Preparing For A Gap Year

Those who wish to take career breaks or have a year out in between studies to explore far-flung corners of the globe will embark on what is known as a gap year. Not just limited to students anymore, more of us head off seeking adventures every year, usually to backpack around locations such as South-East Asia, South America and Australia.

A gap year can also be spent touring, especially if you like to drive. The long and winding highways of the United States are a popular destination for these kinds of trips. Volunteering is also a popular reason for taking a gap year, with organisations offering excursions all over the world to help with nature conservation and humanitarian matters such as constructing schools and digging wells.

Pick Somewhere

During a gap year, the world is your oyster. Now it’s a case of deciding where to dip your toes first, do you want to start in one part of the world and end up at another along the line, or just take your time exploring like a nomad?

After you’ve decided on where to start your journey, it’s time for the research to begin:

  • Research the countries you want to visit; and not just the tourist attractions either, take the time to familiarise yourself with the culture and traits of where you are going.
  • Brush up on your languages; look into phrase books and smartphones apps that can help you to get along in your country of choice.
  • Note down the locations of your country’s embassies in the country you are travelling to in case of an emergency for which you require assistance.

Make A List And Double Check It

When preparing to take a gap year, it’s important to make yourself a checklist before you go, ensuring that you have all the correct documentation needed and enough money and clothes to see you through at least the beginning of your journey.

Important Documents

Before you travel you need to make sure you are covered in case of any incidents which might happen during your travels, including falling ill and getting injured, so it helps to have the following:

  • Passport – the most important thing you should have during your trip – you can’t travel without it after all.
  • Travel insurance – vital to have in case you fall ill or get injured during your journey. Talk to an insurer about a gap year travel insurance policy, which can help to provide cover for the duration of your trip.

Bear in mind though that there may be some locations where insurers will either charge a little more or not cover you at all because of an increased risk, so pick your destinations carefully when planning your trip.

  • Health cards (including EHIC cards) – if you’re travelling within Europe, a European Health Insurance Card can help should you fall ill as it entitles you to access to treatment in countries within the EU.

It should be noted that an EHIC card is not a substitute for travel insurance, and should always be carried alongside a travel insurance policy to provide an extra level of protection.

  • International Driving License – if you’re looking to drive during your trip, you must have a valid International Drivers’ Licence, which is recognised all over the world and can help with getting rental car access.

Also, if you’re currently studying and have a National Union of Students (NUS) card, it can be worth taking this with you as a just-in-case. Some tourist attractions around the world may offer a discount for students, so it can be worth taking along and trying out!

Staying Safe

It’s best to be prepared for any situation when you go away, so packing a small medical pack before you travel is essential to your preparation for a backpacking trip.

Medical kits are available to buy at airports, and it can be worth looking into buying supplies once you get to your destination. Ensure that you declare any prescription medication you’ll be taking with you on your trip, as well as the prescription itself, and be sure to identify where your local pharmacy is in your destination should you need a repeat prescription during your trip.

Before you travel, book an appointment with your GP for a health check, and find out if you require any vaccinations for the countries you wish to visit. Diseases such as malaria, hepatitis or glandular fever usually will have an inoculation before you travel or a course of medication during your trip.

Find out as well if you require any medication as a result, including anti-malaria tablets, and be sure to stock up before you go.

Keep Clean Before You Carry On

Take a wash bag with you with a variety of items to keep you clean during your trip – including a toothbrush, hairbrush and wet wipes among others. Because airlines only allow a certain amount of liquids on your person during a flight, it can be worth seeing if you’d be better off buying items such as soap, toothpaste, shampoo and shaving cream once you get to your destination.

Finance

Budgeting is essential when it comes to a worldwide trip; you don’t want to fall short and be stranded far from home with no means of paying for a way to get home. So what options do you have when it comes to making sure you can afford things?

  • Save

Financial preparation is an essential part of a gap year experience, from saving for the flight to getting jobs during the trip to pay for food, lodging and your plane ticket home.

If you’re saving for a trip, think about taking out a separate savings account to drop a little of each wage packet each month, you’d know then that you can accumulate a good amount to travel with.

When it comes to buying flights, shop around, and be sure to research gap year companies who may offer your flight out to your starting destination as part of the price of their package.

  • Use a pre-paid card

Pre-paid credit cards allow you to load up a card with a certain amount of money, which essentially becomes your holiday budget.

Using a pre-paid card saves you the need to carry a large amount of currency on you at any one time, reducing your risk from thieves who might steal your wallet during your trip.

