Eight ways to make yourself richer
With the long dark winter months behind us and the joys of spring arriving, now is the perfect time to give your finances a thorough spring-clean and see how much you could save.
So whether you want to get a grip on your debt or find a better savings account, our handy guide will tell you all you need to know.
1. Get rid of your debt
Almost nine million people in the UK are dealing with serious debt problems and only a small number is seeking help, according to the Money Advice Service. If you're worried about an outstanding balance you have on a credit card, how can you whip it into shape?
Firstly, work out exactly how much debt you are carrying on your cards plus the interest you are paying. Do this for every card you have. Only once you know how much you owe can you work out how to get rid of it. It might sound obvious but remember that only paying off the minimum balance each month will result in you remaining in debt for longer.
For example, if you have a balance of £500 on a card with an APR of 17% and only pay off the minimum balance of 3% every month, it will take you a startling three years and eight months to clear the balance - and you'll repay £162 in interest.
If you are paying a high interest rate on your credit card, only paying the minimum balance or are unable to up your repayments, the next thing to do is consider a 0% balance transfer card.
2. Don't ignore your credit report
Checking your credit file is a quick way to keep on track of any accounts held in your name. You can access it through any of the UK's three major agencies; Experian, Callcredit and Equifax.
By law, they have to provide you with a copy for just £2. As well as information about your credit agreements and any repayments you may have missed, your credit file also includes personal details and whether you are on the electoral roll. All of these things affect your credit score, which lenders take into account every time you apply for credit – whether for a storecard, mobile phone contract or even a mortgage.
So if you spot any errors, contact the credit reference agency first to log the issue and then contact the company concerned and ask them to amend its records. The credit agency will then be able to update your credit history or include a note explaining the error.
Used correctly, they can be great for tackling debt. That's because once you've paid an initial fee for transferring your debt on to your new 0% card, as long as you don't spend anymore, your debt won't get any bigger for as long as the interest-free period lasts. That will buy you some time to get the money together and clear your balance.
At the time of writing, Barclaycard had just launched the longest-ever balance transfer deal, at 31 months. It comes with a six-month interest-free period on purchases too – not that you should be spending if you're trying to clear your debt – and a standard APR of 18.9%.
But before you apply for the deal – or any other balance transfer card – always remember to make sure you check out the fees you'll pay – which are usually around the 3% mark. Depending on the size of the balance you wish to move, this could impact on the appeal of the 0% period.
The Barclaycard Platinum card has a fee of 2.99%, although Moneywise discovered customers will actually be charged 3.5% upfront, and then receive a credit taking the effective rate down to 2.99% within two working days.
To find more information on the best credit card deals, go to moneywise.co.uk/compare.
3. Make a budget
A surprising amount of households don't sit down and check their statements. And while it may not be the most fun exercise, there's no real excuse for this now, with the ease of internet banking. Going through your outgoings over a month will give you a clear indication of where your money goes.
Check all your standing orders and direct debits. Only by doing this can you spot the things you're paying for but no longer need such as a film-subscription service or an under-used gym membership.
There are a number of websites and apps that can also help you plan your budget, including Toshl Finance, the Money Advice Service's budget planner, and MoneyWhiz, which is available for £2.99 from the App Store.
4. Switch to a better deal
Too many of us are content to remain with the same old companies we've always been with for our phone, broadband, energy or bank account. Instead, we should all be finding out what's on offer from rival firms and working out if we'd be better off by switching to them.
For example, despite the Big Six energy firms putting their prices up last year, the vast majority of us – 98.5% – still use them. However, there are a number of alternative providers, such as First Utility and Co-operative Energy, that aim to offer a simple alternative to the dazzling array of tariffs which the Big Six offer, and at competitive prices.
Tom Lyon, energy expert at uSwitch.com, says there are big savings to be made."You could be richly rewarded by looking beyond the traditional Big Six suppliers - currently the most competitive plans on the market are held by the smaller suppliers," he says. Whether it's the cheapest tariff or long-term protection from price rises that they seek, the small suppliers have plenty to offer."
It's not just our energy supplier we've been getting too comfortable with – even when our bills seem to climb ever higher. Many of us are also guilty of staying with the same mobile provider year in, year out, and some of us forget to act to find better deals when our fixed-term contracts come to an end.
And those who steer clear of phone contracts altogether and instead opt for pay-as-you go may also be unable to escape wasting money on their bills.
Ernest Doku, telecoms expert at uSwitch.com, says: "Around 10 million Brits on pay-monthly mobile contracts overspend each month - adding an average £100 a year to their mobile bills. Whether you are going over your limit or under-using your allowance every month, you are throwing money down the drain."
So if you're on pay-as-you-go, stay on top of what you're spending by checking your average monthly usage – which should be on your bill, says Doku – or call your network to ask for the information.
Doku has another good tip for contract phone customers: "If you've taken out a pay-monthly contract with a 'free' handset, the cost of the mobile is included in your monthly bills. If you're happy with your current phone, switching to a Sim-only deal once you're out of contract will mean you cut your bills and avoid spending more on a handset you've already paid for in full."
5. Don't double up
Always make sure you don't pay for anything twice. For example, there is no need to pay for a packaged bank account for the sake of the mobile phone insurance it offers if you have a decent home contents policy. Mobiles are typically covered both in and out of the house by most policies.
6. Boost your income
A thorough spring-clean of your home as well as your finances can unearth all sorts of unwanted and discarded items - many of which have the potential to boost your bank balance.
Websites such as eBay can be useful for selling pretty much anything. You can set a minimum price you're happy to sell for but you'll usually pay to list the item if you secure a buyer – although the site runs free listings days every so often when it waives the selling fees.
There are plenty of other free sites you can try. In a modern twist on newspaper classifieds, sites such as Gumtree and Preloved allow you to post adverts for your items. Musicmagpie is a good way of turning unwanted CDs, DVDs, video games and clothes into cash as well.
However, if you don't have anything to sell, you could boost your income by giving up some of your free time. More and more of us are taking on a second job as a way to make ends meet. The Debt Advisory Centre says more than 8.5 million Brits are now working in two jobs.
If you are considering taking on another role, then childcare, cleaning, baking and gardening are popular money-spinners, as these jobs offer a fair amount of flexibility. But remember that a second job can affect the amount of tax you pay and potentially your National Insurance contributions, so check the rules at HM Revenue & Customs.
7. 'Sweep' your current account
One way to boost your savings pot without really noticing is to get your bank to set up a ‘sweep' on your account. At the end of each month your bank will take whatever is left in your account after you've paid all your bills and pop it into a savings account for you – a simple but effective way of ensuring you're saving every bit of disposable income you have.
8. Build up your savings
When you've decided on how much you can comfortably save, the next decision is where to put it so you can get the most out of your rainy-day pot.
With interest rates remaining paltry, it is more important than ever to try to make your savings work as hard as they possibly can. And for many of us, the best way to do this is to put our cash in an Isa.
For a complete up-to-date list of all the available cash Isas, visit our best cash Isas page.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.
A report containing detailed information on a person’s credit history, a record of an individual’s (or company’s) past borrowing and repaying, including information about late payments and bankruptcy. It also includes all applications a person has made for financial products and whether they were rejected or accepted. Your credit report can be obtained by prospective lenders to determine your creditworthiness.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.