Buying a house or a car and reading your bank statements
The Mix would like to thank MyBnk for their help and expertise in producing this article. Click here, or below, to take our e-learning course, built in collaboration with MyBnk.
Hey big spender…
If you’re thinking about splashing the cash on a car or a house then hey, that’s amazing! But it’s also a pretty massive decision so we’re not surprised if it’s got you breaking out in a sweat. There’s so much to think about that it can make you feel like your brain’s going to explode. But no need to panic, we’ve teamed up with financial charity, MyBnk, to bring you some expert advice.
Read this handy guide to find out all you need to know about buying some new wheels, a home, how to understand your bank statements and how to balance your spending and saving.
Should I buy a house?
Home ownership is a great way to invest your money and prepare for your future. However, is it the right option for you at this time?
Why would I want to buy?
Owning a house can offer stability for lots of people and it means that when you are finished paying for the mortgage in the future you will own the house outright. This will make your future retirement a lot cheaper than if you were still renting. Also, property is usually a safe investment as prices usually go up.
However, you need to consider whether buying is the right choice for you: do you earn enough? Are you settled in your city? Are you likely to want to move for work in the near future? Owning a property can also be expensive in unexpected costs; where a landlord would have dealt with issues you now have to!
How do I buy a house?
Unless you have hundreds of thousands of pounds in your bank account, you will need to get a mortgage. A mortgage is a loan specifically to buy a house that you will pay off in installments every month, for usually between 25 and 35 years. You can usually borrow around four times your annual salary.
Like all loans, you should look around for which banks are offering the best rates and the best service. Your credit score will affect your ability to get a mortgage, so make sure you are doing your best to have a good score.
You will also need at least a 10% deposit in order to get a mortgage. Let’s say I earn £25,000 a year and I want to buy a house that is £100,000. I would need at least £10,000 in the bank for a deposit. You can find different mortgage calculators online if you’re thinking of buying a house soon.
You will also need to consider whether you will be able to get what you want. You may need to relocate or consider smaller properties if you are on a budget.
If you are saving for a deposit you should consider the best types of saving account for you. You can search around for the best accounts with high AER on lots of different websites. You can click here to find more saving tips!
Should I get insurance?
Getting insurance is the best option to protect you and your future. Usually, life insurance is a stipulation for being approved a mortgage so the bank knows what will happen to the property in the event of your death.
Contents insurance is also a good idea so that your belongings are protected against damage. This type of insurance isn’t usually expensive – on average it costs £59.22 a year — so it’s a good idea to have it in case of an emergency. Read this article by the Money Advice service to find out more.
Insurance is always comparable and different providers might be offering different things. The cheapest one might not be the best for you and your situation. You should search around before you commit.
What else might I need to pay for?
Solicitors fees: Solicitors fees are typically between £850 – £1,500. These are important to get the legality of owning a property sorted out. Read this article by the Money Advice service for more information.
Repairs and upgrades: You should expect the unexpected. You don’t know what problems you might encounter, from leaky taps to replacing white goods. It’s always a good idea to have money saved up just in case.
Moving costs: Do you have lots of furniture and belongings that need to be transferred into your new property? You might need to pay a moving company or you could hire a van and do it yourself.
Buying a house during the coronavirus crisis
You’re still able to move house, however things like physical viewings may be done online instead. As always, you should consider the current financial climate and really consider if you could afford the costs in the future, not just right now.
For more info on housing and coronavirus, check out our article here.
Should I buy a car?
If you don’t live in an area with extensive or frequent public transport, then car ownership is a great way to make sure you can get around. However, deciding whether you’re sure you’re ready for the financial burden of a vehicle is an important choice you have to make.
How can I buy a car?
Cars can vary in price dramatically and you must consider what you need your car for, what you can afford, and how you can pay. Some people might decide to choose a finance option and paying off the cost in monthly chunks might be the best option for them, while others might prefer to save and buy a second-hand car outright.
If you decide on a finance option, you should consider the risks. Usually, the monthly payment can be quite hefty and if you can’t afford to pay then the car can be repossessed. Equally, if you’re buying outright you might have to be prepared to get an older vehicle which could cost you more in repairs than you want.
Whatever you choose, you need to make sure that you’re doing what’s right for you and your situation – even if that means you get an old banger rather than a brand-new BMW!
Do I need car insurance?
The short answer is “yes.” Even if it’s just third-party insurance.
If you’re a new driver or under 25 then insuring your car can be incredibly expensive! There are some ways you can make it cheaper like getting a black box or seeing if you can go on a multi-car insurance policy with experienced drivers.
You should make sure that you’re getting the best deal by shopping around. You can look at price comparison websites to make sure you’re not paying more than you need to.
What else will I need to pay for?
Road tax: Road tax is calculated based on the size of the vehicles’ engine and the CO2 emissions it produces. This is a legal requirement. You can calculate the cost of road tax using the government website.
Fuel: In the UK, fuel tends to be pretty expensive. You have to factor in the cost of how much a full tank will cost you and how often you will have to fill up.
MOT: The MOT test involves checking dozens of components of your car work from your engine to your windscreen wipers. Now, these tests cost £54.85. If your car fails, the test then your vehicle will be illegal to drive. Head to this Money Advice Service article to find out more.
Unexpected costs: Unfortunately, things in life tend to go wrong. Whether it be general maintenance, an accident, or repairs you need to be prepared for any eventualities. See here for our saving tips
Buying a car during the coronavirus crisis
Like all borrowing, you should consider whether you afford to take any new credit out before signing anything. Given the uncertainty of the economy, it might be better to wait to buy a car until you have a better idea of your financial situation.
If you’re currently having problems with paying for an EXISTING agreement, contact your supplier. Most will be willing to grant payment holidays but do remember that you’ll be asked to pay later – that might include interest gained during the time as well.
