According to financial journalist and all-round consumer champion Martin Lewis, British people could be saving up to £5,000 a year by re-evaluating their spending to ensure they get the best deal on absolutely everything.
Lewis says that although there is massive potential for households to cut wasteful spending and avoid debt problems; getting there won’t be a piece of cake. The whole idea is to move beyond the ignorance that allows companies to rip us off, allowing us to get maximum value for money on everything.
How to reassess your finances
The first step, according to Martin Lewis, is to figure out if you spend more than you earn, making sure to take debt problems into account. The best way to do this is to sit down and systematically add up how much you spend compared to your earnings. This may be very time-consuming, but it’ll be worth it in the end.
Next, you need to tackle each separate area of spending in your household. An example of these sorts of categories would be:
- Grocery shopping – could you save money by buying in bulk, using an “own-label” alternative or by planning meals more carefully (which is often cheaper and healthier than buying a ready meal or takeaway).
- Childcare costs
- Energy and utility bills (gas, electricity, water) – how recently have you switched provider or shopped to get the best deal? Try comparison sites, such as “Compare the Market” or “Money Supermarket” as a starting point.
- Travel – could you save money on travel by walking more or using a bike? Public transport may save you money on parking if you have to travel into a city centre or how about asking at work to try a car share scheme and split the costs with other colleagues.
- Mortgages, loans and other debts – with most financial products, these can all be switched to ensure you get the best available rate and so that you are not wasting money unnecessarily. Try to move debts with large interest rates across to ones with lower rates, or pay these ones off first whenever possible
- Non-essential luxuries like TV and broadband – these should really only be bought if you can truly afford them (once you have worked out your budget and know you can cover the cost). Ensure you are getting the best deal by shopping around and changing provider to the most competitive rate when possible.
- Insurances – whilst necessary in most cases, you can still make sure that you are not paying over the odds by shopping around for your premiums. It rarely pays to accept the first renewal quote that you are sent by your insurance company, as your loyalty will often be rewarded by above-average increases in your premium.
With all of the above, if it isn’t necessary or it is no longer needed, cancel any outstanding policies or agreements – so you aren’t letting money slip through your fingers. This can then be put towards sorting out any debt management issues and helping you to be free from debt problems for good.
Finally, you can also try to find ways to boost your income by selling clutter on eBay or at a car boot sale, or getting a part-time job to supplement your current wages. It may also be worth reviewing your benefit and tax credit allocations, as you may be entitled to claim for more than you are currently doing.
