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Reducing Household Expenses and Monthly Costs
With a cost-of-living crisis and spiraling energy prices, everyone feels the squeeze on their household budget.
Our financial health check provides a comprehensive and defined structure so you can work through all your household costs and look at different ways to reduce them.
Mortgage Repayments
- Most mortgage holders are on a fixed rate. Diarise when this is due to end and plan accordingly. You can book a new product up to six months ahead. You could re-mortgage to a different provider to take advantage of a better deal, but this takes a bit longer to arrange than staying with your current lender and may need a survey. If you shop around, use a whole-of-market mortgage broker.
-You could add this to your re-mortgage if you have a lot of unsecured debt. You'll pay it off at a lower interest rate and over a longer term, making it much cheaper each month. However, over most mortgage terms, you will end up paying more interest in the long run, but this might be worth doing if you're struggling to meet the regular repayments on your credit.
-If you're having difficulty managing your mortgage payments and re-mortgaging isn't an option, speak to your lender. Safety nets include taking a short repayment holiday, extending the mortgage term, or switching to 'interest only' for a defined period.
Energy Bills
- Check your energy tariff and make sure you are getting the best deal. Sometimes, there's not much difference between a fixed and variable tariff. Don't assume your energy supplier has automatically put you on the most advantageous package.
- Compare the best deal from your current energy supplier with competitor providers. Use a whole-of-market comparison site to find the cheapest fix. Watch out for exit fees if you consider switching before your deal expires.
- If you pay by direct debit, monitor your usage and whether your account is in credit or debit. If you fall behind and owe money, your energy company could unexpectedly hike the monthly payment.
- Consider wind and solar options – you don't have to have a large property or a big installation. Some products, like portable power stations (PPS), work with small moveable solar panels. These can support your energy usage and are freestanding so that you can use them around the house. They feature multiple outlets and ports for different appliances and devices. You don't need to opt out of the grid, which is there for backup.
- The best way to reduce your energy consumption is to use less power. Turning the main thermostat down by just 1°C can save £100 per year on average.
- Smart technology can help you with lighting and heating, turning down thermostats, and switching off lights in empty rooms. Apps will also allow you to have different temperatures around the house rather than a one-size-fits-all approach, where some rooms are warmer than needed, or you are heating empty rooms.
- Thermostatic radiator valves (TRVs) can control which rooms are heated and when in conjunction with room thermostats and timers, an alternative to Smart technology.
- Electric ovens and hobs are more energy efficient than gas equivalents. However, gas cooking will create lower energy bills because gas is cheaper than electricity.
- Stop using expensive appliances like full-size ovens and swap to air fryers and slow cookers.
- If you need to replace an appliance, use 'best buy' guides to find the most energy-efficient model.
- Part of good energy efficiency is not allowing heat to escape from your home. Insulate or re-insulate your loft, install draught-proofing, or fit new double or triple glazing. There may be supplier or government schemes and incentives to help with the cost.
Debt and Credit Payments
- If you use a credit card, see if you can switch to a new provider with a low or zero introductory interest rate offer.
- If you use credit regularly, consider combining expensive store and credit cards on a secured loan; you will pay more interest over the longer term. However, you can save hundreds each month with lower rates and have the convenience of one combined lower monthly payment. Secured loans are typically cheaper on a monthly basis than a traditional bank loan or unsecured loan.
- If you want to borrow a small amount of money, say under £3,000, a 0% money transfer credit card can be cheaper than a traditional bank loan, which usually carries high interest rates. You can move money from the credit card to your bank account for a one-off fee.
- If you need to borrow, do some work on your credit score first. Customers with high credit scores have a better choice of products typically at lower interest rates than those with low credit ratings.
Tech
Tech is becoming an increasingly expensive part of many households' monthly budgets, indicating how important it is in our lives and how much we use it. In most homes and multi-gadget households, Broadband is as vital as running water, and the costs can quickly spiral out of control.
- Like with your energy provider, shop around to find the best deal in your local area – services may vary depending on where you live. Switch provider when your current contract ends – you might also be able to upgrade your package for a more reliable and faster connection. There are broadband comparison services available that work based on your postcode.
