plonkee money an english-er's thoughts on personal finance

August 21, 2008

fix your finances, save money – step 2

Filed under: frugal — plonkee @ 12:00 pm

Breaking through the wall.

In the middle of the Olympics, I thought it would be a good idea to issue a personal finance challenge, one that I need to take myself. It’s in three parts:

  1. Establish how much you actually spend on stuff
  2. Look at ways of cutting costs
  3. Save and invest the extra money that you find

This, is the second part.

In part 1, we wrote three lists that cover all our expenses (averaged by month). Hopefully you’ve still got these. The first list is expenses that we want to cut e.g. bills, the second are expenses that we would like to stay the same, and the third are expenses we would like to increase e.g. charity donations.

look at ways of cutting costs

Ok, so take your list of expenses that you would like to cut. This shouldn’t take too long, but let’s do the easiest first. You might want a calculator to do some calculations.

It goes without saying that if you are willing to cut back on usage, then that will save you money. I’ve assumed that the amount that you use is fixed and you simply want to pay less for the same service.

debt repayment

Option 1: If you have a credit card that you’re paying off, try calling your credit card company and asking them to reduce their rate. Always worth a try.

Option 2: Look at taking out a balance transfer. Be very careful when considering the fees, and make sure you can work out the interest rate that you’ll be charged on the fee, this is usually not 0%. I approximate the cost by calculating:

(1+balance transfer fee) x (1+interest rate) – 1

Otherwise, if your debt is large-ish (a few thousand and up) and you have a good credit rating, it may be worth taking out a new cheaper loan.

This can also apply to mortgages. If you were on a fixed rate mortgage and it has since reset you might want to look into getting a new mortgage as it could be less than you’re currently paying.

gas and electricity

Key words are *shop around*. The gas and electricity coming down the pipes and wires won’t change if you use a different company. If you haven’t switched supplier for a year, chances are you can save money on these. Don’t sign up with the supplier that knocks on your door, actually look and see which will be the best. If you have your bills handy, you can estimate your usage and put that into the comparison calculators:

Money saving expert keeps an eye on the prices and will tell you if now is a good time to switch.

If you’re on a prepay meter, see if you can get the company to switch to a regular meter – this is one of the things that I need to do.

water

There’s only one way to reduce your water bills. Get a water meter fitted and then use as little water as possible. If you have more rooms than people, or everybody is out all day this is likely to work out very nicely. If there are four of you living in a 2-bed house, then not so much.

Water companies should fit meters for free, unless it’s impossible for them to do so, and you can change back within a year – but that’s a one shot deal.

phone, internet and tv

More shopping around is required here, but with slight differences. This depends a lot on your usage and requirements.

You can’t save money on your tv licence unless you’re blind, over 75 or willing to watch in black and white. It’s hard to save more on basic phone line costs as well.

You can save money on phone calls. Understand your current and anticipated usage, and pick a package that suits. Additionally, consider using an override package especially if you make international calls or calls to mobiles.

Saving money on broadband means picking the best package for your usage. This is often a bundled with phone calls and/or tv so work out what’s best as combined and stand alone packages. Orange offer a deal bundled with their mobile phone package – but work out whether Orange are cheaper for your mobile first.

The cheapest digital tv needs a set-top box. Otherwise it’s a straight competition between Virgin Broadband and Sky. Both have combined packages with broadband so consider whether that would offer better value for money.

For mobile phones, consider your actual usage, and use a comparison site for a new deal. Then phone your existing provider to see if they will match it. If you’re a heavy data user then you can’t compare this easily. Fortunately they vary mostly between networks, but not really between packages, so in your comparison add on your data usage costs when picking the cheapest.

My best deal works out to be T-Mobile Combi £15 plus Web and Walk which has a total monthly cost of £22.50, saving me £2.50 per month. And I’m getting a shiny new phone, and I’ll sell the old one via envirofone.

insurance

Two key concepts. Work out how much you need, and then shop around. For home and car insurance, it’s always cheaper to pay upfront rather than monthly, so you should be saving year round for these expenses.

I’ve recently renewed my home insurance, and saved money doing so without altering my cover, so I know that this works.

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