This transcript was done by an external agency so its accuracy has not been checked by Martin or the MSE team:
Martin Lewis: We’ve got Money Savers in the house. One good damn minute, £48 it was the same bloody train. We are spreading the gospel of Money Saving.
Colin Myler: Good evening, Martin has been a columnist with the News of the World now for 11 months and I’ll tell you that in the last three months and before that I have to say, there have been three things that stick out for me. One chap wrote and told us a couple of weeks ago that he’d save over £6,000 by following Martin’s advice. Before that we had a lady who wrote to us and said that Martin had saved her £3,300. Before that we had another chap from Scotland who told us that he’d saved £2,500 by following his advice. But the best testimony of all was the sub that did Martin’s copy. She followed his advice one week, a hard-beaten free street journalist for the News of the World and she saved £250. So I think that’s the biggest endorsement that you can possibly have about how good this man is so, a big warm welcome for Martin Lewis, who is truly the king of the credit crunch.
Martin Lewis: Thank you. Hi! Hello. Lovely to be here. Wow. Thank you. You’ll get me all emotional so shut up. Right.
First of all, can I just say a huge thank you to the News of the World for putting its hand in its pocket so to try and protect you not from having to do that over the next year. It’s fantastic. You know what, the News of the World, it’s an interesting place to be and I have to say for me, to be in the paper that reaches 7½ million people, to help spread that Money Saving message were one of the places it’s most needed is an absolute privilege and we get to be in here and get to do this all because of that.
The Adversarial Consumer Society
We live in an adversarial consumer society. Adversarial! A company’s job is to screw us for cash, that’s his job, it’s not wrong, it’s not bad, it’s not evil, that is the society that we live in. Our job as consumers is to stop them and this is the problem, they're really, really, really good at their job and we’re really, really, really bad at us. So there is a misbalance in society and what Money Saving is about you say, “Well, let’s try and redress that. Let’s try make those things a little bit better, a little bit tougher” and I tend to think of it like this; I, for my sins, am a Manchester City football supporter. Thank you very much. I know we’re doing this in London that but there’ll be people watching the DVD in Manchester will go “Come on, my son” in a London accent and not your wife. But anyway, right.
So I spoke Manchester City. When Manchester City play Manchester United, I want city to score but I don’t think United are wrong for trying to score and equally with companies and consumers, I'm on the side of consumers. But we mustn’t think companies are wrong for trying to make money of us that seems to me and a completely appropriate thing for them to do. The biggest problem we have is people don’t realize it. People think their bank is there to advise them, wrong. Your bank is a sales based institution. When you go into it, it is selling to you. The nice smiley man is not sitting there thinking, “Do you know it is really important to me to work out how I can make your finances. It’s absolutely better because that’s going to be marvellous and absolutely wonderful.” He’s sitting there going, “If I give enough PPI, I'm going to make some money.” That’s what the bank’s job is. I don’t blame them, I don’t say they're wrong, we just have to accept it and understand it and the problem is we don’t. You know there’s been a whole hoo-ha recently about British Gas.
British Gas made record profits this year at the same time *** [00:04:29] put prices up. Boos!, yes? Boo! Are British Gas wrong? Who says yes? Who says no? I'm with the no’s. British Gas’s job is to make money. It’s not there to keep us warm, it’s not there to look after us, its job is to make money. If we wanted it to look after us, we shouldn’t have sold it to its shareholders, right? So actually what we have to do as a society is say, “It’s not British Gas’s job, its there to make money. If we want prices to be lower, our politicians need to do that, the regulators need to do that, British Gas’s job is to make money and we haven’t got that understanding and until we grasp that.” This isn’t some arcane philosophical point. It is about understanding that integral relationship.
Let me tell you, who’s got kids in here? Hands up let me see. Loads of you, wonderful. This is my first lesson; beginner’s lesson in Money Saving 101.
Six-year old, “Hello,” take them in to the supermarket, “Come on, darling.” “Okay.” Now listen, we’re at the tail, “What they got there?” “Oh sweeties, can I have the moss bar?” Do you know why they put the sweeties there? “No, please tell me.” The reason they’ve got the sweeties there is because the supermarket’s job is to make money and it want you to remember to ask me to buy you more sweeties so it can have a bit more of our money before leave.
First thing you teach them because until you get that fundamental relationship, you haven’t got it right. It isn’t going to work. You’ve misunderstood. You think that they're not there to sell to you and you’ll make the wrong decision. So where am I going to start on this Money Saving journey and venture that we've got tonight? Debt.
GOOD DEBT v BAD DEBT
We in the UK are a nation that educates our youth into debt but never educates them about debt. It’s no surprise we’re in the recession based economy that we are in now. We are second in the World Cup of debt only to the United States because quite simply, once we introduce student loans and forget the politics, I'm not here to do politics, but we introduce student loans so that if you're going to be a student, you're going to study, you're going to university, you have to borrow. We have enforced borrowing to our youth and yet at no point have we ever said them how you should borrow. Now for me, this should be taught in every school. There should be compulsory financial education in every school but it isn’t. So that means that each one of us here is duty bound first of all, to educate ourselves about that because debt isn’t bad. Bad debt is bad. Debt isn’t bad. We need to educate ourselves on the difference.
How many of you have students? Any students here and student parents as well? Keep your hands up if you're in there. We’ve got quite a few of you in.
