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PostPosted: Sat Feb 25, 2012 4:45 pm 

Joined: Mon Jan 16, 2012 3:25 pm
Posts: 129
Guidelines on setting up and running a bank account taken from High Street Bank leaflets.

1) Taking Stock
If you’re worried about not having enough money, then your first step should be to take stock of everything. Try and think of it as a financial health check. Taking an in depth look at your finances means an honest look at your money habits and lifestyle. This may sound a little daunting, but you’ll be much better off in the long run – both financially and emotionally.

2) Keeping to a budget
Drawing up a budget is something that’s personal to you and your circumstances. To make an effective budget plan, be honest with yourself and make a note of what’s coming in and what’s going out each month. It’s only by seeing where your money goes that you can work out how much money you have left to spend after your bills are taken care of. That way, you’ll not only be saving money but making decisions that could change your finances for the better.

Key questions:
a) Are you unsure exactly how much you spend in total each month?
b) Do you see budgeting as making sure you have enough money for ‘Friday night’
c) Do you see your spending limit as your overdraft limit, rather than when your account hits zero?
d) Do you splash out on things you can’t afford?
e) If you find £10 in your back pocket, do you see that as ‘free’ money to spend?

Useful steps
Your income: To draw up a budget plan, you will need to write down all the money coming into your household each month.

Your outgoings: Write down all your household’s basic living expenses. You should only write in your regular financial commitments such as the monthly repayment due to a mortgage, second mortgage, rent, electricity, gas and so on. Remember to factor in any annual, quarterly or one off commitments, such as car insurance, so you canmake suitable allowances for these in your overall budget plan.

What you owe: You will also need to work out how much you owe your creditors. Enter a total for all your priority debt payments and your monthly payments to loans, crdit cards and other credit card debts. Priority debts are those that can lead to serious consequences if they are left unpaid. You should not risk losing your home, for instance, or being without electricity, gas or water.

What you would like to save: Enter an amount for how much you would like to save each month.

Once you have all of your income sources and outgoings listed (including debts and savings) you can see what the difference will be and how much you have left over to spend. A good way to check how much you spend in total is to check the ‘total debits’ versus ‘total credits’ on your monthly statements.

Getting into good habits
f) Open a secondary current account so you can ring fence enough money to cover your bills from one account, and leave the rest in your other account for every day spending. You’ll always have enough money to cover your bills, and you’ll know how much you have left to spend. Use the budget planner to work out how much to put into your everyday spending account each month. It’s a good idea to put enough money in your bills account to cover bills that vary in amount each month, and for irregular bills like car insurance.
g) Try to save any pay rises or bonuses for the future and make sure you make the most of your yearly tax free savings allowance by opening an ISA.
h) See if spreading larger payments, such as your car insurance and TV licence fee, over the year by direct debits rather than paying in a lump sum would better suit you.
i) Sign up to our [Lloyds TSB] control facility- for £10 a month Control stops transactions when there is not enough money in you classic Account, helping to prevent you from going over your limit.
j) Protect yourself from identity theft by shredding all mail and paperwork that contains your personal details, like your name and address. The same goes for old cards- make sure you cut through the chip and along the magnetic strip. Some banks offer online statement services.
k) Always check your bank statements for anything amiss. And always inform your bank and other organisations when moving.

3) Managing the day to day
Key questions
a) Do you plan nights out with friends knowing you’ll be asking them to sub you because you don’t have enough spare cash?
b) Does your pay get eaten up by an overdraft as soon as it goes into your account?
c) Are you unsure exactly when your direct Debits or standing orders go out?
d) Do you pay unplanned bank or credit card charges?
Calendar dates in the month and banking services
Pay Day. Set up a standing order to a savings account
Set up direct debit payments so you can pay your bills on time and know you have money to pay them with.
Sunday withdrawal of cash for the week ahead but don’t carry it all with you
End of month arrange temporary overdraft or transfer surplus amount of money into savings account.
Also prepare to save additional amounts for birthdays and religious festivals (where appropriate).
Keeping track
If you stick to your budget then you should be fine, but there may be times when things get tight and you need something to tide you over until the end of the month.

If you can see that you are about to go overdrawn, because money is expected to arrive in your account later than planned, for example, then apply for a planned overdraft in advance. But try not to get used to having a planned overdraft too much (as it affects your credit rating negatively). You should only see it as a temporary arrangement. Focus on your budget and make reductions where possible

Credit cards are designed to be a flexible form of borrowing and an alternative to a planned overdraft. The interest free period on purchases is often up to 56 days but you need to pay your balance of in full in order to avoid paying interest.

