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Do a Money Makeover

Overhaul finances & save £1,000s

Money-jar, piggy and clockTaking a day to cut your bills, treating it like a job, saves many £1,000s over the year. And unless you earn more than £1.25m, that's the best paid day of the year.

This isn't by 'cutting out cappuccinos', it's by systematically working through all bills & products to ensure you've the best deal on everything. This is a five-step plan to overhaul your finances and save £1,000s.

Martin Lewis gives tips on how to overhaul your finances - Watchdog BBC One

From painful savings to pain-free cut-backs, Martin Lewis offers his top tips on how to overhaul your finances. Watchdog: http://www.bbc.co.uk/watchdog/

Radio special - Save £1,000 in a day

In January 2012, Martin was on a special Jeremy Vine Radio 2 slot, telling people all about the Money Makeover technique, and loads of folks phoned in with their inspirational stories. Listen to save £1,000 in a day.

Will it really make a difference?

Have no illusions, a full money makeover will take up to 10 hours, but it'll be worth it.

Woman worried with her piggy bank When Martin regularly did money makeovers for a TV show, the average saving was a little over £5,000 a year, and this was before he started to say "cut back". Now, suppose that if you did it yourself, you'd do half as well, saving £2,500 (though hopefully you'll do better) - compare that with what you earn.

And remember this saving is without tax. So unless you're paid £4,800 a day (about £1.25m a year), it's likely to be the best-paid day of your year!

What if I don't have the time?

Then make the time. This is incredibly important. However, if you simply can't do that right now and just need a quick MoneySaving hit instead, then shimmy straight along to Step 2: Pain-free savings and you should still manage to gain serious cash.

Can I get someone to do this for me?

Aaaarghhh! People ask this all the time, and Martin hates this question. Asking it means you've missed the whole point of MoneySaving. The process doesn't just save you cash, it empowers you to understand how companies will take your cash through ignorance, apathy and inertia. Yet even if that wasn't the case, there aren't any MoneySaving advisers, the service doesn't exist, and even if it did, their cost would eat up much of the gain.

Step 1: Do you spend more than you earn?

This isn't a trite question. Unless you know the answer, we can't work out how militant the savings must be. Standard MoneySaving is about cutting your bills without cutting back; it involves changing your finances, not your life.

Yet if after that you're still spending beyond your means, then there's a major problem and cutting back may be necessary too; meaning lifestyle as well as MoneySaving changes.

Of course those spending less than they earn may only need to free up wasted cash, so it stays in your pocket, not in that of big companies. This is why it's important to know where you stand.

How to find out

There are two ways:

  • The BIG danger signal.

    Are you in debt? If you are, and can't answer the question, "what are your debts from?" - in other words you didn't buy a car or a conservatory, but simply used cards or loans to fill the gap - then this sounds an ear-piercing alarm.

    It means your debt comes from systematically spending more than you earn. If this is the case, no further investigation is needed. We know the answer and you need to skip straight to pain-free savings.

  • Accurately assess your spending.

    If you're not sure where your finances stand, you need to add it all up. The specially-designed Budget Planner calculates your genuine annual income and then tells you exactly how much more you spend than you earn.

    Most people are shocked by the result. Many who think they're within budget month-by-month aren't when it's done over a year. This is the start point of sorting out your cash, so spend the time to do the budget.

Step 2: Pain-free savings

The essence is simple. If you can get the same thing by paying less, then do so. Yet it's not only about car insurance and credit cards. Saving money stretches to cutting childcare costs, cheaper contact lenses or checking your council tax bill. It's what our site is dedicated to.

How to do it

This site has well over 100 detailed MoneySaving guides, each picking the best deals. Below we've deliberately selected some that enable big and easy savings on current outgoings. Check every section (using the tabs at the top of the page) for your specific needs.