Understanding your bank statements
What are bank statements?
Bank statements are documents the bank will send you to let you know what your account balance is, lists all your transactions and any fees or charges you will pay for the month. Most banks offer paperless statements, so you may have to log into your internet banking to download your latest statement.
Most statements show this by having a list of transactions – either whenever money comes in or goes out. You should check this regularly to make sure nothing unexpected is coming in or out of the account.
Things to be aware of when reading your statements
Also remember that although it may take a couple of days for your account balance to change, any purchases will be dated on the date you bought them on – if you paid for something and it’s not on your statement check the month before and (in rare cases) the month after to see if it has moved.
If you notice anything on your bank statement that isn’t what you would expect, you should call your bank immediately and let them know – delaying telling the bank might mean you won’t get help if it turns out someone has access to your account.
Also – remember that if your balance shows a “-“ sign (-£100 for example) it means you are in an overdraft. This usually adds costs as you need to pay interest so make sure you know how much you have in your account and are keeping an eye on your spending to stay in the positive numbers.
Side note: ‘IN CREDIT’ means you have extra money. ‘IN DEBIT’ means you owe money. So if your account was £100 in credit, that’s a good thing. £100 in debit means you owe them £100. Simples.
You will see all sorts of codes in your transaction list – they are designed to tell you what TYPE of transaction you made.
Here’s what the main codes mean
ATM – Automatic Teller Machine (AKA a cash machine in the UK)– usually for when you make a cash withdrawal.
CDM – Cash and Deposit Machine – the machines in the bank that allow you to deposit cash will display with this code.
CHG – Charge – means the bank is asking you to pay for something – usually a fee or interest.
CHQ – Cheque – means this amount was paid in with a cheque.
D/D – Direct Debit – will usually show when an automatic Direct Debit payment is taken from your account.
DR – Account overdrawn – This means your account is currently in overdraft and you owe the bank money.
DWP – Department for Work and Pensions – payments from the DWP, usually benefit payments.
ERTF – Exchange Rate Transaction Fee (sometimes labelled as FX fee) – the cost the bank added to your transaction because you paid in a foreign currency.
INT – Interest – Shows interest you have paid or, more usually, gained.
POC – Post Office counter – shows your transaction was made at a post office.
POS – Point of Sale – means you paid at the time of purchase – usually used for card payments in shops. Buying online is usually classed differently so POS is mainly stores.
S/O – Standing Order – shows an auto Standing Order payment has been sent.
TEL – Telephone Banking – shows it was done via your phone banking service.
TFR – Transfer – marks payments made by bank transfer.
TLR – Teller (cashier) Transaction – means a staff member from the bank did this transaction.
If you have any questions about your bank statements, you should contact your bank. Lots have great websites to show you how to read your statement and all of them should be able to help if you are unsure about ANYTHING on the statement.
And don’t forget – check regularly for INCOME and OUTGOINGS you’re not expecting – if you find money in your account you don’t expect to have, DO NOT SPEND IT! Alert your bank and go from there – the chances are you will need to repay this money back to someone, so spending it is a bad idea.
Outlooks on money
If you ask most people about how they view money you can usually split them into two groups:
Spenders and savers
But it’s not as straightforward as that – you should think of it more of a scale! You might move along that scale at times but it’s important that you think about where you are right now on that path and where you would like to be.
A lot of people will assume that Savers have it all worked out. But sometimes, the anxiety to spend can stop you from having experiences that are worth more than money. If we save all our money and spend none of it FOREVER, what is the point of all that money?
On the flip side, those Spenders might have a richness of experiences, but does that matter if you can’t pay the gas bill this month? Spending your last bit of cash on that trip, or those trainers, or that shiny new smartphone might feel great when you spend it – but what about a week later? Buyer’s remorse is a real thing!
So the question is: “What’s the perfect spot to be in”?
The answer…it depends on you and where you’re at in life. But generally you want to make sure you do a little of both – save some, spend some (especially when spending now might save you money in the future). The key is knowing HOW MUCH you can afford to spend and how much you NEED to save for whatever it is you’re saving for.
One method is the 50/30/20 model for splitting your cash up – you put 50% aside to pay the needs – rent, the bills, food etc. 30% is for you to play with and spend however you like. The last 20% is what you save.
Doing this means you are doing a little of both – saving that 20% and spending the 30% on you! But if you know you can do without that extra treat this week, add to your savings! Been really good recently and want to treat yourself? Take some of this weeks 20% and add it to your fun spend!
The key here is BALANCE and CIRCUMSTANCE
If you need to pay more than 50% of your income on bills, does the extra come from the saving or spending pot? That’s a decision you need to make based on your circumstance. And balancing that is the key skill we call budgeting!
Lots of people get very anxious about money issues, some people don’t seem to care! That is a great reflection on humans in general – we can all think and feel a different way about the same thing.
Don’t panic if you view on money is different to your peers – just make sure it works for you and you are financially thinking when your mates ask if you want to go for a cheeky Nando’s (or any other restaurant!) And try not to spend money just to keep up with your mates – you might have NO idea how their financial situation compares with yours! This is especially important for freshers at uni – only spend what you can / choose to and don’t be drawn into keeping up with everyone else.
Finally – they say the rich stay rich by spending no money. That’s not entirely true in my opinion – I think it’s more that the rich stay rich by spending CLEVERLY. Finding bargains, reusing old items and selling old ones are not just for “poor” people – you’d be amazed as how many “rich” people do exactly the same thing!
Your money outlook is yours, and while it’s always a good idea to keep an open mind about changing that outlook, the only person it needs to work for is YOU!
For more information on managing your money…
By Holly Turner
Updated on 24-Jun-2020
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