Most people pay their council tax in ten equal monthly installments, not twelve. So in February and March you have two months with nothing to pay. Some water companies also bill like this, collecting eight monthly payments with nothing to pay from December to March.
If you like your budget to be as regular as possible, with the same out-goings each month, this isn’t a very helpful approach. But it does give you a small windfall now… so how are you going to take advantage of these two very cheap months?
You may already have plans for the money, for example if the car needs its MOT or this quarter’s gas/electric bills will be high. But if you don’t, it’s good to make a positive choice, otherwise it may just get frittered away without you really noticing.
So, which of the following would make your life easier in 2017? Is it better to pay the “extra money” off an existing debt or save it?
Do you have any priority debts?
Priority debts are the ‘must pays’ that can make your life really difficult if you get into problems with them – there is a list of them here: Which debts are priority debts and which are less important? Think about using these two months spare money to reduce or even clear one of these problems.
High cost debts
Guarantor loans such as Amigo, logbook loans and Brighthouse-style pay weekly debts are all horribly expensive and difficult to escape from. If you have any of these, that’s where this and any other extra money should be going!
Payday loans and doorstep lending such as Provident can be even more expensive, so they should also be high on your list of debts to target with spare cash.
If you have bought anything from a catalogue on 6 months or a years free interest, check when that is going to end. It’s easy to forget that you do have to pay for these! Be late paying by even a day or two, and that “great offer” turns into a huge hit as you get slapped immediately with a charge for the high rate of interest right back to when you bought it. If this is in a few months time, perhaps use this council tax money to prevent this happening.
Which is your next most expensive debt?
Have you heard of snowballing? It’s the fastest way to clear your debts and end up with a great credit record.
In snowballing you pay the minimum off all your debts except one which you overpay as much as possible. Some people like to tackle the debt with the highest interest first, others the smallest debt – you need to think which approach will work best for you, it’s more psychology then logic. When that debt is gone, you move onto the next one.
So the money that isn’t going on the council tax can be used to make February and March’s snowball bigger.
Start an emergency fund
When money is tight, the idea of having an emergency fund might seem like wishful thinking. But it really can make your life in the rest of the year a lot less stressful. So if you don’t already have one, why not use these two months to start one? Or if you do but it’s got little or nothing in it, then give it a much-needed boost?
Credit union accounts are ideal places for an emergency fund. You can get easy access to your savings, but it’s not linked on-line to your bank account, so you won’t be tempted to dip in too often. There may be a credit union linked to your job, or there may be one in your local area. Check this Credit Union Search facility to see if you can join one. Once you are a credit union member, you may also be able to get a loan at a good interest rate in future.
If you are behind with council tax
If you have got behind with the council tax, these two months are a chance to catch up. Council tax debt is one of the biggest problems in Britain – in 2018 an estimated 2.2 million people had council tax arrears.
Council tax is a “priority debt” – you can be sent to prison for not paying it in England. That is very rare, but councils can be very fast to go to court and pile on extra charges and bailiffs fees, so this isn’t a debt to ignore – read What to do if you have problems paying your Council Tax.