Indeed, for hundreds of years, banks have been a cornerstone of British commerce. At the beginning of the twentieth century, when Queen Victoria was still on the throne, stock market-listed banks accounted for about a sixth of the value of the entire London Stock Exchange. These days, five of the UK’s thirteen biggest listed companies are banks. Hence, banking is a dependable, as well as a profitable, business.

One reason why banks make such large profits is that they borrow money very cheaply and lend it to borrowers at far higher rates. For example, the Bank of England’s base rate is currently just 4.5% a year, yet most credit cards charge an annual interest rate in excess of 16% APR!

What’s more, according to the British Bankers’ Association, at the end of April, we owed £66.2 billion across 69 million credit cards, or almost £1,000 per card. As around three-quarters (75%) of this debt is interest-bearing, I reckon that we’re paying around £7.7 billion a year in interest. This works out at more than £300 a year for each of the UK’s 25 million households. Ouch!

However, for anyone with a half-decent credit history, paying interest on credit-card debts is largely voluntary, thanks to the joy of 0% credit cards. By opening a and moving your existing card debts across to it, you can avoid paying interest on your card balances for a year or more. Here are six of the longest 0% balance-transfer deals currently available:

0% balance transfers for twelve months or more

Note that all of these table-topping cards charge balance-transfer fees, with a single 0% transfer for, say, £2,000 costing between £40 and £50 to arrange. However, this is a small price to pay, given that you’d save upwards of £300 by avoiding interest for a year or so.

In the early days of 0% balance transfers, no card issuer charged a fee for balance transfers. Alas, nowadays, almost all 0% deals lasting more than six months come with a fee attached. However, these fees have led to a drop in new applicants for credit cards, so some lenders have responded by lengthening the period of their 0% transfer deals. Thus, we now have six 12-month+ deals to choose from, which I think is a new record.

(Incidentally, Capital One also promotes a limited ‘0% for 18 months’ offer with an uncapped 2% transfer fee, but this requires you to spend £100 within three months of your account opening. As this £100 will attract purchase interest of around £24 over these eighteen months, I have excluded it from the above table.)

Finally, offering a year’s interest-free credit is a big loss leader for credit-card firms, so it remains to be seen just how long these lengthy 0% deals will last. My advice would be to buy now while stocks last!

You can learn how to become a master 0% card player in .

If you’re going to be a cunning credit-card player, you must learn to use different cards for different purposes. For example, if you’re paying interest on other credit- or store-card debts, then you need a 0% credit card which gives you an interest-free break lasting up to a year, such as these top 0% cards.

Even if you don’t owe anything on your existing plastic, you can still enjoy interest-free spending for up to ten months with a 0% on purchases card. Also, if you always repay your monthly bill in full, you can earn as you spend with a cashback credit card, which could mean £2 back for every £100 spent.

Finally, if you need to borrow over a long period at a low rate, then why not use a lifetime balance transfer card? With rates as low as 5.94% APR, they are as cheap as a Best Buy personal loan, but you choose how long you take to repay your debt!

Enjoy your fantastic new plastic — but don’t borrow more than you can comfortably afford to repay!

1. Get a second job

In other countries, when people are low on cash for a few months, they get a second job. When we are low on cash, we just start switching off the lights when we leave a room. I don’t see why we should be so horrified about getting extra work. It shouldn’t be stressful, because you don’t care if you lose the job and, if it does turn out to be stressful, you just leave! Sounds like a bit of a doss to me.

A few evenings a week or a Saturday job might give you £50 per week extra after taxes. Besides, just one full day’s work will probably do as much for your finances as six months of switching off lights.

2. Take in a lodger

Under the government’s Rent-a-Room scheme, you can make £4,250 a year without paying tax on the income. You’ll have to seek agreement with your mortgage lender or landlord, and your insurance company too, but it can be a fairly easy way to make some money. If you use this scheme, you can’t claim tax relief on your expenses.

