As a family’s biggest asset – and its biggest financial commitment – the family home is the most obvious place to look for ways to generate cash.
1 Take in a lodger
It means giving up the spare room and giving up some privacy. However, the rent is tax-free up to £4,250 a year – or just over £80 a week – under the Rent-a-Room scheme.
Householders should inform their insurance company first. For details go to www.direct.gov.uk.
Suitable for: Empty-nesters and young buyers struggling to pay their mortgages.
If you do not have a spare room, you could consider turning the living room into a bedsit.
2 Rent out the garage or parking space
Obviously, this only applies to those who have a spare space and who live in areas of high demand. Spotted on one South London street last week was a “To Let”sign by a parking space in the rear of someone’s garden – for £150 a month.
Owners of properties near major sporting events and other attractions often also turn their lawns and drives into make-shift car parks.
Suitable for: Those with a garage or spare bit of land who live in towns and cities where it is hard to park.
3 Rent out the whole house
This is an option for those really strapped for cash. Rather than wait for arrears to mount and risk repossession, renting out the family home and moving in with relatives or to a much cheaper property may be a better solution than losing it.
The other advantage is that if the family moves back in after a year or so, then the gains made when they sell should remain tax-free. Mortgage lenders and insurers should be informed.
Suitable for: Anyone seriously struggling to meet mortgage payments and who does not want to sell up when prices are falling.
4 Get domestic help to live in
Four-in-10 households now employ domestic help, spending an estimated £7billion a year, according to a recent survey from Legal & General. Those with larger properties who cannot bear to give up on their home help, can offer a free room in exchange for so many hours of cleaning and ironing each week.
Suitable for: Property-rich but cash poor – those with larger homes but smaller incomes – who do not want to give up the domestic.
5 Change childcare for an au pair
Childcare is now one of the biggest bills for those with young families, costing up to £39,000 a year, according to the 2008 Daycare Trust survey.
The yearly cost of a nursery place for a child under two averages over £8,000 a year in England – and is rising by well above inflation. This is cash that has to come out of taxable pay.
An alternative for those who need between five and seven hours of childcare a day for five days a week is an au pair (and they double as a babysitter, saving even more). Au pairs plus – as they are called – can work up to 40 hours a week.
Suitable for: Mainly those with school-age children who can get low-cost before- and after-school care, babysitting and a home help from £60 a week.
6 Turn the second home into a holiday rental
Over 600,000 of us own a second home, with 240,000 of these in England and many more abroad.
Second-home ownership has risen by a fifth in the past 14 years, during which time house prices have tripled. Now a study from Capital Economics predicts that some 60,000 of these could be sold off because of the slump.
An alternative is to let it. This will affect the homeowner’s tax position so they should seek advice first – and also inform their mortgage lender and insurer.
Suitable for: Anyone with a second home that they could rent out to long-term tenants or as short-term holiday lets.
The average household is estimated to have £1,000-worth of unwanted goods lying around – goods that could be turned into hard cash.
7 Sell unwanted and valuable items
Heirlooms left to gather dust, collectable china that is never used, the flat-screen TV that is no longer affordable and never-worn designer clothes – all are relatively easy to sell on online auction sites such as eBay.
The alternative for valuable antiques is an auction and for low-cost items, try a car-boot sale.
The credit crisis is already hitting home, with families now selling off the family silver – eBay says that fine jewellery sales are up 69 per cent and antique furniture sales up by 30 per cent.
Suitable for: Everyone. Those who cannot face mastering eBay can use a service such as www.serialsellers.com or www.i-sold4u.com. Look online to find what is selling.
8 Convert goods to cash
Pawnbrokers – usually old-fashioned jewellery shops – offer a way to turn valuables into cash. Pawnbroking contracts last for six months with interest charged monthly.
The alternative is to sell the item – for example, in Cash Converters – for money upfront or to use the company’s buy-back scheme – giving cash today that has to be repaid in 28 days, when the goods are bought back plus a fee. Valuables can mean anything from a watch or set of golf clubs to a musical instrument.
Suitable for: Anyone who is desperate for cash in a hurry.
Anyone who has time to “sell” can generate cash.
9 Put in more paid overtime
One-in-five employees is paid overtime, according to the TUC. However, even more put in overtime that is unpaid, with some five million people in the UK missing out on potential earnings of £4,955 a year. Asking for at least some of this to be paid can be a fast way to generate extra income.
Suitable for: Anyone putting in free overtime – and who is brave enough to ask to be paid for it.
10 Take on a second job
One-in-10 workers now has a second job to boost income. The advantage of working unsociable hours at nights or Sundays is that the pay tends to be higher.
Wages for even low-skilled jobs, such as shelf-stacking in a supermarket (which can also offer staff discounts), can be up to £8 an hour. Other possibilities include bar work, mini-cab driving and being a security guard.
Suitable for: Those who need the cash and who also have the necessary stamina.
11 Sell from home
Direct selling is the largest provider of part-time earning opportunities in the UK – with sales of £2billion every year. Companies range from long-established names such as Avon to Amway to Usborne books and The Pampered Chef.
Earnings can be as much as 30 per cent of everything sold. Be aware that some companies pay in kind, rather than cash. Always use a member of the Direct Selling Association – www.dsa.org.uk.
Suitable for: Anyone with the time and inclination who enjoys hosting parties and does not mind selling to friends and family.
12 Sell your time
Our time-poor society creates opportunities for anyone based at home – either because they are retired or looking after children.
Offer to take in deliveries for neighbours (to save them waiting in all day) or to let in builders/repairmen etc. Then encourage them to recommend your service to others.
