Being a single parent means I always have one eye on what's coming in and what's going out money wise. I'm sure this is true of most couples too, but unlike a couple I don't have the security of another person's salary to buffer me if I overspend. Now, back in January I made two new year resolutions; the first was to make a roast lunch every Sunday, the second was to end the year in a stronger financial position. To this end I am usually enjoying leftover chicken on a Monday but more importantly over the first six months of 2014 I have been steadily taking control of my finances, in particular my spending. It's easier than you think. There are so many resources available to help you make better financial decisions. It's an admin heavy task yet thoroughly worthwhile and yields rewarding changes for the better.
GET THE BEST MORTGAGE DEAL
For most people the largest monthly outgoing is the mortgage or rent. With the Bank of England indicating that interest rates will rise by the end of the year now is the time to act by locking yourself into a great deal for the next two to five years. Even if your term isn't due for renewal it's worth taking a look at what's available now as some lenders will keep an offer open for up to six months particularly if you have an excellent credit rating. It makes you a safer bet.
If you rent and don't want to move to get a better deal it's worth contacting your landlord. Good tenants are like gold dust to a landlord. Suggest a lower monthly rent for a longer term, or negotiate against future rent rises. A £30 saving a month is £360 a year in your pocket. It guarantees an income for the landlord and promises them no lost months through having an empty property while looking for new tenants. Hey, it doesn't hurt to ask.
SWITCH ENERGY SUPPLIER
After my energy supplier's shock and awe tactics last winter (they didn't bill me for eight months then slammed me with a four figure bill) I determined to switch as soon as the bill was paid. I joined Ovo in April, a new kid on the block to the UK energy market. I'm paying a fixed monthly amount AND when my account is in credit they pay me interest. Yes I will say that again. They pay me interest. Excuse me while I skip around my kitchen.
PAY OFF CREDIT CARD BALANCES
By paying off your credit card balance every month you will save £100's per annum. If you cannot pay off the balance in full every month apply for a 0% interest card for balance transfers. Then most importantly CUT UP THE OLD CARD(s) and close the account(s). It's all too easy to get yourself in a pickle with credit cards and while it's fun spending, it's not so fun paying it back plus interest.
CONSOLIDATE YOUR DEBT
By having all your debt in one place and paying a fixed monthly amount it is far easier to budget and avoid overspending in the future. Consider a low cost loan from your bank or other reputable lender. You will save £100's in interest and be more confident about your overall financial position.
When remortgaging many people consider consolidating their existing debt into the mortgage. While this may seem like a good idea when rates are low it's important to bear in mind that you will pay interest on this amount for the life of the loan, which over time could easily be more than applying for a fixed rate loan from a bank. More importantly a fixed loan doesn't have to be secured against your home.
SWITCH INSURANCE COMPANY
The cost of insuring cars, your home & contents and holidays soon adds up. When shopping for insurance use any no claims bonus you have built up to negotiate the best deal possible. Some insurance policies have holiday insurance included, but then again so do some bank accounts. Read your policy so you don't end up paying for this twice.
SWITCH PHONE SUPPLIER OR TARIF
Do you really need a new phone? Switching to a SIM only account is a great idea if your current phone is in good working order.
DO YOU LEASE YOUR CAR?
This is one of the biggest money sucks I can think of. Not only are you paying monthly for something you don't own but at the end of the lease you have to pay even more to keep the car or enter into a new lease for something you will not own. Buying a good quality second hand small car in one of the lowest emission categories will save money on fuel, road tax, insurance and even better there no monthly lease payments. Banks often have a small loan category for borrowing to buy a car, repayments are usually cheaper than the lease repayments and you will own the thing you're paying for meaning you can sell it when or if you need to.
Did you hear the one about the woman who has a pay-as-you-go gym membership and never goes? Chances are, unless you're going to the gym three times a week every week your gym membership is going to waste. At £50 a month that's £600 a year! There's been an upturn in the number of social outdoor exercise classes available recently. The beauty of these is that not only will you meet people (and make new friends) who will encourage you to go more often but that without the large overhead costs these exercise classes are often very competitively priced and can be tailored to the group that day.