Let me tell you. One of my great worries, the first time you get debt is 18 and it’s the time that people go to university and now in this country nearly half the population do and they're going to borrow and grandparents really annoy me because grandparents say, “Johnny, you're going to university but please don’t borrow Johnny that is terribly, terribly bad.” This is what happens, they’ve been told not to borrow any money. They go to university. They soon realize they're going to have to borrow. They take out a student loan, they’ve got a student loan, they’ve now got borrowing but it’s not enough, so what they're going to do at that point. Well, we need more zero percent overdraft, zero percent student overdraft absolutely fantastic but that’s good enough, I might as well get a credit card because what we’ve done is we’ve said all debt is bad. So if all debt is bad, we haven’t delineated. So what I would actually do to your students and what I do if you're students or student parents, I would be like this, I would say, “Student loans, good! Zero percent overdrafts, okay. Credit cards, commercial loans, bad, boo, just avoid, don’t go near them, don’t touch them, don’t look at them, don’t smell them, don’t sniff them. Stay away, bad, bad, bad, bad! I've always been subtle with my messaging.
Do you want to play a game?
Martin Lewis: All right. This I first developed this when I went into a school and taught 12 15-year olds Money Saving for a day. I developed this technique; it’s called My Good Debt, Bad Debt game. We’re going to play it now. So when I ask you each question, you have to tell me whether the debt is good and you will say…
Martin Lewis: …or it’s bad and you’ll say…
Martin Lewis: Right, we like this, right. Question number one: I've been saving up on the deposit for a house for five years. We’ve managed to save up 30% of the house’s value. The mortgage is actually going to be lower than our rent. We’re planning to live there for a very, very long time and we know it’s affordable, we’re both in pretty secure jobs as any job can be at the moment and we’re planning to buy a house. Good debt, bad debt?
Martin Lewis: Bad? I'm with the goods. But I’ll tell you something interesting. The thing I said to the kids and the same thing I'm going to say to you. What we've just learned that can be good, so why do we castigate society for borrowing? Companies do it. Governments do it. We do it. The problem is we need to delineate between the good and the bad.
So you got the first question, right, most of you. Second question: I've just been to a holiday to Jamaica, it’s £12,000 but Simon Cowell says, “I earn £6,000 a year“ but this wonderful credit card company said it will give me the money and it’s only charging me 12% interest a month, seems fine to me. Good debt, bad debt?
Martin Lewis: Bad, of course, bad. Easy. Next question: We’ve just move to the countryside. I needed to do it because I was losing my job and this is a safe and secure new job, I hope. Unfortunately, we live quite a distance away from our kid’s school and from where I work. We don’t have a car, I'm going to need to buy a car but I don’t have the money so the only thing I can do is borrow a car. I've checked that it’s as cheap as possible but they're going to charge me 15% interest, 15% APR because I don’t have a good credit rating and I'm afraid to say, you know the best car we can get that’s reliable cost £2,000 which is well over budget and we’re really going to struggle to make the repayments, but if I don’t have that, I can't have the job and I can't take my kids to school. Good debt, bad debt?
Audience: Good. Bad.
Martin Lewis: Who says good? Who says bad? Fifty/fifty. It is a second-hand car, it’s a £2,000 car. It’s the best they can get that’s reliable and won't break down. The answer to the question is between good and bad. The reason I'm telling you that and the reason I told the kids that is because sometimes in this life there are no straight answers. I live my life where people calling, e-mailing in about the programs I do and they ask me a definitive answer and they're going, “You’re the money saving expert, you’ve got to know, you're going to tell me what to do.” They give me a question that frankly has no right answer. Sometimes, we don’t know. I can't tell you what life is going to be like in three years time. If I could, I could tell you the right answer for everything. But I don’t know so you have to be aware that you're taking a risk and a gamble and that good debt, bad debt quest test does something really interesting. First of all, it establishes there is such a thing as good debt and then it says, “Look, this isn’t as easy.” It isn’t as easy as you think and it’s so important because what we are suffering right now is from bleeding ignorance. It dries me up the wall the number of people who have risked their homes from a lack of debt education.
Let me tell you something straight. Ten percent over five years is cheaper than five percent over twenty five years. So everybody who move their credit cards or loans on to their mortgage thinking it was cheaper unless you’ve been overpaying, you have paid a hell of a lot more, you have eaten up your equity and you are probably some of those people whose equity’s evaporating or are in negative equity. Why the hell didn’t we teach it in schools? Why? It’s a deep held frustration of mine that we have a society now let us cross our fingers, it isn’t too late.
Split ticketing, the most illogical thing, a way to save money that has ever been invented in the whole wide world. Do you know what I'm talking about? Hands up. We’ve got money savers in the house. Right. Split ticketing, I love this because it’s so damn silly. For those of you who don’t know let’s explain.
London to Penzance, a train journey that will cost you standard ticket roughly £250. But from London it stops in Plymouth and then it goes to Penzance. Now let’s just imagine what were to happen here if instead of buying our standard return journey, we bought a ticket from London to Plymouth. From Plymouth, oh I'm too old, from Plymouth to Penzance. Thank you very much. Then Penzance back to Plymouth and Plymouth back to London, four tickets instead of one return, four tickets instead of one. One ticket – £250. Four tickets, same journey, same train, same time, if you're lucky same seat – £48. Forty eight pounds, it was the same bloody train.
Do you want to know why it works like that?
Martin Lewis: When you find out you tell me. It makes no logical sense whatsoever but it does work. So we take the logic book and we throw it out the window when it comes to trains. You simply have to say, “I'm on a long journey, it’s costing me a lot, I'm going to find out where the train stops and I'm simply going to see if it’s cheaper to get tickets for those split versions of the journey than the main one.” Now there is one rule, the train must actually stop at the station, seriously. It also there is a technical rule and in all the people I've told to do this, I've only ever heard of it happening once that the guard can ask you to get off the train and back on the train. One, “Excuse me, *** [00:16:25] I think you’ll find you’ve got two tickets, you're going to have to get off the train. My name is Mr. Jobsworth, thank you very much.” Once only but hell what does it matter. So that’s the first rule, you simply do a quick check. You can save a huge amount and there were lots of routes. Lorraine Kelly interestingly told me that she uses one of those when she’s going from Glasgow to Edinburgh, there’s a split ticket there.
