How to afford a better future for your family

H: Deborah Greenwood, host

C: Cliff D'Arcy, broadcaster and finance expert

R: Roger Matthews, chief dental officer, Denplan

H: Hello I'm Deborah Greenwood and welcome to the Personal Finance Show. Now in the midst of challenging economic times, no doubt many of you are thinking carefully before signing on the dotted line for that new kitchen or overseas family holiday. Well according to research undertaken by Denplan, it seems it's more than just our lifestyle which is being affected by the recession, and in fact we're putting our health at risk. Regular attendance to the dentist for example is now at its lowest level since 2001 and of those not attending, more than 4 in 10 Brits said they just can't afford to go. Well, joining me today to discuss this and ways in which you can get on top of your family finances is broadcaster and finance expert Cliff Darcey and Dr Roger Matthews, chief dental officer at Denplan. Welcome. Well we are all feeling the pinch aren't we, especially after clearing those Christmas card bills, is 2010 looking better for UK families Cliff?

C: I think it could hardly be worse than 2009 to be honest Debbie. I mean we're just coming out of the worst recession Great Britain has ever experienced, and growth in the final quarter of last year was a feeble 0.1% so when I'm looking ahead to this year I think yes it's better than 2009, but because of things like rising unemployment, pay freezes, even pay cuts, we're still going to – it's still going to feel like a recession to millions of people, so I do think that we need to pay particular attention to our family finances

H: Ok and what sort of things do you think people are cutting back on at the moment?

C: It seems to me they're cutting back almost panicking and cutting back on what you'd call big ticket items. I mean the sales of cars, new cars for example, slumped last year, even though the government introduced the scrappage scheme where you could get £2000 for swapping an old banger for a new car, and likewise holidays and travel being cut back. So I think that in some ways the leisure and entertainment industry is suffering as a result, and pubs and bars are reporting lower attendance, so it seems as though we're spending a lot less money on entertainment and leisure

H: Ok and vital things, do you think there's anything particularly vital that families are maybe cutting back on that they shouldn't be?

C: Well I think that in the panic to cut back, some people can make false economies, for example there are certain things that you really need to put at the top of your list when it comes to making your bills a priority. Things like, your car, your home etc, but also I think insurance is very important, home insurance, car insurance, life insurance and medical insurance, dental insurance - you know if you cut back on that by just randomly slashing your expenses, what you could end up is a situation where you've got rid of the safety net, and then just immediately after, sods law, you then need to rely on it. So I would say to people don't panic and just cut back willy nilly, make a plan and then organise your expenses and your incomings and outgoings, so that you can make the most gains with the least pain

H: Ok. And just talking about insurance, we've already had one of our first questions in which is from Camilla who wants to know what insurance do I need, and she says which ones are just scams? Not quite sure we agree with you quite there Camilla. But does contents insurance cover most things? What's your view on that?

C: Well insurance is - all insurance is a gamble, and some of those gambles are fairer than others. For example home insurance, car insurance, life insurance, health insurance. All of those are generally reasonably good value for money, because the majority of money that's paid in in premiums – it's also paid out in claims. And it's things we really need. I mean the point of insurance is protecting ourselves, our families, our valuables, what's really important to us in life, and that includes our health. Whereas there are some insurances that I just think are completely spurious, and indeed the profit margins on those can be so high that 80% of the money you put in is paid out in profit. I'm thinking of things like payment protection insurance, which covers accident, sickness, unemployment on credit agreements, extended warranties you buy in the shops where you can buy a £400 digicam and the insurance on top, the extended warrantee can cost £200 which is half the price of the goods. Mobile phone insurance when you've already got cover through your home contents insurance, there's a whole multitude of low level insurances I think you can live without. And what I would say is forget about the trivial stuff and concentrating on making sure you keep up the premiums on the things that are important – so your health insurance, your home insurance, your car insurance, and if you've got a spouse or dependents or young children, your life insurance as well

H: Absolutely, I mean this research that we've just been talking about Roger, it has covered some very worrying evidence hasn't it about our attitudes to our health, particularly towards our dental care

