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MONEY-SAVING GUIDE
Introduction
Saving for that holiday of a lifetime? Decided life
just won't be the same without that new car? Whether
you want your budget to stretch to a must-have but
costly purchase, or you just want some extra cash
to hand, this guide will help you make life more affordable.
From cutting your weekly shopping bill to shopping
around for the best deal on a mortgage, it's all here.
So make a few changes today - every penny saved makes
a difference!
Shrink your household bills
You could start making considerable savings simply
by getting the best deals from suppliers of utilities
such as gas and electricity. And don't forget about
your phone, TV and internet costs.
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How can you compare suppliers? Try uSwitch, a fully impartial company providing information and guidance online at www.uSwitch.com. The site allows you to compare suppliers of gas, electricity, telephone, digital TV and mobile phones in your area
- If one utilities supplier provides you with more than one service, such as gas and electricity, you're usually entitled to a further discount so make sure you're not missing out!
- Cut pounds from your phone bill by switching to a cable company who could supply your phone and television services. Or you could switch to one of the indirect phone companies offering specialist budget packages. Oftel is the industry regulator, and their website, www.phonebills.org.uk will help you compare the range of deals available in your area.
- Are you a home surfer? If your internet bill exceeds £15 to £20 per month, it may well be worthwhile considering a monthly tariff instead of paying as you go. Or pay as you go using the type of specialist phone companies mentioned above.
- Make sure you're getting value for money from your digital TV or satellite package - do you watch enough TV to justify paying that fixed monthly tariff?
Top Tips: Take a packed lunch to work instead of buying from the deli.
On the move for less
Cutting down on your transport costs is one way of boosting your budget considerably. Make sure you invest in a travel pass if you use the public transport network, and don't forget that walking instead of taking the bus is both cheaper and healthier!
If you already have a car, try leaving it at home from time to time - you'll save on parking and petrol. And if you just can't live without having your own transport, you could consider trading your car in for a smaller, fuel-efficient model.
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It's not only running a car that can drain your budget. Buying one can also eat into your funds, but if you opt for 'nearly new', you could save hundreds of pounds, and still have a car that's a good long-term purchase.
- Buying second-hand is also a much cheaper alternative,
but beware! You never know that could be lurking
underneath the bonnet. When you view a car, try
to take along your local friendly mechanic to check
it over or get the AA to inspect the car for you.
Details of the AA's car inspection service can be
found on their website - www.theaa.com
- Will you need finance for your car? As there are so many options available, it's worth shopping around, and your financial advise will be happy to help.
- Bear in mind car dealers can provide financial deals that are much more
competitive than other lenders can offer
- Some mortgages, such as those with equity release features, will allow you to
borrow at competitive mortgage interest rates, so consult your financial
adviser
- Car leasing is another option, but check the mileage agreements on offer as
there are penalties for exceeding such terms.
Top tips: Plan you rmeals for the week, make a list before shopping - and stick to it!
Cut the cost of cover
Reassurance, peace of mind.or just an extra expense? Insurance really is one of the necessities in life, particularly if you have a mortgage, but the costs of the various policies you need really can mount up. Here's how you could reduce them - and still enjoy all the cover you need.
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Speak to your financial adviser or shop around for insurance quotes as there are lots of firms out there willing to compete for your business. And these days, many claim to be able to beat any quote you already have. You may also pick up cheaper deals online.
- Choosing to spread the cost of insurance may result in you having to pay extra interest charges, so if you're offered a payment option, ask if there are likely to be extra charges.
- Bear in mind that it can often be cheaper to buy your buildings and contents insurance from the same provider, so ask your financial adviser to get some quotes.
- As your provider that your annul insurance premium would be with a larger excess. Many companies will cut the cost of your policy under these circumstances, so ask your financial advise to get some quotes on your behalf.
- Some mortgage providers make it compulsory to take out buildings insurance with them and, in such instances, you may not be getting the best deal. Transferring away from your mortgage lender however, might mean you incur a fee, but your new insurer may will be willing to refund it. Ask your financial adviser to source the best deal for you.
Top tips: Cancel your fitness club membership - check out council-run facilities instead.
Make the most of your mortgage
Gone are the days of the traditional mortgage that offered little variety or flexibility. These days, there are so many different mortgages on the market, with a huge range of different features designed for varying needs - and budgets. So ask your financial adviser if your existing mortgage really is giving you the best deal. Remember, whenever you're committing to a mortgage that it's wise not to over-extend yourself. You should always ensure that you can afford the repayments - even if interest rates were to rise.
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Re-mortgaging could mean you can take advantage of lower rates than you're paying at the moment.