Now, here’s the next one. Question for you and I'm noticing from the people when you split ticket that you guys know what you are doing. When is the last time you can buy an advance ticket? Are you ready? I'm going to say, is it three weeks, one week or three days?
Three weeks? One week? Three days? Who said later? She’s right one minute. One good damn minute that’s all you need.
So right, because this guy, he’s on my program, it pays to watch, because this guy, he comes on, he spends £12,000 a year on train pass. Admittedly, he’s a businessman so he commutes and this is what happens. He finds out a couple of days beforehand where he has to go and he gets that two days beforehand, he buys his ticket. So let me give you an example and I might got the number slightly wrong here and that because this was a couple of months age.
So let’s say he goes London to Sheffield. He goes, what he does is he turns up on the morning says, “I want the cheapest ticket, I kind of return today from London to Sheffield.” That’s what he does and that’s why spends £12,000 a year. So we had him on the show and I said to him, “I just want you to do something. Let’s imagine, I'm telling you to go in to Sheffield tomorrow.” “Yes.” “What would you do?” He says, “Well, I’ll buy ticket at the station tomorrow morning.” I said, “That will be about £147 quid.” “I want you to get on the phone now.” Now this is not complex. Anyone who says the stuff I tell people to do is a bit difficult to understand, you can't, this one, right? Pick up the phone; call National Rail Enquiries, not on the 0845 number, there’s a sneaky number that can get through the backdoor, yes. Anyway, picks up the phone, that’s fine. I know sometimes, I have no captions here and you say, “Can I try book a ticket?” and he tries to book a ticket and he puts the phone down, he goes, “£67.” I'm like “£67.” How much would it be?” “£67.” He didn’t really do that but it works. It’s good story. Eight pounds difference by calling the night before. Eighty pounds difference by simply calling up, £12,000 a year. We did our calculations, with that and a bit split ticketing and by buying the rail card, I'm not even going to go to rail card, you spend over £72 a year, you’ve got kids, you're over 60 or you're between the ages of 18 and 25 or a student, get a rail card if you spend over £72 a year on any combined journey that’s not peak time in the morning for some of them. Simple as that.
So anyway, we did all that. I mean, this was just bog standard simple. He was spending £12,000 a year. He’s a small businessman. We finished £5,000. He was overspending by £7,000 a year. But you will I can tell you, most of you in here have somewhere in your finances you are doing exactly the same thing. That’s the message.
The most difficult thing in my job is not telling people how to save money that’s pretty easy. It’s telling people what they can save money on because they don’t ask the questions. Everyone knows you can save money on credit cards. Everyone knows you can save money on mortgages. Everybody knows you can save money on gas and electricity. What about contact lenses? What about train fairs? What about reclaimed payment protection insurance? The single most difficult reclaimed campaign I have ever done for one simple reason and I challenge you to think about how you break through this and if you work it out, please let me know.
One of the ways Payment Protection Insurance which is obviously mis-sold on loans. How many people have had it? Come on, hands up, let me see. How many people have reclaimed it? Well, we got some in here. You might not be mis-sold but you should have a look at whether you were. One of the ways it was mis-sold is by not telling people that they're being sold at. So how do you get people to reclaim a policy they don’t know they have? It is one of the fundamental difficulties of my job, is that sometimes you have to yell, you have to shout to try and make people open their eyes because they think things are fine and they don’t know where the money is being leached out of their pockets and it’s time for another question.
GAS & ELECTRICITY
Gas and Electricity, what’s going to happen? Well, this is where as the Greek say, “I'm taking my malagas in my hand.” Last August, some of you would have seen me in my usual subtle forth through controlled way saying on the television and in the newspaper, in the News of the World saying, “We are about to have mammoth price rises therefore if you would like to fix your gas and electricity right, cut now, cut now, cut now!” Some people got that message. We actually had one of the biggest ever switching weeks in the history of gas and electricity switching that week with people going for the last three cuts. So the point is we knew prices were going to rise and they did, bang! That week, two days later, British Gas announced a 30% rise in gas prices, unprecedented, phenomenal. I sit there and I wonder when I look at that, why don’t we tell people to act in advance because there is a way to work forward. Now at that time, people asked me what are going to happen to prices and we looked at the wholesale rate which is the rate of the gas and electricity supplies back. It looked like in January we’re going to have another 20% gas rise. Now, December not January, remember if you're watching, it looks like we’re going to have a 20% gas price cut. Fascinating, fascinating.
So two questions; one, what does this mean you should do? Well it’s very interesting. For the people sitting in this room, I think we’re getting close to the time that you take your hands and you do this and you sit on them because what happens if you do a comparison now? If you do a comparison right now, you move to a gasoline and electricity company that is cheaper right now, we are going to see price changes in January. Whatever happens we’re going to see price changes in January. I actually think it will be between not and 20% cuts as we’re looking right now but again, the market is moving so quickly that could change so it takes two months to switch. It won't be switched until February and the entire price system would have changed in January that’s why I've stopped saying now, switch unless you’ve never switched before. But in January, we would had one or two companies announce price cuts and people are going to be moving to the companies that took the first move. “Well, they’ve cut the prices, fantastic, I'm going to move.” But of course, this is my impression of a UK gas and electricity company. When one goes, they all go. They all follow each other. So as soon as one announces a price rise or a price cut, you know that within the next five or six weeks, they're all going to follow. The worst time to switch is when everybody switches. The number of people who say switching is *** [00:24:37] “I didn’t save any money, I don’t see what you're talking about. I don’t know what’s going on.” You read as I know what you're talking about. Tell you, honestly, *** [00:24:45] I read your newspaper column, you don’t know what you're talking about Mike.” Yes, I'm bothered. But the problem is that’s never been my message. My message has always been you have to time your switch and what’s crucial is when everything is influx, you don’t switch, there’s no point, there’s absolutely no point. Now some of you who were sitting there thinking, “Hold on a second Mr. so smart Lewis, what about all those people who cut back in August?”
