10 ways to give your personal finances a makeover

Consumer watchdog Which? is advising consumers on how they can save money by giving themselves a ‘money makeover’ and fixing their finances.

Many people are feeling financial pressure at the moment as soaring fuel, energy and food prices squeeze household budgets, writes Adam French, Which? Consumer Rights Expert. However, there are steps you can take to save money and cut back on unnecessary outgoings. Start by taking a look at your finances and giving yourself a ‘money makeover’ in order to save where you can.

Transferring debts to a balance-transfer credit card can give you some relief from costly interest rates, as can finding a bank account with a fee-free overdraft. Many people aren’t aware they could be claiming benefits to help with everyday costs, so it is worth checking what you may be entitled to. 

Using budgeting apps to keep track of your spending habits is a great way to cut out unnecessary purchases and finding a reward scheme at retailers and restaurants can help you save money when you are spending.

Below, Which? offers its top 10 money-saving tips. 

1. Transfer credit card debt

Those making large interest payments on credit card debt can move it all onto a 0% balance-transfer credit card deal. This type of credit card doesn’t charge interest on transferred debts for a set amount of time so that users have some relief to repay any money owed. However, the interest tends to jump at the end of the promotional period, so be sure to pay off the balance in full before this happens and opt for a fee-free card. For example, a £2,000 debt on a card charging an 18.9% APR that you pay £60 a month towards will take 46 months and cost you £2,755 to clear. In contrast, a £2,000 debt moved onto a 0% balance transfer card, with the same repayments of £60 a month will take 34 months to clear and cost £2,000 – saving you £755.

2. Check the overdraft fees on your bank account

Going overdrawn can be costly, especially as some accounts charge up to 39.9% EAR (effective annual rate). If your bank account has a high EAR, it could be worth checking to see if you can switch to an account that offers a lower one if you regularly use it. Nationwide currently offers a free authorised overdraft on its FlexDirect account – but this only lasts for a year, so it won’t be good for long-term borrowing. It’s also worth keeping an eye on the best current account switching offers. Many accounts offer switching bonuses – for example, First Direct is offering £150 to new customers and Nationwide is offering £125.

3. Check if you have any unclaimed benefits

More than £15bn goes unclaimed from the Treasury each year, and more than seven million UK households could be missing out on benefits like council tax discounts. People on low incomes may be able to claim Universal Credit – replacing legacy benefits such as tax credits, housing benefits, income-based jobseeker’s allowance, income-related employment and support allowance, and income support.

Those already claiming child tax credit may also be able to apply for working tax credit to help with day-to-day expenses. Child tax credit is available for those on low incomes who are responsible for at least one child or young person. Which? suggests checking what might be available to claim by entering details about you and anyone else in your household into its Entitled to calculator.

4. Reduce tax bills

Consumers can keep hold of a bigger chunk of their earnings by claiming all the tax reliefs they might be entitled to. Reliefs such as the marriage allowance and Rent-a-Room relief can all save significant sums, yet relatively few people are aware of them. For example, those renting out a room, rather than a whole property, can take advantage of the Rent-a-Room scheme, which means they can earn up to £7,500 tax-free.

5. Use price comparison websites

Insurance policies, credit cards and broadband bundles usually have huge differences between the cheapest and most expensive. Before signing up for new financial products and policies, Which? suggests browsing the best deals available by using price comparison websites to compare different products and make sure they choose the best for their individual circumstances. When comparing the cost of a 12-month broadband package, Which? found a £15.04 difference between the cheapest and most expensive deals available.

6. Sign up for loyalty cards

Many retailers, restaurants and supermarkets offer loyalty schemes to reward customers by allowing them to build points each time they dine or make a purchase. Often, the points earned can be converted into discount vouchers, or offer one-off discounts and deals. When shopping for treats, it is worth choosing a retailer that offers a decent reward scheme, such as Tesco’s Clubcard.

7. Earn rewards and cashback on your spending

Cashback credit cards can help shoppers make money every time they spend. Some pay as much as 5%. Some retailers also offer credit cards that offer rewards for shopping with them. John Lewis typically performs very well in Which? satisfaction surveys, and offers a credit card reward scheme for customers that gives 1.25 points for each £1 spent at John Lewis or Waitrose, but you have to spend £4 at other retailers to earn a point. Shoppers using cashback or reward credit cards must make sure they repay what they spend each month to avoid being charged interest.

8. Cancel unnecessary direct debits

It is worth checking bank statements regularly to keep an eye on direct debit payments and cancelling any unnecessary payments that can quickly tot up. Which? recommends consumers get into the habit of logging into their online bank account and checking statements to ensure they’re not shelling out for services they no longer need or use.

9. Get a better mobile phone deal

Which? suggests evaluating phone bills to make sure that call, text and mobile web use isn’t consistently above or below your monthly allowance – if they are, it could be worth looking for a cheaper deal that matches your current usage. Which? previously found that a low data contract such as 5GB of data from ID Mobile costs £6 a month, whereas 100GB of data from EE costs £34 a month – switching to this deal could save £336 per year. Consumers should also consider haggling to get the best deals. Which? research found customers who haggle saved an average of £35 per year on mobile contracts. 

10. Use budgeting apps to keep an eye on spending

Budgeting apps are a great way to get an overview of account activity and spending habits. Many apps allow users to link multiple bank accounts to help keep track of their overall spending. By checking regularly, consumers can keep an eye on unnecessary costs and budget more effectively. Which? has rounded up the best budgeting apps, to help savers choose the best one for them.

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