3. Take up a hobby

If it takes you ten hours to build a model railway, paint a picture, or shape your plants into amusing shapes –I’m talking about animals! What were you thinking of? — then that’s ten hours that you’re not drinking. If you work to John McCabe’s Standard British Imbibing Law of one drink every forty minutes, that’s fifteen pints you haven’t drunk. You’ve saved yourself about £30 by doing something you enjoy.

4. Use the library

We should use the library more often rather than buying books, DVDs and CDs. Even if you don’t read much, you could still borrow guide books when you plan to go to another country that you never intend to return to.

5. Make your own lunch

With the amount I eat, buying sandwiches every day would bankrupt me by the end of the month. Instead, I cook two roasts at the same time on Sunday and use them for salads during the week. You could easily save £20 per week by doing the same.

6. Cut up your credit card

It’s hard to find a more expensive debt than standard credit cards. Although you can save or even make money by getting the right credit card and using it wisely, the card providers are still stinking rich. This means many of us aren’t using them properly. If you can’t be bothered to switch, then just get rid of it as quickly as possible. Easier said than done, I know!

7. Lose the overdraft

Overdrafts are also a very expensive way to borrow (unless you get an introductory zero percent deal, like Alliance & Leicester’s Premier Direct account). You should aim to keep a minimum balance of at least £100 in your current account, just in case you forget about a bill.

7.5 No fooling a Fool

At the weekend I walked past a bookshop here in London. Prominently displayed was an Oxford Spanish Dictionary. I checked this out and I can save you money straight off — they don’t speak Spanish in Oxford!

Although grumbling about taxation is an almost universal pursuit, the fact is that society can’t survive without taxes, which are the glue that holds nations together.

Without taxation, every service which is currently provided by our government would have to be purchased privately. This would put people on low incomes at a severe disadvantage to higher earners, because they would struggle to afford healthcare, education, policing and so on.

Nevertheless, the UK’s tax system doesn’t necessarily favour the poor, because the wealthy go to extraordinary lengths to avoid taxes, as I revealed in How To Become A Tax Dodger. Hence, it seems that middle-income households take the brunt of tax rises, being squeezed between ever-rising taxes and household bills.

Now for some bad news: according to Independent Financial Advice Promotion (IFA Promotion), in 2006, almost five out of six people (82%) will pay more tax than they need to. In total, our overpaid tax comes to a whopping £7.6 billion, or over £300 for each of the UK’s 25 million households. So, without further ado, here is a guide to trimming your taxes to the bone — legally, of course!

(By the way, you’ll find more information on this year’s tax allowances and so on in Has The Budget Made You Richer?)

Capitalise on this £8,800 tax-free allowance

If you make a gain from selling shares outside of a tax-free ISA shelter, you could lose up to two-fifths (40%) of this gain to the taxman, thanks to capital gains tax (CGT). By making use of your personal CGT allowance of £8,800 for 2006/07, you can avoid this tax. What’s more, by gifting assets to our spouses or civil partners, we could save almost £400 million a year.

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”

(V I Lenin)

You can buy and sell shares cheaply via an online stockbroker.

Claim your tax credits

According to IFA Promotion, workers and families have failed to claim almost £3 billion of tax credits, including the Child Tax Credit, Working Tax Credit and Pension Credit. Although these aren’t a ‘free handout’ (they are simply a redistribution of taxes), they are certainly worth claiming, with nine in ten families eligible for some contribution. Find out what you can claim at independent benefits website EntitledTo.

“Not one cent should be raised unless it is in accord with the law.” (Napoleon Bonaparte)

Contribute more to your pension

For every £78 that you pay into a pension, the taxman chips in £22 in the form of basic-rate tax relief, so £100 is invested. What’s more, higher-rate taxpayers can reclaim further tax relief worth £18 via their tax return or a PP120 form, so a £100 contribution costs a mere £60. So, by paying more into your company or personal pension, you can reclaim some of the tax that you’ve already paid. In addition, your contributions could move you to a lower tax bracket, which is no bad thing!

“I’m proud to pay taxes in the United States; the only thing is I could be just as proud for half the money.” (Arthur Godfrey)

Visit the Fool’s Pensions centre.

