Remember last week I said there were two camps of people? Well now it's time to take a look at the second one - the people who have had their lightbulb moment and now realise they want to do something about their finances. One thing that can sometimes come out of a bad or stressful situation is that it makes people look at their lives in a bit more detail, and quite often one thing that comes from that is that people decide that they want to get their financial house in order. At the moment one thing that a lot of us have is additional free time, so now is the perfect time to make a few changes...
So - you likely have some debt, probably you can make your monthly payments each month as long as your income remains stable, but now you may have started wondering what happens about those payments if you have to take a drop in income, and that is why it's a good time to tackle things. The huge advantage that many of us have right now is that our outgoings will drop fairly dramatically - no commuting costs, none of the costs associated with going out and about as you usually might, reduced spends on entertainment and very probably reduced spends on other purchases too - as you're not going to places which might usually tempt you to impulse buy, for example. To harness those savings is the first thing, and then to work out where you may be able to make further reductions in outgoings should probably be the second. While doing this though, take a moment to think about areas of spending that might increase slightly - electricity, gas and water costs (if your water is metered) are the likely candidates here, so factor in increases there before starting.
Normal debt-busting advice might be to cut all spending on luxuries to the bone - and indeed if you fear you are about to lose income imminently, and would then be unable to meet your outgoings each month, then that may still be needed. For those who are just looking to get their houses in order more generally though, this is probably not the right time for a complete back to basics regime. There are more than enough new things to get used to at this moment in time -so for now concentrate on making savings where you can but without reducing your quality of life too drastically. Looking for the easy wins is the way forwards here -
- take a look at your gas and electricity tariffs to make sure you are on the best one for your needs;
- If you are out of contract on your mobile phone, take a look at SIM only deals, look for one from a competitor to your current provider, then call your current provider, give them the details and tell them that they are too expensive - most will try to match the deal to retain you as a customer;
- If you have satellite TV, again if you are out of contract ring your provider and haggle;
- check the dates that insurances are due for renewal - note them down, then have a read of the MoneySavingExpert.com guides to the best ways of driving costs down for home or car insurance while still getting the cover you need. Car breakdown cover can be haggled down too;
- go through your bank statements and look at your payments one by one - are there direct debits going out for subscriptions you no longer want or memberships you no longer need? Get them cancelled!
- Specific to this point in time - is there anything you are paying for that because of the current situation in the UK you are unable to use? Gym memberships are a prime candidate here - contact the provider and ask them what they plan to do to compensate you for a service you are unable to use.
- Have you got any events or travel booked that has now been cancelled? If so make sure that you chase up or apply for any refunds you might be due - hotels bookings, train tickets, all sorts of usually non refundable things are currently able to be reclaimed.
Once you have worked out where you can make savings, turn your attention to whatever debts you might have - if you have any credit cards that you are paying interest on, then use a resource like the MoneySavingExpert Credit Club (free to join) to establish whether you might qualify for a 0% balance transfer card to move them to. If you can't get everything onto 0% then the next approach is to arrange them all into order with the highest interest rates at the top - then whatever surplus you can create with your savings, you will be able to pay off the most expensive card first. If you have no credit cards, but do have loans, then take a read through the conditions to establish what you can do about making overpayments to those. If no cards or loans, but you have a mortgage then yes, you've guessed it, overpayments are frequently allowed there too!
Another area you might want to look at once you've established how much surplus you can free up from your finances each month is budgeting further ahead for things like insurances etc. Again you can give yourself a real head start at the moment with the savings that you might be making on normal expenditure. Take your car insurance as an example - let's say you'd usually pay it in monthly instalments, and it renews in August. You're expecting to pay around £350 for your year's cover. Firstly, you currently pay a premium to pay monthly - so by paying upfront you'll probably see a drop in the total amount, so let's say £330 for the year. With your renewal in August that gives you 4 months paypackets to get the total amount together - £82.50 each month. When August rolls around, you pay the total upfront, pocket the saving, and then adjust your monthly saving towards the following year's renewal down to £30.25 per month - that will then cover you for a 10% increase in your premium for the next year. You can do the same thing with car tax, home insurance, breakdown cover, and even things like phone line rental too - and pretty much always there are savings to be made.
So there you go - use some of that gift of additional time and saved money that you currently have and make it work for you. God knows this current situation we find ourselves in is - let's be blunt - pretty shit, so let's all grab the advantages where we can. If we have to spend more time at home, then let's seize that time and use it to allow us to emerge from the other side of this in a better financial state. Over to you!
Robyn.
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