How to get your finances straight in one morning
From insurance and credit cards to fuel bills and shopping, Rob Griffin reveals easy – and quick – ways to save money
Saturday 30 October 2010
It has never been more important to sort out your finances. With economists warning that a double-dip recession is a possibility, now is the time to cut outgoings, find great deals on regular expenses and maximise investment returns.
The good news is that it won't take you long. We all complain about having too little time in our busy lives but such an overhaul can be carried out in just one morning by following our simple guide to balancing your budget.
Draw up a family balance sheet
Run your home like a business. Be clear how much money you have coming into the household. What is the monthly take-home (after tax) for yourself and your partner/ spouse? Is this regular or do the amounts fluctuate? Have you got any other sources of income?
Then you should divide your various expenses into essential items, including mortgage/rent, household bills and credit card repayments, and non-essentials, such as your Sky TV subscription, shopping trips and trips to the pub.
At this point the purging can start. Identify any agreements – such as payments for magazines you no longer read – and cancel them, paying attention to the terms and conditions, particularly any notice periods and related penalties.
You should also check with the Inland Revenue to make sure you are on the right tax code and get in contact with your local Citizens Advice Bureau to see if you are receiving the full range of benefits to which you are entitled.
We all have to pay bills but you can still save money by shopping around.
For many people, this will be their largest expense so it makes sense to reduce it as much as possible. If you have at least 25 per cent equity in your house, then there's a good chance of finding a better deal, according to Ray Boulger, senior technical director at broker John Charcol. "It all depends on what you're currently paying, the level of equity and whether you have a fairly unblemished credit history," he says.
Surf the internet to see what's available well in advance of your policies' renewal dates. Top tips include making sure you're not double-insured. Your mobile phone, for example, might already be covered on your home contents insurance which means you don't need a separate policy. Money can also be saved if you agree to pay a higher excess in the event of needing to claim, in return for a cheaper premium.
Paying annually for cover instead of monthly can also cut the cost, while for car insurance adding a partner to your policy – or, if you are a younger driver, adding an older driver – can also help drive down the cost.
Visit one of the many comparison websites to see if you can get a better deal on your gas and electricity supply, as well as on mobile phone contracts, broadband internet connections and even the main home phone.
Those looking to save money on their energy bills must ensure they are on the correct tariff for their usage and region, according to Moneysupermarket.com. This is crucial ahead of the colder winter months when we use the most gas and electricity. One of the best ways to make a saving is moving online to a "dual fuel" direct debit deal. It is estimated that switching to the best online tariff could save at least £300 a year.
Stop yourself paying penalties
Forgetting to pay the minimum monthly amount on your credit card can trigger automatic penalties and interest charges, not to mention affecting your credit rating. Consider paying off the minimum each month by direct debit or at the very least pencil in reminders on the calendar.
Ditch your store card
Store cards are notorious for offering attractive deals when you open an account – such as 10 per cent off your first purchase – then charging sky-high levels of interest. By all means use them for the discounts, then pay off any outstanding debts and cut them up so you won't be tempted by them again.
Move your credit card debts
If you have outstanding credit card debts, look to switch them to a provider which offers 0 per cent on balance transfers for, say, nine months. If you can't clear it all, you can consider moving it again at the end of the interest-free period. However, don't use the same card for further transactions unless the rate for subsequent purchases is also 0 per cent, as any payments made will go towards clearing the cheapest debt first. Consider,therefore, having a couple of different cards.
Your outgoings have been cut down to size and now it's time to ensure your money is working hard on your behalf.
Review existing investments
The first step is examining what you already have in place. Justin Modray, founder of website Candid Money, says there are two questions that should be asked: have they made me any money and how does their performance stack up against their peers? You might initially be impressed that they have returned 10 per cent but if everyone else has achieved 20 per cent it will be less impressive.
"It's a well-worn cliché, but don't put all your eggs in one basket," he adds. "If you spread your money across several investments, this should improve your chances of making steady returns over a variety of market conditions."
Fill up the ISA
Transfer any spare cash you have into a cash or stock and shares ISA. Up to £10,200 can be invested in the current financial year, a maximum of £5,100 of which may be placed in a cash ISA.
Open up a savings account
If you've got spare cash left over after filling up your ISA allowance, open up a savings account. If nothing else, it will act as a good "rainy day account" which you can tap into should the unexpected happen. However, be careful which one you choose. Consumer group Which? has discovered savers are missing out on £12bn a year because banks are keeping us in the dark about miserly interest rates. It found almost half the 1,200 UK savings accounts paid 0.5 per cent interest or less and one in four hands over 0.1 per cent or less. That equates to just £1 a year for every £1,000 saved.
Well done. The expenses have been trimmed and the investments are working harder, so now is the time to generate a bit of extra cash.
Clear out the loft
We've all got things buried away in the attic which are never likely to see the light of day again, so get shot of them and earn some money. List the most interesting items on auction sites such as eBay. The rest can be sold off at a car-boot sale.
Start collecting vouchers
Scour magazines and newspapers for coupons relating to items you buy regularly and take advantage of two-for-the-price-of-one offers. It's also worth picking up loyalty cards on which you can earn points for buying certain products. These can be redeemed at a later date.
Bookmark shopping sites
When you want to buy a certain product, make sure you're getting the best deal by using one of the shopping comparison sites such as Kelkoo (www.kelkoo.co.uk), Price Runner (www.pricerunner.co.uk) and Trolly Dolly (www.trollydolly.co.uk), which scan the country for the cheapest prices on a range of goods.
Subscribe to publications
If you regularly buy the same magazines and newspapers, consider taking out annual subscriptions. Although you may have to pay the full amount up front, you will enjoy a substantial discount on the cover price – as well as the convenience of having it delivered to your door and maybe even a free gift.
Put a budget together
Now it's time to tidy up the loose ends. After all your hard work, the last thing you'll want to do is repeat the process in a few months, so make a pledge to keep on top of your finances, and know exactly how much you can spend each month.
Either set up a basic spreadsheet to track your income and outgoings, or use one of the specialist personal finance packages available. Some are free, such as AceMoney Lite (http://tiny.cc/pwqld). They enable you to track spending, create and manage budgets, monitor the performance of your various investments, keep abreast of deadlines for bills and generally keep on top of your finances.
So there you go – all done! By now it should just be coming up to lunchtime, so why not reward yourself by surfing your favourite shopping websites and working out how you're going to spend all that money you've saved?
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