Let your employer enrich you

This article explains how workers can enjoy discounts and tax breaks when buying shares in their employer. This can be a real money-spinner, especially when firms hand out free shares via an approved Share Incentive Plan. For example, the 600,000 people who presently contribute to profit-related-pay share schemes save over £200 million a year in tax.

“The avoidance of taxes is the only intellectual pursuit that carries any reward.” (John Maynard Keynes)

Save or invest using this tax-free shelter

We Brits waste £170 million a year by paying avoidable taxes on our savings interest. Then again, with a tax-free cash mini-ISA, you can squirrel away up to £3,000 per tax year in order to earn tax-free interest, safe from the taxman’s grasp. Alternatively, if you prefer to invest in shares, funds or bonds, you can stuff up to seven grand per tax year into a shares maxi-ISA (but you can’t open one of each in the same tax year).

“Collecting more taxes than is absolutely necessary is legalized robbery.” (Calvin Coolidge)

Send your tax return and payments promptly

If you fail to complete and submit your tax return for 2005/06 by 31 January 2007 (or 30 September 2006 if you want the taxman to calculate your tax for you), then you’ll be automatically fined £100. This happens to hundreds of thousands of taxpayers each year, who also face further penalties for late payment. In total, we cough up close to £500 million in tax-related fines. Ouch!

“Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.”

(F J Raymond)

Take steps to avoid the dreaded death tax

If you own assets (including property) worth more than £285,000, your death could trigger a 40% tax bill on any excess over this nil-rate threshold for Inheritance Tax (IHT) for 2006/07. Imagine: you’ve never been a higher-rate (40%) taxpayer in your life, yet your heirs could face a 40% IHT bill on your estate. Criminal, isn’t it? Hence, it’s crucial to use Wills, trusts and other estate-planning techniques to avoid IHT, which could save UK taxpayers £1.3 billion a year.

“The wages of sin are death, but by the time taxes are taken out, it’s just sort of a tired feeling.”

(Paula Poundstone)

Use Gift Aid when donating to charity

When you drop £1 into a collecting bucket, one pound is all that a charity gets. However, each pound donated to charity via Gift Aid, Pay As You Earn giving or Deed of Covenant is worth £1.28, thanks to tax relief. Also, higher-rate taxpayers can claim a further 23p via their tax returns, so a donation of £1.28 costs them a mere 77p. If we all gave to charities in a tax-efficient manner, they would gain an extra £800 million a year, which would go a long way towards helping vulnerable members of society.

“Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents?” (Peg Bracken)

Use your child’s tax shelter

Parents, family and friends of children with Child Trust Funds (CTFs) can use these tax shelters to save or invest up to £1,200 a year while steering clear of the taxman. Our children would gain over £20 million a year if we all saved and invested in CTFs, rather than the taxable substitutes.

“There’s nothing wrong with the younger generation that becoming taxpayers won’t cure.”

(Dan Bennett)

Use your personal tax allowances

If you don’t earn enough to pay tax, then you should complete a form R85 in order to stop 20% savings tax being deducted at source; non-taxpayers lose nearly £320 million a year by not doing this. Also, if you are married or in a same-sex Civil Partnership, you can reduce your overall tax bill as a couple by transferring savings to a non-taxpaying partner. Again, this would save taxpayers almost £230 million a year.

“The only difference between a taxman and a taxidermist is that the taxidermist leaves the skin.”

(Mark Twain)

Finally, I’ll leave you with a quote about the moral right of individuals to avoid paying needless taxes:

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

(US Appeals Court Justice the Honourable Learned Hand)

So, don’t feel bad about avoiding taxes, because you have the law on your side!

Indeed, as I explained in A Tale Of Two Bankers, the days of bank managers in bowler hats are long gone. Nowadays, many bank managers are glorified salesmen, under constant pressure from head office to meet ever-higher sales targets. Other than banking staff, who most detests these sales targets? The banks’ customers, of course, who are constantly bombarded with unwanted sales pitches in branches and by telephone and post!

