The Vault with Financielle - UNLOCKED: Self-employed and behind, credit score warnings and balance transfers

Episode Date: June 8, 2025

Send us a textThis week’s Unlocked is for anyone who’s ever thought, “Am I too late?” or “Am I doing this all wrong?”From pensions (or the lack of them) to balance transfers during the debt snowball, Laura’s diving into real questions from the community.Also in the chat:Why you might want to be cautious with credit score websitesWhen health issues impact your finances... what now?---------Connect with our Partners🐝 Consolidate your pensions with PensionBee (capital at risk)🫶 Protect yourself and loved ones with our friends at Lifesearch✍ Write a will that is tailored to you with Octopus Legacy🏡 Meet our Financielle approved Mortgage Brokers💸 Commission-free investing* with Trading 212 (capital at risk)🛒 Cashback on your shopping with Jam Doughnut (use code FINC)*The above are tracked links, which tells our partners we sent you and may in future result in a payment or benefit to our site.The Vault is an entertaining yet thought provoking podcast that answers our community’s dilemmas and confessions surrounding women and money.Visit https://www.financielle.com to download our app.Listen to the podcast on:▶︎ Spotify - [https://open.spotify.com/show/73mv8JnNRNqyDRQVXxcsEN]▶︎ Apple Podcasts - [https://podcasts.apple.com/us/podcast/the-vault-with-financielle/id1732683163]▶︎ Amazon Podcasts - https://open.spotify.com/show/73mv8JnNRNqyDRQVXxcsEN]Follow Financielle for more:▶︎ Facebook - [https://www.facebook.com/financielle]▶︎ Instagram - [https://www.instagram.com/financielle/]▶︎ LinkedIn - [https://www.linkedin.com/company/financielleuk/]The Vault is an entertaining yet thought provoking podcast that answers our community’s dilemmas and confessions surrounding women and money.Visit https://www.financielle.com to download our app.Watch the podcast on YouTube.Follow Financielle for more:▶︎ TikTok▶︎ InstagramAbout Financielle:Financielle is a female focussed finance app helping women to take back control of their money, ditch debt, increase savings and invest in their future.Recorded and Produced by Liverpool Podcast Studios▶︎ Web ▶︎ Instagram▶︎ LinkedIn

Welcome to The Vault Unlocked by Farneshell. Happy Monday. I was so excited to dive into the inbox and see all the many questions, many comments that we've been getting in from you guys. So in the community, we've got some good ones today, all very different. So I will get ready to dive straight in.

But before I do actually, if you have a mini question, a mini dilemma or a longer dilemma that you think would be great for the girls and I to answer on the couch, please do send them in, email the vault at financial.com, always completely anonymous unless you outright request that we share that it's from you, that can be wins or it can be like I said, some of these lengthier dilemmas

and we'll hopefully pick them up on a future episode of The Vault. So we'll jump in, the first one says, I'm self-employed and have put off saving into a pension for years, but as I'm getting older, I'm panicking that I'm running out of time. If you were me, what would you do to get started?

I feel for you so much. I think that the first thing for me to say is, you are not alone. Self-employed people have a really hard task of managing lots of the things that when you are employed, your employer takes care of. So, you know, making sure that your tax is accurately calculated or hopefully accurately calculated

and paid before you even touch it. Same as your national insurance as well. The employer will handle things like auto-enrollment to a pension for you. And actually they're gonna make a pension contribution as well from the employer, but they'll take yours and they'll put it away for you. So basically the employer does a lot of thinking for you, especially with the more technical financial stuff like pensions.

Whereas when you're self-employed, you've got so many different things to consider. You've got fluctuating income, especially if you're starting a business. And you know, at the beginning, especially if you're starting a business and at the beginning, especially if you wanna reinvest in that business, then you're probably paying yourself very little or the bare minimum that you can survive off and you're grinding all year and maybe at the end of the year

when you're doing your tax return, you might pay yourself a bit more out of the business bank account, but I've been there with others and talked through this with them. And yeah, you're definitely not alone because you are having to handle so much as a self-employed person And you say as I you say as I'm getting older that you're panicking that you're running out of time You've not said how old you are, but actually this is true of any age

