Ask Anonymous: Nova Answers 😁

Hello! :grin:We are starting an “Ask Anonymous Nova Answers” thread here at the Nova community, this is where you can ask all the questions you have about personal finance/money anonymously.

So if you have any questions, ask away using the form here!

We’ve been getting questions about personal finance from a lot of people :grin::grin: - so now we’re going to use the Nova community here to answer your questions! :partying_face::partying_face:

Here’s one we got about ISAs :

Hi Team,
I’m trying to understand more about ISA accounts. Could you explain what an ISA is? How do I start an ISA? Are there any particular ISA accounts I should look to get?

1 Like

Good day everyone!

We have an anonymous question with regards to paying off debt:

I have some extra cash to pay off debt and I have heard about some methods known as the avalanche and snowball method. What’s the difference and what would you recommend?

Avalanche Method
The avalanche method consists of paying the minimum amount on all debt, then using your leftover amount to pay off debt with the highest interest rate, regardless of balance. What is the benefit? You would pay less in interest.

Snowball Method
The snowball method consists of paying the minimum amount on all debt, then using the leftover to pay off your smallest debt, regardless of interest rate. What is the benefit? It is said to give you motivation as each small debt is paid off.

Which one is the best?

In general, you should always repay the most expensive debt first, because high interests can compound like hell.

However, some people like Dave Ramsey recommend repaying the smallest debt first to have a taste of victory and keep you motivated.

So it’s up to your personality and what keeps you motivated! If you feel like you need to strike one debt out of the list to keep going then the snowball method may suit you.

If you are rather data-driven, then the avalanche method is the fastest way to get out of debt.

I hope this answers your query. :sunglasses: Remember, don’t hesitate to ask us your questions on our Ask Anonymous form. It is completely anonymous and all questions will be answered!

Let us know what method you prefer, the avalance method or the snowball method? Leave your comments :point_down: :point_down: :point_down: :point_down:

1 Like

Let’s reply to the question on ISAs

What’s an ISA?

ISA stands for Individual Savings Accounts. The biggest difference between an ISA and any other savings account is it’s a legal tax loophole! :dollar: :yen::dollar: :yen:You can save and invest your money without being taxed. This means an ISA account offers tax-free interest payments, so you can get more for your money.:wink:

The best ISA depends on what you are looking for. There are four types of ISA:

  1. Cash ISAs :moneybag:

This works similarly to a bank account. A Cash ISA is likely to pay you more interest than a bank account would on your pot of money that is sitting and waiting for you. There are two options available: fixed-rate and instant access.

Fixed-Rate: These types of accounts lock your money away for a set period of time :closed_lock_with_key::closed_lock_with_key:(e.g. 5 years) in return for a higher interest rate.

Instant Access: These types of accounts are flexible and allow you to make money in and out whenever you want. It is likely to come with a better interest rate than a bank account, however, it will not be as good as Fixed Rate Cash ISA.

Cash ISAs can be opened with as little as £1. However, it is important to take note that you can only have one active cash ISA annually. This type of ISA is protected by the Financial Services Compensation Scheme (FSCS.)

  1. Stocks & Shares ISAs📈

If you are looking to begin investing long-term (5 or so years), this is something you should look into getting. A stocks and shares ISA can help you beat inflation and help you build a nest egg for future financial goals.

Imagine not having to pay any tax on your dividends, growth, interest, or income you get from the investments! However, you can only open one stocks and shares ISA with one ISA provider in a tax year.

If you are new to investing, then a robo-advisor may be a good place for you to begin your journey. Platforms such as Nutmeg make it super easy to sign up for a Stocks & Shares ISA! This type of ISA is protected by the FSCS.

Check out this article on the best investment platforms to try out in 2021.

  1. Innovative Finance​:confetti_ball::confetti_ball:

This type of ISAs are peer to peer lending. This means that you lend money to people and companies. In return, they pay you back with interest; this interest is usually higher than what you would earn on a Cash ISA. It is important to take note that this type of ISA is high risk.

It is also important to take note that this type of ISA is not protected by the FSCS.

  1. Junior ISA

If you are looking to put away some money for your children, a junior ISA is a great way to do it. A junior ISA allows you to save and invest up to £9,000 annually…tax free. This is a great way to start saving money for your kid until they reach the age of 18. Platforms such as Hargreaves Lansdown and Nutmeg handle Junior Cash ISA and Junior Stocks and Shares ISA versions.

  1. Lifetime ISA

If you are looking to buy your first home (costing no more than £450,000 or for retirement after the age of 60, this is for you. You can invest up to £4,000 annually and the government will give you a 25% bonus on top of any contributions made. What does this mean? This means you can potentially earn up to £1,000 annually FOR FREE.

However, if you choose to withdraw for any reason apart from terminal illness or death, a penalty charge of 25% of the value withdrawn will apply.

Remember, you can only open a lifetime ISA if you are under the age of 40. Lifetime ISAs can be available as both Cash or Stocks & Shares ISA. This type of ISA is protected by the FSCS.

I hope this answers your queries on what an ISA is and what ISA would be best to get. If you have some savings but are unsure where to put your money, an ISA is a great start. Remember to understand what are your financial goals in order to pick the right type of ISA for you. Cheers!

Let us know what are your thoughts on ISAs, do you have one? Which one do you have and why?

Good Day Folks! :wave:

Here’s a question we recently received:

I always go out with friends, how can I avoid going over budget?