Alas, the products which banks desperately try to force on us are pretty ropey, too. In these six sections, I examine their most dreadful deals:

1) Bad Bank Accounts

We want two things from a bank account: a decent rate of interest paid on our balances while we’re in credit, plus reasonable interest and other charges when we’re forced to borrow or inadvertently slip into the red. However, what the vast majority of us have is a current account which pays a pathetic 0.1% a year before tax on credit balances, which works out at £1 per £1,000 of funds per year before tax. Furthermore, a typical current account charges interest of 15% to 30% a year on debit balances, plus ridiculously high penalties for exceeding any overdraft limit.

I was a guest at the annual Moneyfacts Awards on 9 June, where 26 Best Buy awards were handed out to deserving winners. Alliance & Leicester won both awards for Best Current Account Provider (credit interest and debit interest) for its market-leading Premier Direct current account. This pays 5% AER on credit balances up to £2,500, plus offers a 0% overdraft for a year, then 5.9% AER. Other short-listed providers included Cahoot and Smile, which you’ll also find in our Banking centre. Why put up with pests when you can have the best?

2) Cruel Credit Cards

A few years ago, I took to calling credit cards WMDs (Weapons of Money Destruction), thanks to their ability to harm the hands that use them! Here’s a short summary of the worst tricks played by our plastic (there’s more about plastic ploys in How Credit Cards Rip Us Off):

a) sky-high standard interest rates, averaging over 15% a year, as I revealed here;

b) murderous minimum monthly repayments, which lead to a lifelong debt;

c) rip-off payment protection insurance, on which we waste a £1 billion a year;

d) punitive fines for late payment and so on, which are being reduced at this very moment;

e) credit-card cheques charging rip-off fees and interest rates;

f) excessive cash-withdrawal charges; and

g) sneaky overseas-usage fees.

You can learn how to beat the system in How To Master Your Credit Cards, but the golden rule is simple: choose the right card for the right job, for example, for spending, borrowing or cashback. Make a start today by checking out the cracking cards in the Fool’s Credit Card centre.

3) Inferior Insurance

In the Nineties, I came up with my Rule of Three, which states that a Don’t Buy product costs roughly three times as much as its Best Buy rivals. In some cases, the multiple can be even higher, with travel insurance from tour operators being five (even ten) times as expensive as the top policies.

My Rule of Three works in most areas of personal finance, but works particularly well when it comes to buying insurance. To be blunt, if you buy life, health, motor, home or travel insurance from a high-street bank, you’re going to get mugged, because they usually charge as much, not as little, as they can for this cover. Your best bet is to shop around online for quality quotes and lower premiums: start with a visit to the Fool’s Insurance centre.

4) Miserable Mortgages

Which interest rate would you rather pay on your home loan: 6.5% or 4.5% a year? The former is the typical standard variable rate charged by leading mortgage lenders, which is paid by borrowers who don’t have a special-rate deal. The latter rate (4.5%) is roughly what you’d pay with a Best Buy fixed- or discounted-rate mortgage.

A reduction of two percentage points may not sound like such a big deal, but it translates into a £1,800-a-year saving on an interest-only mortgage of £90,000, which is a serious saving. However, choosing a new mortgage is far from easy, thanks to an array of upfront and exit fees, plus other pitfalls to beware of. My advice is to employ a reputable, no-fee mortgage broker to search the whole market for you (all 8,500 mortgages!), such as award-winning Fool Partner London & Country Mortgages.

5) Poor Personal Loans

Earlier this month, I showed that borrowing £5,000 over three years could cost you £1,000 too much if you choose the wrong unsecured personal loan. My survey of 79 personal loans proved conclusively that the worst place to find a personal loan is on the high street, and the best approach is to search online for Best Buy loans. However, don’t start shopping around until you’ve read my twelve tips on how to find the perfect personal loan.

6) Substandard Savings Accounts

Here’s a simple rule which I’ve used for years to weigh up savings accounts. Take the Bank of England’s base rate (currently 4.5% a year) and add 0.5%, and then compare this total (5% at present) to the interest rate paid by your savings accounts. If your savings aren’t earning interest at this level, then you’re missing a trick.

If you’d like to improve the returns generated by your spare cash or nest egg, read Your Ultimate Guide To Saving and check out the delightful deals in the Fool’s Savings centre.

