The UK has gone through the biggest squeeze on household finances since World War 2 as a result of the financial crisis that began in 2008.
This means that both households and businesses have had to think outside the box to find ways to break even and cover expenses that have been rising, often at the same time as income has remained the same or decreased.
Here are ten simple solutions that can help you save money and ensure that your finances are on a secure footing:
Save three months income into an emergency fund
Try to save the equivalent of three months outgoings into an emergency fund. This will help tide you over if you lose your job and provides a security buffer that gives you time to find another job without worrying how the immediate bills will be paid.
If you can’t save this much, try and save as much as you can into an easy-access savings account or cash ISA that will pay a small amount of interest and still allow you to get at your funds when you need to.
But only after paying off high interest debts
The best way to help yourself financially is to pay off high-interest debt. Do this even before you save into an emergency fund.
If you have store card, credit card or overdraft debt, you are likely to be paying more interest than you can earn elsewhere through a savings account, so pay this back first.
Paying lots of interest is in effect paying for nothing. Therefore, it makes sense to clear the debt so that you stop paying interest and can use the money more effectively.
Save ten per cent of your income into a pension
With life expectancy increasing and pension savings falling, many of us are failing to save what we will need for retirement.
Pension experts say that we need to invest ten per cent of our income as a bare minimum to maintain a reasonable standard of living in retirement.
The key to making the most of pension savings is to start at a young age. By investing when you are young, your money has several decades in which to work for you and grow.
If you work for a company that will also contribute to your pension, then make the most of this. Some companies will match your contributions up to a certain level, so make sure you take advantage of this by paying in the highest percentage of your salary that your firm will match.
Put together a budget and stick to it
This tip works for households, individuals or businesses and can be the cornerstone for successful money management.
List your income and expenditure and see whether your income matches your outgoings. If it doesn’t, try and select areas that you can cut back on.
This may seem difficult at first, but normally you will be able to find expenditure that is not essential.
When you construct a budget, you need to include future bills that you are aware of.
Include all annual costs apportioned on a monthly basis such as water bills and car and home insurance premiums, and save up all receipts for a few months so that when you construct your budget you will have a fairly accurate picture of where you spend your money.
Improve your credit rating
You can reduce the cost of borrowing and be accepted for cheaper mortgage products if you have a good credit rating.
When you apply for a bank account, loan, credit card or mortgage, the lender will check your credit profile. The better your credit rating is, the more likely you are to qualify for the best deal.
If you have a poor credit history, you can improve it by running a bank account responsibly, by not going overdrawn or by managing your repayments on a credit card.
Switch financial products
Britons are loath to switch bank accounts, energy suppliers and many other financial products because they believe the process is difficult and prone to mistakes that may mean they miss a payment, which could lead to a fine or impact on their credit rating.
However, in recent years the process of switching services has improved and new legislation being introduced in September this year will cut the time that banks manage a current account switch to just seven working days.
By switching bank accounts you can take advantage of cash incentives offered by some banks. Energy tariffs also vary and it is important to regularly check you are on the best tariff. If you have never switched your gas and electricity supplier, the chances are you will be able to save at least £100 a year and possibly more by doing so.
Cut unnecessary expenditure
Rather than build up debts, if you are struggling to control your expenditure and find that each month you spend more than you earn, then you need to ruthlessly go through your expenditure and identify areas where you can cut back.
Making some changes is easier than you may think. Do you have a gym subscription that you don’t use? Then give it up. Do you buy a coffee and a sandwich every day for work? By making your own lunch and taking a flask you can save yourself an average of £15 each week, which will make a difference.
Use the Internet to buy products cheaper
It has never been easier to find the best deal on all sorts of products from groceries to electrical items to furniture. Take advantage of this new development to save money on a host of products.
Use price comparison sites to search for the best deal and use online only retailers to buy goods at the lowest prices.
Invest in a cash ISA
Investing in a cash ISA is a great idea, even when interest rates are low. The interest you earn from a cash ISA is tax-free so it is the most effective method of protecting your savings from the taxman.
You can invest up to £5,760 into a cash ISA in this tax year and the limit goes up in line with inflation each April. Watch out for bonus rates though and remember to review your cash ISA when the bonus rate ends and switch to the best deal available on the market.
Take advantage of low interest rates and pay off your mortgage before you retire
Paying off your mortgage if you are a homeowner will really help your finances. This is because the overall amount of interest paid over a 25-year term is the biggest bill most of us will face in our lifetimes.
A £150,000 25-year repayment mortgage at a rate of four per cent will cost slightly more than £100,000 in interest payments over the period, as well as repaying the £150,000. The quicker you can repay the loan, the smaller the total amount of interest you will pay.
Paying off your mortgage before you retire means your biggest single outgoing will be removed at the same time as your income drops.
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