Going Out with Friends
When you love going out with friends, it’s tough for the wallet. A drink or two a night quickly adds up and before you know it, you’re over budget.

  1. Communicate :speech_balloon:

Let your friends know you want to be financially savvy. There’s no harm in being honest, instead of being judged you would encourage your friends to also be more aware with their spending and jump on the wagon too.

2. Check for discount codes :eyes::eyes:

Many restaurants have discount codes online if you book in advance - take advantage of them. Birthdays and special occasions are often good times to find even better discounts. Some apps and loyalty cards also help you save money too. :kissing_smiling_eyes::kissing_smiling_eyes:

3. Choose the cheapest time to go out :clock1:

Instead of dinner, why not go out for Brunch? Prices are usually lower in the afternoon compared to the evenings.

4. Skip the drinks :wine_glass::beer::beers::clinking_glasses::tumbler_glass::cocktail::tropical_drink::champagne:

If you are eating a meal, drinks can be expensive and oftentimes you only care about the meal, but get the drink because you feel you should. Ask for tap water instead of bottled, it’s free and saves you calories.

5. Eat an appetizer :sweet_potato::taco:

It’s common to see people eat half of their main meal, so why not go for an appetizer instead if you know you aren’t that hungry. It’s cheaper and you also reduce wasted food! ( I usually prefer to skip the meals and go straight to dessert so that might work too )

6. Take food home :house::house:

Saving money doesn’t always mean ordering the cheapest or less in the restaurant. Sometimes it means taking home the leftovers. ‘ It doesn’t look good to others ‘ is often what comes to people’s mind when you finish a meal and suddenly grab a tupperware from your bag. Truth is who cares? You are also doing the planet a favour for not wasting food. Most meals in restaurants are enough for 2 meals, so you just saved money because now you have lunch for the following day!

7. Eat outside :evergreen_tree::deciduous_tree::seedling:

If you can order the food and eat in the park with your friends, do it! The experience will probably be the same, the food will be and you’ll save some money from the added fees for dining inside :slight_smile: Enjoy the sun!

Do you have any other tips on how to save money when you’re out with friends? Let us know in the comments! :laughing::grin:

1 Like

Hey all!

We recently received another question:

**I’m so happy that Freedom Day is finally here and I’m in the midst of planning my summer vacation. After experiencing the loss of a job I want to be more careful with how much I spend on holiday, do you have any tips on how I can save on vacation?

You’ve come to the right place! :smiley: Here’s some tips we have for you:

1. Write down a list of things there is to do and what you want to do

I recently spent a long weekend in the Isle of Wight and there was so much to do, but so little time! I’ve learnt the best way to go about planning a worthwhile, budget friendly trip is to list down the things there are to do, and what you really want to do.

What do you want to tick off your bucket list that is not negotiable? These are the things that you should prioritise and budget for. Everything else comes second to these things and they should be treated that way in your holiday budget.

2. Travel Deals, ALWAYS.

Travel deals have been a life saviour. If you know what you’re looking for but are looking for a good deal, you can check out sites like Sites like Wowcher and Groupon also offer good deals on budget holidays.

3. Student ID

This is the best possible gift you could ever receive. If you’re still in university, or better yet you have a student ID without an expiration date, OWN IT. Students are entitled to plenty of benefits such as meal deals, public transport savings, attraction discounts - the list is endless. Sometimes historic sites or museums allow students to enter for FREE.

4. Invest in a local sim card

Data roaming can cost a hefty sum! To avoid exorbitant costs, I would suggest investing in a local sim card if you are going to need to use data to get around or if you’re just in need of data to stay in touch with the net. You can get lost without worrying about excessive phone bill charges!

5. Compare, compare, compare!

Never accept the first offer you come across when shopping online, unless you are certain a cheaper deal can’t be found. By comparing your travel costs, accommodation, activities and currency exchanges (if needed), you could end up saving a lot of money. Sites like Skyscanner, TripAdvisor and Kayak are some of the sites you can use.

I hope you find these tips useful! And have a blast on your holiday :sunglasses:

Happy Tuesday Folks! :wave:

Here’s a recent question we received:

I find myself eating out more often since lockdown easing. What can I do to save money at a restaurant?

Oh, the struggle is reallllllll :raised_hands: But here’s a couple of things you can do:

1. Can’t finish the meal? Save it for tomorrow

Every meal costs money and portions in restaurants are usually quite big. You might want to eat half to save the calories or just simply because you are full.

2. Check the website
Many restaurants have special discounts on their website. Rather than turning up to a random restaurant on the day, why not spend 5 minutes on their site and check if they have any discount code or special deals. Some do 50% every monday, some do free snacks etc - 5 minutes of scrolling could save you 30-40% off a nice meal and you can use the money to splurge on the next.

3. Skip the drinks and/or appetizers and/or (not recommended because we all know it’s the main meal) dessert

While we all know ice cream is literally the best thing that has ever been created (second to Nova), ordering at the restaurant can be more costly. If you know you won’t be able to finish the main course, why not skip the other non-main dishes? If you’re someone who usually orders drinks because you feel like you have to, opt for water, it’s usually free and lets you enjoy more of the taste of the main meal.

4. Keep track of your budget

Always have a budget. If you just feel like a ‘ eat it all ‘ kinda day and want to feel guilt free. Cut back on other areas, buy cheaper groceries when you eat at home and use the money to enjoy your meal out.

That’s a couple of tips that we have for you, I hope it comes in handy! :muscle: How do you like to save money when eating out? Let us know! :smiley: