Managing your money

Spending less than you earn and saving money is the way to secure financial happiness. Here are some strategies and tips for how to manage your money.

Spending less than you earn and saving money is the way to secure financial happiness. Here are some strategies and tips for how to manage your money.

Anelda Knoesen
From the Money team
6
minute read
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Posted 13 OCTOBER 2021

Become a better money manager 

Being good at managing your money can make you feel financially secure and enable you to do the things you want to do. But managing money doesn’t come naturally to everyone. Here are some tips that can help.

Create a budget 

Knowing what you’ve got coming in and going out is the first step to taking control of your finances, so start by working out a budget.

Add up how much it costs to pay your rent or mortgage, household bills and any loan payments. The money you have left over once those costs are met is what you can spend and save.

Take control of your finances

Working out what you can afford to spend on essentials and non-essentials is just the starting point. You’ve got to actively take control of your money. If you don’t, you could be taken advantage of.

For example, financial watchdog the Financial Conduct Authority (FCA) recently found that some insurance providers were quoting higher prices to loyal customers than would have been given to them had they been a new customer.

This practice is being outlawed from 1 January 2022 for home and car insurance customers. But that doesn’t mean other financial product providers aren’t doing similar things. For example, some mobile phone providers factor the price of the handset into the monthly cost. But if you carry on with the same deal once the contract has ended, you could be forking out for a phone you’ve already paid for.

So it always makes sense to actively see if you can find a better deal when it comes to renewal time.

Managing bills

We all have busy lives, so making bill management straightforward means you’ll have more time to spend doing the things you enjoy. Budgeting apps – or even spreadsheets, or a pen and paper – can help you keep a close eye on money coming in and going out of your accounts.

  • Split your regular bills into categories, from breakdown cover to entertainment, to help you see where you’re spending your money
  • See if your bills have increased since the last payment so you can spot savings opportunities
  • Compare providers with us to see if you can save – from car insurance to broadband and everything in between
  • Knowing what bills you have coming up can help you make sure there’s enough money in your account to avoid going overdrawn

Remember, you can see if you’re paying more than your neighbours for your broadband and home insurance, with our neighbourhood bills calculator.

Tips for getting on top of your bills

If it looks like you’re paying too much, start by seeing what you can do about it.

  • Consider getting a smart meter. Smart meters take readings automatically for your electricity and gas and send them directly to your energy supplier. This means your bills should be accurate, rather than based on estimates.
  • See if you could get a better home tech deal. There’s a lot of competition between broadband, phone and mobile suppliers, so new deals are frequently offered to attract new customers. If you’re out of contract, it’s worth seeing if you can get a cheaper deal, or a deal that offers you more for the same amount of money.
  • Compare deals early. The nearer to renewal date you are, the higher the quotes could potentially be. So put a date in your diary for three weeks before the renewal date and get your price quotes then.
  • Pay the way that suits you. You can pay some bills, like insurance premiums, vehicle tax and your TV licence fee, monthly rather than annually if this helps you budget, but you’re likely to have to pay interest or a surcharge for doing so. An alternative, if you can afford to, is to put money away every month in a savings account and pay for things like your TV licence, vehicle tax and car insurance annually. See our tips on how to save.
  • Set up direct debits for your bills where you can. That way you won’t have late payments harming your credit score. It’s also one less thing to have to remember.

Managing debt

Having certain forms of debt isn’t always bad. For example, having a mortgage, where you should end up owning a property outright, could make more sense than continually paying rent.

But a credit card full of purchases for gadgets and clothes you don’t really need isn’t a good idea. Before taking on debt, consider carefully if you need what you’re buying.

Ask yourself:

  • Is it really necessary, and can you wait a bit longer?
  • Is there another way of getting the item you want – for example, have you considered a cheaper, pre-loved sofa, or refurbished mobile?
  • Will you be able to afford to repay the debt?
  • Have you chosen the cheapest option, at the lowest interest rate?

It’s also worth knowing that the lowest interest rates tend to be offered to those with a good credit history. So make sure you pay any existing debts on time and in full. If you don’t, any future borrowing is likely to be at a higher interest rate and you could end up paying more.

Difficulties with debt

If you’re facing a temporary shortfall in income or additional expenditure and you can’t meet all your debt payments, don’t just ignore the problem. Talk to your provider and see what help, if any, they can offer.

You can get free, confidential debt advice to help you manage your money if you’re still struggling. The sooner you tackle debt problems, the easier they are to sort out.

Paying off loans and mortgages faster

The money you pay in interest on debts like mortgages, credit cards and loans can really add up. Here are a few tips for paying them off faster - and so paying less overall:

  • Investigate remortgaging when your fixed-term introductory period ends. Don’t forget to account for remortgaging fees and charges, to see if you really will save. Our multi-award winning mortgage broker London & Country Mortgages Ltd** (L&C) can provide you with fee-free mortgage advice. Talk to an advisor now
  • See if you can make mortgage or loan overpayments without a penalty. This could be a way to pay your debt off sooner, if you can afford it. Even just paying an extra £10 or £20 a month soon adds up.
  • Pay off your credit cards in full every month. If you can’t afford this, pay as much as you can afford, not just the minimum payment.
  • Consider a 0% balance transfer card. Ideally you should pay off the debt during the interest-free period. Even if you can’t manage that, you’ll have benefitted from not paying interest for a few months. There will likely be a fee for transferring your balance and you’ll need to make at least the minimum repayment or you could lose the interest-free benefit.
  • Put your spare cash towards the loan with the highest interest rate as that will potentially save you the most. Alternatively, you can direct your spare cash to the loan with the smallest debt, then, once that’s paid, pay off the next smallest and so on. It’s sometimes called the snowball method (it gathers pace as you go on).

**London & Country Mortgages Ltd (L&C) are a multi-award-winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002).

L&C are not part of Compare the Market Limited. Compare the Market receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria.

L&C will not charge you a broker fee should you decide to proceed with a mortgage.

Review your finances regularly

Just as a car needs an annual MOT to make sure its mechanics are still okay, it’s a good idea to take a look at your financial position on a regular basis to make sure you’re on track.

Prices go up, utility contracts end, and personal circumstances change. So any number of things could alter your situation in small ways, reshaping your finances and creating potential savings opportunities.

Check interest rates on your savings regularly to make sure your hard-earned money is working hard for you.

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