Well I have two answers for that, first of all we called it to the best of my knowledge, that’s all you can do. I said at that time we have to hope this is how it works. Secondly, most of those cuts back then had no exit penalties unlike they do right now. So the cost of switching effectively was no lost. The third thing and I've already had e-mails from people who’ve misunderstood this. You cut here, then the prices went up, in January the prices are coming down. Most people are going to have the same type of prices that they would have had otherwise, but in the meantime because those January price cuts are likely to only start in March, in the meantime you’ve saved for the vast majority of time on a much cheaper price. But it goes back to the fundamental good debt, bad debt question. We live in a market based economy. Things change, things move, there is transition, there is no way even I am going to get it right and I don’t say even I because I'm not clever. I say even I because I do this all the time and this is what we work very hard on to get the right answers. But you have to take your best punch sometimes. There are of course ways you can save in gas and electricity, make sure you're paying by direct debit it’s 10% cheaper but estimate a meter reading and don’t let the *** [00:26:27] just put the price up too high. Make sure that you're an online tariff if you can because that again is about 10% cheaper. Make sure you're not on a prepayment meter if they will let you move off although thankfully those prices are starting to come down. Those are the four core fundamentals even before you get to switching, huge price savings there.
What’s happening with bank charges? Now I get this walking down the street, my fiancée’s in here tonight, she gets the question as well. What’s happening with bank charges? How many bank charger claimers do we have in the house? How many people who are waiting to reclaim bank charges do we have in the house?
Bank charges has been something I've been hugely proud who had been the big gulp in chief as the newspapers have called me behind it. I certainly didn’t invent it. Some very clever guys who did that, they came to me back in January 2006 and said this needs to be brought to public attention. I’ll tell you the story behind why I got involved in the bank charge campaign in the first place.
A woman who was a carer for her autistic son, she have two of the children as well, had been living of benefits, single mother, had always budgeted, had never spent more than she received in benefits, had done what all of us would say is the appropriate way to behave and unfortunately, social services had simply missed the payment one week. It happened at the time she had direct debits due to come out. So she missed three or four direct debits. She was charged £35 at that time. That is not the small and inconsequential amount of money and she obviously living to the penny on her budget had absolutely no way of meeting it. I met her a year afterwards. She had never spent more than she earned and she was now £3,000 in debt because of charges on the charges, on the charges, on the charges. That was the day I decided to get involved in the bank charges reclaiming campaign. Fingers crossed, we’re going to win. We have had, it’s estimated over a billion pounds back. I've taken a lot of flock over it, people saying, “You're going to see the end of free banking.” My instinct telling too that is but we don’t have free banking. How can we have the end of free banking when we don’t have free banking? We have fees free banking if you are in credit. Ask anyone with an overdraft if their banking is free, right? We earn no point one percent in credit, for years when interest rates have been way higher and they lend it back to you on the credit card, the 18%. Let’s just applaud the sheer genius.
“Hey you guy, well, you lend me that money by depositing it with me, how much are you going to give me?” “I'm going to give you no point one percent.” “Fantastic, it was really kind of you. It’s 10 P on a £100 quid, that’s marvellous.” “Oh by the way, can I borrow that money back?” “Of course you can, of course you can.” “How much are you going to charge me?” “Eighteen percent.” That’s £18. Oh it’s only £17.90 out of £18 that’s not a bad rate of return, is it? She, an adulterated genius. That’s how they charges.
The second thing is I've had this stick with the bank saying, bank charge. How much have they lost by bad debts? To argue the bank charges is why they're going to start and frankly, none of them have yet charging fees on bank accounts is nonsense. So let me make it loud and plain. I fundamentally believe that if you are charged for going beyond your overdraft limit that has been unlawful, it has been wrong, it must be fair under the Unfair Contractual Terms laws, we won that in court and I believe that this is going to come forward and we’re going to win that through.
We had some tragic news recently, because for the last two years, MoneySavingExpert.com has been number one hit wise, business and finance site. About a month ago, I got an e-mail as we do every quarter telling us our position and it came through and it said, “Congratulations, MoneySavingExpert.com is number two business and finance site.” Now the guy who works in our office, he deals with marketing went white. My face went red. I said to him, “Who? Who?” Three minutes later, we got the answer to the question. Another e-mail popped through, it said, “Congratulations, the MoneySavingExpert.com forums are the number one business and information site.”
So we’re doing quite well, the Money Saving messages is the number one in newspaper, the site is the number one. We’re on the television. We are spreading the gospel of money saving and I suspect here tonight, we have a mixture of people who are new convert and who are old experienced hands and I am incredibly proud to be a part of something that will help although I should tell you at the moment there is a genuine dilemma, there is a real dilemma on Money Saving and it’s a question every individual needs to ask himself. If you ask me how to save money during a recession, I will tell you pay off your debts. The absolute personal priority is to be debt-free during the recession. I will say if you can try and reduce your mortgage debt but make sure that you have an emergency fund in case you lost your job so that you’re never defaulting on your mortgage even with the government’s new arrangements that they’ve just put into price. So you pay off your mortgage but you leave an emergency fund with your debts paid off. I will tell you to be cautious and to be sensible, to be careful. But on the other hand, what the economy needs is for us to spend. It’s a very difficult problem that we all face. It’s the classic prisoner’s dilemma. How do we square the circle of spending which we must do to help the economy and saving which we should do to help ourselves individually? I will give you my answer straight and its important people understand this. My job has always been to show consumers how to look after themselves and to think sensibly. I will continue to tell people the right way to save money. It is other people’s job; the prime ministers, the chancellor, the British Business Association, The Federation of Small Businesses, the British Chamber of Commerce, it is their job to encourage people to spend. So I need to hold my hands up and say, “I know eggs unchecked that I haven’t got sweat patches,” yes alright, and say, “You have to understand the agenda and you have to understand where we’re coming from.”
