Women are financial fatties

H: Hello there and welcome to the Consumer Advice Show today brought to you by Abbey, I’m Mark Rise, welcome along to the program. You can join in and I’ll explain how you can do that in just a moment, I just want you to think about Christmas for a second, did you eat a bit too much, stuff yourself full of chocolate, are you feeling the pounds on there a little bit too much? Well if you’re feeling fit after Christmas you’re doing very well, but are you financially fit, because a new survey out shows that 99% of us haven’t got our finances in order, we’re a bit financially flabby. But I’ve got the answer – the guru is here to give us a workout, Nici Audhlam-Gardiner is here from Abbey to be able to show us what we should be doing. That statistic Nici, frankly sounds a bit frightening, 99% of us not financially fit – it can’t be that bad?

N: It is that bad and I think while you would expect that not everybody would be in tip-top shape, you would expect people to be fitter financially than they actually are, and particularly as we think about after Christmas when we’re all making our resolutions, maybe now is the time to start thinking about getting into shape

H: I think it’s one thing to be able to get into shape, it’s another thing working out how badly out of shape you are. If you are out of shape, maybe we can help you because this is a live chat this afternoon, you can actually join in, just go to the little question box, pop in your name and your question, the question will come through to me in the studio and I can ask Nici for you, so please do join in the program this afternoon. So January’s a kind of time that we do re-examine our lives with New Year’s resolutions and things like that. It’s also the times when financial companies have a lot of offers on, to be fair

N: There are a lot of offers and there are a lot of sales if you look down the high street and so now might be a good time to start looking out and seeing whether you’ve got the best and the most competitive products that you could have, so for example a lot of people have loans sales at the moment so if you’re looking for loans, credit cards then it’s worth going down the high street and popping in –

H: And by loans sale you mean better, competitive rates and that kind of thing?

N: Yes, a lot of people are offering either if they have a fee, 50% off that or just a better rate currently, just in the same way as you would do for a clothes sale

H: And all the problem is, when you start talking about finances people glaze over and go – I don’t want to talk about that, and people put it to the bottom of their to-do list which I guess is why we’re in such turmoil at the moment, which is why we’re in such a state is it?

N: Yes I think so, I mean over the last few years, particularly when people have started building up student debts, the debt has become more acceptable and I think it’s a little bit of a slippery slope that people get onto sometimes, and finances have never been the most exciting thing to talk about, in the same way as some people glaze over when they talk about getting physically fit, possibly even more so with financial fitness which is why real financial discipline is needed if we’re to get there

H: It’s one of those things that sounds very hard but doesn’t need to be, and if we put it another way, put it another way go – “do you want to sort your finances out” – dull. “Do you want to save 2 or £300 a year” – yes please, I’ll have a little bit of that. It’s the way of looking at it isn’t it?

N: It is yes I think that if you can get people excited about how much they can save, and if you added up your credit card, your savings, your bank account and your mortgage for example then it could add up to well over £1000 a year that you could be saving by making the right choices and then you think about well what do you need to do? Doesn’t have to be that much, so you only have to look at your mortgage- f or most people – it’s every two years, and you know even then it’s perhaps 2 or 3 days of looking around, using the websites, it doesn’t have to be a big deal

H: I have to say the survey about mortgages particularly is interesting because it suggests a huge number of people, just run with the same mortgage for many – 10, 20 years which is not the sensible thing to do really is it?

N: No it’s not. Almost 50% of people say that they don’t frequently review their mortgage, and that probably means that they’re not on the most competitive rate. Now for most people they’re on a 2 year deal, which gives them a good rate during that time, but actually they do need to start thinking about it towards the end, perhaps 3 months in advance as to whether that is the right thing for them going on or whether they should look around and see if there’s somebody else to go with

H: There’s a bit of light at the end of the tunnel people in Wales and people in the south west of England have done best in the survey. Why are they financially fitter than maybe the rest of the country – any ideas on that?

N: It looks like from the survey that they actually do spend more time sitting down and reviewing their finances so they’re more likely to spend at least an hour a week actually sitting down and looking through and working out that they’re on the best deal, so if you do that, there’s a more likelihood that you’ll pick up when perhaps you’re coming to the end of the deal or when there’s a better rate of interest that you could go onto for a savings account, for example for the people for example in the south east, they’ve just spent less time looking at this, it’s probably because they’re running around doing plenty of other things, maybe you know sort of work is taking up their time or all the other things that they’re doing ,and they don’t seem to have this same discipline as the guys in the west do

H: And you’re only talking about an hour a week, we’re not talking about a huge amount of time every day, every week, every month at all actually are you?