Cut your household bills
What to do Typical Saving
Gas & Electricity
You can cut your energy bills and get cashback on top in minutes. Remember, it's the same gas, same elec, same pipes and safety; only the price & billing processes really change. Full info: Cheapest Gas & Elec plus cashback
£200+
per year
Food Shopping
It's not about buying lower quality, but beating the way supermarkets hypnotise us into unnecessarily paying more for premium brands. Full info: Cheaper Food Shopping
£800
per year
Council tax
The council tax system in England and Scotland is fundamentally flawed. Many people are in the wrong band. It only takes 10 minutes to check: Check your band
£300
per year (and backdated reclaimed payout of £1,000s)
Home phone & broadband
There's no need to pay more than £15/mth for home phone and broadband combined. Full info: Cheapest Home Phone
£200
per year
Childcare costs
There's £1,000s of hidden free cash for childcare. Whether it's tax credits, childcare vouchers (pay for childcare from pre-tax income), or free summer school places, the savings are huge. Read more: Cut Childcare Costs
up to
£2,000
per child per year
Cut boiler cover costs
Don't assume you need to get boiler cover from the same company that supplies your gas and electricity. Standalone providers can be cheaper: Cheapest Boiler Cover
Up to£100
per year
Free international calls
You can call abroad for free via the internet, or call almost anywhere for 1p/min via the normal phone. Full info: Free Web Calls & The CallChecker
£100+
per year for regular callers
Calling mobiles
It's possible to instantly halve the cost of calling mobile phones, without changing your landline provider. Over a year, the savings are huge. Full how to Call Mobiles Cheaply
£100+
per year for regular callers
Should you use a water meter?
If you've more or the same number of bedrooms in your house as people, you're probably better off with a water meter. Read how to cut Water Bills
up to
£200
per year
Cut your digital TV costs
A simple phone call and the right haggling technique could halve your bill. Read Sky & Virgin TV Cost Cutting
up to
£150
per year
Cancel direct debits
Many waste £1,000s a year paying for things they don't need. So whether it's mags, gyms, dating sites or pay-TV, get tough and cut 'em down. Cancel Your Direct Debits
£500
per year
Cut the cost of your debts
What to do Typical Saving
Existing credit card debts
Simply shift the debt to a new card at the cheapest possible rate. Full how to: Balance Transfers
£150
per year per £1,000 debt
Mortgages
Mortgage savings can be massive, and they're much easier to achieve than you might think. Read the Remortgage Guide and Cheap Mortgage Finding
£1,000
a year per 1% rate decreased per £150,000 owed
Existing loans
Cutting existing loans' costs is much more difficult than mortgages or credit cards, but it's still possible. Read a full how to in Existing Loan Cost Cutting
£500+
If it's possible, over the life of the loan.
Loan insurance (PPI)
Check if you've got insurance on any loans. If so it's very likely you're being ripped off. Big savings are easy. Find Cheaper Loan Insurance. Plus, see Loan PPI Reclaiming
£1,000+
over the life of the loan.
Beware paying minimum repayments
Credit card minimum repayments are a trap to keep you permanently in debt. It's possible to escape this trap even if you can't pay more. Full info: Danger Minimum Repayments
up to
£4,000
by the time the debt is totally cleared
Pay off your debts with savings
Almost everyone with both debts and savings is wasting a fortune. Pay off the debts and save big. Read how this works in Pay Off Debts With Savings.
up to
£150
per year per £1,000 of debts
Cut your personal bills
What to do Typical Saving
Haggle down mobile bills
There's a white heat of competition in the mobile marketplace. Push the right buttons to stamp down the cost. Find out how to Cut Mobile Phone Costs and Get Free Texts.
£300
per year
Best bank accounts
You can get £480 in interest or £150 in sign-up bonuses. Top picks in Best Bank Accounts.
£480
per year
Cheaper prescriptions & medicines
If you need regular prescriptions, consider an annual certificate. Plus don't buy branded medicine, identical products are available at a fraction of the cost. Cut medicine costs: Cheap Prescriptions & Medicines
£50
per year
Boost savings interest
Never assume all banks are the same. The difference in the interest paid out is huge, even with savings rates at historic lows. Find how to boost rates: Top Savings & Top Cash ISAs
£15
per year per £1,000 saved
Cheap petrol & diesel
It's possible to cut your annual petrol/diesel bill by a third, saving £100s. Find the cheapest petrol station near you in seconds and use speedy, pain-free ways to make your car and driving more efficient. Full how to: Cheap Petrol
savings of
£100+
per journey are possible
Slash train fares
The train ticket system is complex, but play it right and there are loopholes you can exploit to save: Cheapest Train Fares
up to
£150
per year
Are you missing out on extra money?
What to do Extra cash
Can you boost your income?
There are lots of ways to add to your income; whether it's home-working, using the web to profit or getting paid for your opinion. Read more: Boost Your Income
up to
£5,000
per year
Five-minute benefit check-up
Anyone with family income under £72,000 (mainly for families earning under £46,000) may be entitled to get benefits; ensure you're not missing out. Full info: Benefit Check-up. Get more when you retire too: Pension Boosting
if appropriate, you could get
£1,000s
Get paid to spend
