Personal Finance and Investing All-in-One For Dummies, UK Edition


By Melanie Bien, Julian Knight, and Tony Levene





About the Authors

Faith Glasgow has been writing on finance and property for longer than she cares to remember, and has freelanced since 1998. She has contributed to a wide range of publications during that time, including most of the broadsheets and magazines from Vogue to Investors Chronicle. Faith lives in London with a small family and a large mortgage, and occasionally muses on the fact that she still has to work for a living, given the reams of advice on how to manage one’s wealth that she has dispensed over the years. Sadly, hers is a classic case of ‘Do as I say, not as I do’.

Melanie Bien is associate director (head of media relations) at Savills Private Finance, the independent mortgage broker. She was personal finance editor of the Independent on Sunday for five years and writes freelance property features for national newspapers, magazines, and Web sites. She has written several books and pamphlets to accompany television programmes on property makeovers and design, and on buying, renovating, and selling property. Her other books include Sorting Out Your Finances For Dummies, Buying a Home On a Budget For Dummies, Buying and Selling Property For Dummies, and Renting Out Your Property For Dummies.

Julian Knight was born in Chester in 1972, educated at the Chester Catholic High School, and later at Hull University. He is the BBC News personal finance reporter and writes for the BBC News Web site; Julian is the author of Wills, Probate & Inheritance Tax For Dummies, and lives in London with a large mortgage. Before joining the BBC, Julian worked at Moneywise magazine and contributed to the Guardian as well as many other publications.

Tony Levene is a member of The Guardian Jobs & Money team, writing on issues including investment and consumer rights as well as on taxation. He has been a financial journalist for nearly thirty years after a brief foray into teaching French to school children. Over his journalistic career, Tony has worked for newspapers including The Sunday Times, Sunday Express, The Sun, Daily Star, Sunday Mirror, and Daily Express. He has written seven previous books on money matters including Investing For Dummies and Paying Less Tax For Dummies. Tony lives in London with his wife Claudia, ‘virtually grown up’ children Zoe and Oliver, and cats Plato, Pandora, and Pascal.


Editor’s Dedication

For my beloved Mum and Dad.


Editor’s Acknowledgements

Many thanks to the specialists who helped in the updating of complex information in this book, particularly Paul Causton of Steele Raymond, Tom McPhail of Hargreaves Lansdown, and the HMRC press office.


Publisher’s Acknowledgements

We’re proud of this book; please send us your comments through our Dummies online registration form located at

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Media Development

Project Editor: Daniel Mersey

Content Editor: Steve Edwards

Commissioning Editor: Alison Yates

Text Splicer: Helen Heyes

Executive Editor: Jason Dunne

Executive Project Editor: Martin Tribe

Cover Photos: © worldthroughthelens/Alamy

Cartoons: Ed McLachlan

Composition Services

Project Coordinator: Jennifer Theriot

Layout and Graphics: Claudia Bell, Denny Hager, Heather Ryan, Alicia B. South

Proofreaders: David Faust, Susan Moritz

Indexer: Aptara

Publishing and Editorial for Consumer Dummies

Diane Graves Steele, Vice President and Publisher, Consumer Dummies

Joyce Pepple, Acquisitions Director, Consumer Dummies

Kristin A. Cocks, Product Development Director, Consumer Dummies

Michael Spring, Vice President and Publisher, Travel

Kelly Regan, Editorial Director, Travel

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher, Dummies Technology/General User

Composition Services

Gerry Fahey, Vice President of Production Services

Debbie Stailey, Director of Composition Services



Welcome to Personal Finance & Investing All-in-One For Dummies, your launch pad to understanding the basics of all the financial considerations you face during your lifetime.

Best of all, this book highlights ways to get the most from your money, but it also helps you decide where your priorities lie when it comes to your finances, and gives you the facts up front and honestly. And as your priorities develop and change, all the advice you need is in the same book so you can make the journey from clearing your debts to building your wealth by investing, to setting up a comfortable retirement and a potential nest-egg to pass on to your nearest and dearest. Think of Personal Finance & Investing All-in-One For Dummies as your first great investment!

About This Book

If you’re trying to figure out your financial future, cure a tax-related headache, invest your money securely, or work out the most sensible way to refloat your financial boat, this book provides an introduction to the most useful areas of financial and investment advice.

You can read further details in other For Dummies books or see a financial adviser for personal or more specific advice. If you’ve read all there is to read in this book but still want more, check out the extra information in these For Dummies titles (all published by Wiley):

bullet Investing For Dummies (Tony Levene)

bullet Paying Less Tax 2006/2007 For Dummies (Tony Levene)

bullet Retiring Wealthy For Dummies (Julian Knight)

bullet Sorting Out Your Finances For Dummies (Melanie Bien)

bullet Wills, Probate & Inheritance Tax For Dummies (Julian Knight)

Conventions Used in This Book

To make your reading experience easier and to alert you to key words or points, we use certain conventions in this book:

bullet Italics introduces new terms, and underscores key differences between words.

bullet Bold text is used to show the action part of bulleted and numbered lists.

bullet Monofont is used for web addresses.

bullet HMRC (you’ll see this acronym a lot in this book!) means Her Majesty’s Revenue and Customs – you might better know this organisation by it’s old name of the Inland Revenue, or simply as ‘the tax man’ (regardless of gender). We stick to the technically correct term of HMRC.

