10 Personal Finance Tips For Teachers by @ICTMagic

5. Investing

Getting started with investing in stocks and shares can seem daunting. Hollywood has given us the sense that one can make a fortune or lose it all. While both may be true, a company may be the next big thing, or go bankrupt, this is rare and the reality is usually more mundane. If you aim to invest for the long-term and spread your investments across a number of funds and companies, you can make modest gains above bank interest rates while limiting your risk, although that risk is always there (you have been warned!).

Most banks have share dealing options, with a considerable fee for doing so. There are a number of platforms which now allow you to trade at a fraction of the cost of the banks, and in the case of my current favourite, Freetrade, there are no fees at all. Instead, the platform, available on iOS and Android, makes its money from any cash you load onto your account which is not currently invested. Free trades are made at 4pm each weekday, with the option to buy instantly for a fee of £1.

If you decide to start buying shares, I suggest you put a small amount of a few tens of pounds and test it out for a month or two so you get used to seeing the daily gains and losses and to ensure you are comfortable with these. While red numbers can make uncomfortable viewing, in every 10 year period the FTSE has gained value as a whole, so you need to look at the long game and take the daily fluctuations in that context. As noted in section 3, you may need to pay capital gains tax on your earnings from selling shares, but only when you sell them. You will also pay 0.5% in stamp duty for each transaction.

There are two main ways into the average consumer can make gains from shares. The first is simply if the price goes up and you sell at a higher price. This requires you to pick ‘the winners’ and can be tricky.

A more reliable income can be made from dividend shares. You can think of this as a loyalty bonus that some companies pay to shareholders to reward them for investing in them and to share the profits of the company. The dividend ‘yield’ or the payment is a percentage of the price of the share. So if the share price is £50 and the yield is 5%, you will get a dividend of £2.50 over the year. Therefore a dividend stock offers investors a buffer so, in the case of our example, the share price could fall by £2.50 without the investor losing money. Note that dividend payments may be split over the year, so our 5% may be paid in two lots of 2.5%. To get a dividend you need to hold the shares on the Ex-dividend date (with a day or two before that to ensure the purchase has been made) and the Pay Date is usually a few weeks later. Be aware that dividend payments are taxable in the UK after an allowance (£2,000 as of June 2019), so you will need to tell the tax authorities after this amount. See here for details.

In reality, you should adopt a strategy which encompasses both growth stock and dividends to make gains, a modestly rising stock price over the long-term with a decent dividend yield providing you with regular payments. Your choice should also reflect your values, for example, I will not trade in tobacco or arms companies shares even when, depressingly, usually do quite well.

My main tools for shares research are Yahoo Finance and the free sections of DividendMax, plus listening to BBC World Business Report , BBC Moneybox, FT Money and the FT News Briefing.

If you would prefer for an expert to manage your stock and shares funds for you, you may wish to use your stock and shares ISA allowance to invest with a low-cost fund manager. There are many to choose from, but as you should be aiming to keep your ISA from the long-term I think that the market leaders are a safer option. My favourite is currently Nutmeg and you can try it with no fees for 6-months via this link.

They have three options:

  • Fixed Allocation which is passive and very low cost
  • Fully Managed which is managed by experts to maximise gains, but for a slightly higher fee
  • Socially Responsible which invests in companies with social responsibility credentials for a slightly higher fee still.

For the fully managed option, the fees and charges amount to approximately 1% of your investment a year.


6. Utilities

As with bank accounts, the average consumer has been with the same energy and other Utility providers for more than a decade, and there are considerable saving to be made by switching.

Water

In many areas, there is only one water supplier, so you may not have the option to switch companies, but there may be other tariffs and savings to explore. If you do not have a water meter and don’t often water your garden or wash a car at home, you could save by switching to metered water.

Energy

There are currently around 50 electricity and gas suppliers in the UK, so moving can bring real cost benefits and you can choose how you want your power to be generated. As a tree-hugging sandal-wearing vegan leftie, I have thought about home generation with solar, but the energy market is catching up now so you can get the renewable power with the economies of scale without the upfront costs from the grid. Because renewable energy is now cheaper to generate (even with government subsidies for coal and gas!) you will likely find that the renewable options are amongst the cheapest on any price comparison website. After much research, I opted for Bulb, a completely renewable electricity and carbon-offsetting gas supplier. Switching was easy and took 5 minutes. Click here to get a quote and a £50 credit if you join. I am now paying less than at any time since being a homeowner. We will come back to environmental economics in the next two sections

Broadband

As you might imagine the ICTmagic household uses quite a lot of tech, so good reliable broadband is essential. When you get to a certain ‘Megabits per second’ level, Broadband is broadband, and what you are paying for is the service and what providers think they can get away with. If you are happy with your current package, it is still worth calling your provider and telling them that you are thinking about moving. They will likely cut a substantial percentage off of your monthly bill to be locked in for another 18 months.

While not for everyone, especially in rural areas with poor mobile signal, I am currently with Three and their HomeFi Unlimited package for £22 per month (as of June 2019). It uses the mobile network, so it doesn’t need a landline connection (another huge saving in the age of mobile phones) and I average around 100Mbps, which is double the UK average download speed, and enough to stream video on 5 or 6 devices (I’ve not tried more!) without any issue. Another advantage is, because there is no landline, I can plug the hub in anywhere and get online. Click here before purchasing to get a £25 Amazon gift card if you decide to get the same package, but if you are in a rural area and not a Three customer, you may wish to get a free Three SIM card to see what the signal is like in your area before you buy.

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About @ICTmagic 658 Articles
Martin Burrett is the editor of our popular UKEdMagazine, along with curating resources in the ICTMagic section, and free resources for teachers on UKEd.Directory

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