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FOOL'S EYE VIEW
I've been practising extreme budgeting since the start of the year, although I wouldn't recommend it to everyone! By having "Spend Nothing Days", avoiding cash-machine withdrawals and carrying hardly any cash (as the Royals are said to do), I've dramatically slashed my everyday expenses. However, I'm still struggling to cope with my ever-larger bills (my new Council Tax bill is over two grand), so I'm always on the lookout for ways to save money. Here are a dozen that I dreamed up: 1. Track your expenses In the late Eighties, I was a student with Champagne tastes and a beer income. Eventually, I found myself massively in debt and had to take steps to reduce my spending. So, I bought my "little red book", in which I recorded every single penny that I spent, whether by cash, cheque or card. Although my income is now many times larger than it was when I was but a callow youth, I still need to keep my spending under tight control. Therefore, I've decided to track my expenses for the rest of the year. Obviously, the first entry will be the cost of the notebook itself! One bonus is that tracking all your expenses makes you spend less. It's true - just the effort of getting out your notepad can put you off purchasing something, not least because it helps to separate your "wants" from your "needs". If my little notebook saves me just £1.37 a day, it becomes a £500-a-year weapon against wasteful spending! 2. Start calling your credit card your debt card There are more credit cards than people in the UK, and two out of three of us carry one or more. However, they're dangerously misnamed, because they're actually debt cards. Imagine how different it feels to say, "Thank you, I'll put it all on my debt card" or "I paid for my holiday on my debt card". I guarantee that you'll fall out of love with your plastic after a few weeks of saying "debt card"! And while you're at it, why pay interest on your existing credit-card debts? Simply transfer them to one of the hundred or so cards that charge no interest on balance transfers for an introductory period. Aim to find one that offers 0% on balance transfers for at least nine months, and charges no interest on purchases, too. This interest-free breathing space is a great opportunity to throw money at your debt and kill it off faster. You'll find several tip-top 0% cards in our Credit Card centre. 3. Beat the supermarkets Supermarkets make serious money from shoppers: Tesco alone expects to make pre-tax profits of £5½ million a day during 2005. So, don't feel bad about clipping a few pounds here and there from your weekly shopping bill. All you need to do is save £9.62 a week to recoup £500 a year. Hence, make the most of supermarket 'loss leaders', which carry attractive discounts designed to get you through the door, and fill your trolley with special offers on essential non-perishable goods. Use those coupons, money-off vouchers and loyalty points to reduce your bill – and be aware that some stores will take their rivals' vouchers. Also, check out Fixture Ferrets, which allows you to compare prices at seven major supermarket chains, and Trollydolly, which compares prices at Asda, Sainsbury's and Tesco. 4. Swap your life insurance policy After falling for years, life insurance premiums are expected to creep up in 2005, thanks to the factors described in this article. Of course, shopping around for cheaper cover is one answer, but here's another simple way to cut the cost of protecting your loved ones: Many people buy life insurance that pays out a lump sum that replaces their income if they die. However, if this policy isn't covering a mortgage or other debt, why does it need to produce a lottery-sized payout? Actually, it would be better to have a policy that pays out a tax-free income to your family. The premiums for this cover (known as family income benefit, or FIB) can be half those for comparable lump-sum policies. In this article, I showed how switching to FIB could save a 35-year-old man a tasty five grand over thirty years. Get a competitive quote for life cover in our Insurance centre. 5. Sell unwanted stuff on eBay When moving house last October, I came across loads of things that I hadn't used in years, plus lots of stuff that had been gathering dust in my loft. Much of this jumble was thrown away, recycled or given to charity, but I held onto a few things. I'm going to auction or sell what I kept – mostly books, CDs, DVDs, LPs and VHS videos – on eBay or Amazon's Marketplace. I believe that my large book collection could be worth upwards of a grand to sci-fi enthusiasts, so it's time to find out! 6. Get cheaper home, motor and travel insurance This is an obvious tip, but one worth repeating. According to the latest British Insurance Premium Index from The AA, there's a big gap between the typical premiums that we pay and the average of the three lowest quotes that it found:
Finding cheaper Typical Shoparound Annual Travel* Home contents 1,216
insurance
Cover
premium (£)
premium (£)
saving (£)
Comprehensive car
756
458
298
Home buildings
209
132
77
100
25
75
151
87
64
Total
702
514
*these figures are taken from this article, not from The AA's survey.
So, the next time that an insurance renewal or reminder drops through your letterbox, don't just automatically renew your policy – shop around instead. Even buying from the same company online could reduced your premium by a tenth (10%). And don't buy travel insurance from your tour operator or travel agent, because you'll pay through the nose!Slash your premiums with a visit to our Insurance centre.
