Ask an Expert with Claer Barrett — How to organise your finances for the year ahead

Question asked by: SloanThinking
Question: Looking at all your Qs and As. Tired yet? 🙂

Answered by: Claer Barrett
Answer: Never! I have had four coffees today and am firing on all cylinders! And I did the Today programme 🙂

Question asked by: Anonymous
Question: I have an outstanding Personal Loan of GBP 15,000 for 8 years with my bank. I’ve recently received a lump sum to be able to completely pay this off. I am ok managing the interest payments. Is it wiser to fully pay it off today after 6 months into the loan? Pay part? Pay half?

Answered by: Claer Barrett
Answer: Some things that I would think about if this were me — but obviously I can only guess about your personal circumstances. As a first step, find out the repayment terms. Is it possible to pay it off early? How much interest would you save if you did? Do you have an emergency fund — and if not, would it be sensible to keep some cash back for this purpose? Also — how did you run up this debt in the first place, and can you be confident that having cleared it, you wouldn’t run up another one? I hope that’s helpful — good luck

Question asked by: Anonymous
Question: Is it worth borrowing on a 4% mortgage to pay off a student loan (£40k) at 6.2% on plan 2 when earning £85k + bonus? The mortgage has lower interest but we’re something terrible to happen and I lost my job, student loan wouldn’t be repayable. Mostly paying off interest with bit of capital every year

Answered by: Claer Barrett
Answer: It worries me that so many people I’ve spoken to about student loans this week are even considering doing this, but I can understand why. Everything in my being screams no! You will be saddled with a big actual debt, and not one that’s income contingent (as you say yourself). But the fact that I hear more and more people considering doing this should be a wake up call for MPs and policy makers that the current system — and Budget changes to repayment thresholds — are squeezing graduates too far in the current climate.

Question asked by: Pond Lady
Question: I am approaching retirement age. I am looking to manage my own investment portfolio. Are there any financial education courses that you would recommend, particularly for women without a financial background?

Answered by: Claer Barrett
Answer: Inserts plug for my free FT course, Sort Your Financial Life Out: https://www.ft.com/newsletter-signup/sort-your-financial-life-out/signup/landing Good luck!

Question asked by: Anonymous
Question: If someone could only do one thing to improve their finances this year, what would you suggest?

Answered by: Claer Barrett
Answer: Make doing your financial admin a priority! I am doing an experiment at the FT on Monday and holding our first ‘ADMIN NIGHT’ where me and a load of colleagues will jump on this Gen Z trend for getting in a room with our laptops, and sit together to get our sh*t together. This is a phenomenon known as ‘body doubling’ — worth googling if you have ADHD. I will let you know how it goes — and if this is something you do, email me on [email protected] as I would love to hear if it is helping!

Question asked by: Anonymous
Question: I know I need to get my finances in order this year, but I don’t really know where to start. What should I focus on first?

Answered by: Claer Barrett
Answer: If you are an FT subscriber, then you can sign up for my six week “Sort Your Financial Life Out” course by email for free — here’s the link! https://www.ft.com/newsletter-signup/sort-your-financial-life-out/signup/landing

Question asked by: Anonymous
Question: I’ve tried budgeting before and it never seems to stick. Is there a simpler way to keep track of money without obsessing over every purchase?

Answered by: Claer Barrett
Answer: I like the two card method (though becoming harder in the days of smartphones!). Have your main account that salary is paid into and all the bills / Direct Debits come out of. Then transfer a set amount to your ‘spending card’ (one of the digital banks, say) so you have a fixed pot of money to spend. Yes, most months I usually have to transfer more money over to myself! But it definitely helps me think twice before buying another black cardigan on Vinted.

Question asked by: Anonymous
Question: I keep discovering subscriptions I forgot I had. How often should you really be reviewing your spending?

Answered by: Claer Barrett
Answer: I try and look at this every other month — it’s amazing what you can sign up for in your smartphone account or on channels you have via broadband / amazon prime and not realise what you’ve done! Annual app renewals are things that have caught me out in the past, but I have never been refused a refund request when I have noticed and retrospectively stamped my foot, assuming I have not used the app in question. Good luck!

Question asked by: Anonymous
Question: Where should people be putting cash savings at the moment so it’s easy to access but not losing value?

