Do a money makeover
Overhaul your finances & save £1,000s
Taking a day to cut your bills saves many people £1,000s over the year. And unless you earn £100,000s, doing a money makeover can be the next best way of putting some extra aside – something that's really important during this cost of living crisis. So check your bills NOW and see if you can save £100s on broadband, mobiles, food and more by working through your finances one-by-one to ensure you've the best deal on everything.
This guide was originally written by Martin Lewis and is now updated by the MSE Money Team.
Will it really make a difference?
Have no illusions, a full money makeover will take up to 10 hours, but it'll definitely be worth it (not least to help with the tough times we're living through).
I've challenged you to save £1,000 in a day, but when I regularly did money makeovers for a TV show a few years back, the average saving was a little over £5,000 a year, and this was before I 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 roughly £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 – especially as we're living through an acute cost of living crisis. 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 I 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.
Need help with managing your cash flow?
Check out my Budgeting guide for tips and tricks on how to analyse your finances and control your spending. It also includes a FREE budget planner.
Step 1: Do you spend more than you earn?
This is vital. Unless you know the answer, you 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. I know the answer and you need to skip straight to pain-free savings.
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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 MoneySavingExpert.com 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.
WHAT TO DO | TYPICAL SAVING |
|---|---|
Gas & electricity | £100ish |
Food shopping | £1,000s |
Council tax | £100 - £400 |
Home phone & broadband | £100s |
Childcare costs | Up to |
Cut boiler cover costs | £100+ |
Should you use a water meter? | £100s |
Cut your digital TV costs | £100s |
Cancel direct debits | Up to |
WHAT TO DO | TYPICAL SAVING |
|---|---|
Existing credit card debts | £150+ |
Mortgages | £1,000 |
Existing loans | £500+ |
Beware paying minimum repayments | Up to |
Pay off your debts with savings | Up to |
WHAT TO DO | TYPICAL SAVING |
|---|---|
Haggle down mobile bills | £300 |
Best bank accounts | £150+ |
Cheaper prescriptions & medicines | £50 |
Boost savings interest | £50+ |
Cheap petrol & diesel | Savings of |
Slash train fares | Up to |
WHAT TO DO | TYPICAL SAVING |
|---|---|
Car insurance | £100s |
Home insurance | £100+ |
Breakdown cover | Up to £100 |
Life insurance (level-term) | £5,000 |
Mortgage life insurance | Over |
WHAT TO DO | EXTRA CASH |
|---|---|
Can you boost your income? | Up to |
10-minute benefit check-up | If eligible, you could get |
Get paid to spend | £150+ |
Tax rebate for uniform wearers | £12+ |
Will the Government give you a loan to pay your mortgage interest? | If appropriate, you could get £1,000s |
Have you overpaid £1,000s in tax? | The biggest we've heard is £6,000! |
Grant grabbing | Up to £1,000 (energy) |
Flog it! | £10 |
Car finance reclaim | £1,000s subject to a redress scheme being implemented |
Bank charges. Have you had charges and been in hardship? | Up to |
Get lost Tesco Clubcard vouchers back | Up to |
Did you have a fee-charging bank account? | Up to |
Reclaim forgotten cash | Some have found |
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?
I 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-dramatic. 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 I 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.
Yet 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
These are changes that involve curtailing or changing elements of your lifestyle. It sounds horrid, but actually it can be 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? Could you make your 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?
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.
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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.
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 by 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?
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.
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