Give up smoking
If you didn’t manage to kick the habit in January, then 11 March presents another opportunity to quit smoking and give your finances a boost at the same time.
No Smoking Day falls on 11 March this year, and ditching cigarettes on this day is nearly as good for your bank balance as it is for your health.
For one, you will start to save money immediately. A 20-a-day smoker will save around £45 a week, nearly £200 a month and £2,400 a year by quitting now.
After two years, you will see your money grow by a total of £396.13 completely tax-free, with your balance hitting the £5,396.13 mark.
Alternatively, you could use the money to pay off debt. If you only make the 2% minimum monthly repayment on a credit card with an APR of 18%, then it would take you an astonishing 31 years to pay off a balance of £2,000. During that time you will have paid a whopping £4,931.11 in interest.
However, by using the £200 you’ve saved by quitting smoking to repay your debt, you can pay off the same balance in just 11 months. The total interest you will have paid will also fall to £183.25.
There is another money-saving benefit to kicking cigarettes - after 12 months without smoking life insurance and critical illness providers will start to class you as a non-smoker, and your insurance premiums could reduce by up to 50%.
Research from moneysupermarket.com shows that non-smokers could save considerably on a combined critical illness cover and life insurance policy. A 30-year old male wanting £150,000 worth of cover over 25 years could save £8,404 over the term by going smoke-free, while a woman could save £4,800.
Those looking for single life cover could also benefit. Men could see their premiums fall by £1,725 for £150,000 worth of cover over 25 years if they stop smoking while women could save £4,650.
Emma Walker, head of protection at moneysupermarket.com, says: "In today's climate where every penny counts, it's clear to see there are both financial and medical benefits to stubbing out cigarettes for good. There are real savings to be made by kicking the habit and shopping around for the best insurance deal to suit your circumstances."
Although you aren't guaranteed to pay less for insurance if you quit smoking - as premiums are also based on your age and health - Matt Morris, spokesman for broker Lifesearch, says non-smokers stand a good chance of seeing their premiums fall.
However, he adds: “It is important to make sure you have a new policy in place before cancelling your existing one, as your new policy could turn up some nasty surprises in underwriting and may even be declined if your health has changed."
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.