Can I cut the cost of my council tax? Oh yes. Council tax is interesting. Who’s tried the council tax challenge in the room? I love asking you questions. We’ve got some. Who hasn’t tried? Out.
Now, council tax is something we must all try. There are no guarantees here. The vast majority of you in this room will not save money on your council tax. But I roughly estimate there are about 20 people in this room who will save money and it will be big, big, big money and its worth trying and there is a simple reason why this works.
When council tax was introduced which was 1993, they did evaluation in 1991, that’s how they decided what band you are in. Now, it changed in Wales, this applies to England and Scotland. The way they did that was quite simple. Estate agents in cars, driving – C, D, E. I have to say that’s a complete lie. That’s a complete lie because there’s actually two of them and it wasn’t the person driving, he was supporting. So I'm sorry if I mis-aligned, estate agents, I know there’s in there. It was known as 2nd gear evaluation, I did not make that up. Second gear evaluation 1991, merely 18 years ago and it has never been revalued since because it is a political hot potato and no one wants to revalue because they're scared of doing so yet it was done at speed with the intention that few years later, it will be done properly once they brought it in because obviously they were sitting going, “We’ve just riots in the street and now we need to change this,” and it has never been revalued since. The amount of council tax you pay now depended on that white *** [00:36:00]. It depended on that valuation. Now I believe about one in twenty people are in the wrong band, half of them aren’t paying enough. The other half are paying too much, if you're not paying enough, there is no obligation on you to tell them.
Now you may say, “Hold on a second Martin, aren’t you going to be depriving councils?” Well, yes perhaps I am although actually there’s crossover to do is from central government but it is an absolute fuss that the system works that way and it is a slightly political intention of mine that by telling everybody to check whether they're in the right band, we might actually get a system that will becomes fair in the future, because if we start to devalue it because so many people are getting rebates because let me tell you, if you're in the wrong band, it is not a question of your band is lowered, you get a back dated payment from the date you moved in if it was after 1993. So most you can go back is 1993 but any time you moved in after that if you are in to higher band, £100 a year and back dated biggest payout so far £4,600 council tax, but you're probably not interested in knowing how you check. No? Yes? Shall I tell you? Has some work first.
Now, this is how it works. The first check is the neighbour’s check. You find out if you're paying more the neighbour’s in similar properties. So you check what band your neighbours are in. There are two ways to do this. One, in the reality, “Darling, tell you what, can you do me a favour, what band are you in?” “I'm in Band C.” Well, first of all let’s be honest most people who don’t know what band they're in or alternatively you can go on to VOA.gov.uk and you can just put in anybody’s post code VOA.gov.uk, SAA.gov.uk if you're in Scotland. They write off *** [00:37:56] and you check. Quite simply, you check what band you're in, what band they're in. The more identical the property, the better, right? Don’t start going, “Well, they’ve only got a couple more bedrooms than me. There’s no problem.” It’s got to be the same type of property. If you pass that check and that’s the really important check. So if you're in Band D and everybody else in the street is in Band C and you maybe saying, “God, it can't happen.” It can happen. We had a whole street in Scotland we valued, the entire street, fascinating council, lovely. I'm never going to Scotland or in a bank or setting up a gas and electricity tariff or I don’t go to travel agents either for that matter. There are quite a few more, there have to be mortgage brokers don’t like me very much at the moment, there’s quite a few of them. Yes, I sit in the house writing things, “I'm never going out.” Anyway, right.
So, now we’ve established are you in a higher band than your neighbours in similar properties. The second check is called the valuation check. Now what you have to understand is the amount you're paying council tax depends on a valuation scale from 1991. Now what you have to do is a second you check and it’s no where near as important, is establish your rough valuation of what your band was in 1991. How do you do that? You go on to a House Price website like HousePrices.co.uk or one of various others and what you do is you simply check what somebody in your streets property sold for at a certain date because you can list all that, this is all public information, there was public information going back six years, it’s now just about to come out going back to 1995. So you find a property that’s similar to yours, you take evaluation unless you know what your house is worth and what you bought it for and then you go in to the nationwide House Price calculator and you can simply convert back to a 1991 property price. So now you know what your house is worth in 1991, you look on the council tax bandings and you see what band you would be in.
If both of those checks show that you are paying too much, then I would suggest it is probably worth you having a go. If only the first check works, you might want to consider having to go, if only the second check works, don’t touch it, don’t do it. This is the most important thing I can say to you, you are not asking to have your band lowered. You are asking for a revaluation which means it can go (up) as well as (down), that’s why the first checks are most important. The second check by the way has no legal weight, if you try and use that into your argument and I’ll tell you where to go. But it is for you to be sure that by doing this, you're not going to have your band put up that’s why I would suggest doing both checks. Then you simply write to the council you say you, “I wanted to be revalued.” You write to them and you say that and they will say…Correct, because they will say, “I'm sorry, you moved in to your house more than, not in the last six months, I'm afraid it can't be revalued.” Then you say to them, “You have a legal obligation to maintain the integrity of the council tax list. I believe my property is in the wrong band, your list is therefore not integral. I would like you to revalue it please.” They go, “Bloody, Martin Lewis. Bloody, Martin Lewis.”