Stop using debit cards, cash and cheques for spending and use a cashback credit card - you get paid each time you spend. Very profitable as long as you always pay the card off in full. Top pick cards in Best Cashback Cards.
up to
£150+
per year extra cash
Tax rebate for uniform wearers
Employees who wear a uniform, who wash, repair or replace it may be able to reclaim tax of £12 to £56 per year. You can claim back a rebate for up to the past six years. Full reclaim info: Uniform Tax Rebates
£60
per year extra cash
Will the Government pay your mortgage interest?
If you're struggling to repay your mortgage, and have savings under £16k, you may be eligible for state help to make the interest payments (plus other, more severe, help). Do you qualify for Mortgage Arrears Help?
If appropriate, you could get £1,000s
Have you overpaid £1,000s in tax?
There have been millions of mistakes with tax codes, meaning a huge chunk of UK population has paid too much (or too little) tax. We've built a unique checker to help work out if you're owed. Check here: Tax Code Calculator
The biggest we've heard is £5,000!
Stoozing
If you're debt-free, it's possible to get a 0% spending credit card, then use it instead of your debit card (always repay the min payment). Then stash your salary in a top savings account to earn interest. It's only for the financially savvy so read how in Stoozing: Free cash from credit cards.
Around
£80
per year profit
Grant grabbing
There are £1,000s of unclaimed grants out there for energy efficiency, homes, businesses and study. Do you qualify? Find grants
up to
£500
Check tax credits
The childcare tax credit is designed to help working parents cover some of the cost of getting kids looked after, so they still gain by working. Can you get 'em? Childcare Tax Credits
Average payout:
£3,000
per year!
Recycle old mobiles for cash
There are over 90m old mobiles sitting in people's drawers. It takes five minutes to convert these to cash. Find how much your old phones are worth at MobileValuer.com
£20
to
£100+
Flog it!
A raft of tactics to help you to list auctions effectively and smash down eBay fees. Plus list automatically, profit from bizarre items you thought wouldn't sell and much more. Read our eBay Selling Tricks.
£10
to
£100+
Endowments. Did/do you have one?
If your endowment is underperforming and you weren't told this was a possibility, it was mis-sold. Send a simple letter and you may be entitled to huge money in return. Read our guide to Endowment Misselling Compensation.
£3,000
to
£15,000
Have you moved mortgage company in the last decade?
If so, then you could have been overcharged on the 'exit fee'. You can get this cash back with a quick call or letter. Read out guide to how to reclaim Mortgage Exit Fees.
£50
to
£150
Bank charges. Have you had charges and been in hardship?
If, during the past six years, you've been hit with bank charges and are in financial hardship, you can ask for them back. How to, and who qualifies, in Bank Charges Reclaiming
Up to
£10,000
depending on your charges.
Flog old gold
“Sell unwanted gold for CASH!” TV adverts promise much, although gold-plated traps mean they rarely seem to live up to them. Yet do it right and you can make £100s. We tell you the sites that boost your cash: Sell Old Gold.
Up to
£300
depending what you've got.
Get lost Tesco Clubcard vouchers back
If you've ever lost or misplaced vouchers you can access the codes online for instant redemption, or get the vouchers re-issued. Some MoneySavers have found over £100 of vouchers they didn't know they had. Read how you can Get Back Lost Tesco Vouchers
Up to
£150
Did you have a fee paying account?
If you couldn't use the insurance that came with your packaged account - eg you were too old, or you were told you had to have the account, you may have been mis-sold. Check, and find how to reclaim in Packaged Account Fees.
Up to
£1,500
depending on your charges.
Reclaim forgotten cash
It's never been easier to get your money, or that of deceased relatives, from old bank accounts, pensions, life assurance and investments. Just click on some websites, fill in your details, and it should come to you. Track old money down in Reclaim Forgotten Cash
Up to
£5,000
or more
Cut your insurance costs
What to do Typical Saving
Car insurance
It's possible to easily cut car insurance costs. Don't think "it's not time to renew now", you can still ditch, switch & save. Top comparisons and tricks to save Cheap Car Insurance.
Up to
50%
on existing policy
Home insurance
Like car insurance, you can ditch, switch and save at any time. Using the full system you can sometimes get building and contents insurance for under £100 a year. Find out how in Cheap Home Insurance.
Up to
50%
on existing policy
Breakdown cover
Forget the big boys. Similar cover, with full service and just as quick call-out times, is available for a quarter of the cost. Find our top pick policies in Cheapest Roadside Assistance.
Up to £100
per year on full service policies
Life insurance (level term)
Many people rightly get life insurance to protect their loved ones. Sadly banks take advantage and often charge twice as much as needed. Ditch, switch & save with cheaper providers for the same cover. Read Cheapest Life Insurance.
£5,000
during the life of the policy
Mortgage insurance
Did you get your mortgage payment insurance from your lender? If so, you're probably paying way over the odds, but it's easy to save. Find our top picks in Mortgage PPI.
Up to £300
per year
Mortgage life insurance
If you got life insurance to protect your home from your mortgage lender, you're paying massively over the odds! Find how to save in Mortgage Life Insurance.
Over
£3,000
during the life of the policy

