How to cut spending and pay off debt

How to cut spending and pay off debt

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Saving money isn’t just about cutting back on the grocery bills or nights out. Savvy-savers and budgeters will be familiar with cutting back on regular (and irregular) expenses, but it’s surprising how many people neglect to consider these, or do consider them but never make it as far as following it through.

1. Mortgage

This is something both my sister and I have recently benefitted from. It is possible to remortgage, or request a product transfer, to save you money (as long as your current fixed term has ended, otherwise you’ll wind up paying early termination fees). When I obtained my mortgage, I was on a 2-year-fixed-rate mortgage, which ended in 2014. Since then, I’ve been on a variable rate, which follows the Bank of England base rate. It didn’t even occur to me that I could save on my mortgage, as I’ve been a stay-at-home mum since 2012 and with no regular employment income, I knew I wouldn’t be considered for a remortgage. Of course, if you have a regular income, you should definitely look at a remortgage versus a product transfer, to ensure you are making the best saving. However, if you don’t have a regular income, you should contact your mortgage provider to see how they can help you to save money. You can request a product transfer (which can result in revised monthly payments and will require signing up to new mortgage terms). In this case you will receive a telephone consultation, where you will be asked a series of questions to ensure you are making the correct choice and that they can recommend the best product for your current and future circumstances. Although I’ve had to increase my mortgage term by 5 years, I’ve reduced my monthly payments by £100 per month, with a reduced interest rate and a new two-year-fixed contract. By the end of the two years, I’m hoping to have paid off my short-term debt and would like to be able to reduce the term back down, or invest further, depending on my current financial circumstances.

2. Loans

I don’t advocate consolidating debt, because it can often work out more expensive and/or you’ll be paying for longer. But, if your monthly credit payments are getting out of hand, you might consider arranging a loan to help you to save money and to get on top of your finances. The one thing I will say, though, is that if you do this, you MUST cut up any credit cards and close the accounts, because the temptation to use them with their £0 balance will be too much if you find yourself in a tight spot (and in any case, you should draw up a budget). If a 0% credit card is an option for you, consider this as well and weigh up which will save you the most money. Will the balance transfer fee cost less, or more than the interest you’ll pay over the life of the loan? Consider the monthly payments, how long it will take to pay off, and the total amount you will pay over the term. NB: Please remember that each credit application you make can have a negative impact on your credit file, so consider each option wisely before proceeding with any applications. You can use free services such as Noddle, ClearScore, and Martin Lewis’ Credit Club to check your credit scores, see your reports, and look at the likelihood – NOT guarantee – of you being accepted for credit cards and loans. 

On another note, if you do have a loan and are struggling to repay it, there is nothing wrong with contacting your bank to see whether they can help you. There is a chance that this may affect your credit file, however that’s better than ending up with a CCJ on your file, which will stay on public record for 6 years and seriously harm your credit rating. For more serious situations, your bank or loan provider may be willing to help you out. I had treatment for cancer a few years ago when I still had a loan, and I approached my bank to see whether they could freeze my repayments and put the account on hold. After some input from my local branch manager, they agreed and I was able to focus on my cancer treatment without worrying about how I would repay my loan while not working. It’s always worth speaking to your creditors. It’s empowering, and YOU are the one taking control.

3. Credit card balances

If you’re a regular follower of Martin Lewis and MoneySavingExpert.com like me, then you’ll be familiar with his mantra to pay off your credit card IN FULL (personally, I’ll be averse to having a credit card after this is all over). But if you’re reading this post, the chances are you already have a credit card balance you need to shift. Following on from point 2 above, it makes more viable financial sense to transfer it to a 0% credit card to avoid paying unnecessary interest and therefore saving money. Check out the note above regarding applications and your credit score, and remember to add the balance transfer fee to the outstanding debt to ensure you won’t end up paying more. Also, bear in mind that if you haven’t paid off the balance by the time the 0% interest period has finished, you may end up paying a higher rate of interest, so look for the offers with the longest interest-free period.

4. Utilities

Annoyingly, we often end up spending more than we need to on things like gas and electricity. But of course there are many comparison sites out there, such as Uswitch.com, ComparetheMarket.com, and MoneySupermarket.com, to name a few. These sites can ensure you are getting the best deal on your fuel prices and other bills. You’ll usually be locked into a contract for a year or more, although some of them have no exit fees. But at the end of the contract it’s especially important to look at switching to save, as often the prices go sky high after your fixed-price term comes to an end. If this isn’t something you’ve done recently (or ever done!), you need to do it now. The savings can be surprising.

5. Insurance

From car insurance, to pet insurance, to buildings and/or contents insurance, many people end up paying through the nose from auto-renewals which are often unnecessarily expensive. Be aware of when your insurance is due for renewal. Write it down on your calendar or set yourself a timely reminder, and make some price comparisons via one of the above websites. That way you can make sure you’re always getting the best deal. Your current insurance company will send you a renewal quote, so it’s also worth seeing if they can beat your best quote for the convenience of staying with them, providing you are happy with the service. If you’ve not managed to switch in time, there is a 14 day cooling-off period, although any money already paid may not be refunded. In this case, it’s worth deciding whether it’s financially viable to switch, or stay with your current provider.

6. Water rates

To avoid estimated bills (and this goes for your other utilities, too), it’s important to check your meter reading on a regular basis and update the supplier. It also avoids any large unexpected price hikes if you’ve been paying a low monthly amount on a regular basis. In addition to this, you may be paying for more water than you originally thought you would, so use this opportunity to see if you can save. Also, don’t waste water unnecessarily and get any dripping taps fixed! It’s a well known tip, but try using less water by showering instead of bathing, don’t leave the tap running while brushing your teeth, don’t under-load the washing machine or dishwasher (unless you have a short, money- and water-saving cycle), and chuck that stale glass of water into the plant pot, rather than down the sink. If you’re in an older property with no water meter and you pay water rates, you could be paying for more than you need to. On the other hand, if you have a large family who uses a lot of water, you might end up paying for more if you had a meter installed!