Answered by: Claer Barrett
Answer: Check the best savings rates in the back of the FT Money section on Saturdays or on Money Saving Expert. Cash Isas and premium bonds are your friend if you are an additional rate or higher rate tax payer.

Question asked by: Anonymous
Question: My fixed-rate mortgage ends this year and I’m nervous about what happens next. When should I start preparing?

Answered by: Claer Barrett
Answer: At least six months before it ends. Please speak to a mortgage broker — they are so helpful and will help put your mind to rest and talk you through all the options. You can get in touch before six months to go!

Question asked by: Anonymous
Question: Is it a bad idea to dip into savings to clear debt, or is peace of mind worth it?

Answered by: Claer Barrett
Answer: What rate of interest are you being charged on your debts? If it is more than what you get on savings, then it would make sense to try and pay it down — but it does depend what that debt is (credit cards could be moved to a 0% balance, student loans are not a ‘debt’ in the traditional sense so no point paying to clear them early unless you are a mega mega high earner). I would recommend anyone with debt questions to follow my friend Sara Williams on Instagram — she is a debt adviser called DEBT CAMEL and her advice and tips are superb.

Question asked by: Anonymous
Question: My partner and I have very different attitudes to money. Any advice on how to talk about finances without it turning into an argument?

Answered by: Claer Barrett
Answer: I am writing all about this in my latest book! I don’t have all the answers, but if anyone would like to contact me about this please drop me a line on [email protected] and if you email me, I promise to send you a copy for free when I eventually get it finished.

Question asked by: Anonymous
Question: I would like to give my niece (student) a head start in her investing journey by seeding her ISA. How do I go about choosing the right platform for the ISA? What is the situation with LISA and is this an option to consider now given changes afoot? How do we go about picking investments?

Answered by: Claer Barrett
Answer: What a wonderful aunt or uncle you are! The big drawback with the Lifetime Isa is the property cap, which is £450k and has never moved in nearly 10 years. Yes, she would get a 25% top up from the government, but that would be lost — with a chunk of her savings — if she wanted to take the money out for any other reason. All of the big stocks and shares Isa platforms have tons of investor education materials and ‘quick start’ options. This will improve from April with the introduction of ‘targeted support’. Good for you to learn together!

Question asked by: Anonymous
Question: What are the best practices for husband and wife to manage finances if the husband is working and the wife is not?

Answered by: Claer Barrett
Answer: I am writing about this in my latest book. If people reading this who have a great system want to email me, I am all ears: [email protected]. But in answer to your question — it is great that you are thinking about this. Transparency, and making financial decisions jointly no matter who earns the money (or how much of it) is the method I use with my own partner.

Question asked by: Richard
Question: Following the changes announced to pension salary sacrifice at the Autumn Budget, do you think it’s likely that the government might do a U-turn on this proposal?

Answered by: Claer Barrett
Answer: If I am allowed to swear on the Q&A, I bloody well hope so! And let’s hope they also do a U-turn on the wrong-headed proposal to freeze the student loan repayment threshold which is a kick in the teeth for young professionals.

Question asked by: E=MC
Question: I am due to remortgage this year after coming off a 10 year fix. The rate jump won’t be huge but I am uncertain whether to go for another long fix, a short fix or a tracker. Do you think rates will move substantially over the next 12 to 18 months?

Answered by: Claer Barrett
Answer: A bigger question is how likely are you to move house? (ie would you want to size up if you had a kid etc). You can port mortgages, but have a think about your wider strategy — worth speaking to a mortgage broker too. Even I used a broker when I moved house recently, and I found it very helpful — they thought of things I didn’t!

Question asked by: Anonymous
Question: Is now a good time to look at properties? (Main residence). Are prices falling and will interest rates go down further? And what ways can I make my money work better for me? I have money in ISAs, investment accounts and savings accounts.

Answered by: Claer Barrett
Answer: See my previous answer about leasehold flats and the tyranny of service charges! With so many landlords selling up, there is a lot of stock on the market. The best advice I can give to first time buyers is be prepared and do your research before you start going to view properties and make offers. There is a whole chapter on this in my recent book “What They Don’t Teach You About Money” — you can probably get the audio book version (read by me!) for free if you sign up to Audible’s free trial 🙂

Question asked by: Anonymous
Question: Is now a good time to buy a house (in central London) as a first-time buyer? Or are rates expected to come down, making a mortgage more attractive or do you risk an increase in house prices by waiting?