- If you're still on standard Broadband or ADSL, then upgrade to fibre; it usually doesn't cost any more, and you'll get a better service.
- If you pay separately for TV, Broadband, and mobile phones, consider combining them in one package to save money.
- Check over your mobile phone contract and ensure you are not paying for things (like a data allowance) you don't use. Many mobile phone deals lure customers with wonderful promises, often including services you'll never use.
- Save on your mobile by buying a phone outright and then shopping around for a sim-only deal; prices can start from as little as £5 per month.
Travel and Motoring
Hybrid and remote working have helped to reduce travel costs for many people. However, if you can avoid using your car, there are plenty of cheaper ways to travel.
- Leave the car at home and walk or cycle.
- If you have a petrol or diesel car, then consider an electric vehicle, although the current depreciation of these cars is eye-watering, and they are expensive to buy.
- Look at e-bikes, rapidly becoming one of the most favoured types of travel. These pedal-assisted cycles are far cheaper than an electric vehicle and allow you to travel further with less effort, making them perfect for the work commute. Take advantage of cycle lanes and ditch car parking hassle and expensive charges. E-bikes can be charged at home at a cheap rate or free if you have solar or wind energy.
- If you have a regular commute to an employer, consider a lift share scheme, which many large organisations like councils or universities already operate – you could even start your own if there isn't one!
- If you live in a busy area or are near a train station, tube station, or airport, consider renting out your drive or spare parking space. Several large platforms offer this service, or you could do something more informally via social media.
If you have a motor insurance policy, then shop around before renewal. Most car insurers will increase your premium year on year.
- Check your policy, and don't pay for extras that you don't need.
You can also reduce the premium by increasing the voluntary excess, the amount you pay in the event of a claim.
- Pay for motor insurance annually rather than by direct debit, which is cheaper.
If you are insuring new, young drivers, add an older adult as a named driver on the policy; this can help reduce the premium.
- Look at black box policies that use GPS or Smartphone apps to monitor driving habits, which can result in a lower premium if the driver stays on the right side of the line.
- Use less fuel by reducing your speed and driving smoothly with less rapid acceleration and sharp braking. Most modern cars provide feedback about how economical your driving is. Use the dashboard indicator, which tells you when the most efficient time is to change gear.
- Try and avoid using heated seats and air conditioning as these features drain a lot of power. Used regularly it can have an impact on your fuel bills. However, don't avoid using the air con completely; it can develop problems if you don't run it.
- Check your tyre pressures regularly – low pressures or faulty wheel alignment mean the car has to work harder and can seriously impact fuel economy.
- Set your sat nav or app to an eco-route. Eco routes are designed to be the most economical way to reach your destination. Although not the fastest or the shortest, algorithms can calculate a journey that will take you to that location using the least amount of fuel based on average speeds and driving patterns.
Bank Charges and Repeated Payments
Banking apps make it easy to track your money and identify payments you don't recognise. (EDITOR: My wife and I did this and we were able to claw back hundreds of Pounds of money.)
- Some high street banks charge a monthly service fee just for banking with them, often with different account service levels and extras. Depending on how you use your account, the cost may be low or offer value for money. If you don't use an overdraft and add-ons, switch to another provider for free banking.
- If you are using an overdraft then check whether there are fees attached and the APR; some banks charge APRs up to nearly 40%. Pay the overdraft off or switch providers – you can switch with an overdraft, although the new provider's facility may not match your original overdraft.
- Check through your monthly standing orders and payments; it's easy to find occasional things like annual subscriptions you don't notice and may no longer need.
- Repeating payments are not usually taken by direct debit or standing order and are harder to identify until a payment leaves your account. These payments are called a CPA or Continuous Payment Authority. A CPA is where you have given an organisation authority to take a payment from your card when they want to; subscriptions for things like streaming services or gym membership are commonly collected in this way. Some banks list CPAs in a separate section, like Direct Debits, as part of your account management, but many don't so that a CPA will look like a regular card payment on your statement – that's why they can be hard to spot. Check your bank statement for the past twelve months to identify any payments you don't recognise. Cancel any CPAs you don't need and investigate any that are not familiar.