7. Council tax

Have you ever wondered whether you’re on the right banding for council tax? You probably are, but it’s always worth checking. If you’re over-paying you could be entitled to a rebate. You can check your council tax banding here, but have a read of this article on MSE (Money Saving Expert) first.

8. Mobile phone

These days, so many of us ‘must have’ the newest mobile phone. The devices are sold to us with clever sales and marketing techniques, and we think that we can’t do without the latest technology or unlimited data. But, do we really need them? Think about what you really need in a mobile phone. Are you a social media addict, or do you tend to stream movies and TV shows on your phone? Do you regularly take photos and post them to social media, or do you use it just for calls and texts? Do your photos have to be perfectly crisp, with the absolute best picture quality, or are you just happy with photo snaps? All of these things will determine how important each feature is for you, and whether you really need the smartest smart phone out there. When it comes time to upgrade, do you really need to (DO you? You are trying to save money, remember), or is your phone doing you proud and still going? On the other hand, if you’re still locked into a contract, it might be worth giving your mobile phone provider a call, to see if your tariff can be amended. If you have unlimited data, minutes, and texts, and aren’t using a great deal, you might be able to benefit from a cheaper contract with fewer minutes and texts and a lower level of data usage. In turn, this could significantly reduce your monthly payments. Personally, I’m switching to Pay As You Go when my contract is up. I’ve decided from hereon that I no longer want to be tied into anything, including mobile phone credit agreements (which, after all, is what they are).

9. Broadband deals

There are lots of things to consider when it comes to your home broadband, and the main thing to think of is what you need it for. Are you a high-end user who streams constantly, is always on social media, and has 10 devices or more in your household? Depending on your usage, you might be better off with the fastest unlimited broadband, but this can also be expensive. Alternatively, if you only tend to use broadband to check your emails and access the internet occasionally, you’ll probably be looking at a low-usage option. You can combine broadband with line rental, and there are also broadband, line rental and TV packages available. Your best bet is to look at a price comparison site such as USwitch.com. Do your homework though and check customer service ratings, too – you don’t want to find yourself signed up to an 18-month contract with a service and provider you’re not happy with. Of course, there’s pay as you go broadband deals available now, too, although they may come with a hefty setup fee and aren’t necessarily available everywhere.

10. TV and entertainment

Having recently cancelled our Netflix streaming service, I have to be honest I’m not really missing it. Sure, it’s nice to have when you’re bored and there’s nothing else to watch (you have heard of catch-up TV, haven’t you?), but the aim here is to save money. Do you really need catch up TV, Netflix, Amazon AND Sky or NOW TV? Admittedly, they do all boast a different line-up, but the best thing to do is work out which one you watch the most and which shows you’ll really miss, and cancel those you’re not really using. Our kids used Netflix a lot, but within a week they’ve gone back to the kids programmes on BBC iPlayer and ITV Player. There’s a lot to be said for traditional TV, and most modern technology comes with catch-up TV apps now anyway.

11. Online subscriptions

This one’s really important. Check your bank statements for any other monthly subscriptions that may be unnecessary, or that you’ve missed off your budget because the payment comes out via your bank card, rather than direct debit. Do you have any online magazine or newspaper subscriptions that you could do without? There’s so much free content online these days, I begrudge paying for any of it. If I need in-depth knowledge or research material, I’ll consult a book from my local library (which is also free).

12. Petrol

The obvious choice to save money would be to walk, or cycle, rather than drive, but that’s not always an option. It is possible to save on fuel costs by checking websites (confused.com is one) that tell you where the petrol is cheapest. Also, from experience it seems to me that fuel is more expensive at weekends and the end of the month, around payday. Accelerating less, and lighter, safer braking can also help to reduce fuel consumption, as can removing unnecessary luggage in your car (it’s not a storage space). If it’s rolling around in your boot and you don’t need it or use it, sell it!

13. Grocery shopping

I’ve written a whole other post on this, as this can be a big money-saver, especially if you’re adept at cooking from scratch. You could try downshifting – trying an own brand, rather than a leading-brand; or switch to a discount brand if you already buy the supermarket’s own label. Take the challenge and see if you notice a difference; you might be pleasantly surprised! Also, consider switching to a cheaper supermarket. Mysupermarket.co.uk is a really handy website/app, which helps you to find the cheapest place for your shopping (they also do Cashback, too!). Collect vouchers out of magazines, and check online for discount vouchers to print off and take along. There are numerous apps such as Shopmium and GreenJinn that can also help you save with Cashback offers. Another option is to use the scan and shop function to see how much you’re spending as you shop, to avoid a scary total at the till. And then there’s my favourite tip: don’t shop hungry! And more importantly, if it’s not on the list or you don’t need it; don’t buy it.

I hope this will help you on your own journey to become debt free. It’s really important to remember that bills MUST be paid, and that debts do not go away. Ignoring them will result in bad defaults and CCJs, which show up on your credit file and can affect your ability to obtain a mortgage.

Want some more money-saving tips? Head on over to Tuppenny’s FIREplace for a round-up of 30 frugal-living bloggers and our best tips to save money.

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DISCLAIMER: Please note that I am not a financial advisor, and this post is based on my own experiences which I share with you in the hope that it may assist you with your own debt-free journey. I will always recommend that you do your own thorough research, prior to committing to any arrangements you deem necessary. 



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