  • Take a mixture of currency to begin with

However, depending on where you are going, you might be crossing several countries during your travels. It can be worth taking an amount of each countries’ currency as loose money, especially for buying items such as food and clothing as not all places accept a contactless card.

Don’t Pack Too Much At First

When you’re starting out on a trip, “less is more” can be a good philosophy to stick to, depending on where you’re going. You can always buy more clothes while you’re there of course, but be sure to take enough for at least your first few weeks, or until you locate the nearest laundrette.

Identifying a Pension Scam

New pension reforms were introduced on 6th April 2015 which will change the face of retirement income in the UK forever.

It allows citizens better control and flexibility to access their pension pot. But a lot of questions still hang in the air as people are not fully aware of the changes.

Fraudsters see this as a perfect opportunity and time, to strip the hard earned money off gullible retirees.

Pension Scams of multiple varieties are on the rise in the UK.

From an email that pops out of the blue, promising incredibly high returns from ‘creative’ investment options, to a phone call that lures you into believing that you can get access to your pension pot before the age of 55, there are many ways in which a pension shark may approach you.

The only way you can protect your life savings is by being aware and spotting a scam a mile away.

The Modus Operandi

Most pension fraudsters will try to entice you into transferring the funds in your pension pot in exchange for lucrative returns on bogus investments.

You may receive an email, a phone call or a conman may turn up at your doorstep.

The person will look like a legitimate representative of a pension company and will sound extremely convincing.

They may even have a very attractive website that may have the words, ‘Pension’ or ‘Wise’ in their name, to fool people into believing that they are a part of the government Pension Wise service.

You are more likely to be contacted by scammers if you are nearing retirement.

The Common Ones

Over the years, many retirees have been scammed off their hard earned money by scammers who keep coming up with innovative methods.

These are some of the common ones that you may be approached with:

  1. Free Pension Review: This is one of the most commonly used methods by fraudsters. You may be contacted by companies that claim to work on behalf of the government offering you free guidance on investing your pension funds. Typically, retirees are asked to move their funds into self-invested personal pensions (SIPP) with unregulated investment options like forestry, wineries, storage pods, cement factories in Nigeria, properties in overseas destinations like Costa Rica and rainforest harvesting.
  2. Pension Liberation Plan: The only way you can get access to your pension funds before the age of 55 is if you are batting ill health. Fraudsters who offer ‘Pension Loans’ or ‘Pension Liberation Schemes’ hide the fact that you may lose up to 70% of the liberated pension amount as taxes by the HMRC. This will be in addition to up to 30% charges by the fraudsters themselves leaving you with virtually nothing.
  3. Common Names: These are some of the terms that should immediately draw a red flag. One-Off Investment Schemes, Legal Loopholes, Government Endorsements, Overseas Investments and Creative Investments. The general thumb rule is to avoid any investment option that you receive via cold-calls.

Protect Yourself

It is important to know that the government will never contact you or encourage you to make investments in get-rich-quick schemes.

So, if you receive a cold-call from someone who claims to represent or work on behalf of the government and asks for details about your pension pot, do not reveal the information. The best you can do is hang up. Alternatively, you can ask them if you can call them back.

Most fraud companies do not want you to call them back and will refuse.

If they agree and provide you with a phone number, call the Financial Conduct Authority (FCA) on 0800 111 6768 to verify if the person or company calling you is legitimate.

The FCA register has details of all licensed pension providers. Call back the company or person on the number provided in the FCA register and not the one they provided you with.

Do not be rushed into making a decision no matter how lucrative the investment option seems or how urgent they make it appear to be.

Always seek the advice of an independent professional before you agree to transfer your pension pot to any SIPP. 

How to Select a Financial Advisor

There is such an abundance of information about pensions and retirement online that retirees can make the mistake of trying to cut corners and making crucial financial decisions themselves.

If one thinks closely about the implications that such a decision may have in the next few years, the thought can be scary.

One small mistake while buying an annuity or while choosing an investment fund, can virtually change the way your life unfolds in the twilight years.

SEE ALSO: What is an Annuity?

All those years of planning, saving, and preparation can be undone in minutes.

That’s why most financial experts and even the government encourage you to seek independent financial advice before you make decisions about your pension.

It is not very expensive, and the information and advice you receive can be very well worth it. In fact, you should consider it as an investment in its own right.

How to find financial advisors

One of the easiest ways to find a financial advisor is to ask for recommendations from your colleagues or friends who may have hired their services.

However, the catch is that it may not always be possible to gauge the quality of the advice provided that a few years pass.

There are other public resources which can be a valuable source of impartial information about Independent Financial advisers who are regulated by the Financial Conduct Authority (FCA). Here are some of them.

  1. The Unbiased Web Directory (www.unbiased.co.uk) lets you search for a financial advisor close to you by entering your postcode
  2. Vouched (VouchedFor.co.uk) is a review based website that provides ratings and reviews written by genuine clients of various financial advisors. It is a good resource to analyze the services of financial advisors.
  3. The FCA (The Financial Conduct Authority) register allows you to check and know if a financial adviser you selected is an authorized one

What should you look for

Financial advisors come in all shapes and sizes and have varied areas of expertise.

Since you are looking for advice regarding retirement income, pensions, and annuities, you should look for an adviser who is skilled and qualified in those areas.

  • Check if they are qualified. Although all Independent Financial Advisers are required to be qualified to a certain minimum level (Ofqual accredited level 4 qualification), any additional qualifications will be a plus.
  • Check their expertise. A financial adviser who has been around for the last few years will certainly be a better choice than someone who has recently started their practice.
  • Ask for references to see if their clientele has mostly been people who had similar requirements as yours. A diverse clientele does not necessarily mean that they cannot provide you with good advice.
  • Check the fees beforehand. As per the RDR – Retail Distribution Review dated 31st Dec 2012, you can choose to pay fees upfront for the services, or you can choose to pay them a commission from the amount you invest in a product that they recommend. But do not slump for the first quote you receive. Get quotes from multiple financial advisors.
  • Ask if they are an independent adviser who will be able to provide you with impartial advice and offer a broad range of investment options. If the adviser only offers a limited number of investment options, then they may be a ‘restricted’ advisor.
  • Ask if you will be provided on-going advice if necessary and what it will cost you.
  • Look for advisers who agree to meet you face-to-face, free of charge. Usually, a direct meeting is a better way to understand if you are dealing with the right person.

The Preparation

If you have selected a financial adviser, then the next step is to ensure that you prepare well for the meeting. They will first try to get a clear picture of your investments and if applicable, that of your partner or spouse.

So prepare a list of all relevant details like your assets, liabilities, existing policies, private pension plans, investments, power of attorneys, wills, employment pension schemes, payslips, national insurance number and any other information which you think may be relevant.

You may also look at our Complete Pensions FAQ.

Ways to Borrow a Small Amount of Money

At times, borrowing a small amount can be more complicated or more expensive than availing for a larger loan. Here is a guide on some of the cheapest ways to borrow if you only need a small amount.

What are your options?

If you wish to borrow less than £1,000 you have some options:

  • Personal loan
  • Overdraft
  • Credit card
  • Friends or family

Each has an effect on your credit record in different ways,  and costs various amounts of money, and has numerous pros and cons.

Should you get a payday loan?

Payday loans or short-term loans are very costly and can hurt your credit record so it should only be considered as a last resort.

The options listed below are cheaper and are better for your credit record compared to a payday loan, so examine each one first.

Personal loan

ProsCons
Can improve your credit recordNeed strong credit to apply
Quick to apply forOnly for sums over £500
Regular repaymentsMore expensive rates

You could borrow between sums between the amounts of £500 and £35,000 with the use of a personal loan, so it is still worth contemplating even if you would only want to borrow a small amount.

How much will it cost? For a smaller loan, you may need to pay a higher rate since the best rates are for bigger loans that are usually between £7,500 and £15,000. Some lenders do not lend amounts that are less than £1,000 too, so you may have lesser choices.

How long will it take? Small loans are no faster than bigger loans. After applying for the loan, you should know whether your application has been approved within 24 hours. The money could then be credited to your account in one or two days.

Your credit record: To receive the best rates, you need a strong credit record. The loan will be included on your credit report and may restrict how much more you can borrow, but handles your loan well and it will improve your credit record.

You could apply for a guarantor loan rather than a standard personal loan if you have a poor credit record but you will require the help of a family member or a friend.

You could also study at bad credit loans. They are more costly than standard personal loans. However, they are more likely to consider your application if you have experienced credit issues in the past.

Credit card

ProsCons
Can improve your credit recordWithdrawing cash is very expensive
Quick to apply forNeed strong credit for best cards
Cheap option if you get a 0% cardCan take a while for a card to arrive

A credit card could be an easy and a quick way for you to borrow a small sum of money.

Most credit cards offer credit limits of several hundred pounds or more, and you can decide to borrow exactly the amount that you need.

How much will it cost? With a 0% purchase card, you can dodge paying any interest. Alternatively, you could transfer money into your account for a small fee using a 0% money transfer card. However, withdrawing cash from your card is very expensive.

