Now that it is the new tax year here in the UK, we receive our interest on our cash ISA’s. The Egg Cash ISA is advertised at 6.05% variable. One thing I really missed when I signed up for it was the term ‘variable’. The two things that made me sign up for it was the 6.05% advertised interest and the guarantee to beat the Bank of England base rate for a year. The latter made me instantly think that it would provide me with a decent return, I know better now!

Whilst Egg have not done anything wrong, the point of this article is to be very careful when you sign up for these things and make sure you investigate the interest clearly. Instead of the £181.50 I thought I would get in return (6.05%) I in fact got £126.29 which equates to a 4.21% return. £55.21 less than I thought! You must also remember that if you pay in installments you also won’t see the return you expect, maybe self explanatory but it’s easy to forget in the heat of the moment.

Moral of this story is take your time and read and do calculations, don’t hurry to sign up like I did as for such a small amount of money it can cost you fairly dearly.

We are at the end of the tax year here in the UK and as such I have just completed my accounts, and planned the investments for the next financial year. I will be posting about my new investments in a post later this week but I thought I would give you a look at how my net worth has increased since 1st Jan 2008. Through the first few months i curbed my spending, it was far to affected by consumerism. I also created a new savings budget and have cautiously tracked all spending, even the spending of the cash in my pockets

A few of the steps taken were:

1. Planning specific meals and write a shopping list of ingredients needed. Savings of £5-£10 per shop.
2. When I want something, I add it to a list and revisit this list everyday. 9 times out of 10 my impulse to buy has faded within 24hrs and my sensible brain has kicked in telling me I don’t really need the wanted item.
3. I have moved money around to new higher interest accounts.
4. Tracking all money spent in iBank. This includes money i spend out of my pocket which is recorded on my iPhone at the time and entered in iBank when I do my accounts.
5. Sold some old junk on Ebay and some old phones on Envirofone.
6. Received Lots of cashback on my Egg Money Card (Balance paid in full each month).
7. Working from home saving money on food and coffee, compared to students union shop and coffee vending machines.
8. Reinvesting in Zopa. Interest rates beat any UK savings accounts rates.

Well it would appear that all the steps I have taken have paid off, in just three months my net worth has increased by 57.91%!!!

This is set to drop evenly until the end of the year as I will effectively be unemployed until November but the old plan will be recreated when I start earning again so it shouldn’t fall to much.

How has your net worth done so far in 2008?

For the tax year 2008/2009 there are no longer two types of ISA, the mini and the maxi. From April 6th 2008 ISA’s will come in a single flavour with new allowances. You will be able to invest in a cash ISA will allow and increased deposit from £3,000 per year to £3,600. This allows you to then Invest upto £3,600 in a Shares ISA (£7,200 in total)

However, you don’t have to invest like that, the above figures are maximums so you could invest £1000 in the cash part and £6,200 in a stocks and shares ISA with a different provider.

So what about PEP’s? Well all PEP’s will be converted to stocks and shares ISA’s automatically.

Early in April I will post with my new ISA plans for 2008 as I have a few ideas up my sleeve

How are you finding the return on your stocks and share ISA’s?

Many people I know do nothing more with their money that leave it in their current accounts (checking, for the americans). These accounts may as well not give you any interest as its so appallingly low! The more savvy people move money into a savings account which in the UK average between 5 and 6.5%. So what should you do if you have filled you tax free ISA allowance for the current tax year yet you want a greater return than a high street savings account?

ZOPA. (Available in the UK and USA)

Simply put Zopa is members of the public lending to members of the public, easily, simply and securely via the Zopa website. This cuts out the greedy banks and brings in the new phenomena known as social lending.

To lend on Zopa is a simple as signing up, paying in your money and then deciding on what ‘markets’ you want to lend too. You decide how long you want to lend for (1 to 5 years) and also which market you want to lend to where the different markets reflect the perceived reliability of the people you lending to. For example, borrowers in the A market will have a better credit than those in the C market. However, you can typically lend at a higher rate of interest to those in the C market.

Typically my money in Zopa is lent out at a rate of 8% for 24 months, certainly much better than the high street rate of 6.5% that I have.  After 6 months and only £100 in Zopa I have made about £4 interest which includes interest from the people I have lent to and also interest on the money that is currently not lent out in my Zopa account. That is pretty good by anyones standards and now that I have used it for 6 months and got used to it and know there is little risk to my investment from defaulters I am going to invest more of my money in Zopa.

