It’s always a good time to review your finances and get into better spending habits. Rather than cutting back on the joyful things in life, however, let’s consider some ways to save money that won’t impact too much on your lifestyle.
Review Your Borrowings
Many people don’t review their mortgage regularly. Interest rates are generally still on the low side, which means that mortgage borrowing is cheap (historically speaking). But a mortgage is probably the most substantial, and longest-running debt you will ever have, meaning that it costs more over the long term.
Of course, there may be fees to consider, and early repayment charges will apply if your existing deal runs for a fixed term. But if you are approaching the end of your deal, or if you have not renewed your mortgage recently and are on the bank’s standard variable rate, you could make significant savings.
Remember also that the debt is reducing all the time, and your credit may be better than when you first applied for your mortgage. This can open up more competitive deals. It is worth seeking mortgage advice to find out if your borrowing situation can be improved on.
Your home may be repossessed if you do not keep up repayments on your mortgage.
On a smaller scale, you could also look at transferring your credit card balances to a 0% deal. While you should still prioritise repaying these debts, this means that your entire payment goes towards reducing the debt rather than servicing the interest.
Save on Childcare
While the Childcare Voucher scheme is no longer open to new entrants, it has been replaced with Tax Free Childcare. When you open a childcare account, the government will contribute £2 for every £8 you personally fund. This is broadly equivalent to basic rate tax relief. There are a few conditions:
- You cannot receive Tax Free Childcare if you are in receipt of Tax Credits or Universal Credit.
- There is a cap on the amount the government will contribute. This is up to £2,000, or £4,000 per annum for disabled children.
- The money must be used to pay for approved, registered childcare.
- You, and your partner if applicable, must be either:
- Working
- On sick leave or annual leave
- On parental, maternity, paternity or adoption leave. If you’re on adoption leave, you cannot apply for the child you’re on leave for unless you’re going back to work within 31 days of the date you first applied.
- Earning at least the National Minimum Wage for at least 16 hours per week (this does not apply if you have started a new self-employed business in the last 12 months)
- Tax Free Childcare is only available if both you and your partner earn less than £100,000 in taxable income.
- Your child must be 11 or under, or if they are disabled until the 1st September after their 16th birthday
Reduce Your Bills
Reducing bills is easier than ever now, with numerous comparison sites able to filter and sort the best deals for your needs. The main comparison sites are:
- Money Supermarket
- Money Saving Expert
- Compare the Market
- Go Compare
- USwitch
You can compare and save on various household bills, including
- Gas
- Electricity
- TV Packages
- Phone and Broadband
- Mobile contracts
- Buildings & Contents Insurance
- Car Insurance
Remember some companies do not appear on price comparison websites, but if you are comparing multiple contracts at once, you will save a vast amount of time by using a price comparison site.
Cut Your Grocery Spend
There are a number of ways to save on your food shop, which will depend on your lifestyle and family situation. There are entire websites devoted to this subject, but here are some suggestions:
- Plan your meals for the week, and only buy what you need
- Shop online to keep spending under control
- Use www.mysupermarket.co.uk to compare prices across the main grocery retailers • Switch to discount supermarkets
- Try supermarket own brand or discount ranges. Buy branded items only when on offer. • Buy non-perishable items in bulk
Seek out discount coupons for eating out, or go a little earlier and order from the set menu.
Pay Less Tax
Saving on tax means more money in your pocket. While tax planning is a complex area, here are a few simple ideas that most people can use to save tax:
- Increase your pension contributions
- Use your ISA allowance
- Make sure you are claiming all the reliefs you are entitled to
- Take advantage of benefits provided by your employer
- If you have a business, check with your accountant that it is structured in the most efficient way
Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
The Financial Conduct Authority does not regulate taxation advice.
What to Do with The Savings
If you have gone through all of the above steps, you may well have saved some money.
Rather than wasting all your hard work and spending your savings, make a plan for what you would like to do with the money. For example:
- Pay off some debt
- Increase your emergency cash reserve
- Top up your pension, allowing you to retire earlier. Remember that tax relief will increase a £100 contribution to £125 for a basic rate tax payer.
- Pay more into your ISA for long-term investment growth
- Take an extra holiday each year
- Start a new class or hobby
The value of your investment can go down as well as up and you may get back less than the amount invested
With a small amount of effort, and no real change to your lifestyle, you can create good habits that lead to a happier, more fulfilling life.
The content in this article was correct on 01/02/2023.
You should not rely on this article to make important financial decisions. Teachers Financial Planning offers independent financial advice on savings, pensions, investments, protection and mortgages for teachers and non-teachers.
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