Give yourself a Money Makeover: How to completely overhaul your finances and save £1,000s
The average person in the UK could give themselves an effective 25% pay rise by stopping waste. 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.
Be under no illusion, a full money makeover will take a good eight or ten hours, but it’ll be worth it. In my ITV1 series Make Me Rich, I was challenged to go to families’ homes and save them as much as I could in a day.
The average saving was a little over £5,000 a year; and this was before I started to say “cut back”. Now, suppose by doing it yourself, you only do half as well, saving £2,500 (though hopefully you’ll do better); compare that to what you earn! And remember this saving is without tax so unless you’re paid £3,500 a day (just under £900,000 a year) it’s likely to be the best paid day of your year!
What if you don’t have the time?
Then make the time. This is incredibly important. However, if you simply can't right now and just need a quick MoneySaving hit 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!” I’m asked this all the time, and hate 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.
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, 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 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, as 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.
The essence is simple; if you can get the same thing 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 this whole site is dedicated to.
How to do it
This site has well over 100 detailed MoneySaving articles each recommending the best deals. Below I’ve deliberately selected some that enable big and easy savings on current outgoings. Yet do also check every section (using the tabs at the top of the page) for your specific needs.
Done right and you can save hundreds with regular payments. However take your eye off the ball and you could be wasting hundreds in cash seeping from your account unnecessarily.
Read it: Direct Debit
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.
Read it: Cheapest Gas & Elec plus cashback
It’s not about buying lower quality goods, but beating the way supermarkets hypnotize us into unnecessarily paying more.
Read it: Supermarket Secrets: Cheaper Food Shopping
The council tax system in England & Scotland is fundamentally flawed. Many people are in the wrong band. It only takes 10 minutes to check.
Read it: Council Tax: Check your band
There’s no need to pay more than £20 per month for a top home phone package and broadband combined.
Read it: Cheapest Home Phone
There’s a little known scheme called “childcare vouchers” which enable you to pay for childcare from pretax income. While this doesn’t sound much the resultant savings are huge.
Read it: Childcare Vouchers
Don’t assume you need to get boiler cover from the same company that supplies your gas & electricity.
Read it: Cheapest Boiler Cover
You can call abroad for free via the internet, or call almost anywhere for 1p/min via the normal phone.
Read it: Cheapest International Calls
If you’ve more or the same number of bedrooms in your house than people, you’re probably better off with a water meter.
Read it: Water Meters
A simple phone call and the right haggling technique could halve your bill.
Read it: Sky & Virgin Media TV Cost Cutting
Simply shift the debt to a new card at the cheapest possible rate.
Read it: Best Balance Transfers
Mortgage savings can be massive, and they're much easier to achieve than you might think.
Read it: Remortgage Guide
Cutting existing loans' costs is much more difficult than mortgages or credit cards, but it's still possible.
Read it: Existing Loan Cost Cutting
Check if you’ve got insurance on any loans; if so it's very likely you’re being ripped off; and big savings are easy.
Read it: Cheaper Loan Insurance also see Loan Insurance Reclaiming
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 afford to pay more.
Read it: Danger Minimum Repayments
Almost everyone with both debts and savings, is wasting a fortune. Pay off the debts and save.
Read it: Pay Off Debts With Savings
It’s possible to get less than half price gym membership at Virgin Active, Cannons & LA Fitness with a special loophole.
Read it:Virgin Active, Cannons & LA Fitness
There’s a white heat of competition in the mobile marketplace. Push the right buttons to stamp down the cost.
Read it: Cheapest Mobile Phones and Free Texts
You can get 6% plus interest or a 0% overdraft without paying a fee.
Read it: Best Bank Accounts
If you regularly get prescriptions use an annual certificate. Plus don’t buy branded medicine, exactly the same things are available at a fraction of the cost.
Read it: Cheaper Prescriptions & Medications
Never assume all banks are the same. The difference in the interest paid out is huge.
Read it: Top Instant Access Savings orTop Cash ISAs
You can get exactly the same lenses for a huge discount by buying away from the high street.
Read it: Cheaper Contact Lenses
The train ticket system is complex, but play it right and there are massive loopholes to exploit.
Read it: Cheapest Train Fares
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 it: The Boost Your Income Guide
Anyone with family income under £66,000 may be entitled to get benefits; ensure you’re not missing out.
Read it: Benefit Check-up
Stop using debit cards, cash & 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.
Read it: Best Cashback Cards
If you’re financially savvy, and debt free it's possible to take a credit card’s 0% debts, save them at a high interest and make real money.
Read it: Stoozing: Free cash from credit cards
There are £1,000s of unclaimed grants out there for energy efficiency, homes, businesses and study.
Read it: Find all grants
There are over 90m old mobiles sitting in peoples drawers; it takes five minutes to convert these to cash.
Read it: Recycle Old Mobiles For Cash
If your endowment is underperforming and you weren’t told this was a possibility, it was missold. Send a simple letter and you may be entitled to huge money.
Read it: Endowment Misselling Compensation
If so then almost certainly you were overcharged on the ‘exit-fee’; you should be able to get this cash back with a phone call.
Read it: Mortgage Free Reclaiming
If so then you should be able to reclaim them. This one will probably take a few hours to go through in its own right, but it’s well worth doing.
Read it: Bank Charges Reclaiming
If you've paid charges for late payment or overspending; you can get up to six year's worth back.
Read it: Credit Card Reclaiming
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.
Read it: Cheapest Car Insurance
Like car insurance you can ditch, switch and save at any time. Using the full system you can sometimes get home insurance for under £50 in total.
Read it: Cheapest Home Insurance
Forget the big boys, similar cover, with full service and just as quick call out times is available for a quarter of the cost.
Read it: Cheapest Roadside Assistance
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.
Read it: Cheapest Life 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.
Read it: Mortgage Payment Protection Insurance
If you got life insurance to protect your home from your mortgage lender, you’re paying massively over the odds!
Read it: Mortgage Life Insurance
Did you save big? Please report your savings
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, you need to keep on top of your finances. Today’s best deal isn’t necessarily tomorrow's.
Ensure you get the free weekly MoneySaving e-mail; which includes any changes and new top deals to help you save even more. Sign up to the free weekly MoneySaving e-mail at www.moneysavingexpert.com/tips
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 do is change the values for areas 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-dramatising; 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:
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; thus 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 tomorrows.
To help, ensure you get the free weekly MoneySaving e-mail; which includes any changes and new top deals to help you save even more.
Sign up to the free weekly MoneySaving e-mail at www.moneysavingexpert.com/tips
If you're still spending more than you earn; there is no option – you need to rein in your expenditure, so keep reading….
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 2 takeaways a week to one, can save you £250 a year.
The place to start is the Stop Spending article, 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 advice 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 constructive ways to cut your outgoings.
- MoneySaving 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 your own things rather than buying them, cooking and growing your own.
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 and 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; you need to urgently take action. There are a range of non-profit debt counselling agencies that will help you. For more on this read Debt Problems: What to do and where to get help.
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 ‘piggyback budgeting’ technique, which helps you easily allocate and manage your money, a detailed explanation is in the piggyback budgeting section of the main budgeting article.
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