Don’t forget that some banks, offer added value current accounts which you pay a monthly fee for. You can often apply for an interest free planned overdraft and obtain a range of other benefits, including mobile phone insurance, breakdown cover and travel insurance. It is worth checking to see if having all of these benefits with one of these accounts could save you money.

Useful Steps
Get into the habit of checking your balance online or by phone. Also:
Pay your bills by direct debit or standing order. For example after you’ve been paid, or spread the payments if you’re paid weekly.
Some banks offer text alerts and for a small monthly fee to get the mobile banking pack.
Use cash or debit cards instead of cheques. Your money will leave your account much quicker, giving you a clearer picture of what your balance is.
Know how much you should have in your account at different times of the month, so that when you check your balance, you know if you’re on track.
You can choose not to have your bank statements sent to you and look at your statements online – ask your bank for details.

Protect against identity theft
Always shred mail and other paperwork that contains personal information, including junk mail, before throwing it away.
Always check bank statements. If you spot something suspicious, contact your bank. And do the same if your bank and credit card statements fail to arrive.
When getting rid of old credit cards, make sure you cut through the chip and along the magnetic strip.
Online passwords: choose a minimum of eight characters. Combine letters and numbers. Don’t use your login or obvious names, such as your mothers maiden name. Most people only remember one password, but this is less secure. So consider adapting one password for each website you use. For example: for hotmail use fredz294h and for a bank account fredz294b.

4) Borrowing
At times, it’s good to be able to borrow money. It enables you to purchase the things you want right now without having to save for them. There is some risk involved as borrowing is similar to using income you have yet to earn, today. Credit is something that needs to be repaid and different kinds of credit are usually repaid differently. So you should only take it on if you can comfortably manage the repayments.

Key questions:
a) Do you use credit (like credit cards, hire purchase, loans etc) without knowing the exact rate you’re paying?
b) Unsure as to how you’re going to pay off your debts?
c) Are you unsure how much interest you’re paying?

Choosing the right sort of credit
Overdrafts are ideal for tiding you over until the next month when you know you’ll have the money to pay it back. A planned overdraft is one you agree with your bank in advance depending on your circumstances. An unplanned overdraft is where you make a payment from your account when you don’t have enough money and your bank agrees at the time to cover it. Obviously its better – and cheaper – to have a Planned Overdraft as Unplanned overdrafts incur extra charges but its cheaper to control your spending and not need an overdraft at all.

Credit Cards are a flexible form of borrowing. The interest free period on purchases can be up to 56 days if you pay your balance off in full. And whilst spreading your card payments by paying just the minimum amount every so often can help you manage your money, its not advisable to do this for too long. Also look out for special balance transfer offers. You could transfer the balance from a store card or another credit card and benefit from a lower rate of interest for a while.

Loans are for when you need to borrow money that you can’t pay back quickly, for example a large item like a car. With a fixed rate loan you’ll know exactly how much you’ll need to pay back each month and this amount doesn’t change, so you can work out how much you can afford to borrow and make a plan to pay it back.

Hire Purchase is a finance facility made available through a supplier of goods (for example a department store or a motor dealer) to help you pay for the goods, where you pay an initial deposit, followed by equal regular instalments over a set period. The interest rate is fixed for the term of the agreement (or possibly interest free) so the instalments should stay the same for the full length of the agreement. At the end of the period once you have paid all the instalments and the purchase fee, the goods will be yours.

Leasing allows you to hire an item for a monthly repayment. Some arrangements give you the option to purchase the item at the end of the period.

Mortgages are loans secured against your house or flat. This means that if you’re unable to pay back the loan, the mortgage company can repossess your home and get their money back by selling it. There are different mortgage deals and rates available and usually, the more money you put towards the purchase price yourself (your deposit), the better deal you can get, so its best to start saving for your deposit early.

How the cost of credit can soon add up:
If you do apply for credit, its important you get the right credit for the right purpose. Short term credit is more flexible, but obviously you’ll pay higher interest for this kind of flexibility. Long term crdit, however tends to be cheaper but less flexible. Whichever you choose, make sure you pay it off as quickly as possible and avoid raking up debts.

If you have any concerns about your debts, there is lots of advice available.

Understanding Credit Scoring
Credit Scoring is how banks, credit card companies and other lenders make decisions on whether or not to lend to people money. A good credit score can get you better rates of interest when you apply for a loan or a mortgage, so you should treat your rating with care. It uses statistical analysis to decide whether an application falls into a low or a high risk category, so is fair and unbiased.

Basically, every time you apply for a loan, credit card, store card or mobile phone contract, lenders predict your likely behaviour.