7. Give yourself a feel-good boost
Instead of indulging in a bit of "retail therapy" by buying the latest designer gear or gadget, why not do something that is guaranteed to make you feel good about yourself? For instance, giving blood costs nothing (well, only an armful!) yet always gives me a buzz, and giving money to charity through Gift Aid is both rewarding and tax efficient! All you need to do is spend £41.67 a month less on luxuries to hold on to an extra £500 a year.
8. Buy everyday goods online
Shopping around online enables you to make big savings on recommended retail prices (RRPs). For example, I bought The Incredibles on DVD for £9.49 last week, a saving of £13.50 on the RRP of £22.99, or a whopping 58% off. Also, I recently bought a Best Buy child's car seat online for £65, saving £25 off the RRP, or 28% off. This discount took about five minutes to find, which means that I was briefly earning £300 an hour!
I reckon that I easily save £500 a year from online price comparisons, which I also use as a negotiating tool when haggling in the high street! This article lists a few of my favourite websites for shopping around.
9. Slash your communication and energy bills
Thanks to two modern miracles - the mobile phone and the Internet - we spend far more on communication than we once did. But there are impressive savings to be made by switching your mobile tariff, Internet Service Provider and home-telephone service. You can even get completely free calls using your PC, or pay just 1p for every UK call. These three switches could easily save you £400 a year.
Check out this free phone-comparison service from Fool Partner uSwitch.
Another easy gain is to switch gas and electricity suppliers. Yeah, yeah, I must mention this topic at least one a fortnight, but the message still isn't getting through. At present, around two-thirds of households have yet to switch from their local or incumbent suppliers. This means that there are sixteen million households yet to save an average of £170 a year by switching!
See how much you could save on fuel bills with uSwitch.
10. Bring a packed lunch to work
Until this year, I bought my breakfast and lunch either on the way to work, from the sandwich man who visits our office, or by popping out to local shops. However, this was an expensive way to feed myself, as I was spending roughly £6 a day on breakfast, lunch, drinks and snacks. With 227 working days a year (after deducting personal and Bank holidays), my laziness was costing me £1,362 a year. Yikes!
These days, I bring a packed lunch to work. To tell the truth, it's usually lovingly crafted by my long-suffering wife - thank you, darling! This year, I've been eating healthier food that contains quality ingredients (no more trips to fast-food outlets), plus it costs about £5 a day less. Oddly, some people feel embarrassed about bringing sandwiches to work, but it's very common in the US, where it's known as "brown bagging". Several of my colleagues do the same – and we're saving upwards of a grand a year thanks to better eating habits!
11. Don't buy payment protection insurance when you borrow
Payment protection insurance (PPI) is optional insurance that covers your repayments on a mortgage, loan or credit card if you lose your job, have an accident or fall ill. Non-mortgage policies also pay off your debt if you die. Although PPI appears to be valuable protection, it's ruined by poor policy design, oodles of small print and get-out clauses, plus massive commissions. In fact, about four-fifths (80%) of your premium is gobbled up by the commission that your lender creams off. Yikes!
Saying no to PPI could save you upwards of £1,000 on a £5,000 loan. For example, borrow £5,000 over three years with a protected Barclayloan and you'll pay back a total of £7,179. Ditch the PPI and this total falls to £6,150. In other words, Barclays is charging you £1,030 for a policy that you'll most likely never use. My advice would be to kick loan protection into touch every time!
Believe it or not, PPI on credit cards (often called credit card repayment protection, or CCRP) is even more over-priced. Most major card issuers charge a monthly premium of around 79p for every £100 that you owe, which comes to 0.79% of your balance. In other words, the annual cost of CCRP on a balance of £3,000 is almost £285. CCRP is money for old rope as far as lenders are concerned so, if you're not claiming at the moment, cancel your policy today! If you need this peace of mind, try an income protection policy instead, or buy PPI through a broker or online.
Get a low-cost loan from our Personal Loans centre or a super 0% credit card.
12. Stop playing the Lottery
Spend £5 on each Wednesday and Saturday Lotto draw and you have a £520-a-year gambling habit. As I explained here, the Lotto is a brilliant way to lose money. In fact, over the long term, you should expect to lose around 75p of every quid that you hand over to Camelot. Instead, why not put your weekly tenner into a high-interest savings account, where you're guaranteed to make money and be a winner?
More: Six Ways To Make A Million | Seven Things Your Bank Keeps Quiet.