Answered by: Claer Barrett
Answer: My quick tip, as someone who owned a leasehold flat in central London for 22 years and has just sold it, is be very wary of buying leasehold flats! They are sadly most of what you can buy in central London. Service charges are a tyranny. I have now moved just outside of London and bought a freehold house. While you are looking on Rightmove, see what your deposit could get you if you went further afield and managed to get a freehold. Good luck!

Question asked by: Yeti97
Question: Would you suggest that people should enjoy life in their 20s, if they’re still saving in to a pension? Then look at further investment opportunities in their 30s? It’s a tough environment for young professionals.

Answered by: Claer Barrett
Answer: It is very tough, I agree. But don’t forget that even small investments will make a difference — the power of compounding will help you over the decades as a young investor! DEFINITELY invest in yourself and enjoying life (there are always cheap and expensive ways of doing things, for example I would never pay to fly first class — what you have never known, you won’t miss). I expect most FT readers look back and wish that they had been on more adventures in their 20s while they were child free. You may enjoy reading this column I wrote recently on why friendship is our best investment: https://www.ft.com/content/12e02b41-1b71-44ff-8830-e44fca343bd5

Question asked by: Vernon Philander
Question: Is it better to build up 6 month emergency funds or use up some cashflow to do house repairs that are not urgent but verging on necessary

Answered by: Claer Barrett
Answer: My view is that — a bit like the dentist — not investing in basic home maintenance can often result in a much bigger unexpected bill. Good luck — and I am now reminded to make a dentist appointment!

Question asked by: MillenialMum
Question: With one child in nursery (2k/m), and two parents earning over 120k should we still be considering salary sacrifice to get 30 funded hours?

Answered by: Claer Barrett
Answer: The answer very much depends on whether you can afford to be this tax efficient. You would both need to be sacrificing large sums to get both of your incomes below £100k. As a primer, this piece I wrote for the FT has more info: https://www.ft.com/content/8fc5e345-20dd-42a6-bac1-25cbe2bbf8d3.

Question asked by: Anonymous
Question: I understand we can contribute to the pension 3 years backwards (in case current year maxed out). Please advise if we are also able to claim the tax relief for those backward contributions through self assessment? Thank you.

Answered by: Claer Barrett
Answer: Yes, it’s done through your tax return, but this is called the carry forward rules. You will need to fill up this year’s allowance (£60k for most people) before you can go back and fill up previous years. Here is more info on the government’s page: https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings.

Question asked by: maple_hamster
Question: I earn over £100k and want to pay the excess into my pension to avoid losing any of my personal allowance. I know that the pension provider will reclaim 20% basic rate tax, but how do I reclaim the remaining 20%?

Answered by: Claer Barrett
Answer: Briefly — as there are a lot of questions piling up! — if it’s Salary sacrifice this should be done at source (ask HR if you’re not sure). If it is a personal pension or what’s called ‘scheme pays’ (so non salary sacrifice) you will need to reclaim the difference yourself via your annual tax return. Anyone reading this who didn’t know it was possible to reclaim higher rate relief, I think HMRC will let you go back four tax years so well worth looking into — more details on GOV.UK site here: https://www.gov.uk/guidance/claim-tax-relief-on-your-private-pension-payments.

Question asked by: Calsonic
Question: Spreadsheets aside — what’s the best software for managing PERSONAL transactions & expenses e.g I used Quicken in the noughties. Modern day equivalent?

Answered by: Claer Barrett
Answer: I am of the old school, and do the monthly sit down and go through the bank statement (!) but I would welcome tips from other readers especially if they’re using AI tools to analyse their spending.

Question asked by: James Harley
Question: I’m a postgraduate student a couple months away from entering full-time employment. Do you have any savings / personal finance tips for young people like me starting out in life?

