Want to be better with money?
People often think of a detox for their body in January – getting rid of the Christmas eating and drinking excess.
A Money Detox is the same approach for your finances if your bank balance looks sick and your credit card bill looks bloated. This could also be a post-Christmas finance handover but you may need it at any time of the year.
Perhaps this isn’t just a nice-to-do because you have lost your job, your benefits are being cut or you are worried about your energy bills going up.
The aim is to track and then reduce or get rid of the things that are poisoning your bank balance.
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 Emma 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 priority bills such as rent, council tax, credit card repayments, utility bills and the TV licence this way is great as it saves you time in making the payments and there is no risk you can forget if busy, ill or on holiday. A money detox means making everything as easy as possible!
If you want to keep those newspaper or magazine subscriptions, see if you can get free access online through your local library.
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. Read 7 ways to donate to charity when you are short of money and see if one of them will work for you.
2) Pay lower bills
Some people are entitled to discounts they aren’t getting or may be able to get help from benefits through their local authority’s Council Tax Reduction scheme. See What to do if you have problems paying Council Tax for your options.
Energy bills – a crisis
In autumn 2021, just as energy bills are set to rocket, the switching system has effectively stopped.
Suppliers aren’t allowed to charge more than the “price cap”. Before this just helped people who never switched who were being ripped off for their loyalty to one supplier. But now prices have gone up so much that there aren’t any contracts on offer that are lower than the price cap!
I have used MoneySavingExpert’s Cheap Energy Club. for years, as do more than 4 million other households. They send me an email when I can save by switching, but this is what an email from Martin Lewis said on 5 October 2021:
There are no decent tariffs left to switch to – in fact, there are very few tariffs for new customers at all.
On the back of this, I’ve spoken with the team and asked them to temporarily change the way that we operate Cheap Energy Club, and I wanted to let you know what we’re doing.
I’ve asked the team to pause sending you energy alerts for now.
You chose for us to tell you via email when there are cheaper and better tariffs you can switch to, based on your Pick Me A Tariff preferences. These deals don’t exist at the moment. So we simply won’t be sending you any alerts, though if you’re on a fixed deal right now, we will let you know when your tariff is about to end, which means you’ll be moved on to a price-capped tariff.
If you are on some benefits or a low income you may be eligible for £140 off your electricity bill from the Warm Home Discount Scheme – find out how to apply.
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 our 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.
Also see if you are overpaying for TV packages or could manage with different ones. These get ever more complicated as streaming services multiply but you can’t afford to keep on adding new ones unless you let some of the others go.
Have a look at your mobile expenditure. Upgrading at the end of a contract can sound easy and appealing but you may have much cheaper options – keeping a phone for another year on a SIM-only contact will work well for many people. MSE’s Cheap Mobile Finder can help.
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?
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 great. They have absolutely no fees, even if a direct debit is returned unpaid.
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.
In 2021 there are still 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 if 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 to make it easy
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 Plum 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) Pay more than the minimum to your credit cards and catalogues
If you only pay the minimum on a credit card, store card or catalogue it will often take more than 20 years to clear it, as the minimum drops a tiny amount each month.
This is the minimum payment trap and there is a surprisingly easy way out described in that article. If you want to clear a card but can’t afford to pay a lot to it, try it!
Of course this only works if you stop using the card! Which brings me to the next step…
7) Cut down your online spending
For many people spending online has overtaken going out to buy things in shops. And this has been given another big boost with coronavirus lockdowns.
It is so easy to idly look for something and then a couple of taps and it’s on it’s way to you. But is it too easy for the sake of your bank balance?
If you think that is your big weakness, have a look at these tips to let you get online spending under control.
Which will you do first?
You don’t have to do everything here all at once. If you have just lost your job, increasing your pension contributions won’t be on your list at all.
This article is updated every year.