It’s also worth remembering that although we’ve included up to date financial and investment information at the time of writing, these things do change! Use the facts and figures within this All-in-One as a guide, but if in doubt, seek expert advice on the most up to date information.

What You’re Not to Read

You can read this book cover to cover, or skip through just reading the sections that interest you the most. You can also glean plenty of information from this book without reading the sidebars (the grey boxes) – the detail in our sidebars is interesting but not crucial to understanding the rest of the book’s content.

Foolish Assumptions

In writing this book we’ve made a couple of assumptions about you:

bullet You’re not a financial expert and don’t want to become one – you don’t want finance to dominate your life, but you do want to feel secure.

bullet You want to know the basics of your financial future or the key to good investment and want access to tips and advice as and when you need them.

bullet You are interested in some or all aspects of personal finance, for example:

• You want to tackle your finances but you don’t know the first place to start. You’re wondering whether – just maybe – it might be possible to get out of debt once and for all.

• You want to know enough about tax to make sure you are paying the right amount and claiming what is due to you. You also want to know how to make the tax system work in your favour!

• You want someone to help you understand what investing is really about and what types of investments are available. You also want pointers to help you to risk only what you can afford to lose and to make a worthwhile return on your hard-earned cash.

• You’ve made a conscious decision to plan towards a wealthy retirement and you want to know how to draw up your ‘retiring wealthy’ plan – and how to follow it through.

• You want to make plans so that your money and property is used to help your loved ones when you die, but you don’t know where to start. You feel a little intimidated by all the legal and accountant speak that surrounds wills and inheritance tax, and are looking for a straightforward explanation.

If any (or all) of these assumptions accurately describe you, you’ve come to the right book.

How This Book Is Organised

We’ve divided Personal Finance & Investing All-in-One For Dummies into five separate books. This section explains what you’ll find in each of these books. Each book is broken into chapters tackling key aspects and skills. The table of contents gives you more detail of what’s in each chapter, and we’ve even included a cartoon at the start of each part, just to keep you happy.

Book I: Organising Your Finances and Dealing with Debt

Book I is the one most people will want to start with – the chapters within run through the basics of sorting out your current financial state. If you’re in debt, this Book is for you too, providing hints and tips on grinding down loans and overdrafts.

Book II: Paying Less Tax

It’s very difficult to avoid dealing with HMRC; practically no-one escapes the tax inspector’s net. This Book is designed to help you pay the right amount for your financial situation. It contains tax-saving tips and then more tax-saving tips; almost everyone can benefit from reading this Book!

Book III: Building up Savings and Investments

Book III is primarily about investing, but incorporates other aspects of planning your financial future, too. Whether you’re looking to start saving your money in a high-interest account, find a cost-effective mortgage, or dip your toes into the world of shares and bonds (or even something more exotic), this Book helps you to understand your options . . . and to weigh up the risks against the benefits.

Book IV: Retiring Wealthy

Putting something away for a rainy day is the name of the game in Book IV. The chapters within outline your different pension options, along with details of other ways to save for your golden years. It’s never too early to start planning, and this Book aims to give you a head start.

Book V: Protecting Your Wealth For the Next Generation

Two-thirds of people haven’t yet made a will and half of us never will. These people are missing out on a golden opportunity to look after their families and frustrate the tax collector. This Book provides advice on putting a framework in place for your family’s future for a time when you’re no longer around.

Icons Used in This Book

When you flick through this book, you’ll notice little icons in the margins. These icons pick out certain key aspects of personal development:


This icon highlights practical advice to get our investing and finance ideas working for you.


This icon is a friendly reminder of important points to take note of.


This icon highlights information that you might not need to know to sort your finances out immediately, but could stand you in good stead for the future or as background knowledge.


This icon marks things to avoid – they could be costly or drop you in deep water with HMRC, the government, or your bank.

Where to Go from Here

If you need emergency surgery to stop your wallet rupturing, head straight into Book I, or if your finances are in reasonable shape and you’re thinking about planning for your or your family’s future, check out Books IV and V first. You can of course, read through each and every chapter, but why not spend some time browsing through the detailed table of contents to see if anything of immediate interest springs out at you?

Good luck to you, and we wish you all the best in finding the answers to your financial and investment questions. And if it all goes according to plan, can you lend my editor a fiver?

Book I

Organising Your Finances and Dealing with Debt

In this Book . . .

Being good with money is about getting into good habits and understanding the choices you can make. This Book gives you the confidence to understand and plot where your money goes, to know your limits, and to choose the right financial package for a wealthier future.

Here are the contents of Book I at a glance:

Chapter 1: Figuring Out Financial Goals, Financial Budgets, and Financial Advisers

Chapter 2: Choosing the Best Current Account for You

Chapter 3: Covering Yourself with Insurance

Chapter 4: Tackling Your Overdraft and Other Credit Nasties

Chapter 5: Choosing a Credit Card

Chapter 6: Weighing Up Personal Loans