N: No I think that it is maybe a little bit of up front deciding what you’re going to do, and that might be the good time to sit down with your advisor or go into the bank and help them to point you in the right direction, but then after that sort of what I would do is literally sort of put an hour in the diary every week, so you’ve got a regular date, potentially even do it with a friend, so if it’s the sort of thing that you’re going to make excuses and not do it -

H: Like going to the gym

N: Why don’t you – like going to the gym

H: Treat it like going to the gym

N: Exactly, why don’t you make a date with a friend so that you’re both doing that, you really don’t have the excuse not to, and you could perhaps make it a little bit more fun, so it’s an hour a week, maybe a little bit longer each month so that it’s not something that needs to take up a lot of your time

H: Well let’s get into the nitty gritty, some questions have come in and thank you very much indeed for sending them in. Ruth has sent us a question saying “I’m currently buying my first home and I’m worried about my credit rating which is low from my student days” – a lot of people find this – “is there anything I can do to help myself?” So if you find yourself with a low credit rating, you’re in a poor state, what can you do?

N: I think there are a couple of things, so if you think there’s anything wrong with your credit rating then there are things that you can do to either tell the bank that you’re looking to borrow money from, or potentially even contact your – the credit rating agencies -

H: Like Experian -

N: Like Experian, exactly

H: There are three main ones aren’t there?

N: There are yes and if you – you can get, you can ask them to give you the whole details of the credit rating, look through it -

H: Does that cost money?

N: I think they have to do it for free apart from an admin charge so it doesn’t cost you very -

H: So like about £2 then isn’t it?

N: Exactly yes

H: So you – no excuses there, yes

N: So that might be something, if you think that there’s just something wrong with your credit rating. If there’s not then again a conversation with the bank or the lender that you’re going to, it’s a good idea to give them the full background to explain what might have changed, so how your circumstances have changed now, versus where you might have been a couple of years ago

H: Let’s talk about top tips, because it’s really important and Amit has sent us a question asking, you know “have you got 5 things I can do so that I can assess my financial fitness so I can actually give myself a makeover – a workout?”

N: Sounds good doesn’t it? I think there are 5 things that you can do, so one – start with your bank account, so if you opened your bank account say 5-10 years ago you’ll probably find that you weren’t on the same rate of interest then that you could get nowadays so it might have been sort of 0.1%. There’s now bank accounts which will offer you 6% interest for example, and that’s a really good place to start to make sure you’re earning as much as you can on the balances

H: I do have a question about that, because if you’re saying chop and change your current account, my question is when I’m applying for a mortgage or something like that they always say how many years have you been with your bank, and I’ve always been told the more years you’ve been with your bank the better in that respect

N: I don’t think that’s the case, so while they do like to see a banking record, it’s not just that you’ve been with one bank

H: Right

N: And it certainly doesn’t work against you if you’ve had a bank account but it’s been in a couple of different places or if you’ve had more than one at the same time. What you might find is that if you’ve had a period of time when you haven’t had the bank account, that would work against you

H: So don’t use that as an excuse not to chop and change for the best rates

N: Exactly

H: So ok bank account first

N: Bank account first, savings account, very similar – you know because a lot of people, if you do have savings put away, just check that it’s on the right rate, particularly look for example if you don’t need to take it out straight away perhaps put a part of it for 3 months or 6 months time, then you might get a better rate on that, so that would be another good thing to do

H: Ok

N: Thirdly check when your mortgage is due for a renewal and put a date in the diary if it’s not coming up now, put a date say 3 months before it’s due for renewal to start looking, so you don’t end up in a blind panic and trying to do it on the last day

H: And should you always talk to your current mortgage provider to see if they can do you a deal first, or should you be looking much, much wider than that?

N: I would always start with the current mortgage provider, but don’t just assume that they’re the only ones that you should be looking at so -

H: Because they want to keep your business presumably?

N: They do, yes and you might find as well that it is slightly cheaper with the current mortgage provider because they have more details with you, they maybe don’t need to do a valuation again, so there are reasons why staying with your current mortgage provider might be a better deal, but then there are some very good deals on the market so it’s worth looking around too

H: So again talk to your independent financial advisor or mortgage broker, that kind of thing to be able to get the full picture of the market I guess?

N: Exactly. Online as well, you know definitely next up

H: Ok current account, savings account, mortgage -

N: Mortgage

H: I guess credit cards has to come next doesn’t it?

N: Credit cards has to come next and it’s a very good discipline to check what the balance is on your credit card. If you find that you’re not paying it off every month then looking for other deals which you might be able to have if you move your balance to another provider say for a year they might give you interest free. Can be something to do which can help you out, particularly in the short term to bring down your balance

H: You do have to be quite organised about that don’t you, you have to have the dates in the diary when you’ve got to transfer money over, so if you’re an organised person

N: Yes

H: You can do that really quite easily?