I think if you're in retirement or just about to you've got that job to manage Income and expenses and kind of balance them as best you can so that you can enjoy the life that you want to lead, but accepting that there's a limit on what you can spend because there's only so much money coming in. But any time before that, it's always a good idea and it's never too late to focus on your pension. So first things first, accept that it's not too late, but the more that you procrastinate and overthink this and don't do anything, you are running out of time

and time is so helpful when we talk about investments because we want investments to compound and it's the number that you contribute, it's the money that you contribute times by time that helps to get it to grow. For self-employed people, I often say treat it like a tax. So tax is calculated as a proportion of your income. I know that you get a personal allowance and then tax is obviously applied at different rates after that but a lot

of self-employed people pick a percentage and put that away and you usually end up having more than you need in the tax account hopefully. But you pick a percentage so say if you decided to put 25% away for tax and national insurance and you made a thousand pounds in a month, you'd put 250 pounds into a savings account for when your tax bill's ready. And the hope is that you've put more than enough in, you've got a little bit left over. But the point is that you have to pay tax. And so most people find a system of picking a percentage, taking it off what you pay yourself and putting that in a side account works. There's no reason why you can't do that

with a pension as well. So pick a percent, you might start with 5%, we can kind of put aside the conversation about how much do you need and working out what you need. Let's use the same example, let's pretend that you've made a thousand pounds, you'll take another 50

and you will pay that into a pension. So what you need to do is open up a self-invested personal pension, or they're also referred to as SIPs. And essentially this is like a bank account, it's an investment account, but that has special, like a pension's wrapper protection around it, so you can't get money out once you've put in.

But when you open one of these and you could go to a comparison website and find the right one for you, you can treat it like a bank account and every time you pay yourself from the business and then you pay money into your tax account, pay money into the pension and pick a percent like we said if it's five percent it's ten percent whatever it is first start there, transfer something and get used to that and get used to how it feels and then later you can do an exercise and that tends as a pensions episode that we did a couple of weeks ago now.

If you look back, it's like you're overthinking pensions. That's one where we go into how to calculate how much you need. So go back and listen to that and follow those instructions for when you're ready to level it up. But the biggest thing for you is starting and not putting it off. Something that I have seen people do before is save up money in a side account, ready to put into a pension at the end of the year and I really don't recommend that because we want time in the market there's something called dollar cost averaging, pound cost

averaging which means you're just contributing regularly so that you're not trying to time the market you're just getting it in the market and getting it invested. If you save it all up for the end of the year you will have missed out on a year's worth of growth. I've often heard people actually in this scenario say things like I can't afford it yet like I will once I'll earn more money I'll do it but I've just set the business or I just need to do this or I just need to do that but when we're talking you know 50, 100, 200 pounds we can find this money for our bills, we can find this money for

a holiday, we can find this money for a holiday, we can find this money for meals out and if we can find money for those things we can pay into a pension. I think deciding on a figure and committing to it and starting making those payments will make you feel a million times better and it's all to you, it's to future you. Don't panic but get moving, do not delay, don't be messing around, don't be overthinking there's another month, and let us know how you get on. Okay, the next question. Laura, I've heard you give warnings about credit score websites.

What should we be worried about? Oh, I do do that a little bit. It's not to scare you, and some of these brands are really good reputable brands, okay. And they can be very helpful. So I am a massive fan of making sure that you can check your credit report. And notice I say report, not score. So your credit report is like a list of financial data on you,

a little bit about name and address and where you live and stuff, but also things like where you have accounts, what products you have, if you've got any debt, if you've got debt, how much of it you have, payment history, whether you've missed payments, and it's to build a picture of your credibility as a potential borrower. So let's be clear, that's the context of why you have a credit report.

It's so that someone could lend you money and get an idea of how reliable you are as someone that they're gonna give money to and want you to pay it back. But the great thing about checking your credit report is you're going to be able to see whether there's anything untoward on there. You know, have you had any bills that you've forgotten about? Have you had credit taken out in your name and it wasn't you that did it? Just loads of stuff like that and so they can be really helpful. I probably do check mine once a month and it's to do this,

it's to make sure that no credit has ever been taken out in my name and that it's all looking okay. I don't personally check my score I couldn't tell you what mine is but again this is gamification isn't it and if you do like numbers and if it does help to motivate you and you have pretty poor credit or you've got a lot of red markers on your credit score as you make those green it might be nice to see the score go up. Each brand has its own score. The banks are not looking at score. All they're doing is taking the underlying data, putting it through their own systems and algorithms

and coming up with a credit view on you that could be completely different from a different bank and a different bank and a different bank. The reason I want you to be where it is, I believe there's a conflict of interest between the gamification of the credit score and the recommendations that some of these companies provide.

So the main revenue of a lot of credit score websites is commission. They receive a commission when someone via their site takes out a credit card, a loan, possibly even a mortgage. And if you needed this product and they've connected you to this product and they've given value by helping you out with your free credit report at the beginning. There's nothing wrong with that

commission, like that makes absolute sense but what I definitely feel uncomfortable with and this is what I kind of remind people of is the conflict between one of the ways that these sites say to increase your credit score is to take out a credit card. Oh look, and here's a link, click it. Bang, commission. So I'm conflicted because this website is suggesting something that could increase your score with them, which no one else is looking at this score.