Answered by: Claer Barrett
Answer: I would say “ask and you shall receive”. Our Big Read today about the dire state of the graduate careers market is something that depresses me and all of my colleagues and people I work with — The Great Graduate Job Drought: https://www.ft.com/content/c89496b1-bc8d-425e-b86b-ec89402410e4. But equally, it makes us more motivated to lend a helping hand to those at the start of their careers. Build up your network as much as you can. Speak to as many people as possible. Ask to have coffees (virtual or IRL) with friends of friends, friends parents, connections you’ve made on LinkedIn or people who you can see pursuing careers that you would be interested to emulate. Flattery will get you everywhere! The worst that will happen is that people will knock you back, but some will say yes. And if you are not already signed up to receive the Working It newsletter by my colleague Isabel Berwick, here is your sign 🙂 I am sure everyone reading the Q&A today will join me in wishing you the very best of luck.

Question asked by: Anonymous
Question: I’m 23 currently, what would be you number 1 tip to start now that would help me be financially free in the future.

Answered by: Claer Barrett
Answer: You are doing well by reading the FT! (well, I would say that, wouldn’t I — but I really hope our reporting is helping you in your life and career). Here is an article I wrote recently for FT Schools called “Five big decisions you’ll need to make about money.” Number one is “Who you marry” — controversial, but something I am sure many older readers will say, yes, that’s a good one — and another important one is how early you start investing. Little and often is an excellent goal to aim for: https://www.ft.com/content/af6714ad-9105-4064-bca7-686470bb2ec0.

Question asked by: Anonymous
Question: Hi Claer, what is the optimal % (out of total comp) to be saving on annual basis?

Answered by: Claer Barrett
Answer: The rule of thumb many experts suggest is 15% of your pay (as a combination of what you and your employer pay in). As a first step, find out what the MAXIMUM your employer will match going into your workplace pension. Often if you pay in a bit more, they will pay in a bit more. The bare minimum in the UK under automatic enrolment is roughly 8% of pay (you pay 5% and employer pays 3%) but this is calculated on a band of salary, so is actually a bit less. Second — younger readers take note — all employers are not created equal. Some offer much more generous staff pension arrangements than others. This is a GREAT question to ask at job interviews (as sadly this information is not generally in the public domain).

Question asked by: Anonymous
Question: I plan to retire this summer aged 64. My SIPP (only pension until state one at 67) is worth £1.1mn including £55k in a cash fund (rest 85% in equities). I also have c £600k in ISAs (mostly equities), £50K in premium bonds, £15k in easy access savings. How might I fare in a lengthy market downturn?

Answered by: Claer Barrett
Answer: The short answer is better than most people (not a dig — intended to make you feel better). The longer answer would relate to your cash needs / annual spending. A financial planner would do a cashflow modelling scenario with you, work out how much cash you need to fund say 2/3 years of retirement spending so you could manage withdrawals during market blips without depleting your pot. They would also consider the impact of your property / mortgage / if you downsized. We did a Money Clinic podcast looking at some of these options with a (slightly older) listener that you may find helpful — but don’t be scared of investing in professional advice, especially if this puts your mind at rest. https://podcasts.apple.com/gb/podcast/investment-clinic-im-67-will-us-stocks-crash-my-retirement/id287031335?i=1000698690601

Question asked by: Julius Caesar
Question: I have maxed out my pension contributions / SIPPs, my ISAs and am in the privileged position of having money left over which goes into my trading account. What else can I do that is tax efficient? Are SEIS schemes worthwhile?

Answered by: Claer Barrett
Answer: Well done for maxing out your investments! I had one year where I managed to do full pension and Isa, and felt I should have got something akin to a sticker at the dentist to commemorate this. Alas! My personal view on other tax-advantaged investments into start ups — VCTs (Venture capital trusts) and EIS (enterprise investment schemes) and SEIS (seed EIS) — is that you are taking on an ever growing amount of investment risk for a limited amount of tax benefits. Granted, some people who got into them years ago have done very well, and others manage to recycle any losses and offset them elsewhere, but the fees are high and the recent performance of some of these schemes has been very hit and miss. They are also very illiquid investments. I have had correspondence from readers regretting this, and saying they would have been better off investing in a general investment account (GIA) and paying the capital gains tax. Equally, wealthier investors who have had the time to get really involved with an EIS business (which tend to be larger investments) have raved about the experience. So go in with your eyes wide open!