R: Yes it really jumped out at us this year Debbie, we've been doing these surveys for 6 or 7 years now, and we suddenly found that in the last 12 months alone, there've been a drop between about 3 in 5 people saying they went to the dentist regularly to just over 2 in 5, so that was a big change across the whole population, and so we began to think well why are people putting off going for their regular dental check-ups, and we asked them and they said the primary reason was cost. So it was as Cliff says, people are cutting back on things and not necessarily cutting back on the things they can do without, but perhaps making you know short adjustments that might in the end cost them dearly

H: Ok, so you would say that obviously dental care is a priority for families, it should be something they're thinking about right now?

R: Dental care is very important because unlike most things in life, I mean you might hope that you're not going to have any great medical disasters or any major problems with your health, but with dentistry you know because of our modern lifestyle you're going to need maintenance care for your teeth, from time to time. And that's an ongoing need, it's not a gamble as Cliff said with insurance, it's not a risk. You are for the vast majority of us, going to need some care, and therefore it is prudent to go along and have your teeth checked, preventively on a regular basis, rather than simply waiting until major problems blow up and then who knows what the cost might be

H: Yes and obviously something that's of interest to our viewers, Darius has a question for you – "how does Denplan compare to the NHS and what are the main benefits?" I think it's something we'd like to know

R: Well Denplan, and in the light again of what Cliff has said, Denplan is not an insurance product it's a dental plan, so you're not paying in the hope you may get something back, you're actually paying out an amount which is related exactly to the care you're going to receive in the future. Where Denplan helps is in budgeting. You know each month what you're going to spend. You know that you're going to get treatment from a dentist that you prefer, a dentist that you know and trust. You know that there aren't going to be tremendous waits, that you're going to be able to find somebody that's local and convenient through our network of dentists, and what's more, you'll know exactly what you're going to be paying in advance

H: Ok, it's definitely stirring up a little bit of interest here. I've got a question in from Becky saying "hi my mother has had dental problems over the years, and so is unsure as to whether she'd be accepted onto a dental plan and could you please advise her?"

R: Well if her teeth have been maintained now and her teeth are in good health now, she would be accepted onto any plan. If she needs some work to become fit, then she might need to have that done first, but the answer is go and ask your dentist and he or she will find a plan that suits her, suits her pocket and suits her needs. There is no question of us ever turning somebody down for cover

H: Ok so some good ideas about budgeting and finance and I'm sure Cliff you've got some excellent ones to add to that. What do you think are some of the best ways to get on top of your family finances at the moment?

C: Well actually I would argue that the only way to get on top of your family finances is to actually measure what's coming in and what's going out. I mean I used to work for a chap, a boss, who said if you can't measure it you can't manage it, and for a lot of people they have absolutely no idea where the money goes. A recent survey of family spending by the government discovered that they typical household spends £460 a week and we can guess where most of that spending goes – on housing cost and on travel and expenses, but there are lots of other things, so the first thing I would say is, there's a really powerful tool on the internet, it's called online banking. Go onto your online bank, download 3, 6, 12 months statements as much as you can, do the same for your credit cards, if you haven't got the online facility, bring all your bank statements together, and just take a look where the money goes, because the answer will immediately leap out at you. If you see that you're spending money of – for example putting £15 a month towards something that you no longer use, a classic example is the person who takes out gym membership in January as a new year's resolution and never uses it again, or has a policy that they haven't looked after or don't need any longer, you know your mobile – you've changed your mobile phone provider and you're paying two lots of mobile phone insurance, I see that quite often. You know, look for the obvious, obvious games. What you don't want to do is cut back on things that are really important to you that affect your lifestyle, you should be looking at things that are really simple to replace one for one but at a lower cost. In other words what you're looking for is value and not just necessarily price, so for example things like broadband, internet, your mobile phone, all these communications costs – they can add up to £200 a month and by bundling them you could save in excess of £100 a year for example. So I'm very much in favour of firstly having a look at where the money goes and deciding how you can swap to different providers in order to benefit because to be honest, in the modern world and particularly with some big companies and financial firms, loyalty is for dogs. Often you're treated much better as a new customer than you would be if you stayed with that company, and there's such fierce competition these days to win your monthly or your annual income, that there really is no sense in when you get your renewal notice or your late notice bill or whatever for your energy or for any other aspect, why just stick with the same provider when shopping around can save you a fortune

H: Excellent, and you've mentioned energy, and Sandra Johnson wants to know, "do you think the energy companies will bow to pressure this year and put their prices down?"