Kids! Who’s got kids? Who knows about Childcare Vouchers? Childcare Vouchers, we must tell the world about this; a huge frustration that these are under publicised. Quite simple, your employer has to offer the scheme and that is the big problem. Your employer has to offer it. If they don’t, they actually make money from doing so, so encourage them. Frankly, in this current climate, you need to say to them, “Look, I'm not sure how much of a pay rise you're going to give me but doing this effectively gives me a pay rise and it doesn’t cost you anything so I would like you to do it please, if you want to keep a happy staff.” If you're just wondering these members of my team in here, we do Childcare Vouchers.
Now, it works quite simply. You get a thousand pounds worth of vouchers, let’s say it doesn’t have to be a thousand pounds, you get a thousand pounds worth of vouchers and you give up a thousand pounds worth of salary. “Of salary? Say it isn’t so.” It is so because it works like this, you get your Childcare Vouchers from your pre-tax income. So a thousand pounds worth of Childcare Vouchers give you a thousand pounds worth of Childcare, a thousand pounds worth of salary after tax and national insurance, gives most people £700 quid in their pocket. So you're getting a thousand pounds worth of vouchers and it’s costing you £700 quid in your pay pocket, all go your £300 better off. That’s how Childcare Vouchers work and you can have quite a bit more. Two parents can be between the two, if you both get it because it’s per parent not per child, it doesn’t matter how many children you’ve got, it has to work at a registered childcare, childminder or in a registered nursery but you could, almost all of them take them these days. There are only time you have to be slightly careful is if you're on benefits because it can impact your benefits and there’s a certain marginal rates or pensions but the vast majority of people who want some on high benefits will be better off doing this and substantially better off doing so, but so many people don’t know about it or are scared of it, it’s a real problem.
The second thing I should tell you while we’re on Childcare very quickly, this is one of those things that frustrates me. I did a bit of work with the government. I'm trying to tell people about Childcare Tax Credit. There is this tax credit out there that can pay for your childcare. Unfortunately, to try and work out whose eligible is the most complicated thing I have ever seen. So I said to them, “I tell you what, how about I come up with a rule of thumb? If you're a single parent and you work more than 16 hours a week or a joint parents and you both work more 16 hours a week and you earn roughly under £40,000 combined income, it’s worth checking out whether you're eligible for childcare tax credit if you spend on childcare.” They said to me, “But there are people at £50,000” and I said, “Look, I've never seen anything more complicated, if you haven’t got a calculator to do it, we just need to tell people when it’s worth claiming. There are people on £50,000 but it’s not that much money for them. But if you are under £40,000 it can be really big money. Some people you know £50 quid a week here; £50 quid a week or more, that’s £2,500 a year. That’s the average amount claimed. Check out whether you're eligible for Childcare Tax Credits.
If you have to give everybody wanted quick tip for the recession, what would it be? Two words, Section 75. The most important thing we all need to know coming up to recession to protect ourselves. If you buy something on a credit card but cost over a hundred pounds, the credit card company is jointly liable with the retailer, therefore if the company you bought it from goes bust and you haven’t had delivery or it goes bust and there’s a problem, so I don’t know, it needs to be repaired, you can go to the credit card company and ask for your money back. Couple of quick sexy tips about that: Number one: The goods cost £10,000, you pay £1 on the credit card, £9,999 by check, cash or any other way you care, the credit card company is jointly liable for the whole amount; the whole amount; £1 on the credit card, the whole amount. Don’t need to say anymore. One complication, there’s a suit in a shop cost £120 that’s more than a £100 you're covered by Section 75. There’s a suit in a shop, trousers priced at £60, jacket priced £60, you're not covered. Really important that you understand that the single item has to be valued more than a £100 but any big purchases you're going to make put them on your credit card if you’ve got one, simple as that Section 75, most important words that we must raise in the English language.
So if you’ve got any questions, I would love to take them. Let’s have some hands up if we can.
Natasha: Hello, I'm Natasha.
Martin Lewis: Hello, Natasha.
Natasha: What’s your advice for first-time buyers buying new build properties now as in terms of fixed rate or variable?
Martin Lewis: Or don’t.
Natasha: Well, yes but…
Martin Lewis: …or don’t.
Natasha: …or don’t.
Martin Lewis: Look, let me make this plain. I'm not saying don’t buy a house. You know, you want to buy for the long term, you’ve got the money saved up, you got a decent deposit then you can go for it. It’s absolutely fine and right. But one of the deep frustrations for me is that we have been hypnotised as a nation into believing that property ownership is a right. I blame the property poor in program as to being hideous in our television for the last six or seven years, who have encouraged us to believe that house prices can only go up, to borrow as much as we can, as much as the mortgage lender will give us. You know why they want to do that, mortgage lender gives you six times because then you can't afford your other bills so you have to get a credit card and they can charge you 18% on it. I mean this is how the market works. To believe that even if house prices can kind of go down, they can't go down in Highgate or Wilmslow where I live because it’s a fundamentally different market there you know. Right, the fact is property is an asset class, you're asking me the question, my answer to you is you need to do your numbers as a very, very rough rule of thumb, very rough. If house prices are dropping by more than 7% you're better off renting. Renting is not a dirty word. People who rent are not a sub class of citizen. People who rent right now over the last year have probably made more than the people who own property. It is not – I mean, the deep frustration, I'm not having to get at you my love, but we need to get off this holes of owning property is an absolute must about the wise, I'm not a real grown up human being. I always remember an intelligent friend who runs quite a substantial business saying to me, “I need to buy a house.” This is a year and a half ago when things were slightly different. I was like, and he told me how much and I'm like, “That’s a real stretch, that’s five times your income.” He said, you know, “But I've got to buy a house. You know, after all renting is throwing my money away.” I thought, “Well, I hear this argument a lot, I'm not sure I believe it. What type of mortgage you're getting?” He said 100% interest only. I'm like which point of throwing your money while you're renting, that’s renting effectively.