That’s almost it from me, apart from one final piece of advice: keep your wits about you when your bank offers you a “great deal”, because it will almost always fall short of your expectations!

However, the general level of inflation (which measures price changes) is around 2.2% a year, so housing expenses are rising at a much faster rate than the cost of other goods and services. Indeed, according to this survey from Clerical Medical, running the average UK household adds up to more than £679,000 over the course of a lifetime. Ouch!

So, if you’d like to hammer your household expenses, check out the following tips:

MASSACRE YOUR MORTGAGE

The greatest mistake that homeowners can make is to stick with the same mortgage deal for the full 25 years. Amazingly, according to one report, half of all mortgage borrowers (50%) have never changed their mortgage lender, and over two in five (41%) claim that they’ll never switch.

Sadly, with over 8,500 different mortgages to choose from, finding your ideal home loan is far from easy. However, it’s worth the effort, because a 2% saving on a typical £85,000 interest-only mortgage means an annual saving of a handsome £1,700 a year.

I could bore you by attempting to explain all of the ins and outs of mortgage interest rates, arrangement fees, exit penalties, blah, blah, blah. Instead, I recommend that you take expert, independent advice from leading no-fee mortgage broker London & Country Mortgages, which will search the entire market on your behalf. Easy as pie!

Compare home loans in our Mortgage Centre!

HAMMER YOUR HOME (BUILDINGS AND CONTENTS) INSURANCE

According to the latest quarterly British Insurance Premium Index from The AA, the UK’s biggest insurance broker, the average annual premium for buildings and contents insurance was £360 in April. However, shopping around could reduce this to £227, saving £133 a year. So, don’t renew your household insurance when it’s due: instead, shop around online for a cheaper quote!

Get quality quotes in our Insurance centre!

LOWER YOUR LIFE, CRITICAL ILLNESS AND INCOME PROTECTION INSURANCE PREMIUMS

Many of us have insurance policies to protect ourselves and our families, so that if something nasty were to happen to us, we wouldn’t lose our homes as a result. However, with a typical mortgage lasting 25 years, choosing the wrong insurance policies could mean paying well over the odds each month for three hundred months or more. D’oh!

Hence, it pays to choose your protection carefully, as you could easily save tens of thousands of pounds over the life of your home loan. These articles will help:

Life insurance: Oops, You Bought The Wrong Protection and More Buying Blunders To Beware Of

Income protection (long-term sickness cover): Look After Your Greatest Asset

Critical illness cover: Do I Need Critical Illness Insurance?

Get cheaper cover in our Insurance centre!

SWITCH YOUR MORTGAGE PAYMENT PROTECTION INSURANCE (MPPI)

Around 2.5 million mortgages are protected by mortgage payment protection insurance, which provides monthly payouts to borrowers who are unable to work due to accident, sickness or unemployment. However, most MPPI policyholders bought their policies from their mortgage lenders, who charge as much as they possibly can for this rip-off cover.

Hence, a typical MPPI policyholder is paying over £400 a year for this protection, when similar cover can be had for around £250. A saving of £150 a year adds up to £3,750 over 25 years, so don’t delay: ditch and switch your MPPI today!

Get cheaper cover in our Insurance centre!

SLASH YOUR ENERGY, TELEPHONE AND WATER BILLS

Gas and electricity

The first step to trimming your energy bills is to use less of it, so read these energy-saving tips, which could reduce your energy usage by a fifth (20%).

Sadly, even though the cost of domestic gas and electricity has risen by two-thirds in the last couple of years, most of the UK’s 25 million households have never switched supplier. This is bad news, because buying your gas from British Gas and your electricity from your local supplier probably costs you an extra £200+ a year! So, shop around by visiting one of the many energy-comparison websites, such as Energy Helpline, Save on Your Bills, SimplySwitch and so on.

Home telephone

Why pay hundreds of pounds a year to BT when you can save a fortune simply by using alternative call suppliers? If you want super-fast broadband with your telephone, the out-and-out winner for home-phone calls is the “Talk3 International” package from the Carphone Warehouse, which I reviewed here.