How long will it take? If you already own a credit card, you can use it straight away. A 0% money transfer, on the other hand, usually takes around two to three days. If you need to apply for a new card, then it could take more than a week to arrive in the post.

Your credit record: You need to have a strong credit record to receive the best cards. All your credit cards appear on your credit report but if you make your payments on time, stay within your credit limit, and use the cards properly, they can help in improving your credit history.

Overdraft

ProsCons
Quick if you have existing accountNeed a bank account
FlexibleNeed a strong credit record
Some banks offer 0% ratesHigh fees if you go over your limit

With an overdraft that is approved, you can borrow from your bank account by using your debit card or withdrawing cash.

How much will it cost? For small amounts, some banks offer 0% overdrafts which can make this option one of the cheapest ways to borrow. Standard overdraft rates are around 15-20% APR. However, other fees may apply.

How long will it take? If you already own a bank account, an overdraft could be included the same working day. However, if you have a low income or bad credit, it can take longer.

Your credit record: Once approved, your overdraft will be added to your credit record which could decrease the amount that you can borrow. However, if you stay within your limit and manage your overdraft well, it will improve your credit record.

See: What is an overdraft?

Friends or family

ProsCons
No impact on your credit recordNo formal loan terms or rights
You can agree a loan termOwe money to friends or family
Can be cheapest optionNeed willing friends or family

Opting to borrow money from family or friends could be cheap and flexible. However, it is not always the best option.

How much will it cost? This will depend on what you agree with the person lending you the money. However, borrowing from family or friends could be your option that is cheapest.

How long will it take? If the person you are asking to borrow money from has the money ready, it could be the fastest option. Equally, if they would need to borrow or transfer or the money themselves, it may take longer.

Your credit record: Family and friends are less likely to bother about your credit record and borrowing from them will not display on your credit record so it will have no positive or negative effects on your credit history.

Family or Friends, Who Should You Borrow From?

When you need money, the first thing that may come into your mind is to ask your friends or relatives. However, you must weigh carefully about whether you can manage to return it and can deal with what might follow if you cannot.

Pros and cons of loaning from family and friends

Asking your family may be the easiest way to borrow money. They can give emergency cash and help you dodge borrowing with extremely high-interest rates, such as doorstep lending, bank loans, and payday loans.

If both parties are confident it will not destroy a relationship with a family member if you cannot pay back, this is the best choice as it is usually free of interest.

If you are borrowing from a friend, be conscious that if you do not return the money, this could end your relationship with your friend.

Work out a budget ahead

If you want to ask a family member or a friend, make sure you have drafted up a budget to see how much cash you have left after clearing your living expenses.

Look at your current-account and credit-card records from the last three months, and think carefully how much you can borrow.

What if you cannot repay?

It can be stressful if you cannot manage repayments, but it can be even worse if you are leaving a someone out of budget as it might endanger your relationship.

That is why it is necessary to form out your budget and create a new payment plan as soon as you see yourself in distress.

The first thing you may need to do is to let them know what’s happening to show them that you are an honest person and that paying them is your primary concern.

Here are some other tips that will assist you if you are coping with debt:

Other ways of borrowing money

If you are unsure whether or not you should loan from a family member or a friend, there are other alternatives even if you have a bad credit standing.

See: The UK’s Top Debt Solution Providers

Things consider before lending money to friends or family

If someone asks for financial help, especially if it is a family member or a friend, it can be difficult to decline.

However, there is no point going into hardships yourself because you want to help, or because you feel sorry for not helping. On the other hand, maybe you cannot afford to sacrifice your relationship with them just because of money.

Can you afford it?

Work out your budget before lending to anyone. Consider everything you lend as gone. Be sure that even if someone cannot repay you, you would still be able to pay all your living expenses comfortably without borrowing from anyone.

Can they afford it?

Encourage the would-be borrower to draft out their budget, just like what you would be doing. Remember that if they cannot repay you, this may cause financial trouble for yourself or worse, your relationship with them

What will you do if the borrower cannot pay?

You might be certain the person you have lent funds to will be capable of paying it back in full, but you must study what you will do if they cannot; this is a very personal decision, so take your time and think about this.

How formal should it be?

Always keep in mind that whatever you or the would-be borrower says can be denied. Get something in writing when you are lending to family members. Do not be embarrassed by this as this is very common.

Know that if you lend money to family and friends on a regular basis, you might need to be documented by the Financial Conduct Authority (FCA).

In case the borrower died with an outstanding debt, having a formal contract can protect you. Contracts can be used as a proof to claim from their estate.