No bank's looking at the score, just they are. And they're saying here's something about, and they're not obviously disclosing that they're making money when you take out that product. Now, they're disclosing it legally, it will be, there's lots of caveats and throughout the application process, I'm sure that you'll be told lots of times that that website will be getting a commission

and hopefully you will, as you will do on the big ones but I have a great credit record I have two mortgages one on my home one on a buy to let I have no credit cards at all and haven't had them for years I've not had loans for years I don't have overdrafts and some may say oh you should you know you should get a bit of credit and use a card and get it to be credit I've never had a problem with a mortgage. I've never had a problem getting a mortgage, remortgaging. I'm fine. I don't need a credit card to improve a pretend score. I'll stick with what I know, which is making sure I pay for bills on time, making sure that I keep my data up to date and making sure crucial that I don't take on extra

payments so that my affordability is good should I need to remortgage. And the only credit I will ever need a good credit report for is, you know, borrowing for property, it's not borrowing consumer credit. So when I log in, the only thing they can tell me to do to increase my pretend score is take out a credit card. And I'm just like, and every time I see it, I think of the hundreds of thousands of people

that are logging in to check their score all the time that may have dreams of home ownership, or that their parents told them it's really good to have a good credit score, that they may take out that card, and if they don't need the card, the human discipline required to not use it ever is so, so difficult.

And the number of people that share with us that they got into a load of debt off the back of taking out a car to improve the credit when they were 18 19 is astronomical and it's kind of this like hidden thing in the industry no one talks about the concepts of credit scores and whether you need to build one and no one can prove to us when we ask them how is someone penalised if they don't have any credit or if they've never had credit before? Why can't you use good financial behaviour and why can't you use accounts and affordability

and all that to assess risk while we're still using a 20 to 30 year outdated assessment of whether someone is good, is gonna be a good borrower. And I think one of the reasons that we can't get the answer to that question is because it's not in a bank's interest to not incentivize using other means of credit. You know, it's not unheard of to have your bank with your current account,

and then you have a credit card with them, and then you have a loan, and then you go with them with a mortgage like they're your bank, you keep it in one place, you keep it simple, you like the people, you like how they help. They all benefit from you taking out credit and playing around with credit as you're working up the credit ladder to the ultimate which is a mortgage for lots of people. So there's just so much not known, but what I do know is when you don't have credit cards, you don't run up credit, and

you don't run up debt, and you don't get into sticky situations, and you have more money. So be wary and be aware of what's behind the website. And if you're aware of that, you'll be fine going in, checking your credit report and making sure, as I said, nothing untoward, all good. Okay, next question says, should I be doing balance transfers during the snowball?

It's a great question. And a similar question that we get asked is, should I consolidate my debt? Should I consolidate my loans? The quick answer is, yeah, why not? But, and there's a big but. This is a tiny part of the process which is getting out of debt.

So obviously paying off debt is a maths game and if you have things on higher interest, it's gonna take you longer than if you had things on zero interest. So it's a good idea to manage the cost of all your credit and bring those rates down as low as possible. Some people do that via a consolidation loan. Some people do it by moving credit cards around

and doing balance transfers. That's fine, but it's not the thing. And what I don't wanna see is people doing balance transfers and going like, whew, okay, done that now. Moving on, where should we go on holiday? And they've literally felt like they've paid that debt off and they feel amazing because they've, you know, jumped off a high rate or they've stopped it

going on to a high rate. And all that is, is a tiny bit of admin. It's a tiny bit of admin. It doesn't scratch the surface on the work involved in paying off debt. And so what my concern is, is when people play around with balance transfers and consolidation loans to a point, they ease off, they take the pedal off the gas,

they ease off, they take a deep breath. And especially with the consolidation loan, it brings down your monthly payment often, which is a good thing, right? And it can be really helpful to people that are struggling with big, big payments and they need to push it further out. They've had a change of circumstance

and we don't wanna get into a situation where people are defaulting and much better to help upfront. And so a consolidation loan can bring the payment down. But so many people then go, fine. And then they're paying off for a lot longer. Whereas actually if they'd have built a really good plan, followed the snowball method, do it smallest to largest and have these quick wins,

you actually gain momentum and motivation and you're much more aggressive with getting rid of them. So yes, you could do balance transfers during the snowball, but be aware that it's just a tiny bit of admin is not a big thing and be very aware that it could knock you off course. It could lull you into a false sense of security

and we want aggression and we wanna get out of survive and get into build and build in that bigger emergency fund and crucially being debt-free. Now, the next thing I wanted to move on to was I saw a post in the community that really grabbed my attention on chronic health. For those of us in relatively good health, there's a certain level of privilege that comes with that, that we won't really understand the realities of

someone with long-term health issues or short-term acute health issues. There'll be so many things that I am blissfully unaware of as a challenge for someone else because I don't experience it. Having poor health generally or even from time to time or during a particular period of your life can massively impact you financially. People need time off work and therefore their earnings drop. Sick pay can vary and on a statutory level it's really poor. It can lead to a reliance on credit cards, it can lead to debt building up or even if you're on a debt payoff journey it can just feel incredibly slow. And so if you are someone with you know health issues and it is impacting you financially