For £20.99 a month (plus a one-off connection fee of £29.99), Talk3 International gives you up to 8Mb broadband (with a monthly allowance of 40Gb), free calls lasting up to 69 minutes to UK geographical numbers (those starting “01″ or “02″), free international calls to 28 countries, and includes your monthly line rental of £11, which you no longer pay to BT. What a bargain!

However, if you don’t want to switch broadband provider, you could make calls via an override provider, such as the popular www.1899.com or www.18185.co.uk. With 1899, I pay just 3p for any UK call beginning with “01″ or “02″, no matter what the time of day, or how long the call lasts, which slashes my bill for call charges to just a couple of pounds per month. You can even get free local and national calls at evenings and weekends with the Saver Option 2 tariff from Primus. Yippee!

For more tips on trimming your home-telephone bills, read this article.

Water

These eight tips will show you how to dodge the drought and pay less for the liquid of life. By the way, don’t forget to pay your bills by Direct Debit or standing order, as this could save you a further £200 a year.

Sadly, until about eight years ago, I’d never done any financial planning in my life.

Back in 1998, I started with a single, simple goal: to rid myself of the massive debts which I’d built up from gambling, overspending and generally squandering money. In total, across thirteen credit cards and three personal loans, I owed just short of £50,000.

Thanks to a combination of self-control, better budgeting and selling assets (plus the generosity of my wife), I managed to clear this debt within a year. Freed of the burden of crippling debt, I was able — for the first time in my adult life — to face the future with confidence.

It was at this point that I took my first positive steps towards serious financial planning: I created various goals, milestones and targets to meet as I went through life. Initially, my first target was to build up cash savings of £5,000, which took less than a year. I have since set myself progressively more challenging goals.

Anyway, in order to meet my targets, I had to improve my money management by several degrees of magnitude. Despite being a mathematician by education and having worked in financial services since the late Eighties, I wasn’t terribly good at managing my financial affairs! Hence, I had to adopt better habits in order to help me to manage my money better. Here’s what I came up with:

Budgeting and spending

The first rule that I had to learn has been around for as long as money itself: the Romans phrased it as “sumptus censum ne superset,” or “let not your spending exceed your income”. So, I learned how to budget and made sure that there was something left before each payday.

I also started to trim my expenses by making sure that I paid the best price for everything that I bought, from my mortgage right down to the smallest monthly expenses. I started haggling for discounts on larger purchases, and used price-comparison websites to cut the cost of everyday goods. However, nothing saved me so much money as simply cutting back and spending less — these days, I’m a wiser miser!

For the record, we Brits took home a total of £831 billion last year, yet we spent £1,005 billion, which was £174 billion (21%) more than we earned. Thus, we have a long way to go before our national overspending habit is under control!

Borrowing

Having come very close to bankruptcy in the late Nineties, I’m now a passionate anti-debt crusader. Nevertheless, I recognise that, for most adults, debt is a fact of life. Indeed, the average unsecured (non-mortgage) debt comes to about £4,000 per adult, which is a burden that we could all do without.

Naturally, the first debt to tackle on your way to financial fitness is your mortgage, because it’s the biggest millstone around your neck. If you’d like to find a better home loan, my advice would be to instruct a reputable no-fee mortgage broker to search the entire market (over 8,500 loans) on your behalf. Awarding-winning broker London & Country Mortgages is one such firm.

While hammering your home loan, you should also take steps to reduce the cost of other borrowing, particularly any balances on credit and cards, most of which charge rates of between 15% and 30% a year! One sound move is to shift these debts to one of the scores of cards which charge no interest on transferred balances for up to a year. You’ll find a super selection of 0% cards here.

In addition, if you need a personal loan, don’t sign on the dotted line until you’ve read my ten tips to choose a loan and paid a visit to our Personal Loan centre. Lastly, you can learn to be a brainier borrower by reading Cheaper Borrowing Made Easy!

Saving

Once I’d destroyed my hefty debts, I started saving in earnest. Initially, I saved into cash mini-ISAs, in order to earn tax-free savings interest, and then put the remainder into Best Buy easy-access savings accounts. If you’d like to develop superior savings skills, read Your Ultimate Guide To Saving.

