Monday 25 June 2018

Consumer guide: On the money for 2018

Sinead Ryan has the essential guide to making your cash go a little bit further - in easy steps

Financial discipline is like any other sort: you need to stay on top of it. Stock Image
Financial discipline is like any other sort: you need to stay on top of it. Stock Image
Sinead Ryan

Sinead Ryan

Well, that's that for another year, and as we enter 2018, we're already thinking of regrouping, renewing and maybe doing things slightly differently.

When it comes to family finances, making your money go a little bit further is one of every household's New Year resolutions, so this week I'm looking at how to do just that. It starts even as you're still clearing away the wrapping paper and taking down the tree.

And just like those goals you have for getting fitter, or drinking less, financial goals are best tackled in baby steps. Don't try to do too much at once, but you will see a difference straight away.

1. Post-Christmas Challenge

Despite people's generosity, we're invariably left with too much stuff or even some gifts we don't want. It's a great time for a spring clean, so sort out clothes, shoes, gadgets and glassware and see what you can get rid of.

Hire a baby skip ( see A1skips.ie, from €85) and chuck what you simply won't use into it; make 2018 your minimalist year. Set yourself the challenge to sell enough of what's left on eBay or DoneDeal to pay for it.

2. Get a Financial Grip

We all have regular outgoings every month. Can you name the purpose of every single direct debit on your bank statement? There may be old subscriptions, insurance policies or utility charges disappearing. If you cannot say exactly what it's for, find out, and decide if you really need it again this year.

Then, write two columns: the first is your income. Include salary, average overtime, children's allowance, pensions - anything that comes into the house in terms of money.

The second is all your outgoings. Most of us know how much we spend on say, our weekly shop, or transport, but we're less good at remembering to budget our property tax or TV licence. See the panel for other things you might forget, especially those that occur infrequently. Work out a monthly cost for each (even if you pay it annually).

Next, calculate the 'gap' between income and expenditure. Hopefully the former is higher.

3. Plan for the Year

Unlike the Government's budget, yours should be organic and change as circumstances do in the year.

To plan ahead, set up two or three deposit accounts, which are free and easy to do online. Name them with their purpose, e.g. "summer holiday", "new car" or even "Christmas 2018". One should be "household expenses".

You'll build up savings quicker if you have a goal, and psychologically, it's much harder to take it out for an impulse purchase. The household one is for those bills that only crop up occasionally. How great will you feel when the money's sitting there when the bill comes in!

Savings are part of budgeting - not something you do with 'leftover' money, because there never is any, so add to them on pay-day. If you overdo it, no problem, you can always dip in if necessary.

4. Switching

It's a pain in the neck, but switching to new providers for utilities, insurance and phones is really going to save you money in 2018.

If you haven't reviewed your health or home insurance in more than three years, you are definitely overpaying on both. They're the policies with the biggest change, and a good broker will sort you out.

5. Discipline (and treat) Yourself

Financial discipline is like any other sort: you need to stay on top of it.

But don't beat yourself up either. Treats are important too!

If you find yourself, after all your hard work, with money left that isn't ear-marked for savings, then spend it without guilt.

But once you're in the habit of having cash put by, you'll want to keep it that way.

How to budget your expenses so you can best work out what you are paying

Your outgoings should be costed monthly but listed as they arise. Doing it chronologically helps to work out what you're paying.

Use bank statements to help work out what's going where, or 'calendarise' your year with regard to events, holidays and household expenditure, so you don't forget (and then aren't surprised) by any bills that land on your doorstep.

One way of budgeting your expenses is by writing down bills as they are paid, as below...

  • Weekly: Groceries, pocket money, lunches, transport (petrol, bus, train etc), your 'walking around' money.
  • Monthly: Phone/Wi-Fi, direct debits (e.g. insurances), subscriptions (e.g. gym, cable TV), mortgage/rent, savings, entertainment/leisure.
  • Bi-monthly: Gas, electricity, oil
  • Yearly: Property tax, residents' association fees, bin charges, TV licence, holiday, back-to-school costs/voluntary contribution, Christmas costs, birthdays, car service.
  • Other: Clothing, vet bills, doctor, dentist and hairdressing visits, contingency fund.

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