Question asked by: tiramisu
Question: Late 20s. I’ve maxed out my workplace pension contribution, but add lump sums. I have a SIPP. Following the autumn budget, I would like to put as much as I can into my pension before the 2029 changes. Should I put my all into the SIPP, work pension or split?

Answered by: Claer Barrett
Answer: CONTINUED: If you are someone who is approaching the £100k tax threshold where the personal allowance is withdrawn, this could be particularly advantageous from a tax point of view, especially if you have young children in nursery (see this FT piece I wrote with Emma Agyemang about the £100k childcare cap: https://www.ft.com/content/8fc5e345-20dd-42a6-bac1-25cbe2bbf8d3. You can access greater investment choices within a Sipp, although the fees may be higher (see my previous answer on this). But either way, the money is going to be locked up until you are 57 or older. As someone in her 40s, I am OK with this, but I have also made investments using my Stocks and Shares Isa that I could access sooner if I needed to. You don’t get upfront tax relief on Isas, but your investments can still grow tax free. I was able to raid this pot last year when I moved to a bigger property, so was thankful for the flexibility. Finally (and I’m sure older readers will chip in on this) another risk of making large pension investments in your 20s is that the tax rules change. We’ve already seen panic withdrawals of tax-free cash in the run up to both of the last Budgets as speculation swirled. Of course, the government could also change the rules on Isas in future — nothing is sacred! But personally, I am hedging my bets and contributing some to pension, and some to S&S Isa.

Answered by: Claer Barrett
Answer: Tiramisu, your FT username is making me hungry! You have smartly identified the opportunity to max out Salary Sacrifice benefits before changes heralded in the Budget come into effect in 2029 (note we do not yet know the full details of how these might work). I wrote this column about it in the FT at the time — Fill your boots before Budget changes kick in: https://www.ft.com/content/7529ca87-2b60-4f3f-9141-d60d57292799A couple of things for those in this position to consider. You say you have ‘maxed out’ your workplace DC pension. When people say this, I felt they often mean they have contributed whatever the maximum is their employer will match. However, with salary sacrifice, you could consider contributing a higher percentage of your salary if you want to — it just won’t be matched by your employer. Using myself as an example, the most the FT will match is 8% of our pay, but I have previously paid in over 20% of my pay — this is called an AVC or additional voluntary contribution. For most people, the maximum limit for this is £60,000 a year (the pensions annual allowance) which is the combo of what you and your employer pay in (note that for really higher earners on £200k+ it could be less). The reason I did this via my workplace pension rather than a Sipp was simplicity — it’s taken direct from my pay. Once a year, you tick a box saying how much you want to contribute, but can change this if you have a ‘life event’. (See my second answer for part two!)

Question asked by: ChrisNomad
Question: My wife and I (70s) have inherited a house in a national park valued at £400k. We love the area, but don’t want to live there as main or second residence. Should we sell it, use deed of variation in favour of our 2 children to sell or rent out?

Answered by: Claer Barrett
Answer: What a happy situation to find yourselves in! My first tip would be speak to your children. But that’s assuming you don’t want or need the capital to boost your own retirement options (and I would encourage all of our readers to put their own financial oxygen masks on first before helping others). Personally, the prospect of running a holiday let / rental business is not one that appeals to me, even if I could go and stay there myself for several weeks of the year. If asked, your children may prefer using any cash you wish to gift them to buy / upsize their own homes, which they would be able to enjoy the benefit of every day. Here is an FT article on the tax implications of gifting property and the IHT implications written by the excellent tax lawyer Clare Munro, which others in a similar position may find helpful: https://www.ft.com/content/070d3416-1266-45e2-8160-e6bb55672117.

Question asked by: BettyBooth
Question: I currently keep all my investments on a basic spreadsheet. Is there an app which can pull them all together in the same way the budgeting app I use does? (Life Stage Money but there are others available)

Answered by: Claer Barrett
Answer: Great question! Hive mind of the FT commentariat — do tell us what apps you use for both budgeting and investments? I am sad that the Open Banking powered Money Dashboard is no longer going. I am a fan of simplicity, and not having more accounts than you need (it’s worthwhile thinking about this as you get older, and the chances of a family member or executor having to manage your affairs increases). I try to schedule a twice-yearly manual check in where I check the balances and performance of pension, Isas, savings, crypto, etc and the mortgage balance, and think about bigger picture investment / financial planning questions. However, I don’t have the investment apps on my phone otherwise I would be tempted to fiddle, or look at what big market shocks (ie the Orange one) have done to my portfolio. I don’t think this is helpful for someone in their 40s with decades until retirement (if that ever happens).

