Christmas is an expensive time of year so if you’re starting the New Year with a resolution to spend a bit less and save a bit more, what really works and what is a waste of time?
Here’s our round up of some of the things you might want to consider doing when sorting out your finances.
1. Ditch expensive credit cards
Credit cards are great if you pay off what you spend in full each month. That way you get valuable consumer protection at no extra cost. But if you end up paying interest on them, it can increase the cost of your purchases. So, if you owe money on your credit cards, find a 0% balance transfer deal. Set up a direct debit so you pay enough off each month, so that when the deal runs out, you will have cleared your debt. Don’t use that card for spending. Just use it to clear your debts.
2. Pay off debt fast
If you can’t get a 0% credit card, so you’re paying interest on your balance, try and get rid of your debt as soon as you can. The typical interest rate on a credit card is around 18% so the interest can really add up. Likewise, if you have a personal loan, you can overpay that to pay off your balance quicker. The rules let you pay up to £8,000 a year extra every year, and the most you’ll be charged is 1% of the extra money you’ve paid off.
3. Keep a spending diary
If you don’t know where your money goes each week or month, start keeping a spending diary. It just means you write down what you spend, when you spend it and what you spend it on. I’ve done this before and it’s an easy way of highlighting where you may be spending more than you want to!
4. Make your lunch
Unless your employer provides free lunch or a heavily subsidised canteen, it’s much cheaper to make lunch than buy it. I’ve never really liked sandwiches and prefer to eat soup, salad or something like a risotto at lunchtime. It does require a bit of organisation in advance, but – like anything – once you’ve got a system up and running it sort of runs itself. If you normally spend £3 on a meal deal lunch every day, you’ll save £15 a week, minus what you spend on making your lunch. If you spend more than this, the savings will obviously be greater.
5. Switch your mortgage
If you’re on your mortgage lender’s standard variable rate deal, you can compare mortgage deals and find out how much you could save with a cheaper deal. If you’re on a fixed rate mortgage, it may still be worth switching, even if you have to pay an early repayment charge to get out of your deal. It will depend on the size of the penalty, the size of your mortgage and the interest rate you’re on.
If you’re not sure which mortgage deals you’ll be eligible for, or what age you can borrow up to, fee-free mortgage brokers such as Fluent Mortgages or London & Country Mortgages can research the various options that may be available to you on your behalf. They’ll also be able to advise which deals may be best for you based on your individual circumstances.
Where to start
It’s a good idea to begin with the area where you can save the most, because this will give you an incentive to make further changes. So, if you have a large mortgage, or you’re on the standard variable rate, start there. If you don’t have a mortgage or you’re already on a good deal, maybe start with your credit card, or by making your lunch.