Want to be better with money in 2020?
If you eat and drank and sat on the sofa far too much over Christmas, you may be thinking of detoxing your body and making 2020 the year you get fit.
A Money Detox is the same approach for your finances if your bank balance is looking sick and your credit cards bill looking bloated.
You want to track and then reduce or get rid of the things that are poisoning your bank balance. And also look for ways to make the rest of the year easier and less stressful so you can keep up good money habits.
The seven ideas here aiming for long-term gains with the least pain. Whatever your target, you will be getting the rewards of this detox for a long while after it finishes!
1) Check your STOs and DDs
Check all your Standing Orders and Direct Debits – that’s money just vanishing from your salary. There may be some you have forgotten about! Magazine subscriptions? Paying for ad-free apps? A free trial that wasn’t cancelled? Insurance you don’t need any more?
If you decide you don’t want a service or a subscription, remember to tell the firm, don’t just cancel the payment at your bank.
The Bean app helps can help with this. It checks your bank account and credit cards for regular payments and when you tell it to cancel one, it informs the firm, not just your bank.
Also check with your partner, that you aren’t duplicating things like Netflix, Amazon Prime or Spotify subscriptions, or insurances.
Not all DDs and STOs are bad. Paying the rent, council tax, credit card repayments, utility bills and TV license by DD or STO is great – these are priority bills and it saves you time in making the payments. In fact, if you are paying any of these manually, why not set up a Direct Debit to automate it? A money detox means making everything as easy as possible!
Cancelling a regular charity donation may not feel right – others are a lot worse off than you. But if you are paying 20% interest on a credit card, you are effectively borrowing the money that you are donating. So it’s better to stop donating until your own finances are on the mend. But also read 7 ways to donate to charity that don’t involve giving money and see if one of them will work for you.
2) Pay lower bills
If you haven’t changed gas and electricity suppliers in the last year, it’s well worth checking what you could save by switching.
Two million people use MoneySavingExpert’s Cheap Energy Club, including me! This looks at all the suppliers (some comparison sites only check the suppliers that pay them) to find you the cheapest deal now. Then it will email you in 6 months or a year when you can again save money by switching. So by joining the Cheap Energy Club now, you are making it easier to keep your bills as low as possible in future years.
Could a water meter save you money? If you don’t have a meter, you are being charged by the number of bedrooms you have. A simple rule of thumb is that most people who have the same or more bedrooms as there are people in your family can save by getting a meter. So a couple with two bedrooms can probably gain from switching. When my two adult children left home, I switched to a meter and my bills more than halved.
If you are on a low income or certain benefits you may be able to switch to a cheaper water tariff, see How to cut your water bills.
You can’t switch insurances until they come up for renewal – but you can make a note now in your diary a couple of weeks in advance of that so you are ready for it. the cheapest time to get car insurance is a couple of weeks before your current one ends – if you leave it until the last minute insurance companies know you are desperate and jack up their prices :(
Also see if you are overpaying for TV packages. Many people on older Sky packages are – you may even be able to complain and get money back!
3) Get a better bank account
In Britain, you are more likely to get divorced than switch banks. That’s not because we love our banks but because it seems too complicated or scary to try to change. But it’s much easier now than it used to be.
Most banks now offer a switching service takes care of everything, notifying all the people who send you money and the people you pay regularly. It should all be completed in seven working days. If they get it wrong, you will be refunded any lost interest or extra charges that occur as a result of the switch in the first 13 months.
So look for an account which sounds right for your banking needs. Are you often overdrawn or always in the black? Some people can even get cash back by switching!
If you would be refused a normal current account because of your poor credit score, you can still switch to one of the new-style basic bank accounts. They are good and have absolutely no fees, even if a direct debit is returned unpaid.
But be careful… all banks are having to change their overdraft charging by April 2020. If your bank has already put its charges up, don’t switch to one that hasn’t yet announced their new rates and then get hit in a months time. See New overdraft charges where there is a list of which banks have so far announced what they are doing.
4) Pay less interest
With a good credit rating, you may be able to refinance credit card or other expensive debt and save a lot of interest.
At the start of 2020 there are some good 0% deals on offer, but they are shorter, with higher fees and lower credit limits than they were a couple of years ago, so grab one now while you can!
Don’t forget your mortgage! It may be “good debt” and it’s a lot cheaper than other sorts of debt, but this is probably one of your biggest bills so getting even a half a per cent off is well worth doing.
If your fixed-rate has ended, you may be able to cut your interest rate by switching now, but even if you can’t cut your costs much, it’s good to get a fix for as long as possible so you are protected against future rises.
5) Automate saving an emergency fund
Having an emergency fund can really cut down on stress. Perhaps you try to keep some spare money in your normal bank account for a rainy day, but all too often you will find it isn’t there when you need it, you have spent it on something that wasn’t an emergency.
Here are two approaches:
- open a savings account Open a new account, not with your current bank. You want to be able to get at the money but not be tempted to dip into it too easily! Then set up a standing order to move some money across to it the day you get paid. Paying in £25 a month may not feel like it’s enough, but it will build up over time and it feels less painful as the money goes out automatically, you don’t have to make the decision to save each month.
- get an app that does it all Chip is a savings app that moves small amounts of money that you won’t miss out of your current account several times a month. For people who think they should have money left at the end of the month but never do, this can work really well.
6) Sign up to a cashback site
If you don’t already use Quidco or TopCashBack, sign up to one or both of them now! They may be able to save you small amounts on lots of purchases and those small amounts add up if you buy a lot online.
Of course you could save even more money by not spending online so much – if you think that is your big weakness, have a look at these tips to let you get online spending under control!
7) Pay more into your pension
Most people should be paying more money into their pension!
If your work has a pension scheme but so far you have opted out, think again. Unless your financial position is dire, you are effectively turning down free money from your employer, see Too much debt – should I still pay into a pension for details.
If you are self-employed you also need a pension. This can be really hard when you are trying to balance having a life and expanding your business, but it is a necessity, not an optional extra that you can postpone until next year. Pension jargon is off-putting and making investment decisions seems scary, but so is the idea of being old with little money. So make a start, even if you start small. Nutmeg is an option that is worth considering if you don’t know where to begin with investing.
Which will you do first?
You don’t have to do everything here all at once. You could plan one a week or even one a month if that seems more realistic. Perhaps do one that sounds challenging, then an easier one. If you have a partner, split them between you.
At the end, you are going to be in a much better financial shape!