This piece originally featured on The Pool
Nasty surprises are all too common when it comes to my finances. EDF Energy makes me miserable every month. Thames Water, too. ATMs are the forever bearers of bad news; I much prefer cashback in the supermarket, so I don’t have to see the balance (I’m not the only one – research by VoucherCodes.co.uk found two-thirds of UK adults don’t know how much money is in their bank at any given time.)
Every month, I say it will be different. I won’t be counting the days until payday. I’ll make packed lunches. I will drink glasses, not bottles, of Prosecco. Somehow, however, my vows never seem to happen.
A friend of mine recently admitted the only reason she sells so much stuff on eBay is to pay for her monthly travelcard, so I know I’m by no means alone.
I always thought you were either a saver or you weren’t — but, having grown up with a sister who bankrolled her pocket money, I am starting to realise that there may be something in the phrase “a little goes a long way”. There are small things you can do to save yourself monthly money misery, plus, at this time of year, in the lead-up to Christmas, it’s more important than ever so you don’t have to put it all on the credit card on December 23 and start 2017 on a low.
I called on Nick Hill, expert at Money Advice Service, to shed a little light on this. His first pointer was to face your cash situation head on with a budget plan to see how much you earn, where your biggest spends are and what you have left over to put aside as savings. This small, but mentally and emotionally huge, step is sure to be an eye-opener and will act as a realistic personal-savings gauge to try and stick to. But how?
“Use apps to keep on top of your budget and your spending.” Mint and Wallaby are two excellent apps that you can link to your bank accounts, so they automatically update and categorise your transactions, and can warn you when you’re nearing the edge.
According to FCA, you are 24 per cent less likely to incur overdraft charges if you use a mobile banking app and text alert service. So, set those up pronto. “A lot of bank accounts and credit cards offer services that allow you to receive updates when you’ve spent a certain amount – usually via text message or email.”
It’s broadly recommended that you should try and split your monthly income into the 50-30-20 ratio. Fifty per cent is for “essentials” (rent, bills and such); 30 per cent should be spent on “lifestyle”; and the final 20 per cent should be squirrelled away for the “future” – whether that’s saving for a deposit on a house or a potential business venture, you’ll always need some spends to fall back on. Of course, this is a benchmark and isn’t always practical. Sometimes, we need to tweak and prioritise different things, but try to keep as close to this formula as you can.
Ultimately, this is the goal and the dream situation to be in: a savings pot building up without you even noticing it. Hill says, “The trick is to deposit manageable amounts regularly — £20 a week, say — and you’ll be impressed how quick it adds up.” Use your banking app to quickly transfer money between your accounts without having the hassle of going to the bank. Even better, “set up a direct debit to your savings account the day after payday. That way, the money will leave your account and you probably won’t even notice!”
Sadly, in this day and age, it couldn’t be easier to spend – the likes of Apple Pay mean you don’t even need your card nearby to do so — so do you stop? Stats show we spend 12-18 per cent more when you use card over cash. First, take all auto payment means like Apple Pay off your phone. Secondly, stop using contactless – the more conscious you are, the better. And, finally, when you’re getting cash out, get £10 less than you usually would; the change jangling about in your wallet is all too easy to spend on this, that and anything.
Often, when we can’t be bothered to cook at our house, we’ll pop to the local Thai because it’s quick, delicious and cheap. Only, when we get there, we can’t resist a wine and a beer each and some prawn crackers of course, and suddenly it’s not so cheap. In predictable know-what-you’re-in-for situations like these, leave your card at home and take cash. That way, you have to resist.
Although a lot of us really do hate checking our bank balances, so avoid doing so, it is essential to make sure all your money is going to the right places. My partner realised he’d been paying £8.99 a month for Netflix for the past 18 months. We’ve never even watched Netflix. Likewise, I noticed a £251.83 transaction on my account last month I couldn’t account for, so I called the bank to discover it was a fraud attack — quickly, kindly refunded by Natwest, but if I hadn’t realised, £251 is a lot of money to go without. Install your banking app on your phone; it’s less formal than logging in online and you can go through all of the individual transactions. There’s also a lot of value in feeling the guilt when you look at the individual transactions. The amount of times EAT and ASOS feature on my statement is depressing; two things to focus on cutting down…