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MONEY COMMENT
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Until a couple of years ago (when my son was born), my wife and I both worked full time. We both had high incomes and good benefits packages at work; we had a small mortgage and little or no debt; and we had plenty of money left over each month to save substantial sums. Although we didn't appreciate it at the time, we were in financial Nirvana - not to be confused with the seminal grunge band of the same name! However, when the little one arrived, our world was turned upside down on many levels. My wife took eight months off work before returning to part-time work last year. Having another mouth to feed is also a strain: all new parents quickly learn that children are remarkably expensive to raise. Also, I'd become fed up and left corporate life last year to seek my fortune as a financial writer. It goes without saying that working for the Fool doesn't pay as well as middle management in financial services (but, just like Warren Buffett, I tap dance to work every day)! Looking back, it's a jolly good thing that we saved as much as we did, because times are a lot harder now. Just today, my wife commented that her outgoings were larger than her income these days. To be fair, she pays our two largest bills (I pay most of the rest). The mortgage and childcare fees together dispose of around half of her salary. Nevertheless, we're living on a fraction of what we had in our golden era, so we've been forced to be more creative with our finances. You could argue that we're on a lasting financial diet for the foreseeable future, which could prove to be a good thing. Here are five fundamentals of our diet: 1. Re-mortgage (read Make The Most Of Your Mortgage) 2. Shop Around For Car Insurance (read Keeping Down The Cost Of Motoring) 3. Shop Around For Home Insurance 4. Switch debts to 0% credit cards (read Switch To Interest-Free Cards) 5. Switch fuel providers (readSlash Your Household Bills) So, if your finances are looking a little bloated, why not come up with a financial diet of your own? Who knows, an hour a week could help you become a little richer every year....
By paying a penalty to get out of our fixed-rate mortgage and then switching to a tracker mortgage, we reduced the interest rate on our mortgage from 6.25% to 4.5% at present. This saves us almost £100 every month.
I don't run a car, but my wife does. She's never caused an accident since learning to drive at 17, so she has the maximum no-claims discount. Her faultless driving record and the fact that she drives a small family car means that her insurance premium is already very low. However, we've saved money every year by shopping around (although, to be fair, we often end up sticking with Direct Line).
This is something I love to do. I worked in insurance for 15 years before joining the Fool (although not in this field), so I'm fairly clued-up on how to get the best deal. For years, we used a major insurance broker to do this for us. However, we never renewed our buildings and contents policies without first re-broking our business to find the best deal at that time. Last year, our premiums shot up but, using the AA website, we managed to save over £100 on our buildings insurance alone.
Unsecured (non-mortgage) debt can be horribly expensive: each year, the interest can cost you up to 30% of the amount you owe. It's possible to save a tidy fortune by switching loans, overdrafts, credit and store card balances to 0% cards.
I'm amazed that perhaps only a quarter of UK households have switched gas and electricity providers. We've done it twice and it's been a doddle both times. This saves us at least £100 a year.