Your Money: Penny pinching
The recession does not just mean cutting back on life's little luxuries. You may have to make some really big decisions to keep you financially afloat in these lean times, writes Charlie Weston
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Tuesday February 10 2009
THE recession has turned us all into penny pinchers. Whether it is cutting back on those little luxuries, like a take-out coffee in the morning or meals out, almost everyone is cutting back.
Others, who have lost their jobs, are finding they have to make big choices about paying bills like credit cards or the mortgage.
A recent survey conducted by the Financial Regulator found that over a quarter of respondents said they had experienced a drop of income in the last six months.
This focus on living on less has given rise to a whole new lexicon.
Up until recently we may have spent freely, but consumers are now said to be frugalistas and cent savers. Another phrase gaining currency is recessionistas.
Whatever you call it, we all need to make our money work harder. Here are some tips for living in lean times.
Financial health check
You should review your financial situation to make sure you know exactly how much you are earning, how much you are spending and what you are spending your money on.
If you have a good understanding of your financial situation you may be able to spot areas where you can make changes.
Change cards
Change your credit card usage: If your credit card balance is so high that you can only pay off the minimum each month, you should switch to a card with a 0pc rate on balance transfer.
Alternatively, get a loan from a credit union to pay off the balance on your card. But you really need to stop using your card if you transfer to another card or get a loan to pay it off.
Tax reliefs
Check you are claiming all the tax entitlements you can. This can include mortgage interest relief, union subs, medical costs, annual transport tickets, etc.
Call costs
Make sure you are getting the cheapest possible deal on your mobile, landline and broadband by logging on to the website, www.callcosts.ie, run by the Commission for Communications Regulation (ComReg).
Enter some details about your current usage and see if you can get a cheaper deal.
Cut out luxuries
Cut back on the little luxuries: non-essential spending (clothes, magazines, entertainment, etc) is where consumers can potentially cut down.
Save on insurance
There are enormous savings to be made on home, motor and life insurance by ensuring you thoroughly scour the market for the best deal.
For example, the difference between the cheapest and the dearest quotation for insuring a house in south Dublin is €236, according to the Financial Regulator.
Pay down debt
It is important to have an emergency fund of three months' salary, but beyond that it does not make sense to have debts and be saving at the same time.
That is why it always costs more to borrow money than you can earn on your savings.
If you have got any credit cards or loans that you are allowed to pay off, you should be using any savings or spare cash to clear them.
Get free banking
Almost four out of 10 people do not get free banking for day-to-day transactions, according to research carried out by the Financial Regulator.
If you are not happy with your current provider, then consider switching -- it is easier than you think. Most providers have easy switch systems in place.
Review debt repayment options
Keeping a roof over your head is a priority. If you're having difficulties making repayments on either your mortgage or personal loans, then contact your lender to discuss your options, for example, payment breaks, extending terms or renegotiating the rate.
Use a budget account
Budget accounts, offered by some banks and credit unions, can help you spread out the cost of your bills over the year.
Instead of paying different amounts each month, you have one set payment. These accounts also make sure that you pay your bills on time.
Use cash
Start using cash again. It is incredible how much you will realise what you are actually paying out when you have to get notes and coins out of your wallet or purse, instead of using your laser or credit card.
And if you think about the money you are spending it will make you spend less.
Be a savvy shopper
There are so many offers out there, and retailers are desperate for your business.
The "buy one, get one free" offers are worth considering.
Also, do not forget how to haggle. Just try asking -- you might be surprised at how easy it is.