So my answer to you is, what would you do, fixed or discount? Well, first of all, I would take a serious consideration of whether you really want to buy. If you're buying as a place to live in the long term and the mortgage is going to be cheaper than your rent which is perfectly possible or about the same, it’s not too bad. You could consider waiting another year but you might not want to. But for long term, if you're not buying it as an investment property, I don’t particularly want to put you off, the way I always decide between fixed and discount is this question, let me ask you a question here, right? If I said to you now I'm going to toss a coin, you call it and if you get it right, I’ll give you a £100 quid, I'm not going to do it by the way, this is complete lie, I'm a Money Saving expert, I don’t throw my money like that, and if you get it wrong, you give me £1. So it’s a fat corn, I'm not cheating, I promise. Would you take it back? So I’ll give you a £100 quid if you call it right and you only have to give me £1 quid if you get it wrong. Would you take the bet?
Natasha: I would because I can afford to lose £1 quid.
Martin Lewis: Exactly. You can afford to lose £1. I would think that’s a pretty damn good answer, yes? I toss the coin, call.
Martin Lewis: Tails. Now, were you wrong to make the bet?
Martin Lewis: But you lost. This is what we have to think about fixed and discount rates. You made the bet for the right reason; the fact that you lost it doesn’t mean you were wrong to make that decision. Now, when you get a fixed rate, you get a fixed rate for the sake of surety. You know what you're going to pay, you know you can afford it, you know it isn’t going to change. If you are close to the brink on your mortgage which hopefully you won't be, then the more you should hedge towards fixing. If you have space, the more you should hedge if tracker rates or discount rates are cheaper, the more you should hedge if there more expensive one you know, but you got to look over what’s going to happen to interest rates whether they're going to come down as they have them right now but that’s a balance. So the fixing equation is about surety. Now at the moment, there are a lot of people going all fixed and it’s a nightmare, “I wish I haven’t fixed.” Well, you made the bet for the right reason. You can't now come back and say, “Ahh.” It wasn’t a bad bet. The outcome wasn’t what you wanted but the decision and the reason for making the decision isn’t right.
So my answer to you would be it depends how long the deal you're getting is for, in the short term it’s likely the track is in discount, so going to be cheaper than fixed. But if you have surety issues, you probably want to hedge towards surety. There is no right or wrong answer but I think of it as a surety equation rather than there’s anything else. Does that help?
Natasha: Yes, it does. Thank you.
Martin Lewis: Thank you very much. Right. I like a round of applause. We've got loads so many, thank you my love. We’ll go for this lady here.
Sheila: Hello Martin, my name is Sheila.
Martin Lewis: Hi, Sheila.
Sheila: Hi. I owed £6K on MBNI and I got a critical illness plan so I decided to pay off and cancel to direct debit. The direct debit it was in that time limit so the company had put it into the bank and the bank bounced it because they cancelled it. I hadn’t told MBNI. I was charged £12 so that cost a £100 interest. So I then wrote a Letter of Complaint and they refunded the £12 and they wouldn’t refund the interest. I wrote several letters but they said it would have to go to the ombudsman and I couldn’t be bothered to be honest with you. Could I have done anything different?
Martin Lewis: No, go to the ombudsman.
Sheila: Go to the ombudsman.
Martin Lewis: Be bothered or don’t ask the question.
Sheila: Would I getting back on?
Martin Lewis: I'm not being rude to you.
Sheila: No, no, no.
Martin Lewis: You know, I tell you. It’s a classic thing. I'm not having to go, I promise, that was a bit of an easy dig but the fact is sometimes you have to put the work in. You couldn’t have done anything differently, you could’ve told them obviously but you didn’t tell them and after that point to try and repair the damage, it is always going to be an effort. Finance is deliberately complex, they make money out of confusion marketing, they make money out of making things difficult for us. We have to work the system. Interestingly by the way, the ombudsman will actually, if you tell people it’s taking you a lot of time and you get a pay out, you can legitimately charge £10 an hour for your time and thus we all know dealing with these things. I say you can legitimately charge, what that means is that the ombudsman will judge your time being worth £10 an hour and will adjudicate that for you. So often when you're going for this type of money, I would write them a letter but it says, “I am going to go to the ombudsman.” You could do this as, “I'm going to go to the ombudsman, this is taking me a number of hours to deal with, I'm going to ask the ombudsman to adjudicate that its fair rate at £10 an hour which means I'm going to be asking you for £200 back or £100 back or whatever the amount of time that you spent on it is or you can just give me the £100 quid now that could be slightly easier.
Martin Lewis: I’ll give you a chance about 20% if you do that.
Sheila: Thank you very much.
Martin Lewis: Yes. No, we’ll do you and then we’ll go up there to that gentle there, no, no, I’ll come over here, I promise.
Gayle: Hi, my name is Gayle. You’ve mentioned before you have a fiancé so on the day of your wedding, what would you do to make it cheaper or save money? Sorry fiancé wherever you are.
Martin Lewis: Some things are priceless. But the answer, I will tell you the one thing I won't be doing which is half borrowing or having anybody borrowing money to pay for a wedding. That is not the way to start married life. That’s the most important. So have a wedding that you can afford, have a happy life, it’s one day. I've heard of people who’ve had weddings where they go and sit in the park and asked their friends to bring the pick nick and its being the most romantic occasion. I've also heard of wonderful grand weddings where people have paid lots of money that they can afford and had a wonderful time too. What I would say is if you have a wedding within your means, you start it the right way for a happy married life together.
Gayle: Thank you.