N: I think so. The other thing obviously on credit cards is that a lot of them will give you some quite good deals, so air miles, cash back etc, so always compare what you’re getting with your current credit card and see if there’s a better deal for you which might suit what you particularly want to get out of it

H: And one thing that I’ve learnt in my life about credit cards is that if you haven’t used a credit card for 6 months and you’re not planning on using that one any more, ring them and cancel that card because then in a year or so you’re eligible for their new deals

N: Yes

H: Which is a good idea

N: And often the new deals are for say 6 months or a year, so actually you know it’s good to be able to stop and then start again rather than assume that you’ll get that good deal just because you’re an existing customer

H: I have actually got a question in about credit cards specifically in and then we’ll come back to the rest of our financial makeover in a second

N: Ok

H: Jane wants to know – we hear this so often – Jane wants to know “I bought all my Christmas presents on credit cards and I worry that I won’t have paid them off before next Christmas. How can I get out of the vicious cycle?”

N: Well I think this is where financial discipline comes in as well as you know just being organised and planning, so financial discipline is all around, making sure that you are saving up each month so that you can pay off the balances and get yourself back to a neutral position before it comes to next Christmas and maybe even have a bit saved up before you have to start going out and buying Christmas presents again

H: That’s the ideal Nici. A lot of people aren’t living in the ideal – what can we do if we’ve – so we’ve got a big balance on our credit card, what can we do so that we ‘re not hit every single month by a payment that is in effect going up because of the interest?

N: Yes. Well I think it’s – you know again this is where other credit cards can come in, so the fact that if your current credit card provider is going to be charging you interest, but if you move that balance to a new credit card provider, that could be a way of giving you just that bit of leeway so you can start to lower the balance that you’ve got before you get hit with interest on the new provider

H: And of course there’s a big thing about store cards versus credit cards, very often store cards are higher interest rates anyway so you’ve got to be careful about things like that haven’t you?

N: They are and what we wouldn’t advocate is that you necessarily end up with 20 different cards just because that’s a way of rotating and you know so you never quite get to the end where you’ve managed to pay it off, so it is a combination about finding the right deal for you, but then also thinking about well then I don’t want this balance on my credit card forever, so what can I do to start paying it down

H: And there are a number of different websites that you can look at as well to find and compare all of the different rates

N:Absolutely

H: Just as there are with car insurance and home insurance and things like that

N: Yes

H: You can actually do a much easier comparison these days than ever it used to be

N: Yes and that’s why it shouldn’t feel like such hard work to become financially fit as it probably would have done say 5 or 10 years ago, although the downside the choice is greater so it feels like you’ve got to wade through the whole of the market before you can get there, but on the up side, there are sort of very clever comparison sites that can really start to narrow it down based on what you want, so they will end up giving you a choice of very few

H: We’ve talked about mortgages once, but there is a specific question about mortgages, you know it’s a difficult one to answer, it says would you say it’s harder to get a mortgage now than it ever has been and what’s your advice for first time buyers? Because you know a lot of people worry about this

N: Yes I think particularly if you’re a first time buyer then yes for a number of reasons it is difficult to get a mortgage, so that’s partly due to the fact that historically house prices have increased at a rapid rate and we know that that’s changing now, but just at the moment we’re on this sort of peak where house prices are very high, but yet people are finding it very difficult to save up for a deposit and also just to be able to afford the size of house that they’re looking at, maybe even compared to what they’re looking at when they’re renting

H: Of course

N: So you might need to trade down in rent versus actually buying because of the cost of the house. I think there are a couple of things which are making it easier, and as we go through the next 12 months might make it easier for first time buyers – first of all as we know rates have started to go down and are probably likely to go down further

H: Fingers crossed we don’t know but let’s hope so yes

N: Fingers crossed, if you’re on a variable rate. And then the other thing is that we know that sort of house prices in some parts of the country at least are probably likely to go down, so not so good if you already have a house, but very good if you’re trying to get onto the property ladder that it might make it more affordable. The other thing -

H: It’s also a question of not actually believing all the headlines in all the newspapers about house price crash and everything else. Although we may see prices go down, I don’t think we’re necessarily in a market where it’s going to be as dramatic as maybe some of the red top tabloids suggest?

N: No I don’t think we’re looking at a house price crash, I do think we’re looking at – and because people have been so used to seeing house prices go up

H: Indeed

N: Just this year in fact even if they stayed the same then that to some people feels like quite a shocking -

H: Indeed

N: Statistic, but crash – probably not. There are some parts of the country where that’s more likely to happen, but again if you’ve made a wise house decision in terms of the area that you bought in and the type of property that you bought, then you know you should be fairly confident in the value of it

H: And I guess when you have a mortgage it is easier in some respects to get loans because you have a house and you’re a homeowner, so it may be sensible to be able to perhaps spread your risk to be able to do your financial workout if you’re a homeowner. Do you think, do you think it’s easier?