Protection

To be perfectly honest, most insurance policies aren’t worth the paper they are written on, especially those sold by high-street banks and retailers. In particular, payment protection insurance and extended warranties are ridiculous rip-offs!

On the other hand, the right insurance cover is vital if you want to protect your most important assets, such as your earning power, home, car and so on. So, before you buy life, home, motor, medical, travel and other types of insurance, read Eight Ways To Protect Your Wealth and get quality quotes from our Insurance centre.

Investing and pensions

I’ve grouped these two topics together because, in many ways, they are one and the same. After all, a pension is nothing more than an investment which is designed to provide you with a retirement income. Indeed, you don’t even need a pension to save for retirement: you could invest in shares inside a tax-free ISA shelter, or even in cash (although this is an awful long-term investment).

Still, thanks to the pensions A-Day changes which came into effect on 6 April, pensions have become much more attractive to most workers. Indeed, you can now put as much as you want into pensions, although you can only claim tax relief on contributions of up to 100% of your income, with a ceiling of £215,000 a year. Learn more and check out the offers in the Fool’s Pensions centre.

As for investing, I mean only one thing: investing in the stock market to build long-term wealth. Most of my wealth is tied up in individual shares which I’ve picked myself or have acquired through attractive employee share schemes. However, a fair slice of my wealth is invested in the cheapest, simplest stock-market investments: index trackers.

These merely track an index up and down, such as the FTSE 100 index, which measures the value of the UK’s one hundred biggest listed companies. By doing away with human fund managers and allowing a computer to run the fund, an index tracker can charge investors ultra-low fees.

I regularly invest in index trackers or index-tracking shares and also throw in the odd lump sum, as does my wife. For the record, I think that the FTSE 100 index looks cheap in historical terms, so I’m happy to ignore other financial pundits and keep stuffing my money away inside simple tax shelters to build a better future!

So, there you have it. No tricks, no magic spells, no “double your money” schemes. I got to my first £100,000 by getting rich slowly and surely and, if you follow the same road, you’ll get there too.

Don’t buy it! Gloomy anecdotes sell newspapers, but don’t signal systemic failure. If subprime were rippling into a systemic disaster, we’d see it in vastly widening credit spreads. Yet, credit spreads today - the difference between high quality debt and low quality debt of the same maturity - are up but, are nowhere near levels necessary for a credit crunch.

Despite recent spread volatility, even the largest moves are relatively small - 10 and 20 basis points per day - compared with the massive early-stage spikes seen in history’s true credit crises. Conveniently, those sharp spikes usually preceded, though not always, the subsequent stockmarket meltdown.

Spreads will tell you

Take 1998’s front half. The spread between corporate junk and US government intermediates bounced around 3.5%. Then, Long Term Capital Management (a £2.3 billion US hedge fund) infamously imploded, sparking fears that the entire finance sector was doomed. But credit spreads warned you, spiking all summer to nearly 7%. US shares corrected a bile-inducing 20%. But both the spike and correction were short-lived, spreads narrowed and shares recovered, returning 29% in 1998 and 21% in 1999. The trouble was temporary - spreads told you.

Spreads warned again in 2000, as tech imploded. But the broader market didn’t seriously begin slipping until 2001, after spreads signalled trouble all 2000 - spiking from 4% to 8.5% by year-end. The message was much more massive than in 1998, but this was no short-lived spike. Spreads lurched between 6.5% and 8.5% during 2001, while shares grinded down. Then, spreads even signaled a brief relief-narrowing below 5% after 11 September as recession ended and shares rallied.

But if you were lulled, widening spreads warned again, spiking mid-2002 into a bumpy plateau, sending shares into a soul-crushing double-bottom. Then, spreads briskly narrowed all 2003, in time for global shares to return 33%. Just watching the spreads told you!

Trouble ahead? Not

What about today? A true credit crisis must have vast widening credit spreads. At 4.3%, spreads are up markedly from January’s 3.3, but where they were in mid-2005 and 2003 when the bull market began. For a real dilemma, we are going to need to see spreads widen another several per cent.

