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Taking stock of your finances: step three

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AR011062 01/2018

Cut your expenditure 

Once you have a clear idea of what income comes into your household and where it goes, you can begin to exert some control. 

Work your way through your expenditure subject by subject, with the largest items first: mortgage, food, loans, utility bills, car maintenance and fuel, insurances, clothes, home maintenance, and so on.

With each category of spending, ask yourself ‘Could I get the same for less?’ and ‘Do I really need to buy that?’. 

Of course, some costs are easier to reduce than others, but here are a few that could allow you to make the biggest savings: 

 

Mortgage

Housing costs are probably the largest monthly bill for most people. While saving money on your mortgage is possible, it could come with some trade-offs, such as the possibility you might end up paying more in the future. 

TIP: If you think that you can save money on your mortgage, take financial advice first and allow an expert to point out the pitfalls that may not be immediately obvious. The cost of a mortgage is not necessarily straightforward and can involve extra fees and penalties, as well as the normal monthly interest payments. Speaking to an expert will help you to make a decision that’s appropriate for your own circumstances.

 

Other household bills

Saving money on gas and electricity is more straightforward – and the saving could be in the hundreds of pounds a year. That’s enough to pay off Christmas debts within a few short months.

The same stuff comes out the pipes or down the cable no matter who you buy it from, so the purchase decision should be based on price. Perhaps the one exception to this rule is where your proposed new supplier has a truly awful service record. If this is the case, consider the next-best provider.

If you haven’t switched supplier before, or for a few years, there’s a good chance the savings you make will be large.

TIP: Use an energy switching service, such as ‘energy helpline’ or ‘uSwitch’. The personal finance website moneysavingexpert.com also has an energy switching service.

By using these services, you might also get introductory cashback to add to any savings you make on your ongoing monthly bills.


Broadband, telephone, television and mobile phone tariffs

The standard approach of suppliers of communication and entertainment services is to hook you in with a great introductory offer. The price is then gradually increased, and they rely on your inertia to keep you as a customer.

Make sure you regularly review your suppliers. Even if you don’t want to switch, contacting your current supplier to let them know you’re considering a move can often allow you to negotiate a reduced price. Quote them some of the deals their competitors are offering and take it from there.

Take stock of all your subscriptions. Do you really need Netflix and Amazon? Or BT Sport and Sky? Dropping one or two of your least used subscriptions could save you over £100 a year.

TIP: Also make sure you review your mobile phone contract when it comes to an end. The tariff usually includes the cost of the handset, so continuing to pay the same price after the contract has expired means that you are still paying for something that you already own.

If you keep the same handset and move to a SIM-only deal at the end of your contract, your monthly rental could fall by 50% or more – that could add up to over £200 a year. 

 

  

Motor and household insurances

Shop around when your motor and home insurances come up for annual renewal. Not all providers supply prices to price comparison portals, so the only way to cover the whole market is to get a quote direct from these insurers.  

Younger and high-mileage drivers may also get lower premiums by fitting a telematics device to their car. This ‘black box’ monitors driving habits such as speed, acceleration, braking, road risk and time of day. But beware, you’ll need to be on your best driving behaviour most of the time if you want to keep your premiums low.

TIP: When comparing insurance prices, make sure that you do so on a like-for-like basis; the same sums assured, same excesses, and so on.

 

Transport and travel

Cars are expensive to buy, maintain and run, so there are lots of ways you could potentially save – such as switching to a more fuel-efficient car. Low emissions are also rewarded with lower road taxes.

Another point to remember is that the cost of parts for popular mass-market cars tends to be lower, making them cheaper to maintain.

When it comes to rail travel, buying advance tickets will normally cost you a lot less. The downside is that you must travel at a specific time and date, and refunds are not available (but you can change your ticket for a fee).

Another way to save a lot of money on rail fares, particularly for longer journeys, is to buy split tickets. Rather than buying a ticket for the whole journey – say London to Edinburgh – buy part journey tickets, but staying on the same train – for example, London to Peterborough, Peterborough to Darlington, and Darlington to Edinburgh.   

 TIP: Changing your car less frequently can also cut your motoring expenses. The cost of maintaining an older car is usually higher, but still lower than the depreciation cost you will pay if you buy a newer model.

 

Out-of-pocket spending

Cash and contactless payment card spending can add up to a surprising amount over the course of a month. Newspapers, daily coffees and lunchtime sandwiches can easily cost you more than £100 over each four-week period.

TIP: Keep a daily diary on paper or the notes page on your phone, and jot down everything you have spent money on at the end of each day. Change your daily routine to avoid spending money unnecessarily. 

There are lots of ways to cut your bills – frugality is now becoming something of a national trend. We even have TV programmes like ‘Eat Well for Less’ dedicated to cutting our food shopping bills!

Make sure you review your spending habits regularly – once a year is a good guide, as we all gradually allow ourselves to accept less than the best deal over time.

Now read step 4


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