What To Do With Your Spare Monthly Income
published on 10/10/2019
The Bank of England's Monetary Policy Committee voted unanimously to hold the Bank Rate at 0.75 percent during its September policy meeting, as widely expected. The bank also reaffirmed its pledge to gradual and limited rate rises in the event of greater clarity that the economy is on a path to a smooth Brexit, and assuming some recovery in global growth.
Interest rates may have gone up slightly in the last few years to 0.75% but in terms of the big picture that is still a staggeringly low figure. So, what is the best thing to do if you already own your own home and have some spare cash each month?
1. Pay off debts outside your mortgage
If you have surplus cash every month, it always pays to reduce the most expensive debt first. If you have credit card debt that is not on a 0pc interest deal, or you have an expensive loan, this should be the first place to put your spare money, if you can.
Putting your money into a savings account might seem attractive, but it is far more cost effective throwing that same money at your credit card debt, you could save thousands in interest.
2. Overpay your mortgage
It may seem a boring way to use your extra cash but overpaying your mortgage with the extra money you are receiving could yield very significant savings in the long term. The quicker you can pay off your mortgage the better, as it’s the most money you will generally owe in your lifetime.
3. Start a savings account
Interest rates have been low for many years now and competition is fierce for your business, some of the best savings rates are reserved for those who are willing to put money away regularly. Even more attractively, some banks are offering fixed rates on their regular savings, meaning that your money will not suffer from falling interest rates.
4. Save into a pension
Savers looking further into the future might want to use the money to add to their pension contributions – it's also another way to get money away from the taxman. A great option is too look at a Lifetime ISA (LISA) - if you are eligible - where the government will give you 25p in the pound as a bonus of up to £1,000 per year to help with saving for retirement.
5. Spend your money!
Want to have some fun and help give the economy a much-needed boost? Why not go out and spent it on Britain's high streets, a couple of lattes and an expensive meal out suddenly seems like the charitable thing to do.
It might be fun for a few hours living like royalty, however it’s probably smarter to take a look at the first four points and opt for one of those instead.