Did you save big? Please report your savings in the Money Makeover discussion

Step 3: Still spend more than you earn?

Now you've done all the main pain-free savings, your new expected monthly outgoings should be significantly lower. What to do next depends on you.

Were you already spending within your means?

If so, you should now have more money to spend, save or repay debts. However, remember things change, so you need to keep on top of your finances. Today's best deal isn't necessarily going to be tomorrow's.

Ensure you get the free weekly MoneySaving email; which includes any changes and new top deals to help you save even more.

Yet even though you're now spending within your means; you may still be in debt or wanting to quickly save for something specific. In that case, some of the techniques in Step 4: Painful savings may still be useful.

Were you spending more than you earned before?

We now need to know if you've brought your spending under control. This again means calculating an accurate answer based on your new expenditure levels. If you did the budget planner earlier, all you need to do is change the values for areas where you've made savings. If not, then it's time to start the budget planner process.

You may consider this to be a bit unnecessary, after all you've done the savings, so do you really need an accurate answer? My response is an unrelenting yes; and as I explain in many other places on the site, the reason is because of what's called a "debt spiral"; one of the nastiest, most unrelenting, life-destroying, financial problems you can have.

You may feel this is over-dramatatic. Yet when there's no money left, you can't borrow more, and the creditors are asking for money back which you've no ability to repay, it touches every element of your life. The danger is what's called a 'debt spiral'. It works like this:

How a debt spiral works

All this means we need to know whether you still spend more than you earn, which means filling in the budget planner. If it says you're now spending within your means... hoorah! Though you may still be in debt or wanting to save for something specific; so you may still find some of the painful savings below useful.

Alternatively, you may consider the job is done. Yet even in that case, remember things change, you need to keep on top of your finances. Today's best deal isn't necessarily tomorrow's.

To help, ensure you get the free weekly MoneySaving email; which includes any changes and new top deals to help you save even more.

If you're still spending more than you earn; there is no option - you need to rein in your expenditure, so keep reading.

Step 4: Painful savings

No smoking, save money These are changes that involve curtailing or changing elements of your lifestyle. It sounds horrid, but actually it can be much easier than you think. Small changes on things you do regularly, for example cutting from two takeaways a week to one, can save you £250 a year.

The place to start is the Stop Spending guide, which is specifically designed to challenge your spending impulses and includes The Demotivator: a tool to stop you spending what you can't afford. Yet it's all about asking yourself the right questions.

Do you really need all your Sky TV channels? Can you make food rather than get takeaways? Do you really need the cappuccino? Why not start making sandwiches for lunch? Do you need the weekly celeb gossip magazine? Do you need a car - could you sell it? Can you get a second job? And why not stop smoking?

You'll find many MoneySavers' top suggestions for these in the Great Ways To Cut Back Hunt. Yet it's actually about asking two questions for every element of your life: Do I need it? Even if I do need it, can I still satisfy the need, even though it mightn't be as good, in a cheaper way?

Seek help from other people in a similar boat

There are two sections of the site's forum where you can seek help and suggestions from others on cutting back.

  • Debt-Free Wannabe

    This forum board is dedicated to paying back debt, many people have already turned around huge deficits to pay back all they owe. As such the regulars in there have redefined the term "necessity"; for them it isn't the creature comforts we all need, but the bare minimum requirements.

    So go into Debt-Free Wannabe and post your 'Statement of Affairs' detailing everything you spend money on and how much (without giving away any personal details), and then be prepared to have your habits torn apart; but all in a constructive way to cut your outgoings.

  • Sewing machine: Save money the old fashioned wayMoneySaving Old-Style

    This forum board has its own philosophy, separate to the rest of the site, all about thrift. Rather than just saving money, it's about cutting back, being less consumerist and more environmentally-friendly; making, cooking and growing things rather than buying them.

    If you want to know how to clean your house using only white vinegar, get stains out without Stain Devil, cook for a family of four for under £15 a week, make your own clothes, then MoneySaving Old-Style is for you. There's also the Thrifty Ways for Modern Days book (all proceeds to charity) based solely on the wisdom of this board.

What if all these cut backs still aren't enough?

My first answer is "try a little harder". Many people think they've cut back on everything, but there are still little things that could go. As the Demotivator shows, over time, the little things add up.

If things are so serious, it's very likely you're also in significant debt. If that's the case and you can't afford to make even the minimum repayments on your standard outgoings, then you urgently need to take action. A range of non-profit debt counselling agencies can help you. For more on this, read Debt Problems: What to do and where to get help.

Piggybank budgeting

Budgeting isn't just a way of calculating your expenditure, it's also a way of controlling it. One of the ways to do this is to start living with a philosophy that says "what can I afford to do?" rather than "how can I do what I want for less?"

To help with this I've designed a special 'piggybank budgeting' technique, which helps you easily allocate and manage your money, a detailed explanation is in the Piggybank Budgeting section of the main budgeting guide.