John Lowe, the Money Doctor, has 5 tips for you to consider that will save you money for the next season. Christmas is only 98 days away but when it comes to planning it, you can never be early enough to consider how you are going to fund it and other important events in your life.
Once you have started to save, take heart and heed the words of Benjamin Franklin: 'Beware of little expenses; a small leak will sink a great ship'.
Make sure you spend the savings on your itemised budgeted expenditure:
1. Plan it
There is a difference between saving and investing – saving is generally short term and immediate while investment is for a minimum period of three to five years. You have to work out initially, how much disposable income you have after tax, rent/mortgage, household bills, food, petrol and "spending money".
You might even know how much money you can afford to put away already. The most important decision about savings can be summed up in one word – start. By planning to save, you are setting immediate goals – for holidays, that new plasma screen television or funding Christmas presents etc.
Save small but save often whether it's through a bank's Regular Saver account, the post office or your local credit union.
2. Cut down your banking bills
Overdrafts and especially those exceeding the limits should be a no-no. Apart from the arrangement fee and the high interest rate (11% - 15%), once you have exceeded your overdraft limit, referral fees (currently €5.15 and charged every day once the overdraft limit has been exceeded).
Surcharges (an additional cost over that already being charged – can be another 12%) and unpaid fees (when the bank decide to send back your cheque and not honour it – you are being charged € 12.70 for this transaction) all take their toll on your disposable income.
Credit cards are similar – try and use it like a charge card and pay off when the bill is due. Best credit card interest rate is AIB Bank’s internet-based Click Card at 9.13% but be wary of taking out cash – they charge a whopping 23.4% from the time you withdraw. Or transfer your balance to the BEST credit card provider at 0% and 12 months – An Post Money.
You should also shop around for the best mortgage and loan deals, not to mention those insurance premiums – life, health, travel, even your car – they should all be compared with the best on the market – or through an adviser.
3. Find the right savings/deposit accounts
There is no point in saving in a current account. Albert Einstein was accredited as saying that compounding is mankind’s greatest invention as it allows the reliable systematic accumulation of wealth.
Many of the top deposit accounts have some minimum and maximum thresholds so you need to do a little research to find out where is the best account for you. With the government’s blanket guarantee on €100,000 per person deposits in Irish owned financial institutions you now only have to find where the best rates are.
Therefore your choice is simple:
a. Find out where the best rate is – better in your pocket than theirs. Best demand before DIRT tax is 0.15% (KBC Bank & Permanent TSB ) and best 1 year fixed is 0.35% (Permanent TSB). Expect these rates to further drop following the ECB’s recent deposit rate cut to – 0.5% (meaning you’ll be paying banks to hold your deposits.)
b. Don’t forget the Regular Saver accounts (saving between € 100 & € 1000 per month for up to 12 months… best rates currently are EBS at 1.25%.)
4. Cut down your household utility and travel bills
When you analyse your household bills, you will find you may have left the lights on for too long, or not used the washing machine on the night-time rate or had the central heating blazing while you were away for the weekend.
- Buy discounted bus passes, use www.tolltag.ie, a bicycle – over time, not only is it cheaper but better for you physically.
- Look up www.taxsaverbikes.ie – or the Last Minute type holidays. You will find many ways to reduce those overheads.
- Adhere to the Money Doctor mantra: stop spending, and if you must, ensure best value.
- Download the free Money Doctor app to track your spending – you may be surprised at where you are frittering your money away to.
Don’t put all your eggs in one basket Invest across the board so if one investment goes down, others will thrive. If it's too good to be true or you don’t understand it, walk away.
Make sure you have provided for your retirement across a broad range of assets including the set up of a pension plan. The main priority should be to preserve your wealth and not look for spectacular returns. Make sure you know the difference between an ARF and an annuity.
Never let the tax tail wag the money-making dog – in other words, tax efficiencies or not, an investment should still stack up on its own merits whether there is tax relief or not.