FOOL SCHOOL
How To Save More Each Month

January 17, 2003

Every penny counts. You'll be amazed at how even little savings here and there can add up. We've already looked at calculating your net worth and assessing how much you spend. Last of all we're going to see what you can do to save more each month.

Increasing your income is difficult to do. For most people, short of getting another job, the best thing to do is to make sure that they are earning a decent rate of interest on any cash balance that they have. Most major current accounts pay a mere fraction of 1%. That's pitiful and it means your money is working for the bank and not for you. There are numerous savings accounts that offer higher rates (our Online Banking Centre has more details), and this is where your spare cash and rainy day money should be.

Reducing your expenses

You might find it useful to think about these reductions in two distinct categories. In the first camp there more efficient ways of spending your money whilst still getting the same product or level of service. Secondly there are those that require a sacrifice of some sort.

We're all different. What some might consider a luxury that they can do without, others might consider a necessity. So look down the list, concentrating on the big numbers first of all, and think about where you might be able to make some savings.

Common examples of more efficient spending are:

• Remortgaging your house to take advantage of a lower rate. You can save hundreds of pounds a year by remortgaging but you need to be careful of incurring any penalties with regard to your existing mortgage. Find out more about this in the remortgaging section of our Homeowning Centre.
• Take advantage of cheap credit card deals or consolidate your debts at a lower level of interest. If you can't consolidate your debts pay off those with the highest rates of interest first.
• Think about changing supplier for your telephone, gas or electricity. Many suppliers also give you a discount for paying by direct debit. The same thing applies with your mobile phone as well. Do you really need to pay that fixed line rental each month?
• Shop around for insurance. Many financial providers rely on our natural inertia and the fact that we won't look around for a cheaper deal. It's highly unlikely that you'll get the best deal on your house and contents insurance from your mortgage provider.

OK, what about those items requiring a little sacrifice? For most people one of the biggest drains on their cash will be their car (or cars). Even after the recent price reductions in new car prices the humble motor remains incredibly expensive. For most people buying a new car makes no financial sense at all.

Other areas are more subjective and the list is almost endless. Do you really need to pay £50 a month for that health club when you could just run round the block or go for a cycle ride? Do you hop in a taxi rather than taking public transport? Do you splash out on lunch each day rather than making your own sandwiches? Do you need to buy the latest video or DVD for £15 if you can rent it for £3 six months later? Do you get the papers delivered every day but never have time to read them?

That's it for this brief introduction. It's time for you to go out and take control of your finances.

Where Next?

• If you've done the quick fixes and you are still in debt then visit our Get Out Of Debt centre for some more intensive treatment.
• If you're looking for help on how and where to save then try our Savings Centre.
• Think you might be ready to start investing? Pop into Getting Started to find out.
• For an overview of the entire financial journey, read the 10 Steps.
• Visit our discussions boards. Living Below Your Means is a great board for finding out how to make those pounds go a little bit further. We also have dedicated boards for Dealing With Debt and Credit Cards.

> Financial Healthcheck - Part 1 | Part 2 | Part 3 | Part 4