Question asked by: NutshellN
Question: I’ve built up my DC Stakeholder pot with Legal & General, which then went to ReAssure. I’m tempted to transfer it into a SIPP with Freetrade who have just announced a lowering of fees from 22 Jan. Are these app based platforms safe for my pension? I’ll happily buy ETFs with them, but my pension . . .??

Answered by: Claer Barrett
Answer: Thanks for your question. Let’s start with the safety point. In the event of provider failure, you’d have the backstop of FSCS protection of up to £85,000 for investment accounts (note that this limit has not risen for investments, though it has just gone up to £120,000 for cash savings). While this will cover losses from the provider failing, it will not cover investment losses if you put your money in shares that sink! As a further safeguard, platforms also segregate client monies under separate FCA rules, and will explain this in detail on their websites (here is what Freetrade itself has to say: https://help.freetrade.io/en/articles/2750663-is-my-money-safe). Pension providers have different protection rules depending on what sort of pension it is. Next, let’s focus on fees — workplace pensions are subject to specific rules on fees, meaning their default options usually have lower fees than many Sipp platforms — but the quid pro quo is they offer a more limited range of investment options. So the growing price war among rival investment platforms is welcome news for investors — and I see Vanguard has lowered fees on its popular LifeStrategy range today (full disclosure: I hold some of its funds in my own investment portfolio, and so do family members). Finally — and I would WELCOME other readers views on this — if this is a workplace pot and you and your employer are still contributing, this may affect whether you can transfer it to a Sipp. I have heard from readers who say they’ve managed to do a partial transfer, but in my (limited personal) experience of this, much depends on the rules of your specific scheme. I will happily write more about this in the FT in future, so please share your views or email me direct on [email protected].

Question asked by: FTreader
Question: I have recently started to receive a DBS pension and took the full tax free lump sum. Should I still think about contributing to my other DCS pensions that I have not yet touched and what is the maximum I can contribute?

Answered by: Claer Barrett
Answer: Thanks for asking this question, which is one we are increasingly hearing from readers who took their tax-free cash fearing a Budget rule change. As with all my answers today, this is an illustrative example to help readers with further research, and is not intended as financial advice. In summary — be very careful! There are strict rules governing the “recycling” of tax free cash into other pensions — simply put, the government doesn’t want people getting further tax relief on what is already tax free money. So there are heavy penalties as a deterrent — you could be hit with a 55% tax charge of the sum reinvested. Here’s a government page explaining the rules in more detail: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810. However, reinvesting your lump sum via a Stocks and Shares ISA is allowed. Once invested, your money can grow free of capital gains tax, and dividend tax, and any withdrawals you make in future will not count towards taxable income or attract income tax (so different from pensions). The only restriction is the £20,000 annual ISA allowance (reset every tax year on 6th April). If you have a spouse or civil partner, you could also consider using up their £20,000 ISA allowance and thus potentially shelter £80,000 within Isas (£20k each = £40k invested either side of the tax year). Many people leading up to retirement find the combination of pensions and Isas is a flexible way of funding their future retirement needs. But it pays to think about what these might be before making decisions (such as taking tax free cash) that cannot be reversed. You may consider it is worthwhile getting professional tax or investment advice.

Question asked by: Leke Oso Alabi, Communities Journalist
Question: That’s all we have time for. Thanks FT readers for your questions, and Claer for your thoughtful responses. We’ll be back with another Ask an Expert soon. Visit www.ft.com/ask-an-expert for more information.

Answered by: Claer Barrett
Answer: Thanks for so many amazing questions. I have kept going for a bit longer! But you can contact me at the FT via [email protected]. Obviously, I can’t provide you with personalised advice, but I do like to hear from readers, and you can also email Lucy Warwick-Ching who compiles the “Any Questions?” page in the FT Money section via our general email address: [email protected].