We’re told the economy is improving, wages are finally rising above inflation, yet many people still feel far from flush. Financially 2015 is still likely to be challenging.
It’s important to understand that there’s little any of us can do as individuals to change the big picture, but you can create seismic changes in your own money situation if you’ve a bit of willpower and determination.
So steel yourself to take control of your cash this year, here are some crucial MoneySaving resolutions to grasp hold of.
I resolve to…
… do a REAL budget.
Most people know how much they earn, but not how much they spend. Unless you balance this financial seesaw you don’t really understand your finances.
Therefore it’s important to do a budget to calculate whether you’re in what the government call’s “a deficit” – in other words overspending. If you are it either eats up savings, or worse, builds debts.
The problem is most budgets don’t work. They tend to just look at a snapshot of one month’s expenditure which misses out big annual spends like Christmas and summer holidays – plus the categories are too broad; don’t think “motoring” instead think MOTs, car insurance, petrol, breakdown cover and more. Break it into small categories.
To help my free www.mse.me/BudgetPlanner does it for you. Once it’s done use it to work out where you’ll save cash or cut back so you can balance the books.
… pay off debts with savings.
If you have £1,000 debt on a typical 18 per cent interest credit card, it’d cost you £180 a year. If you had the same in the best interest-paying account (Santander 123’s 3 per cent), you’d earn 2.4 per cent a year after tax (or £24 a year). So pay off the credit card with the savings and you’d be £156 a year better off.
Many people object to this thinking, “I still need some savings for an emergency”, yet that can be a false economy. For example, if you used your savings to clear a credit card debt, then hit a true emergency, you could simply use the plastic to cover that. That would leave you in the same situation, but you’d have cut the interest meanwhile.
A similar theory works on mortgages - if your mortgage interest rate is higher than the after tax rate you earn on savings, then it mathematically makes sense to clear the mortgage rather than save too. Yet there are complexities so here do read www.mse.me/MortgageVSavings first.
… NOT put my pedal to the metal
While petrol prices have fallen, it’s still a hefty sum to fill up a tank. Use www.petrolprices.com to find the cheapest forecourts, but for a bigger impact change how you drive.
Think of your car’s accelerator as a money pump. The harder you press it, the more you spend. Changing up gear sooner, keeping the rev lower, and speeding up gradually, massively improves fuel economy.
Plus remember when you break you’re burning fuel you paid to put in the car. I’m not saying don’t use it, just that good road positioning means you can slow down gradually instead of suddenly, and that’s safer and more efficient. Combined many can lower petrol costs by over 20 per cent.
… not overpay for my energy bills
The vast majority of the UK is still on their energy firm’s standard tariff. With typical usage this means you’re overpaying by over £200 a year. It only takes a few minutes to plug in your details and find your cheapest (there’s no one top pick as it depends on where you live and how much you use). My www.cheapenergyclub.co.uk will find your cheapest, then monitor it to alert you when that’s no longer your cheapest.
… cut the cost of my debts for the long term
Don’t pay more than you need to on credit card debt. A balance transfer is where you get a new card that pays off the debts on old cards so you owe it instead, but at a cheaper interest rate.
You can now shift debts for up to 34 months interest fee, though you will pay a one off fee of around 3 per cent, still over that period you’d save over £1,000 on a typical £3,000 debt. Just ensure you aim to clear the debt in full or balance transfer again before the 0 per cent ends, and never miss a minimum repayment or you can lose the 0 per cent deal.
Don’t just apply willy-nilly though, as each application marks your credit file. You can use my balance transfer eligibility calculator which shows which of the top cards you’re most likely to get. It’s at www.mse.me/BTeligibility.
… become a cashback connoisseur
If you’re shopping, go through a website like www.quidco.co.uk or www.topcashback.co.uk and they give you cashback for many retailers. This is done because they’re paid affiliate commission for sending traffic to those sites and they share it with you. The cashback is never 100 per cent guaranteed, but it works pretty well.
…stop letting energy firms rip me off.
If you’ve switched energy in the last five years, then your old provider may still owe you credit – this can be £100s. Many operated a ‘don’t ask, don’t get’ policy. So call up and ask. And remember if your energy company doesn’t treat you correctly make a formal complaint, and if that doesn’t work you’ve a right to take it to the free energy www.ombudsman-services.org.
… prepare for next Christmas NOW.
Buy your cheap wrapping paper, cards, Christmas decorations and even presents right now while they’re still on sale. Plus, remember, Christmas costs an average £840 per family. To try and pay this out of one month’s salary is a nightmare. Put aside £70 a month and you’ll have the money ready without any risk of borrowing.