I can imagine that's super difficult and I definitely don't have the answer. There's definitely some things that we've seen people do that have helped to navigate those challenging times. The first thing that goes without saying is just making sure that you're prioritizing you, you're prioritizing your health, your recovery if that's possible or at least maintaining health, you're getting the advice and guidance that you need and you've got people that advocate for you on your behalf. But when it comes to the numbers, this is a maths game and the maths can be very cruel for someone who has health issues because you need to have more income coming in

than the costs going out to create that excess just like everyone else. But if you are someone who, like I said, has to work in a particular way or only work part-time or can't work and your income's limited. And it's limited in a way that's a lot more challenging than for someone who is completely well and completely able to work,

but maybe out of work for a different reason. But because it is a bit of a maths game, I think it is important to highlight the maths things that you should be looking to try and do. One is keeping your costs as low as possible. So making sure you're not overpaying for anything, switching things like right and centre. I guess the most helpful part of this answer is directed towards people that have fluctuating health. And so if you

have what you might describe as good times and better health times, still keeping expenses low and growing the excess means that you can put that money towards a bigger emergency fund because you are in need of a bigger emergency fund. Because from experience, your experience shows you that you're going to have to rely on it if the poor health returns. So keeping your costs as low as possible, building up a bigger emergency fund, making sure that if you do have debt, that you're speaking to your credit companies, they are there to help and they can move on things like contractual interest and so sharing any diagnosis with them, sharing with them that you're struggling with work, proving to them that your income's dropped, there are some things that

you can do to try and limit the damage that interest bearing debt can carry and if things are getting a lot and if debt is unmanageable, making sure that you take the time to reach out to a regulated debt advisor because they're so experienced and just having someone else to talk to and share stuff with when things are quite difficult financially is such value. So I hope that some of those tips were helpful for those of you who do struggle with your health either from time to time or on an ongoing basis. But actually I think the bigger message is to people who are in good health to have an appreciation for what it must be like when your health limits your income and limits your ability to work because a lot of what we talk about

here is about go and make an extra money and go do this and go do that and that's not possible for everyone. But if anyone listening has this lived experience and has something they'd like to share, please do email into the vault at financial.com. I would love to be able to share an experience, the harsh reality, some good tips, the fact that someone else listening wouldn't be alone and that you're going through this with them as well. Please do email in because I'd love to be able to share that

with the wider community. And actually, last one before I go, Susie in the community made me laugh this week because she talked about when you're having to pay double for things when you're setting up sinking funds. And honestly, it's so frustrating the first time you do it. So let's take, for example, car insurance. When you pay for car insurance monthly, what you're actually doing is getting a credit time you do it. So let's take, for example, car insurance. When you pay for car insurance monthly, what you're actually doing is getting a credit agreement to do it. It's so annoying and the industry should change. It drives me nuts.

But basically, it's like the product's an annual product. And if you want to pay for it monthly, you're paying for the annual one via credit. And so you take out credit and they kind of lend you the upfront payment and pay that to themselves, sometimes a different company but often themselves, and then charge you for the privilege and then you can spread out the payments. And so often it is cheaper to pay annual than it is to pay monthly. So if you wanted to save up for that annual car insurance payment, what you need to do is put aside an amount of money every month.

And when you've hit the total and it's time to pay for the car insurance, you pay for it from the sinking fund part. And then you just carry on paying for it monthly, but paying yourself monthly and putting it into a pot. And then again, year after year, you'll pay for it in annual. But the first year you do it, you're still paying your monthly car insurance payment. So it feels double. And it feels quite cruel when you're still in survive,

probably, and you're trying to pay off debt, and you're building these emergency funds, and you're also doubling up a little bit on things like car insurance. So it is tough. I was glad that Suzy shared it, because if you're going through that, you're not alone, it does pay off.

Once you've done it once, literally you'll just feel like you've got so much more money. Okay guys well I'm going to leave it there have a wonderful rest of week hope you listen to Thursday's episode where we discuss some really really juicy dilemmas and just a quick disclaimer before we go at the bottom lot in the light hearted chatter on life and money we're not giving financial advice.