Top finance tips Give yourself a Financial Health Check
By completing a simple exercise you can quickly understand how your income stands up to your expenditure, you can simply make a list with two columns outlining exactly how much money you have each week/month to spend and compare that to exactly how much you spend.
It is vital that you include everything in both columns so that you can understand how much disposable income you have each month or week. In the book you will see an example of a more in depth type of form, this includes two separate sections for secured and unsecured debt, you can easily replicate this form if you have word or excel or you can down load a copy from the internet. It is vital that you are totally honest with the information you provide otherwise the whole exercise becomes pointless.
Check your credit report
Find out for yourself what any potential lenders will read about you, your financial situation, payment history etc. It is a very good way of understanding how lenders see you at this time, if you have a low score that would suggest that you need to take steps to protect yourself from possible problems.
As I have mentioned on previous pages, your credit report can be used in conjunction with income and expenditure form, this will allow you to cross reference the information you have in both documents and ensures you have all the facts.
Cut your use of Credit Cards and Store Cards
Using credit and Store cards is a very expensive way of buying things; even with 0% transfers you are only delaying paying the price as interest will be charged after a very short period of time. Mint offers amazing deals!
Only use this option if you are confident that you can either clear the full balance or that the ongoing rate will in fact be cheaper. If you are using your credit card to pay for things like your weekly shopping and everyday living costs that is a sign that your finances are getting out of control.
If you have more than three credit cards it is highly likely that you have over extended on your borrowing, if all your credit cards are at their limit and you are only paying the minimum amount required then you have very definitely over extended on your borrowing.
Credit cards are best used as short term loans which can be paid quickly in full each month. One possible solution may be to consolidate all your cards onto a personal loan with a much lower interest rate, however if you chose this path it is vital that you do not then go to use your cards.
Change your attitude to your mortgage
The most expensive item you are ever likely to buy is your home. If you’re not in the privileged position to pay cash, make sure the loan you use to finance it is the best available.
For example, if you are paying your lender’s full standard variable rate (SVR) you are probably paying hundreds of pounds a year more than you need to.
There are thousands of deals to choose from and while it is vital to check the small print for hidden catches, this is a relatively easy way to save a lot of money. Remember: loyalty to your bank benefits your bank, not you.
Even better, if you can afford to make overpayments on your mortgage, you’ll clear your debt several years early and make massive savings. For example, if you borrow £100,000 at 6% over 25 years, you’ll pay it back at £643 a month.
The total charge for credit will be £93,000. But if you can overpay by £100 a month you’ll clear the loan in less than 19 years, giving you 6 years of mortgage-free living and saving a staggering £25,000 in interest.
Links: This is Money mortgage finder; mortgage calculators; mortgage guides
Clear your credit card debt
One of the golden rules of financial planning is to clear your most expensive debts first, in other words your credit cards. OK, credit cards offer a convenient way to pay for goods and services but if you can’t clear the balance every month, consider a low-cost loan as an alternative. Do the sums: a credit card debt (APR 15%) of £2,200 over three years will cost £545 in interest. A loan at 6% will cost £209. A saving of £336.
Link: This is Money credit card finder
Use your Isa allowances
If you’re not already aware, you can save up to £3,000 a year in a tax-free savings account called an Isa (for the more financially savvy there’s also a stocks and shares Isa). It means you don’t pay any tax on the interest accrued so, if you have spare cash in your current account, this is the difference between earning next to no interest and up to £150 a year.
Link: Best Isa rates
Claim your benefits and tax credits
There was once a certain stigma in Britain attached to claiming benefits. Well, not any more. The Government has put benefits at the heart of the family budget and it’s your money so make sure you’re claiming it. That includes Child Benefit, Working Tax Credit, Child Tax Credit and other employee-related tax benefits.
Link: Confused? Ask a This is Money Expert
How saving £50 a month now can save you £120 next year
Do you pay your insurance premiums by monthly installments? If you do, then consider this: you are probably being charged a premium of between 15% and 20% for the privilege. In other words, if your home and car insurance bill for the year is £600, you’re paying up to £120 a year in interest by paying monthly. If you are in a position this year to save up for next year’s premiums in advance, you can save money by paying the whole lot in one go.
Link: This is Money’s best savings rates
Making the most of your mobile
With mobile phones being used by practically every adult in the UK mobile phone bills have become the norm. 20 years ago the phone bill was paid by Mum and Dad and children were encouraged to make calls brief to save money.
No days everything has changed, few children over 12 do not have a phone. Day as you go or a contract is all adds up. It is estimated that the family phone bill has increase by over 232% over the last 10 years.
The reason is the number of phones. Even with free minutes, limitless text and data the average person’s mobile phone bill. According to the Telegraph you could save over £200 by switching tariff. Click here for mobile repairs that do not cost the earth.
Don’t be a credit card tart
‘Card tarting’ is a technique where, if you are incredibly organised and money-savvy, you can take on the credit card companies at their own game – and even make money from them. It centres around the 0% interest phenomenon that began several years ago – and there is still a lot of talk about playing this game. It is not a game for everyone. It’s not for me! And it’s certainly not for anyone who has a weakness when it comes to credit cards. The providers aren’t stupid and will try to exploit that weakness by casually offering more debt when you call to activate your new card, or by sending credit cheques in the post. A tempting offer if you’re weak. Beware. If you have a history of credit card problems, cut the cards up. Certainly don’t take out more. You could save yourself Potentially £1,000s and avoid a lifetime of financial misery.
Sort out all your finances in eight steps
Check your statements, receipts – and everything
Business exists to part you with your money. It’s a simple logic that, while obvious in the souks of the Maghreb, is much more cleverly disguised in the so-called developed world. Everyone’s at it and always has been; sometimes innocently, often not. Always check your bank and loyalty card statements, restaurant and phone bills and till receipts. It’s a chore to complain (see 24), and can be embarrassing if you’re wrong, but those extras you never received at the restaurant, the bank charges and the worse, the internet dialing scam, could be costing you a fortune – and if you don’t check you won’t know.
Negotiate your salary
‘The best and easiest time to negotiate a better pay and benefits deal is when you go for a new job. An extra £1,000 per annum is extra every year.’
Avoid cashback credit cards
The same psychology is at work here as for loyalty cards (see 39). Only this time the rewards are even greater: FREE MONEY! Yes dear. Clawing at your subconscious here is the idea that the more you spend the more money free money you’ll get back. It’s a brilliant concept for the card companies, whose sole aim is to get you into debt so you pay them interest every month. There is no such thing as free money. The house always wins.
Are you paying too much for your life insurance?
We’re living longer. As a result the cost of insuring the unthinkable is getting cheaper all the time. If you were sold a policy when you took out or mortgage you may have been under too much stress to shop around. You could be missing a trick.
Link: This is Money’s life insurance finder
Shop around for the cheapest household insurance
Unless you drive – car insurance is mandatory – you don’t need insurance. But it’s strongly advisable. Can you afford to foot the bill if your house burns down? Probably not. Similarly, can you afford to pay over the odds for the same policy available elsewhere because you can’t be bothered to shop around? Possibly, but it’s not advisable. The internet has made finding cheaper insurance easy and you can compare hundreds of policies in minutes.
Link: This is Money’s insurance finder
Choose cheaper breakdown insurance
The breakdown sector is dominated by big names such as the AA and RAC. But being towed home if your car breaks down is just another form of insurance like any other and there are scores of cheaper alternatives.
Saving: Up to £100 a year
Link: This is Money’s breakdown insurance finder