FOOL'S EYE VIEW
Ten Tricks To Make You Richer

By Cliff D'Arcy
May 15, 2003

When it comes to my personal finances, I'm no angel, despite my job. Even after fifteen years working in financial services, I still over-complicate my financial life at times. My main problem is letting things drift along too much when I know something needs sorting out.

Still, I do put some time aside to tackle my finances (at least twice a month), so I keep things on track overall. Even so, I make as many money mistakes as the next person; I just try and learn from experience. Here are ten good habits that could make us all better off:

1. Open all bills and statements

We wouldn't last too long in our jobs if we refused to answer (or even open) our correspondence. So, if you dread the thought of opening certain envelopes, you need a new approach.

One way to make bills and statements easier to face is to think of them as calls to action. Open every bill while saying, "This is too high - how can I reduce the next one?" and let your bills become triggers to shop around for a better deal. For example, it's so easy to slash your energy bills with one quick Web session.

2. Track your biggest expenses

No matter what your salary is, if you spend more than you earn, you'll eventually go bust. Successful people and businesses track their expenses meticulously in order to understand where their biggest savings can be made. If you write down your ten biggest monthly outgoings, it'll be easy to see where you can save. You don't have to log every purchase in a little book, just become familiar with where, say, 90% of your money goes, and you'll have a good enough grasp.

3. Don't stick with one mortgage lender

Loyalty is an admirable quality (especially in dogs), but don't expect to see it in mortgage lenders. Once they've lured us into their clutches with special deals, lenders tend to treat existing customers pretty shoddily. What they pray for is customer apathy: that we'll sit there quietly for 25 years, paying the full standard rate and earning them a fortune in the process. Your mortgage will be one of your biggest commitments, so learn how to make it sweat.

4. Use the right credit card

Credit cards are incredibly useful, whether you borrow money or not. If you don't need to borrow and can always pay off your balance in full, credit cards can offer you valuable protection, 'cashbacks' and interest-free credit for up to two months. If you need to borrow money for six months or less, you can do it interest-free with a credit card. Read Cunning Credit Card Conduct for the full story.

5. Don't save money in notice accounts

Thanks to the popularity of the Internet, some of the highest interest rates on savings are available on instant-access accounts, both online and on the high street. So why do some people earn lower interest by locking their money away?

For example, Safeway (LSE: SFW) is paying 4% gross to savers willing to tie up £500 or more for at least 60 days in its postal account. This is one of the best notice accounts; most deals are far worse than this. It's a no-brainer: why lock away your money when you can earn a tidy 4.3% on just £1 in ING Direct's instant-access Internet, postal and telephone account?

6. Don't get a loan from your bank

Most high street lenders have a marketing strategy based on laziness -- ours. Their marketing managers (to my shame, I was one once) know that around 8 out of 10 of us will go straight to our local branch for a personal loan without shopping around at all. Thus, they don't bother pricing loans competitively to challenge the Best Buys; they price for maximum profit. If you're buying a car or raising money for home improvements, a holiday and so on, here's how you can find the best personal loan.

7. Choose index trackers over managed funds

One of my brightest -- and wealthiest -- friends is a big hitter in an American investment bank. He's a brilliant guy, highly educated, charming, insightful and talented (with an income to match!). However, his predictions for the year-end levels of the UK stock market have been pretty terrible in recent years (as have those of all the leading commentators.)

One thing I've learned is that, despite employing these highly skilled people, most investment funds underperform the UK stock market over the long term. This year's best-performing funds have only an average chance of being next year's best performers, suggesting short-term outperformance is based on luck, not skill. By sticking to index trackers, which track the overall market closely and have low charges, you'll do better than most professionally managed funds.

8. Use up tax allowances

If you're given a tax allowance, use it. Don't pay tax on savings (at up to 40%) when you can save £3,000 every year in a tax-free cash mini-ISA. If you pay tax and your spouse doesn't, transfer income-producing assets to him or her and pay less tax between you. Read more in Eight Ways To Pay Less Tax.

9. Be prepared for the worst

We Foolish writers are always pleased to receive e-mails from fellow Fools (you can do this by clicking on the link under every article's title). As I often write about family finances, I sometimes get e-mails from Fools who have tragic tales to tell.

I feel privileged when some brave Fool tells me about his/her spouse dying unexpectedly, or being forced to retire young due to ill-health. By warning others about these everyday tales of catastrophe, I try to bring reality home. As a starting point, try reading Five Things Every Family Should Have and visit our Insurance Centre.

10. Always use your secret weapon

If you approach every financial transaction unarmed, with your eyes and ears firmly shut, you'll get what you deserve ("Please bend over the desk, take a deep breath and brace yourself...")!

If you want to come away feeling that you've performed well, and glowing in the knowledge that you've secured a great deal, learn to shop around. There is a huge difference between the worst- and best-value financial products, but no-one's going to show you how to understand the differences. Shopping around shrewdly will teach you more about good and bad products than anything else and should turn you into a canny "money Black Belt" in the process.

Use our Centres to shop around: Mortgage | Credit Card | Personal Loan | Savings | Index Tracker | Insurance.