By carefully examining your finances, you may find you can shave money off your regular outgoings which can be put to much better use…
During the lockdown, many of us will have been forced to look very carefully at our finances. With so much uncertainty as to what the future holds and what the ‘new normal’ will look like, many of us will now be prioritising how we spend our money.
Regular outgoings such as mortgages, subscriptions, memberships, bank charges and life assurance all need to be carefully examined to ensure we are not paying out more than we need to – and if savings can be made, perhaps now is the time to consider how these can be used to improve other areas of your life - for example, to boost your savings and investments and protection policies.
This is particularly timely as so many members of the working population are furloughed and trying to manage on 80% of salary.
Time to check all of your regular outgoings
Many of us use online banking and this makes it easy to check regular standing orders and direct debits and instantly make adjustments to them. Even without online banking you can still refer to your bank statements and check all of your regular outgoings.
Are you paying for duplicate services?
You may find you are paying subscriptions or for memberships that are no longer serving any real purpose or providing value to you.
For example, you may be paying subscriptions to one or more online streaming services such as Amazon Prime, Sky, BT or Netflix. If you do have multiple services ask yourself if you need them all, and if not, which ones can you live without?
Overall, streaming services tend to have high retention rates because the pricing models of some providers offer subscriptions at an almost insignificant level, so as to hardly be noticed. But in times when many are counting their pennies, every outgoing needs to be carefully considered.
Banks that charge you for an account
While you are working your way through your bank statements, take a look at your bank charges and add up the amount paid over the past year. Could you have saved money by switching your account?
Beware of changes to overdraft charges
If you have an overdraft facility, you need to be aware that many banks have announced changes to the way they charge interest on them. Interest rates can vary between 15% and 40% APR (annual percentage rate), and charges can still be applied even if you don’t use the facility!
While some banks are deferring the increased interest and general account charges during the pandemic, once we are on the other side of this, you can be sure they will be applying their new rates and re-applying charges as soon as they can.
If you have an overdraft facility, you should compare the interest charged by your bank with others to make sure you’re getting the best deal.
Should you find you are using your overdraft facility regularly, there may be a better way to manage your finances. For example; using a credit card for your groceries or fuel payments and repaying the balance in full, each month, may be a method worth considering.
This has three advantages:
- You avoid any interest charges if you repay your card balance in full each month
- You can avoid running up your overdraft and paying high-interest charges
- Using a credit card may improve your credit score (More info from ClearScore)
If you have found ways to reduce your monthly costs, what will you do with any extra cash you have saved?
You may want to consider looking at the level of your family protection.
Many financial advisers are reporting a large increase in life insurance enquiries and applications.
This is possibly due to the virus raising a sense of uncertainty and vulnerability, with many experiencing and realising the potential consequential losses from being underinsured.
For example, consider how your loved ones would cope if the main breadwinner of the family was no longer able to provide the financial resources to maintain monthly repayments on the mortgage or other loans secured on the family home. The home could be re-possessed, leaving your family without the security and protection they once took very much for granted.
Protection for you and your loved ones
Basic life assurance cover is often very affordable and can provide a valuable safety net if the worst happens. Life assurance pays a lump sum on death. However, there are of course other expenses that would need to met such as utility bills, car loans or store card debts, grocery shopping and other miscellaneous costs.
An Income Protection policy can be both affordable and tailored to pay a regular amount each month to cover these expenses and is possibly the most important area of insurance of all.
Taking time to carefully evaluate your monthly outgoings and make any necessary adjustments could provide you with the amount needed to pay for valuable insurance protection.
When you have gone through the process, use our free search tool to find a financial adviser near you who can offer advice on the most suitable assurance and other financial plans for you.
Published: 19 May 2020