Jason: My name is Jason. Firstly thank you, I saved so much money since I've been on *** [00:55:09] on your site. Of all the term included at the moment we've got retail and *** [00:55:14], what’s the future hold? You know, what’s to look forward to generally *** [00:55:21]. I'm very sorry to look forward to.
Martin Lewis: I tell you what, it’s funny because people make a joke to me and they say, “Well, a credit crunch, it must be great for you.” No, it’s hell enough. I've never seen so many people financially scared. I've never seen that so many people miserable and worried about their jobs. I am afraid, if it hasn’t happened already over the next year, you're going to get calls from friends telling you they're being made redundant, its probably happened already. It may well be you. I think at least the next year is going to be extremely miserable and most of us who are 36 – 37 or under have never experienced a scenario like this while we’ve been in the working world. I'm one of them. I think life is going to change. Job mobility is going to be traded in for job stability. If you’ve got a stable job, probably best not to leave it because you need to keep the earnings. The idea of profligacy and showing off about how much you spend is going to end and I think over the next year, the time is going to be incredibly scary. I can't sweeten that in any way. I certainly, am petrified about some of the stories I read and problem is we’ve done it on the back of this idea, these fundamental beliefs that people had that things were *** [00:56:47] you know, this concept that we had seen the end of boom and bust was a very dangerous one because what it said to people is things won't go wrong again and unfortunately they have and if we’re being told, “Well, time is good right now but they will get bad again because we always have cycles and you need to protect yourself.” Something, you know I don’t want to feel shortened but I've been saying this for whole my career. So the answer is it’s going to be incredibly difficult and we have to protect ourselves and backing down the hatches and make sure we had savings. As for when we’ll come out of it; two, three, five, seven years, I can't know and I won't predict, I will simply say, we just must be prepared for this to be quite long, quite deep, be sensible with our money. That’s it.
Oh gosh, look at you're all demanding. Oh the lady right at the top. Pure random.
Anne: Hi, my name’s Anne. Now you’ve got us all shopping at little, brewing our own beer, digging our guns, grow vegetables, knitting all those things, are there any tricks we’re missing to save money in that sort of local home-thrifty way?
Martin Lewis: See, it’s a really interesting question because actually that’s not my core philosophy. I don’t consider myself a thrift man. I consider myself a value man. I always remember when Philip Schofield called me the tightest man in Britain and I was slightly upset about it because actually, my big thing is lead your life as you want just don’t *** [00:58:33] more than you need to, but if you don’t have the money, then you start getting thrifty and I think the tips around the home that we’re going to have to do right now are energy efficiency, your energy saving light bulbs which frankly nobody should be paying for anymore at all because they’ve given away free in some different offer almost every week. I would certainly make sure your home’s energy-efficient, I will get on to the Energy Saving Trust website and check whether you're entitled to any grants to cut the cost of the energy that’s going on in your home. I would sit there and think about your conspicuous consumption, you're at little that’s great, have you tried out doing letter.
Anne: It’s too far to drive.
Martin Lewis: It’s too far to drive, well that’s good. Are you checking your petrol prices? Have you got your tire pressures pumped up? Have you?
Martin Lewis: One. Have you got a refract on your car?
Anne: I don’t have a need for a refract now.
Martin Lewis: Good. Do you have junk in your trunk and it’s not a personal question?
Anne: Actually, yes I do.
Martin Lewis: Get rid of the junk. Do you keep your air-conditioning units on?
Martin Lewis: Right. How do you drive? Do you drive like this?
Female: Yes, she does.
Martin Lewis: Thank you. I’ll tell you the story.
Anne: It’s a Ford car I'm doing that with.
Martin Lewis: It doesn’t make at all. It doesn’t make any difference. I’ll tell you the story, it’s a fun story. It’s a story of a holiday. We’re in South Africa and we have hired the most exciting car you have ever seen. This car is sexy because while it’s not big or fast, it has a gauge on it that tells you how many miles per gallon you're doing and I'm like, “What?” I’ll drive. I'm saying, “I’ll drive.” So we do these long drives and I set it up. Now, we are on holiday, it’s true, we are. So I'm like, “Look, this is what I'm going to do. On every journey we do, I'm going to drive one way normally and I am not that type of driver like you ma’am. Miss, “Look at my home all nice and tidy.”
Anyway, what I'm going to do is I'm one leg of the journey I'm going to drive normally and on the other leg of the journey I'm going to think about my acceleration. I'm going to accelerate up gradually. I'm going to think about road positioning. I'm not going to override it. I'm going to position myself correctly in the road. I'm going to be effectively think every time my foot goes down I'm spending money. That’s it. That is a money pump. So each leg, one way out and one way back, I drove once my normal way and one good boy Martin Money Saving like.
Now, because to make the experiment fair, I know I'm on holiday but still, I varied whether the outbound route or the inbound route was a journey because I didn’t want the height varying just to have an impact. You have to think about these things.
Now we drove 600 miles that holiday. South Africa is a big place. My normal driving style, I think, I still remember the numbers, that’s how sad I am, 11.8 kilometres per litre. The other style 13.7 kilometres per litre. It doesn’t sound much, 20% difference. Someone who spends £50 a week, £2,500 a year that is a saving of £500 a year. So how you drive, remember it’s a money pump.
There we go. That’s it. Thank you all very much for coming. I do hope you all save some money. Thank you so much to all of you for your questions, your enthusiasm and for helping inspire me today to carry on, making sure that people continue to save money. To all those watching the DVD, get out there, get your hand out of your pocket and start to look after your cash. The average person in this country can give themselves the equivalent of a 25% pay rise not by cutting back but by being better with their money and a quick thank you as well to the New of the World for paying to enable all these to happen and to get this most important Money Saving message out. Thank you all. Goodnight.
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