We need it to eat, to keep warm and generally live. But what’s the point in earning money if you can’t use some of it to have a little fun and more importantly ensure you’re doing what you want in life whether it’s a hobby, a night out/takeaway or a lavish holiday. So as part of our happiness and confidence goals for 2016, we think a money topic is something to be covered. From our own personal top tips and others we’ve come across, here’s our top tips for a better year financially:
Years ago I started analysing how I bank as a way to better manage money. My bank manager at the time suggested a basic four account system, which, to this day, I still stick to. I found it a better way to manage my money and keep track of my finances and my financial records have never looked better.
- Current account number 1– this is the account the money should come into and your expenses (such as debt and utility bills) should come out of.
- Current account number 2– I class this account as the spending account. This is the card that I carry on my person at all times and is the money I can do what I like with.
- Easy access saving account– to further manage money, the cash I have available once my bills are paid is transferred into this account and as and when I need money, I transfer into the spending account. This is particularly beneficial for shopping on a budget. When I am out shopping, I set a budget and transfer that amount into the spending account. Fine nowadays transferring money on the go is no problem but you’ll be surprised by how much hassle it is when you don’t have/good internet access and no time to stop. I find it allows for a better track and hold on money.
- High interest/ISA account– it’s always a good idea to save, even if only a little with each paycheck. Set aside a set amount each month to transfer into your high interest account and treat it like a no-access allowed account. It can be your emergency fund for when something crops up unexpectedly or it could be used for that dream vacation- whatever you want/need it for.
Personally, I think it’s best to have all your accounts under one roof as it saves remembering multiple usernames and passwords and it’ll also be an easy go-to for a one stop review of your financial situation. The only exception to this rule would be your high interest savings account. If you’re not able to see your savings account when logging into your other accounts, you’re more likely to forget its there/not realise its true value and therefore not eat into it when something unessential pops onto your radar.
Take interest in your interest
- Repayments– if your debts are hanging over your head and you’re keen for them to go, work on paying off the debts with the highest interest first.
- Repayment penalties– loans come with early repayment penalties so if you’re keen for it to disappear, see if there is a way around that. We’ve heard on the grapevine that you can clear the debt up to the final payment stipulated in the contract and when the ‘final’ payment comes out the following month the debt will be clear without any penalties. We’ve not actually seen this in practice though so don’t take our word for it but certainly it’ll be worth a try?
- Shop around for the best deals– this applies to both credit and savings. Before taking any credit or signing up to a new account, determine what the rates of interest are.
- Balance transfers– 0% balance transfers are attractive deals. Though shop around for the best deals as there is always an administrative charge to do the transfer. Once you’ve transferred the balance, consider how much you need to pay each month to clear the balance at the end of the deal and stick to that amount, otherwise come the end of the promotion and you’re left with a balance that you’ll need/want to transfer again or you’ll start to pay interest. The 0% deals can lure us into a false sense of security so ensure if this is a deal you take up that you make more than the minimum payment due.
- Re-mortgage– make an appointment to see a financial advisor and see if they can help reduce your monthly repayments by switching to a lower interest rate. This should be something done every time you’re due to come out of your fixed term.
Becoming an avid saver
Saving can be a real challenge, here’s our top tips and tricks to save those pennies:
- If you take up a four account system as above, set up a direct debit for your savings account to move money into it on each payday, it’ll be like you never had it in the first place. Specialists recommend a minimum of 6 months salary in savings to cover you should you find yourself unemployed- perhaps a third savings account would be beneficial for this.
- Penny a day challenge- at the start of the year we saw a post floating around the net on how to save £670 in a year by putting away a penny a day. The idea is you double the pennies from the previous day. E.g. 1st of January 1p, 2nd of January 2p, 100th day of the year £1.00, day 365 you put in £3.65. By the end of the year, you’ll have saved £670 with pretty minimal effort- that’s Christmas sorted. To date, you just need to add 91p to the pot!
- Sell on the things you no longer need or want. Head to a carboot, recycle your technology for cash, get on Amazon and sell, get on the buy sell swap sites in your area and clear our house of the clutter and make money on your preloved items. Save what you get from the sales in a rainy day fund.
Save money on everything
- Save on bills– renewing your bills and insurances with your current providers is an easy option, we’ve all done it. But more often than not, especially when it comes to car insurance, their premiums often shoot up when it comes to renewals. You could therefore be paying more to stay with your current provider. Shop around for the best deal through comparison sites. Even just doing a single search with a single company is more likely to save you money, just ensure before you figuratively sign on the dotted line you’re getting a like for like service for peace of mind.