C: I suspect not. I think they believe that there's upwards only increases in energy costs. I mean you know it's very difficult to say because wholesale energy costs – gas and oil vary so much. I mean the price of oil has dropped 10% in the last 10 days, but you won't see that at the forecourt when you buy diesel or petrol, and you won't see it in your home because there are other implications. I mean for example when you look at the cost of fuel when you fill up your car at the forecourt – we're paying £5 - £5 a gallon now for petrol, or more, and two thirds of that is taxes. There's fuel duty, there's VAT, VAT has just gone back up again which explains why fuel prices are increasing. So even though the price of oil has dropped suddenly and could drop further, I suspect that we will see very little change at the forecourt, and with extra taxes at the forecourt coming later this year , I suspect vehicle fuel will become more expensive. And as for the gas and electricity in your home, I think there's a pretty slim chance that we'll see any major reduction in bills, regardless of what happens to wholesale prices

H: There's a final one I think here for you Cliff, or maybe not – it's going pretty mad with the questions. David says "hi Cliff. Given that interest rates look set to remain low, is now a good time to transfer my cash ISA into the stock market?"

C: It very much depends what you want to do David. I would say if you're interested in investing in the stock market, you know you're buying a stake in companies. This isn't something you can do as a quick reward. If you're in it, you're in it for the long term, so I suspect that given that the last 10 years have been very poor for the UK stock market, in fact the worst 10 years we've seen in the last century. What that generally suggests is that the next 10 years will be pretty good, so I think over the next 10 years you'll be able to invest in – with confidence, knowing that your returns could exceed those on cash. But of course by investing in the stock market you have to ride that particular roller coaster, and that can mean, you know short term fluctuations where you could be losing money. If your concern is that you want to get more income, from that cash, and it's in a cash ISA, have a look at the interest rate, look it up on the internet or go into your local branch, find out how much you're paying and then go and find the best buy rates, because I was recently dealing with a reader who managed to increase the rate on his cash ISAs by a factor of 6. He was earning 0.6% a year on his savings over £50,000 and now he's earning 3.6, so you can actually, just by shopping around, increase the amount of interest you're earning by a multiple and then not have to take that stock market risk. So it's up to you, if you want to take a risk, have a 10 year plan, maybe put it in the stock market, but if your goal is to increase the amount of interest that your cash is earning, get on the internet and shop around for those best buys

H: Excellent advice, thank you. We've got a question here from Richard, back to you Roger – "what does Denplan cover? Does it include a dental hygienist for example?"

R: Denplan can include a dental hygienist, it depends on the plan you're on and the dentist you go to. The answer to that is to check with your dentist, check with the dentist you want to register with. Denplan offers a whole range of plans from all inclusive ones to ones which cover just maintenance, the preventive care of check-ups and scale and polishes and x-rays. So there's a wide range of plans available. The answer is have a look on our website, have a look on denplan.co.uk/findadentist, put your postcode in, you'll find the practices nearest to you, you can phone them up, in some cases you could actually enrol with that practice online there and then straight from our website. In other cases you can go straight into the practice's website which will often explain more about the individual circumstances of what they offer in that practice. Every dentist is a private company, virtually all dentists in this country are privately owned, including NHS dentists, they're all private businesses so they all have slightly different offers. What we try to do through Denplan is to pick the best that's on offer and to make that available to the patients, and the great thing is that you know that whichever level you pick you're going to be budgeting for your plan in advance, you'll know what your monthly payments are and what they cover. No small print

H: No, sounds like it makes sense. And you undertake this survey at Denplan quite regularly, as we go through the recession, hopefully we see a greater increase in growth, do you think people's attitudes are going to change, are they going to get their mind back round how important health is and how much of an absolute imperative it is for the family?

