Last week we looked at the A to L of saving, but hhy do we need to save? As famous US comedian Jackie Mason once said I have enough money to last me the rest of my life…unless I buy something!
For some, lockdowns have been good to initiate a saving ethic but whether it is at last that summer holiday, the deposit for a car or a house, education fees, Christmas, birthdays there are just so many reasons for us to save, we need therefore to change our mentality.
Here John Lowe of MoneyDoctors.ie in the second of two parts on saving gives his M to Z of that saving mentality:
M is for mortgage
The European Central Bank interest rate is at its lowest – 0%. Rates can really only go one way BUT may not go up for quite a while. Make hay while the sun shines and check:
- Are you getting the best mortgage rate?
- Could you switch and save?
- Have you still the income to justify your current mortgage?
- Is your loan to value 80% or less?
- Is your credit history good?
Your mortgage could be on 3.5%+ standard variable rate and qualify for the lowest rate on the market 1.95% - a massive saving each month and well worth checking out. Email me for details.
N is for negotiate
Haggling might seem crass but take your inspiration from Arab souks and try to negotiate the price. For certain types of purchase, such as buying a new car, this is already common practice. Car dealers expect a bit of to and fro with potential customers.
Apply this to other purchases, particularly big ones, and see where it gets you. Retailers and service providers want your money, so make sure they give you the best deal. Bargaining might not get you a better deal on a hotel room, but the hotelier might throw in an extra. Likewise, delivery charges could be waived on home purchases if you play hardball. If you don't ask, you’ll never know.
O is for other people
Consumers should realise that information is their friend, so make use of your networks and share information. Did your friends get a great deal on their latest car service? If so, find out where. In a world of Facebook, Instagram, Linkedin, Pinterest and Twitter, information has never been so instant, making it easy for consumers to vote with their feet. If you learn that you are not getting good service, or better options are available elsewhere, act quickly.
P is for petrol
Use the website www.pumps.ie to find the cheapest forecourt in your area for petrol or diesel or just keep an eye on the prices as you drive by the petrol stations. A difference of a few cent per litre may seem like nothing, but when you work out the cost based on a year’s supply, it can be considerable. Petrol prices have hit lows this year but are never far away from starting to rise again. Better again, buy an electric car or hybrid – better in your pocket!
Q is for questions
Before you buy something, understand exactly what you are getting for your money. Questions might not save you money immediately but can certainly stop you wasting it in the long run. For example, make sure to ask if vouchers expire, otherwise you could be wasting the money you have spent if they run out before they are used. New laws on vouchers now make them "unexpirable"! If something looks too good to be true, it probably is – always ask what conditions apply to special offers. And if you sign up to a new service, ask what fees apply if you break the contract.
R is for relief
Or more specifically, tax relief. Medical, dental bills and pension payments are just some of the day-to-day expenses on which you can claim tax relief. Tax relief on medical expenses is granted at the standard rate of 20%, with no threshold applying. So for every €5 you spend on medical bills, you get back €1.
S is for switching
Do you moan about your bank, insurer or mobile phone company, but never bother to take your custom elsewhere? Tackling your inertia could be the first step towards saving some of your hard-earned cash. If you find that you are not getting value for money and good service, put your money where your mouth is and move. Switching provider is easier than it seems, and there are statutory provisions to help you. For example, under the terms of the Central Bank’s code of conduct on current account switching, your bank is obliged to make the process easy for you and liaise with your new bank. Check www.ccpc.ie for current account comparisons.
T is for technology
Saving money on technology is twofold. Do you need that gadget? Sleek marketing and shiny new gadgets have turned us into a nation of magpies, craving everything we see. But think first: do you need a new phone or laptop? Or does your old one still meet all your daily needs? If you use broadband at home, have a phone line and watch television, you might be able to reduce your home communications expenses by bundling your bills. Check out www.comreg.ie, a website from the communications regulator, to see if you can get a better deal.
U is for using your head
Saving money is not rocket science. Simple steps, clever choices and very little effort can make a big difference to your bottom line – so make the effort.
V is for value for money
Two-for-one offers, 20% discount deals, other special discounts. Before you jump on a bargain, make sure that you need it, and that the offer is what it seems. Download the free app STOCARD to input all those discount tags you are supposed to attach to your keyring. It’s easy to fall victim to sales psychology and stock up just because you can, but then you end up with items you never use and a hole in your wallet. If you are going to buy, make sure you are getting real value for money.
W is for wills
Not quite a cost saving, but something to keep in mind. Developing a new frugal approach to cash, saving lots of money and putting it aside for your family’s future is laudable. But make sure you have control over what happens that money on your death. Make a will. You can keep the original Will too but let the executor/trix know of its whereabouts. The same person could also very easily complete the Probate for your estate when you die and save hundreds in the process. Also give some thought to inheritance tax, and the most tax-efficient way to pass on whatever wealth you accumulate to your chosen beneficiaries.
X is for X marks the spot
Or so say the treasure hunters. A dream of winning the lottery might seem like a perfect financial plan - but realistic, it is not. Remember, your financial future is in your hands. Your circumstances may change beyond your control, but how you adjust your budget and how you spend your money is up to you. Be practical, don’t expect a miracle, and recognise that changing your spending habits takes time.
Y is for yield
When you have built up a savings pot, make sure it works for you and gives you a decent return – difficult at the moment given the rates (the current best demand account at 0.01% – net 0.0067% after 33% DIRT tax...) There’s no point though leaving your money in an account that pays 0.01% interest, when you could enjoy a better return without sacrificing access to your cash. Remember also if you do want any kind of growth, you MUST take some risk – and that risk can be measured. Your goal should be at least to maintain the purchasing power of your savings. So you want an interest rate that, at best, beats or, at worst, keeps pace with, inflation. Not always possible, especially when banks are scrambling to improve their balance sheets, but certainly worth keeping in mind.
Z is for zero
Not the amount that you want to see in your bank account at the end of the month, but definitely the balance you’d like to see on your credit card bill. Spend within your means, and always leave some room to manoeuvre – that’s where the Rainy Day Fund comes in (c. 3 to 6 months net income in an accessible deposit account for those emergencies, sudden loss of income or investment opportunities.)
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.