Protection Against Fraud and Scams
With a high proportion of transactions and services now managed online, including banking, it's never been more critical to understand how fraud and scams work so you can protect yourself.
Most scammers are out there to try and get their hands on your money, either directly by accessing an online account, selling you fake goods or services, or indirectly by stealing your identity. Scams operate on many levels, from the chance to the sophisticated, and are constant.
There is virtually no area of our daily lives that isn't subject to scammers, from fake parking tickets to bogus holiday cottage bookings where people turn up at a normal residential property expecting to walk in and unpack.
Here are our top tips to stay safe:
- Always view unexpected texts, calls, and emails with extreme caution. If you are concerned, call your bank back on a genuine number. Emails from African princes in dire need of money are easy to spot, but some phishing emails designed to look like they are from your bank are incredibly convincing.
- Don't impulse buy or invest on social media or if you see pop-ups; at best, you may end up with something you didn't really want or need, and at worst, you could be trading with a criminal.
- Only buy from reputable websites with appropriate security in place. Try and verify where an item comes from. It takes time out of your day, but it's always worth reading genuine reviews.
- Always take independent professional financial advice before investing money and check that the firm's credentials are genuine. The Financial Conduct Authority (FCA) has a site called ScamSmart, which identifies unscrupulous or illegal investment companies.
- Always view emails or text messages that say you have won money or are owed a refund with suspicion – they are almost always scams to get you to part with your banking details or make a payment upfront to access the money.
- Never click on links in unprompted text messages or emails. A common scam is that a courier is trying to deliver a parcel, which may well be true for many people, and scammers rely on this.
- Keep your laptop and other devices safe by downloading the latest security software. Some viruses lie dormant for a long time before they are activated.
Always use strong passwords and if you can't remember them all (who can!), then use a secure password manager. Never write passwords down, and don't use the same password on multiple accounts because a criminal will have a field day if one of your accounts is breached.
- Use two factor identification on your devices, sometimes called MFA, Multi-Factor Authentication.
- Use wi-fi carefully with a strong password for your home wi-fi. Be careful using public networks when you are out and about, and never sign into password-protected accounts on a public wi-fi network, as other users may be able to see your login and password.
- NEVER open any attachment unless you expect that email or SMS, are 100% certain of the sender's identity, and know roughly what the attachment will contain.
Shred any sensitive financial information or documents that contain your identity details.
- Be careful how much personal information you put on social media.
- Use your credit card for purchases over £100 as the law offers more protection. Under Section 75 of the Consumer Credit Act 1974 still in force today, both the credit card company and the retailer are liable if something goes wrong. This added layer of protection means if the seller isn't cooperating or they've disappeared, you can go to your bank or card provider for redress.
- If you're making a payment on a website, always check the site address starts with 'https' rather than just 'http'. Look for a security padlock beside the web details; it means any data you enter is automatically encrypted.
- Check your credit report at least once a year to see if there are any credit applications made in your name or other information you don't recognise.
- Report scams to the relevant authorities.
- Remember the two golden rules of staying safe financially: first, never act in a hurry, always check details independently if you receive anything unsolicited, and second, if something seems too good to be true, then it usually is.
Saving Money & Staying Safe
Making your money work harder has never been more important than in this cost-of-living crisis.
Good financial health is like mental and physical health – it takes work. Getting into a system of regularly auditing your bank account, checking how much you spend, and shopping around for new providers or services, particularly at renewal time, could save you thousands.
Modern banking apps make it easy to track how much you're spending and saving and make it easier to stay vigilant against scams and fraud.
One thing is for sure: the financial landscape is constantly changing, whether that's how much you spend on your shopping or the latest round of phishing emails and scam SMS messages. Staying proactive and informed is the key to managing your money and protecting your financial health.
Full article at: https://www.kisbridgingloans.co.uk/consumer-guides/one-stop-guide-to-saving-money-and-protecting-your-finances/
We would like to thank KIS Finance for their help in preparing this blogpost.
