Nearly half of UK households say that they would struggle to cope if their monthly outgoings rose by £99. We look at how you can create some financial 'breathing space' to help you out if you lose your job or become ill.
Money lessons from Formula One!
Money lessons from Formula One!
Last weekend saw the Australian Grand Prix open the new Formula One (F1) racing season. Over the next eight months, 22 drivers, along with their racing teams, will visit 19 countries, ending in Brazil on 25th November. And travelling with them will be a heady entourage of the rich and famous – traipsing the globe in super-yachts, private jets and luxury cars.
Yes, F1 is not a sport known for its financial modesty. But, nevertheless, there are a few money lessons we can glean from it…
Make frequent pit stops
Planning and executing pit stops quickly and efficiently can win or lose an F1 race. Cars are refuelled, mechanical adjustments made and tyres switched. These changes improve the overall performance of the car as well as allowing less fuel to be carried – making it lighter and quicker.
Likewise, it’s essential for all of us to take frequent financial pit stops to spruce up and refit our money arrangements – especially if your savings vehicle of choice is an instant access savings account.
Easy-access savings accounts are usually fitted with a temporary bonus interest rate. Stay with the account for one lap too many and this will fall off – leaving you with a paltry return.
Indeed, Coventry Building Society and ING Direct have two of the best initial savings rates: 3.15% and 3.03% respectively. However both come with 12 month bonuses – 1.15% in the case of the Coventry account and 2.49% on the ING Direct deal. When these both fall off, you’ll need to switch out and take a savings refit if you want to keep earning a decent return.
It’s a similar story for energy tariffs. The cheapest gas and electricity rates are available on fixed tariffs. But when these set-term deals expire, you’ll be shunted onto the regular rates and will need to switch again.
Take careful note of conditions
Picking the right tyres for the right weather conditions and track is another vital decision within F1 racing. Wet conditions require grooved tyres, while the wheel ‘hardness’ will depend on the track characteristics. Pick the wrong type and the car and driver will be at risk of skidding or aquaplaning on standing water – or at the very least, they’ll lose valuable seconds in the race.
In the same way, you should always take external conditions into account when picking a financial product. And if the financial product you're after is a mortgage, you should consider the longer-term economic road ahead.
There's a major conundrum for borrowers, one that continues to motor on in the current climate, and that is the choice between trackers and fixed deals. Tracker mortgages are pegged to the Bank of England base rate, rising and falling with it, while fixed deals offer a set rate for a set period. The former is cheaper, but as it’s not fixed, you’ll have no guarantee that your mortgage outlay won’t accelerate.
So in one respect, whether you go for a tracker or a fixed rate will depend on your view of the economic road ahead. If you think interest rates are set to make a sharp turn then fix; if it’s clean, straight track for the foreseeable future, opt for a tracker.
But that’s not the full story.
Picking a mortgage should also depend on how well you’re kitted out personally for any additional challenges ahead.
Essentially, it’s all about how many bumps in the road you can soak up. If you absolutely need the security of a fixed rate to budget into your monthly finances, then opting for a tracker that could potentially leave you out of pocket is a bad idea. But if you can afford to see your repayments increase then snapping up a cut-price variable and overpaying while the rate remains low could be a good way of making a dent in your home loans before any interest rate rises.
Head over to our mortgage centre to get hold of all the current top rates.
Get yourself in pole position
Pole position is where every F1 driver wants to be. Derived from horse racing, where the leading rider started on the inside of the track next to a pole, the front-of-the-grid position is handed to the driver with the fastest qualifying time. So those that get their act together prior to the race itself will boost their chances of winning it.
Likewise, if you’re planning on snapping up a new credit product, switching banks or even getting hold of a new phone contract, you should make sure your financial form is in pole position before you start applying.
Opening up your financial bonnet and checking your credit history for potential problems is an essential first task before embarking on any money journey. You can see your credit status for free using CreditExpert through lovemoney.com (although you need to cancel within 30 days if you don't want to be charged).
Look for any mistakes on the history and get them corrected immediately. You can also add in a personal statement to give your side of the story about any black marks. Staying at one address and in one job for an extended period of time can also boost your credit-worthiness.
Further to this, you should ensure you’re on the electoral register; as this is used by lenders to check that you live where you say you live. Closing any unwanted and additional credit cards and bank accounts is also a wise idea. If you have a lot of credit available to you, lenders will be put off giving you more. It’s also essential to pay up on time on all of your accounts. Missed payments and defaults will puncture any chance you have of getting credit.
And when you do come round to applying for a new card or loan, try to limit your applications. Applying several times can harm your financial form by leaving a footprint on your history – putting other lenders off.
So there you have it, three money lessons from F1 to ensure you’re always winning with your personal finances.
related stories on msn
latest money videos
While Royal Mail showed an increase in yearly profits Marks and Spencer saw profits fall agaisnt last year's figures.
Date 21/05/13, Duration 1:51, Views 469
more on msn money
msn money poll
When did you last switch your current account?
Thanks for being one of the first people to vote. Results will be available soon. Check for results
- In the last six months
- In the last year
- In the last two years
- In the last three years
- In the last five years
- 73 %I have never switched current accounts