N: I think it can sometimes give you more flexibility, and depending on how much of a loan you’ve taken versus the house price, the house value to start with, you may find that you’ve got some kind of head room to be able to take out an additional loan which is still secured against your house but maybe allows you to do home improvements or use it for other things as well

H: The one area we haven’t talked about, back in the financial fitness is pension as well because a lot of people are concerned whether it’s pension versus mortgage. What do you think is more important, what should a young person be going for first do you think?

N: I think given what we know about the size of the pension gap going forward, the pension and just making sure that you’ve got onto the first sort of rung of the pensions ladder is the thing that people need to think about straight away, and in fact the sooner you can start, the sooner you’ve started work the better, and even if it’s a small amount you’re putting into a pension to begin with, it does get you on the ladder and you can start to build it up over time. Property is also obviously a good investment for the future, so I think everybody would still agree that while in the short term you never know with house prices, in the longer term house prices are likely to go up so it is a good investment. So to me it would be kind of a close number two, but pension first and then start to save to get yourself a deposit for a property

H: Indeed I mean the statistics are quite clear in property I mean every 7-10 years house prices double in this country and have done historically for 200 years so

N: Absolutely

H: Potentially we’re not going to see that happen on a graph any time -

N: No

H: Soon. Let’s go back to the survey because you’ve talked quite a lot about how we can do our financial workout, and it shouldn’t take that long, it shouldn’t be too difficult in this day and age, but women are coming out worse in this survey than men – any particular reason for that?

N: I’m afraid to say we are yes, I’m sorry to say

H: By quite a long way it has to be said

N: By quite a long way yes. Women, when we’ve looked at them, seem to have 2 particular areas where they fall short versus men. One is in looking at their mortgage, and women tend to be on less competitive deals because they don’t do the review as we talked about every couple of years and they’re not quite sure whether they’re on the best deal to start with, and then secondly it’s around savings, so women are not so good at building up a certain level of savings which will give them a bit of a buffer if they needed it in an emergency, and I think there’s probably two things underlying that, so one is this idea of having enough time to be able to sort of carve out, to look at and to review your finances, and you could argue that maybe women are juggling even more things than men in terms of the job, the family -

H: Very much so

N: All the other things, so they’re just not carving out that time and it’s part of the time

H: Yes the cynics go “oh it’s handbags and shoes” – in fact no, it’s much more family pressure and time to be able to do it isn’t it?

N: I think it is, you know sort of it’s a broad discipline thing and handbags and shoes might come into that but it’s also just sort of the time that you have as well as what you’re spending the money on. Second thing is might be something still around the degree of confidence that women have in the financial products, so when something looks incredibly difficult, that’s the time that you tend to put it off and put it off, and for women, just given the historically, they have been less involved in finance, particularly in the older generations you’re still finding that women are less inclined to start looking at their finances and they will keep the bank account with the same provider, they won’t look at the mortgage, they’ll still keep renewing their insurance with the same provider, and it’s just they’re not making the most of the opportunities that they have

H: So to get financially fit, to recap what we’ve talked about, your financial fitness starts by looking – current account, savings account, mortgage, insurance, pensions, they’re the 5 things you should be looking at just to see if there are better deals available, and if you’ve been in the same place for more than a couple of years there may well be better deals available. Let’s just assume for a second we’ve got ourselves financially fit and we’ve turned that statistic round, now not

N: Fantastic

H: Not 99% being flabby, 99% of us being financially fit, wouldn’t that be fabulous?

N: Yes

H: What do we do with our money then, and we’ve got a question from Jim come in “where should I invest in 2008 do you think personally?” India, Far East, Latin America, China – is there any way – have you got any ideas or should we be just talking to an IFA about that?

N: You know I think it would be very difficult for me to say and at the moment you know sort of literally day-by-day the markets are so volatile, and sort of places like the Far East that were bailing out sort of the UK and the US banks now seem to be starting to be infected with the same sort of contagion as to are they also going to go through a credit crunch, so it’s difficult to say where would be the one best place. I think you know sort of the answer that I would give is it’s best to have a broad range of investments and then you’re balancing out the portfolio but really what I would say is talk to your financial advisor

H: Eggs in baskets come to mind if you know what I mean?

N: Exactly

H: Spread your risk. Exactly right. So there, financial fitness in one easy 20 minute lesson! Nici Audhlam-Gardiner thank you so much for coming in, you are a fitness guru in the financial stakes, thank you very much. If you want more advice do go to abbey.com and thank you very much indeed for joining us on the consumer show today