal with your money, property and estate in order to avoid your heirs paying inheritance tax (IHT).

One of the ways you can avoid IHT is by either spending or giving away a significant proportion of your wealth during your lifetime. You can make several different kinds of gifts during your lifetime that are exempt from IHT.

Potentially Exempt Transfers

While other gifts that you might make don’t automatically come under the tax-free list, they might become tax-free if you live for seven years after making the gift.

These are called Potentially Exempt Transfers (PETs). Most gifts that are made to people, rather than trusts or companies, come under the PET category.

Releasing equity

If your estate is mostly tied up in houses or other forms of property, you might not be able to access it in order to make gifts or spend during your lifetime.

In order to work around this, you can take out an equity release scheme. This means that you will be borrowing money against your home’s value (also called a lifetime mortgage) or you will be selling part of your home at a reduced rate, while you stay living there (also called a home reversion scheme).

If you take out one of these schemes and release money, then you can pass it on as a gift to your heirs, as long as you live for seven years longer after making the gift. If these criteria are met then no IHT has to be paid.

What happens when you die?

If you have a lifetime mortgage then your estate will be reduced by the debt when you die. Although releasing equity this way is tempting, think carefully before you decide to take out a scheme.

Lifetime mortgage interest is ‘rolled up’, meaning your debt will grow fast. As an example, take a look at a £50,000 mortgage with a 7% interest rate per year. This will almost double to £98,358 within a decade. So, you could end up owing more to the mortgage lender than the IHT would have been anyway. It’s always worth consulting an expert if you are considering this route.

Life insurance trust

If you have a life insurance policy and you want it to specifically go to your heirs when you die, then you can put the policy into trust.

These won’t count towards your estate when HMRC works out your IHT. They will also be paid before probate is granted, which means your heirs will get the money much faster.

Deed of variation

This gives your heirs permission to change your will after you die. It could be used to redirect part of the inheritance to someone else, for example. A deed of variation can be drawn up within two years after you die, but all of the will’s beneficiaries have to be in agreement.

Insure against IHT

This is perhaps the simplest way to deal with the IHT bill, but it’s expensive if you’re still young. If it is too expensive, you could consider having your heirs paying the premiums, as they will ultimately benefit.

It works by you taking out a ‘whole of life’ insurance policy. The policy should pay out enough to cover the IHT. The policy is written under trust, and so is paid free of IHT before probate is granted.

HMRC will consider the premiums paid to the policy as a ‘lifetime gift’ if they’re paid by you. They can normally be covered by one of the tax-free exemptions as well.

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