Lenders then use this to determine whether they’re going to lend to you and on what terms. Different lenders do it in different ways, so if one lender refuses you it doesn’t mean that everyone will.

The information used comes from several sources. Lenders use public records such as the electoral register to check your identity and address, court records to check for County Court judgements (CCJs) or bankruptcy, and information from other lenders such as details of other applications or whether you’ve made repayments on time.

Even if your records show that you have, or once had, financial difficulties, not all lenders will automatically turn your application down.

Get hold of your credit file from each of the three main credit reference agencies so you can correct any mistakes- for instance if you’ve ever lost your wallet or had it stolen, someone may have attempted to take out credit in your name. A credit report only costs a few pounds, but it’s well worth it. When the companies reply, they’ll explain what the information means and tell you how to get it changed if you can show them that its wrong.

Equifax, tel: 0845 600 1772

Experian, tel: 0870 241 6212
Callcredit, tel: 0870 060 1414

If you find that you do have a bad credit rating, either because you’ve slipped up on repayments in the past or for some other reason, there are things that you can do to improve your credit score.

For instance, avoid applying for credit all at once as it makes lenders suspicious. Also, get evidence of stability- things like being on the electoral roll and in regular employment help. Remember to keep up repayments and don’t pay late. Cancel any unused store cards, credit cards, and bank accounts. Oh, and remember that being financially linked with someone with bad credit can affect your rating. If you split up with someone you’ve had joint finances with, write to credit reference agencies for a ‘notice of disassociation.’

5) Saving
Saving some of your money will always give you greater long-term security and peace of mind than spending all of it. As a nation (Isn’t the UK a country made up of 4 nations?) we really need to save more. In fact it’s become increasingly important as housing and retirement costs keep going up.

Key questions:
a) Do you have any extra cash sitting in your current account?
b) Are you unsure exactly how much interest you’re making on your savings?
c) Do you think you could save a bit more if you were more disciplined?
d) Are you hoping to splash out on something special in the future, but don’t know where the money will come from?

Getting advice.
To a lot of people, savings – and particularly investments – can seem complicated. So take a while getting the right kind of advice, so you can be confident you know exactly what you’re doing and why.

1) Try the Money made clear pages at, now succeeded in part by the money advice service
2) Many companies do helpful guides. And if you’re aged 50 or above before 6 April 2010 you will benefit from the new increases in ISA limits. As of 6 October 2009 the cash ISA limits will change to £5,100. Try
3) Speak to your bank to make an appointment with a financial adviser.
4) ISAs are advertised by most High Street Banks [This leaflet was released by Lloyds TSB as of 01/10/09 and they have guidance about them on the How does an ISA work part of]
5) Become a savvy saver. offers financial guidance.

So what can you do?
The first priority is to clear most if not all of your debts as quickly as you can. Then, you should find a way of budgeting to save a little each month. Aim to put aside a days pay after tax every month to start with. Your first savings priority is to set up a little pot of money for emergencies in an instant access savings account. It may help to set up a standing order to your savings account on pay day so you don’t spend all your incomings and can keep payments regular.

Whatever crops up in life, whether it’s an unexpected bill or a shock redundancy, it’s worth having some savings to put by. Ideally you should have enough to cover you for at least a couple of months. Then it’s time to think about longer term savings, investments and pensions and where applicable, to set them up for your children and relatives as well with the relevant child trust funds and state benefits if you are on lower incomes.

The three main ways of saving in the UK are:

Everyone [who has done the UK citizenship class] is familiar with the basic ‘retail banking’ savings account, which is one where you can deposit and withdraw cash and the bank pays interest for the money while it is in the account. However if you want to get extra interest and are prepared to tie up your money for a set number of months with a term deposit or savings bond (as The Post Office used to offer?), manage your account only through the internet with an internet-based savings account, or set up a monthly savings account.

For most UK taxpayers, their first choice savings account should be a cash ISA. This is a savings account that pays interest tax free. You can currently pay in up to £3,600 each tax year, either all in one go or over the year – and if you’re aged 50 or above before 6 April 2010 you will benefit from the new increases in ISA limits. As of 6/10/09 the Cash ISA limits will change to £5,100. But once you’ve paid in your Isa allowance, you can’t add any more even if you take money out, so you should have other savings too.

Just how safe are savings?
The Financial Savings Compensation Scheme is an independent body in place as a last resort to cover most deposits, including savings, paid into retail bank accounts. It covers 100% of the first £50,000 deposited (Note: though it is worth checking if that is per bank, per account or per individual).



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