- A flexible mortgage could enable you to save money and pay off your mortgage early. You could make overpayments to reduce the amount borrowed and save on interest charges.
- You could use the equity built up in your home to consolidate your debts - you'll be borrowing at mortgage interest rates, which could be much cheaper than an unsecured personal loan.
- You can reduce the term of your mortgage or save on interest by offsetting your savings against your mortgage. This can be done in a number of ways. Some banks and building societies offer current account mortgages - so any funds held in the account at any time are offset against the mortgage balance. With daily interest calculation, this can make a difference over time. Other lenders offer a more straightforward set up, offsetting designated savings accounts against the mortgage. Whichever you choose, you are basically reducing the amount of interest you pay on your mortgage, therefore you can reduce your mortgage payments or pay off your mortgage quicker.
- If you don't yet have a mortgage, it's well worth saving up for a deposit instead of paying a higher rate for 100% borrowing. There will be many deals you can take advantage of, so consult your financial adviser.
Top Tips; Enjoy reading? Borrow from your local library instead of buying your books.
Would you credit it?
These days a credit card could be considered a financial necessity. After all, they're so convenient. They save you carrying cash. They let you buy things whenever you want - not just when you've saved up the money. They're essential when you're travelling too as they're welcomed all over the world.
But beware. There can be pitfalls when you put it on plastic.
Firstly, if you're not going to completely clear your balance each month then you should look very carefully at the interest rates. Many credit card companies will offer you incentives to take their cards. You could be offered 0% interest for an introductory period. Or you may qualify for a longer term low rate or other incentives like free insurance on purchases, low rates on balance transfers, cashbacks, free gifts and all kinds of little hooks to pull you in.
Like everything else though, if it looks too good to be rue then it probably is. Long term interest rates on credit cards can be high. If you're going to have an outstanding balance then there will probably be a cheaper way to repay it - and most loan providers will welcome you transferring credit card debt to them as long as you have a good history of being able to repay.
As ever on rates, shop around. Look at the internet, there are more competitive credit card deals online. And don't be frightened to transfer your business elsewhere for a better rate too - if one organisation offers a better deal, take it and close your old account.
Of course it helps if you don't run up a big credit card bill in the first place. And that takes discipline. The credit card company will offer you a credit limit but you don't have to spend it. Always work within your means and only borrow the money if you know you can afford the repayments. If you do run up a balance, clear it as quick as possible too. Remember, once the interest kicks in, you'll probably be paying over the odds for your purchase so that bargain you picked up in the sales could soon seem rather less than a shrewd purchase.
Good homes for your savings
You've cut down on your spending, you've shopped around for better deals, so what are you going to do with all the extra cash that's accumulated as a result? If you'd like to put it away for a rainy day, it might help you to set yourself a savings target for the year - say at least 10% of your salary.
So what next? There are so many savings and investment plans out there, so you should consult your financial advise. Here area few ideas to get you started:
Current Accounts
Many current accounts these days pay decent levels of interest when your account is in credit. Again, shop around to find the deal that suits you best - and check deals that are available online as these tend to be more competitive.
Savings Accounts
Bank and building society interest rates can vary considerably and can often struggle to keep up with the rate of inflation. However, they do usually offer instant access, security and regular interest which means they are many people's favoured option.
Notice Accounts
While some savings accounts allow you instant access, you'll receive lower rates of return than if you saved with a notice account. Terms vary for notice accounts, but usually range from 15 days to 90 days - the longer the period of notice before you can access your money, the better the interest rate you'll receive.
Top tips: give yourself a monthly allowance and try to stick to it
Goods Homes for your savings
ISAs
Individual Savings Accounts (ISAs) allow you to invest up to a combined total of £7,000 in cash, life assurance, equities or other stock exchange securities and any returns are free of personal tax. The options available for ISA investment are relatively complicated so it's worth speaking with your financial adviser before investing. To make the most of your ISA, you should invest at the beginning of the tax year rather than the end in order to maximise the time your money is invested. And remember, tax-free benefits are lost if money is withdrawn.
Bonds
There are a number of different types of bonds provided by investment companies, life assurance companies, banks and building societies. Many bonds will offer you a guaranteed return after a set period of time. Again, it's worth speaking to your financial adviser before investing in a bond.
Stocks and Shares
There will always be an element of risk ten you invest in the stockmarket, and as there are so many different investments products available, your financial advise can help you find one which offers a risk and reward level you're comfortable with.
The general rule of thumb is, the greater the risk, the greater the potential reward. Managed funds can spread the risk however, by investing in a wider variety of companies than a direct investment could. And they'll still provide potential for growth
Top tips: Periodically shop with cash instead of your credit card.
© Standard Life bank Limited 2002
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