- Cashback schemes– such as Topcashback and Quidco offer you the chance to earn cashback on everyday shopping including household bills. You could save hundreds, even thousands in a year! It’s a habit you’ll need to get into but well worth it! The sites are free to sign up to but may have annual fees, TopCashBack’s basic account is free but for a few extra perks (though doesn’t impact on how much you’ll save, it’s the same regardless if you pay or not) charge £5 per year which just sits on the account and clears once you’ve reached the £5 cashback in savings, everything on top of that is yours to keep, it in no ways affects your credit scores. The banks have recently cottoned onto this too so it’s worth checking out what your bank is offering otherwise it may be time to move!
- Pay for– break down, travel insurance and phone insurance as separate policies? You could save yourself a pound or two by taking out a paid for account with a bank and still receive these same services. An added bonus? Some banks will also offer interest free overdrafts for up to x amount, some added security for circumstances of as and when.
- Points cards– The supermarket cards are pretty impressive, whether it can be used on money off your shopping or towards a day out or items for the home. Rewards for your weekly shop is brilliant. We particularly love the Tesco Clubcard for nights out/day trips.
- Meals and days out– aside the points system above and other policy benefits a lot of companies offer now (e.g. Money Supermarket and their free cinema tickets) the discount websites such as Groupon and Wowcher are always good for getting out more for less.
- Holiday savings– ensure you’re getting the best deals out there by doing a little research first. Using a travel agent is a super easy option and takes all the stress out of booking a holiday and although sometimes they can secure the best deals, most of the time it isn’t the case. With sites such as skyscanner, trivago and booking.com you can go on the holiday you’ve dreamed of for a lot less.
- Car share– does one your colleagues live in the same area as you? Save money and be good to the environment!
Your credit ratings affects well, your ability to obtain credit. Simple as. Banks and other lenders when doing a credit search on you, request information based on your previous borrowings and your ability to meet your agreements. Although it’s not the single criteria when choosing whether or not to lend to you, it clearly makes a difference, here’s our top tips on a better credit score:
- Meet your monthly repayments– simple. A missed payment can stay on your record for up to six years. That’s a pretty long time. If your missed payment is a case of circumstance, e.g. there was a problem with your salary being paid into your bank, get on to the phone to your service provider (whoever you’ve missed the payment with) and explain the situation. They’ll usually arrange to take the payment on another day and you’ll not hear another word about it and it’ll have no effect on your record. If it’s something else, seek financial advice.
- Take credit– This is an odd one. The point of a credit score is so that lenders can check on your ability to repay your debts. If you’ve not got much of a history, they’ve not much to go on and there’s every chance you could be refused on this basis, strange, we know. Head to Money Saving Expert for tips on building a credit record.
- Taking too much credit– there is such a thing, especially if you’re opening accounts one after the other. It doesn’t look good and is terrifying to a lender. Before applying for any credit, really consider and budget for how much you need.
- Don’t take payment breaks– some lender providers offer the opportunity to take a break on your repayments. Avoid at all costs. It seems like a good idea and if things are particularly strenuous, it’s an option available, however, the interest that you didn’t pay during that break gets added to the balance of the mortgage and your monthly payments will increase. When you consider that increase over the remaining term of the mortgage, it mounts up to an awful lot.
- Paying in full– another odd one. Paying your credit card balance in full every month can actually reflect badly on you. Don’t forget the interest they charge is where they make their money, if a lender doesn’t see you as profitable, they may decide not to lend to you.
- Know what it includes– utility and phone bills and car insurance (if taken out monthly) are some of the least unknown items that flag up on a credit score as well as mortgages, loans and credit cards. If taking out any kind of repayment plan it’s likely you’ll have a credit check done on you and that policy stamps on your credit record for at least 6 years.
Other financial considerations
- Set up a pension– if you don’t have a pension scheme already set up, do so now. Money Saving Expert can answer all of your pension questions. Whatever your beliefs on pensions is, it’s always savvy to start saving for the future as soon as you possibly can, even if it’s just £20/£25 a month. You’ll want to make sure you get the safest investments possible though as pensions have a bit of a bad rep, this is down to investment based pensions, so do plenty of research to keep your money and future safe.
- Get a will in order– it’s one of those things we really don’t want to think about but if you’re married, have children, even just cohabiting but in a stable, committed relationship, you need to get a will in order. Just so everyone is clear.
- If you’ve debts of any kind– get life insurance in order. Protect yourself and loved ones in the event of your death. Ensure the amount covers debts outstanding. A decreasing plan is usually better but research what is best for your circumstance. As and when your financial circumstances change, e.g. you move house, review your plan and see if you can get a better offering elsewhere. Always read the fineprint, check what the policy covers and what it doesn’t, look into critical health and other clauses/benefits of the policy before agreeing. Take full advantage of any cool off period by reviewing the policy in full when you’ve committed, if it doesn’t meet your needs, you’ll be able to cancel it without any penalties.
- Schedule your direct debits– for a date close to your payday as it’ll allow you to keep better track of your money.