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Robin Powell: It’s well documented that, all over the world, levels of financial literacy need improving.
The good news is that, by investing a modest amount of time in researching this subject, you can improve your finances substantially.
Andrew Craig runs a financial education website called Plain English Finance. He was inspired to start it while working in the City of London.
Andrew Craig: One of the things that really came home to me in doing that was, even people in the city had a really kind of bad nuts-and-bolts understanding of their personal finances. What is an ISA? What is a pension? What are stock markets? What’s inflation? What are interest rates?
I started Plain English Finance as a sort of angry young man, as a reaction to that. And our guiding principle ever since I did that has really been to improve the financial affairs of as many people as we can.
Robin Powell: What then, according to Andrew, are the most important personal finance rules to follow?
He suggests there are two main ones.
Andrew Craig: Rule number one is: don’t spend more than a third of your income on your house - which is something that sounds a bit crazy to people these days because we’re so obsessed with homeownership in Britain - because rule number two is: you should basically always invest ten percent of your income in investment products that aren’t your house. And a lot of people, in spending vastly more of a third of their income on a roof over their head find that they then can’t afford to save and invest ten percent of their money in investments.
Robin Powell: Saving or investing ten percent of what you earn can be a challenge.
The best way to tackle it, says Andrew, is to start a spreadsheet showing all your monthly outgoings.
You should then focus on trying to reduce the biggest numbers.
Andrew Craig: Rather than trying to save money on how many cappuccinos you buy everyday… or, you know, going to Lidl instead of Waitrose… which is all very laudable; actually, the single easiest way… there are two things that are very easy to change if you’re willing to live in a less fashionable neighbourhood and perhaps a slightly smaller house or flat, is - number one - the biggest number is invariably the roof over your head.
And then the second one down the spreadsheet from that tends to be cars.
Too many people… dare I be slightly sexist, particularly men, rush to buy a really flash, expensive car prematurely.
Robin Powell: For more tips on keeping your finances in shape, you can always visit Andrew Craig’s website.
You’ll find it at plainenglishfinance.co.uk. That’s plainenglishfinance.co.uk.
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