R: I'm sure they will because back in the early '90s we saw a bit of this trend previously, we haven't seen it in recent years but we saw dental attendances drop off then, and they came back because there is no getting away from it. The problem is if you neglect your teeth you know what's going to happen, you're going to have problems, you're going to have toothache, and this isn't going to help anybody. We want to make sure that you prevent those problems, so whilst I'm sure those figures will revert to normal, in the meantime don't be one of those statistics, don't be one of those people that's caught out with toothache and hasn't got a regular dentist to go to

H: Claire over in Putney by the look of it says "I had some pretty major orthodontic work done when I was a teenager and it does mean my teeth are straighter than a lot of people, but would this get taken into account on something like Denplan and would I be charged more as I have a history of major dental work?" Good question

R: Well Claire you obviously took great care of your teeth because you had them straightened, you went and had the orthodontics done, that should be a great point in your favour, because straight teeth are generally healthier teeth. They're easier to clean and so they tend to have less disease, so I would have thought that on the orthodontic basis you'd actually be doing rather better rather than worse. You certainly wouldn't be loaded against as a result of having that done. If you've had lots and lots of dentistry done, it may be that you need higher maintenance going forward, but your dentist can take this into account because again the great thing about a plan is it's not insurance, you get back what you're paying in for and therefore you will get value for money wherever you go

H: Thank you Roger, I hope that answers your question Claire. Cliff, now for a woman with a major shoe addiction and probably someone who shouldn't be going through her bank statements and underlining all the things she spends her money on, what would you give me as my 3 absolute top tips, me and my family, things I can do right here, right now to move ahead on my family finances for 2010?

C: Well I would give a little bit of advice I give my children who are 6 and 8 – when I hand them over their pocket money I say look you can only spend it once, and that's really important because you have this kind of false accounting that goes on. With children I call it stealth pocket money, where I hand over the pocket money and then they come back and ask for a magazine and what have it. So when you sit down at the start of the month with your wage on payday or your earnings for that month, remember that you can only spend that month's money once, otherwise you're forced into borrowing. So that would be my first advice that to – to keep an eye on your fiannces properly you have to know that there's a limit on what you can spend because you know that credit card limit is a limit not a target, and I know that some people get a new credit card and think whahoo I've got £3000 to spend. No you've got £3000 more debt potentially. And the second thing I would do is have a look at your borrowing situation, because although the Bank of England base rate is at 1/2% which is a 315 year low, you know interest rates on credit cards for example, personal loans etc are very high. I mean the typical credit card is still charging 18% a year interest when the base rate is ½% so if you're – what I would do is have a look at your borrowing and try and put as much effort in as you can into paying off the most expensive debt. I mean I know some people who have £2000 on a credit card at 18% and £2000 in a savings account earning ½% and using one to pay off the other makes you £350 a year more, so yes that's my second piece of advice. My third piece of advice would be have a look at the bills that relate to your housing expenses, because they are by no doubt going to be the largest, so things like your mortgage, your rent, your house insurance, your council tax, and have a go at crushing those, particularly if you've got a substantial mortgage. The last year the mortgage market was almost frozen with fear. This year it's starting to thaw a bit and you should, I think be able to get a better deal now, especially if you've taken out a mortgage several years ago. So my tip is you can only spend it once, have a look at those borrowings and try and bash your most expensive borrowing first and have a look at those housing costs

H: Very sound advice there, thank you Cliff. Thank you Roger now for more information on spreading the cost of your dental work, you need to visit denplan.co.uk and otherwise I hope you found that useful. I have to say I'm off home now to have a look at my bills, my borrowings and I definitely like the idea that my credit card is not a target. Probably the first time I've ever considered that in my life! Thank you very much

C: Thank you