SWITCH TV SUPPLIER
This is one I still have to do. I love my TV supplier but they have me over a barrel; I'm also paying for the landline and internet data package with the same company. I've done some research and I could be saving over £40 a month by shopping around. It's a no brainer.
Fuel costs soon add up. If you know of a colleague or friend doing the same or a similar journey to you every day talk to them about car pooling. Not only will this keep your fuel costs down, but your mileage too, adding to the resale value of your car. Having a lower annual mileage can also bring your car insurance costs right down.
USE COUPONS & SHOP SMART
If your pantry is full of supermarket brand 'finest' products you are a victim of a canny marketing ploy. Have you done a taste test? Have you compared ingredients? Who is to say which product is finest? Of course if you want to eat organic food you will already have accepted that it will cost you more, but even within organic produce there is a large difference in price vs availability. Try going to your local farmers market and speak to the growers. They may be willing to do a deal on the veg you want for a weekly guaranteed price. Even better a lot of the produce will be seasonal giving you variety across the year.
Bulk buying and using coupons is a great way to cut costs on essentials, just don't get suckered into buying more than you need.
CLEAN YOUR OWN HOUSE & CAR
I use a domestic cleaning service twice a month. I love those ladies and their bleachy clean smell. I used to do it all myself but I've chosen to prioritize my sanity and spending time with Bella & Bear over a perfectly clean home vs a small fee. It's a good decision for us. I also used to get my car cleaned once a month when I was grocery shopping. Now I bring out the hose and a bucket and we make it a family activity. The kids LOVE helping! We get rather wet.
SCHOOL DINNERS VS PACKED LUNCH
From September 2014 in the UK all school children will be entitled to a free hot lunch. I think this is marvelous and I will be taking advantage of this for both of my children from the get go. Bella is a picky eater but I know when she's hungry she will sit and eat what's in front of her especially if her peers are digging in too.
What to do with the savings?
Ahh, now here is where I have traditionally excelled... spending! But I am turning over a new leaf and now that my outgoings are under control I'm going to do my utmost to embrace these options instead:
REGULARLY OVERPAY YOUR MORTGAGE
If you're comfortably meeting a higher monthly payment on your mortgage, when you switch to a lower interest rate keep the repayments the same. Not only does this significantly reduce the capital sum you owe, it also reduces the length of the loan and consequently the time you are paying interest on the capital you've borrowed. In short you will pay off your mortgage faster and it will cost you less.
If you are remortgaging and need the saving to meet other obligations it's still a good idea to overpay when you can, but it may be more prudent for you to save up first and make a one-off payment with reserves at the end of the financial year. That way you will still have access to your money if you need it suddenly, an important distinction because you can't get overpayments back from the mortgage lender.
USE YOUR ANNUAL CASH ISA ALLOWANCE
Regular saving is the best way to future proof your finances. Once you have your debt, and spending under control take advantage of your tax free saving allowance. It's not much, currently £5,940 in real money or £11,880 in stocks and shares. You can open a new one every year and from July 1st you are allowed to top up your old cash ISA to £15,000.
Cash ISA's are simply a savings account that you don't pay tax on. To put that another way say you earn £100 interest on the money you've saved in a cash ISA you keep 100% of the interest, you keep £100 and the tax man can't have any of it. A regular savings account works differently, if you earn £100 interest on the money you've saved you may only receive £80 because the tax man has come along and taken a bite, the amount you keep will be even less if you are a higher-rate tax payer, possibly only £60 of the £100 interest your money earned you. Huh.
It's worth pointing out that your money is not locked away in a cash ISA unless you choose that option. You can access it whenever you like if that's how you want to operate your account.
If you want more information on how to make the most of your money, or financial advice in general I recommend the MoneySavingExpert as a great place to start (I'm not affiliated with the site, it's just a brilliant and comprehensive guide).
Wishing you all a prosperous (or just financially stable) 2014!