15 Awesome Tips To Save Money And Beat Debt
Get organised. Know what you owe to whom and how much you need to spend each month.
1. Know exactly how much you owe and to whom
One way to find out is getting a copy of your credit report which shows this and more. See Credit Ratings And Reports for more info.
2. Keep a spending diary
For 1 month keep receipts and itemize everything you spend, in particular day-to-day cash purchases. Your morning Coffee may be a £100 per month Starbucks habit.
3. Create a budget and stick to it
Determine how much you need for your essential living costs and credit repayments. Your online banking may prove such a tool; if not try moneydashboard.com which is free and connects read-only with your online banking.
If you find that once you’ve made a budget you can’t afford both your essential living expenses and your debt repayments – then you need to consider getting some debt help.
4. Pay with cash only
Use cash only as much as you can. Counting out ten tenners feels more than a £100 swipe of a debt (or credit) card. And, with rise of micro-payments from contactless cards and Apple pay, it’s becoming easier to spend and barely notice the amount.
If you find you can’t get by without the use of your credit cards – take that as a warning of a debt problem.
5. Create a meal plan
Tesco have a create a meal plan service – get inspired.
How much of your grocery shop ends up in the bin? If you’re typically of the average household – it’s a shocking 30-50%. Think of it as not the food in the bin; but the money you spent in the bin.
Draw up your own weekly or two-weekly meal plan – you’ll feel the health as well as the financial benefit.
Bonus Tip: Food shop on a full stomach
It reduces the temptation to snack, make unhealthy choices and to buy food you don’t need.
6. Create an emergency fund
Many people live payday to payday without an emergency fund or contingency plan. When something goes wrong a very expensive payday loan is often the only option. Save a little if you can to create an emergency fund.
Bonus Tip: Make the most of your Council Tax payment break.
Many of us pay council tax over 10 months from April To January and don’t have payments to make in February and March. If this applies to you; then try to put away this money for a rainy day.
7. Avoid debts with your bank
People tend to stick with the same bank due to the hassle of switching over all the standing orders and direct debits. There is now a service for making this easier, see SimplerWorld.co.uk.
Your bank can prioritise themselves over other creditors and take your money whether you can afford it or not. See Overdraft & Bank Account Debt for reasons why. You need a safe haven for your money, separate to where your wages and benefit are paid.
8. Take advantage of competitive current account offers
A quick way to make some extra cash is to take advantage of the very competitive current account market and get a switching bonus, cashback or high interest on your savings. See becleverwithyourcash.com for the current best banking switching deals.
Considering debt consolidation loan?
9. Don’t borrow more than you need
If you’re able to borrow enough to consolidate all your debts into one payment – Don’t borrow more than you need and blow the rest. Don’t reward yourself for doing this – you don’t deserve it. Don’t think – “what’s the harm in an extra £3,000 at 7% and we can all go to disneyland this year”. It’s not your money and you have to pay it back.
10. Don’t borrow for longer than you need to
Not only will you be paying more interest, but you will be stuck with the loan for longer. If you want to save for a house deposit, increase pension contributions or start a family, you are postponing the time you can get on with the rest of your life.
11. Beware of the dangers of a secured debt consolidation loan
By swapping all your creditorss for a single secured creditor you’ve fewer options should you find yourself with payment difficulties.
Now your once unsecured debts are secured on your home – you’re at a greater risk of repossession and in a weaker position to negotiate.
Debt management options
12 – Avoid fee charging debt management companies
You can get the same service elsewhere without fees – so all your payments go to repaying your debts.
13 – Beware of the motives of free debt management companies or charities
But, just hold on a minute. If you’ve done your research and concluded that a debt management plan is for you – then a free to consumer provider is usually the best option.
But bear in mind – these organisations may have charity status – but they are financed by creditors. While they help many people in need – they are essentially paid to debt collect over a longer period.
There is always the risk that you could find yourself entering into a debt management plan, where debts are repaid in full; over formal solutions such as an IVA or bankruptcy where their paymasters get back less money but you become debt free sooner.
14 – Consider alternatives if you’re in a long debt management plan
If you’re in a debt management plan that is scheduled to last more than 5 years – then this may may not be me in your best interests as you could be debt free sooner with an IVA.
15 – Don’t pay up front fees for formal debt solutions
If you have decided that an IVA is the best option for you – pick a company that does not charge an upfront fee to make the application.
Some companies charge what they may call a “Fact Finding Fee” or similar.
However, insolvency practices are not allowed by regulation to charge the consumer such a fee. If you are being asked to pay an upfront fee then you are dealing with a middleman who wants paying from both sides – from the consumer and from the actual IVA provider they are referring you to.
Some debt solution companies get around this by having their insolvency practice as a separate company with their company structure. Don’t fall for this and don’t pay a penny until your IVA is setup and running.