As a final note i’d also recommend Zopa for people that need a loan as you will typically get the loan a few percent less than you would in the high street.

Do any of you use Zopa?

Part of the reason for writing my blog was to cover topics i feel most passionately about. Those things being money saving, frugality, life hacks, technology and a few other bits and bobs. I’d thought I’d kick off my writing about money by showing you all how I arrange mine.

Now given the public nature of the internet I’m not going to discuss figures, I will however discuss percentages as these don’t give my salary away! So come 2008 I started to look at the budget I had set up in 2007. To much money was wasted and it was time to evaluate my losses.

This coming year will be potentially tough. I am going for a job this week and if I am lucky enough to get it I will have to start paying rent on my own (Current flat is a reward for doing my current job). I got a job this week so I need to think about the 3-6 months between current salary starting and new one coming in. This essentially means I have no cash flow, well there is a little, but it is cash flowing out. I therefore need to be extra careful for the first 6 months of this year.

This post shows a pie chart of how my outgoings/free cash is currently organised. A few of the categories had to be combined because they formed such a small percentage of the chart it wasn’t worth displaying them separately. The pie chart represents what happens to the income from each paycheck. As you can see a good proportion goes to investments which I can utilise for things such as stocks and shares. The current investment sum however will be used to fill as much of my new ISA (tax free savings for the american readers) this coming April. A good chunk goes to my emergency fund which given my approaching new salary i need to increase to £13,800, a 57% increase from my current goal. However the impending increase for February 2008 for the emergency fund is due to the lack of income that is fast approaching in June. Therefore given the relatively large amount of ‘free money’ I have i’m going to increase my emergency fund by 100% between February and June 2008. 

Part of my new job also includes a good pension plan so I will maintain the current payments that I am making now until I start, there is no need to increase at this point given the hardship I will soon face. I also have a large holiday fund which I will continue to maintain. However, I’ve decided it would be wise to decide upon an upper limit for this account and then let the excess overflow into other accounts. The other savings section represents money put aside for Christmas and birthdays. These figures don’t need adjusting as they were determined in January and were fixed sums that I know I need to achieve. The expenditures represents any monthly subscriptions and bills I have. I am aiming on reducing this by 14% by changing my mobile plan given O2’s new iPhone tariffs being released in February.

In all this is so far proving to be an effective budget, frugality skills will help me to use as little of the ‘free money’ I have available on things I don’t need, hopefully feeding this money into my emergency fund which I will live off come July 1st 2008. Come next months budget review I will be giving you comparisons of January and February and where I saved money and how. Please stick with these articles as they will only improve as the data collected grows.

If you would like to keep up with my bugeting, if you think you could use some of my ideas please subscribe to my RSS feed so you don’t miss following articles 

I thought I would kick my money posts off by dispelling a common misconception. Many people think that being economical with money, or buying cheaper brands is being cheap. Actually by defination it’s being frugal (Wikipedia):  

Frugality (also known as thrift or thriftiness), often confused with cheapness or miserliness, is a traditional value, life style, or belief system, in which individuals practice both restraint in the acquiring of and resourceful use of economic goods and services in order to achieve lasting and more fulfilling goals. In a money-based economy, frugality emphasizes economical use of money in meeting long term personal, familial, and communal desires.  

Let me put this in real terms, baked beans! You have your top of the range beans at say 99p, a can of your supermarket own quality label at 75p. Intermediate label at 50p and the basic range at 12p a can. I can tell you now the cheapskate would have gone for the 12p can without battering an eyelid. A frugal person on the other hand would way up the best taste/price balance. They may think the 50p can is as good as the top brand at 99p therefore making a saving of 49p with little difference to the quality of their life whilst the cheapskate would have saved 87p but probably lost a lot of quality in the process.

This principle stretches across all walks of consumerism. The cheapskate will by the cheapest flat screen TV that will probably only last a couple of years (if they are lucky) whereas a frugal person would do their research and purchase a set of good build quality and reputation even if it means spending more for it to ultimately last longer. They may even purchase an extremely expensive set if it would a good investment to do so.

Thats smart spending and it sets the scene for the way I have constructed my budget for 2008 that I will share with you here starting on the 1st Feb, as well as tips on saving money and being more frugal. If you have credit card or other debts, just want to get your money act together subscribe to my RSS Feed and over the coming weeks and months I how to bring you a lot of good ideas and tips to get your financial life back on track.If you have any comments on frugality, or would care to share some of your favourite frugal moments or tips please feel free to comment.