Suitable for: Anyone at home all day.
13 Set up as a freelance
The same skills that enable millions of employees to earn a living by day can be sold to others at evenings and weekends. Provided the employer agrees (to ensure job security and that any employment contract is not breached, it is best to check first), it is possible to sell skills – typing, bookkeeping, graphic design, copywriting, editing – to others through sites such as www.PeoplePerHour.com.
Suitable for: Anyone who has a skill that can be sold on a freelance basis.
14 Teach others a skill
It could be years of practising yoga, a reputation as an artist, being a brilliant bridge player or having a musical talent – anyone who has a skill and the ability to communicate can turn this into a money-spinner by learning to teach it to others.
Suitable for: Those highly competent in a particular area and who are prepared to teach others (and possibly train for a professional qualification to do so).
15 Sell what you make
From the local café selling home-baked cakes made by a stay-at-home mum to a cottage industry selling hand-crafted pottery or hand-knitted sweaters – there are thousands of small businesses successfully selling what they make. For food in particular, it is essential to ensure regulations are met. Visit www.businesslink.gov.uk for guidance on setting up a business at home, marketing and red tape.
When starting a business, you should register with the tax authorities – www.hmrc.gov.uk.
Suitable for: Those with a hobby or skill – knitting, carpentry, cooking, jam-making, pottery or arts and crafts – who believe there is demand for what they make.
MISSING AND UNCLAIMED MILLIONS
If you need some extra cash, it is worthwhile searching drawers and documents for forgotten assets.
16 Unclaimed assets
It is estimated that £15bn lies unclaimed in forgotten life insurance policies, investments and pensions as well as unclaimed Premium Bond prizes and free shares from former mutual building societies. These can all be traced through the Unclaimed Assets Register (www.uar.co.uk). Searching the register costs £18, with 10 per cent of this going to charity.
Suitable for: Everyone – but particularly those who have moved and as such may be harder for financial companies and former employers to trace.
17 Unclaimed tax credits
Britons will miss out on £3.6 billion in tax credits this year, according to a new report from IFA Promotion, the organisation that promotes independent financial advice. This includes one in every four pensioners who fail to claim their Pension Credits, resulting in a wastage of just over £2 billion.
Suitable for: Anyone on a low income or a pensioner should check entitlement to tax credits. It may surprise some families that tax credits may be available for those households with combined earning of as much as £66,000 a year. Visit www.hmrc.gov.uk to check entitlement.
18 Overpaid tax
In addition, eight-in-10 people pay more tax than necessary, with the average person paying £290 more tax than they need to each year. The most common sources of waste are:
- Tax paid on savings. £263 million of tax could be avoided by sheltering investments in Individual Savings Accounts (ISAs). Also consider a Friendly Society savings account or products from National Savings & Investments. In addition, some £330 million could be reclaimed each year by non-taxpayers who have had tax deducted from savings.
- Too much tax on investments. Transfer assets to a lower or non-taxpaying spouse to ensure income is taxed at a lower rate – or not at all. Making the most of the annual capital gains tax allowance (CGT) – which allows profits of up to £9,600 per person to be taken tax-free this year – could save couples £264 million each year. For more tips visit www.unbiased.co.uk/taketaxaction.
Suitable for: Everyone, particularly those with savings and investments.
19 Compensation claims
Unfair credit card charges, mis-sold endowment policies and mis-sold payment protection policies mean consumers may get money back. Anyone charged £20 or so for late payment or being over the limit on a credit card can get the excess above £12 refunded for the past six years.
Anyone who has remortgaged in the past few years and was charged a mortgage exit fee higher than in the original mortgage agreement can also claim compensation. Visit www.moneymadeclear.fsa.gov.uk.
Suitable for: Everyone should check if they are due some compensation.
This section is for those who are really desperate and possibly already in debt.
20 Cash in investments, endowments or the pension
It is not an ideal time to cash in any investments. However, those who are desperate can consider cashing in their policies. Always seek independent financial advice, as investors can offer suffer penalties for cashing in policies before their term is up. Visit www.unbiased.co.uk to find an independent financial adviser.
Also consider selling rather than surrendering endowment policies (investors often get a higher price) using a traded endowment policy company. If an endowment is linked to a mortgage, check with the lender first.
Anyone with a personal pension who has reached the age of 50 can take up to 25 per cent of this fund – free of tax – and reinvest the rest until retirement. Those with employer pensions may find it harder to take the cash early.
Suitable for: People with immediate needs, including those with larger pension funds struggling to meet liabilities such as private school fees.
Case study: net extra cash
Like one-in-10 workers, Helen Castree, 29, has a job on the side – earning extra money in the evenings and weekends working as a freelance part-time personal assistant.
After getting married a couple of years ago, she was looking for a way to generate extra income to pay into the mortgage before starting a family.
“I thought that, as I have a skill, I might as well use it,” said Mrs Castree, from Shropshire. She found the easiest way to get work was via the internet and signed up with the free service, www.PeoplePerHour.com, to bid for work – which can be done remotely for businesses and individuals across the country.
“I have been able to get involved in a range of projects including copy typing, web content design and administration, all work that I can do in the evenings and at weekends,” said Mrs Castree.
“This extra work puts me on a much better financial footing and does not cost me anything as I work from home and already have a computer.
“When we start a family, it will be an ideal way to supplement our family income as I can fit this type of work around children.
“It is also important to remember that you are running a business. I keep records and receipts of all income and spending and take a proportion out of each job and set it aside for my tax liability.”