Headlines suggest more trouble ahead… So what? There’s always some marginal troubled area in an otherwise healthy, galloping market. Someone’s always going bankrupt - why not subprime? And a handful of failing hedge funds tells you nothing (except perhaps that those hedge funds were lousy risk-hedgers). You know the problem isn’t threatening the market and economy by the spreads.

But what if crisis is real? Spreads will tell you! If they sharply widen, by several percentage points, watch out. Until then, bet against those bears - they’ve been wrong all year and they’re wrong now. Subprime’s just one more meaningless headline telling you there’s nothing much economically negative to report  (see my last column Sell Journalists, Buy the Market). The global economy’s galloping, earnings are strong and the share supply is shrinking all under-appreciated good news. The more the media frets about imaginary meltdowns, the better. Fear of a false factor is always bullish when the outcome isn’t what those credit cowards fear, the positive surprise will drive shares higher.

So fight silly fears with shares like these: celebrate with Constellation Brands (STZ), the world’s largest winemaker, producing a bevy of alcoholic beverages - beer, wine, and liquor - at diversified price points. It’s had nice growth and healthy margins, but sells at only 15 times 2008 earnings and 1.1 times revenue. The CEO had better get his price up, or someone else will do it for him. Either way, you profit.

Amdocs (DOX), incorporated in the Channel Islands has a big multinational reach. The company provides software and services to big telephone companies, enabling customer-relationship management, orders, billing, and so on. It turned a tasty profit over the past 12 months and should continue growing rapidly. At 16 times 2008 earnings, it looks cheap. Take advantage now.

(In this article we’re considering the spreads between 7-10 year US Treasuries and corporate high yields).

Figure out how much you have to spend - This includes your down payment, which should be at least 10 percent of the purchase price of your home. You should also calculate just how much you can spend each month on a mortgage payment. Your mortgage payment should be much less than your net income minus all of your monthly expenses – a cushion is essential to cover any unanticipated costs.

Assess your own tolerance level - Are you a risk-taker, or are you more comfortable with knowing what you will be paying each month for the next three, four, or five years? The answer to this question will help you decide whether you want a fixed- or variable rate mortgage.

Shop around - There are lenders literally falling all over themselves to attract new customers, so there are many different mortgage products offering a variety of great deals. Even if you have been with a bank for several years, it may save you thousands of pounds to go with another lender, so do not be afraid to choose the best deal. Mortgage customers have more power today than ever before, because banks are vying for your business. Therefore, remember that you are in charge, and can demand the very best deal:

• Check out the prepayment and re-mortgaging penalties on any mortgage product you negotiate.
If you want to have the best mortgage deal, you will want to be able to renegotiate your mortgage whenever you like. Even if you have to accept a few penalty clauses, you may still be able to save money in the future by re-mortgaging your home

• Make sure the home you buy is sound - Have a structural inspection completed in every case to ensure that you are not taking on a home that has hidden damage. Even if you have a good insurance policy, it may not cover damage, such as to a roof or patio that is found to have existed before you bought your home.

There are many things to consider when you are about to buy a home, so be sure to do your research and shop around for the best deal!

The reality is that Banks and financial institutions typically decline more than half the applications they receive. Following advertising regulation changes imposed by the Office of Fair Trading in recent years, banks must promote their typical rate, which is the rate that most of their customers receive. In the past they may have been able to approve an application at higher rate, but now some banks with the best rates would rather decline it in order to preserve their typical rate.

Fortunately, there are a number of financial institutions which cater for customers who have been refused credit, and they offer secured loans to homeowners at rates very close to those offered by the more familiar high-street names.

Furthermore, there are specialist car loans offered by other financial institutions which cater for customers looking to buy a car who have been refused credit.

Often the rate offered by these financial institutions will reflect the extent of your credit history, so the odd discrepancy should get the best rate available, whereas several months of mortgage arrears or County Court Judgements (CCJs) will attract a less favourable rate to balance the additional risk for the lender. That said, many customers are often surprised at how favourable some of the rates can be given their past credit history.