TikTok user shares money saving method using envelopes
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It will be particularly hard on pensioners with inflation expected to top 6 percent in the spring while the State Pension will rise by just 3.1 percent in April. The following 12 New Year financial Resolutions might help you survive.
1. Get budgeting. Put your finances on the right track by drawing up a list of all your income and spending, said Emma Watson, head of financial planning at Rathbone Investment Management. “A budget makes it easier to cut your spending and live within your means.”
2. Drop those costly habits. Take a look at your spending to see if you have fallen into expensive money habits, such as buying a coffee or lunch out every day, said Sarah Pennells, consumer finance specialist at Royal London. “Reducing your spend by just £2 a day saves more than £700 a year.”
3. Start counting the pennies. Trawl through your bank accounts to see where your money goes and how to cut back on spending, including on subscriptions and streaming services. Aim to earn rewards, loyalty points and cashback on your shopping. Remember to cash in existing points before you lose track.
4. Follow this rule. Peter Kimpton, personal finance expert at Family Money, suggests following the 50/30/20 rule. Allocate 50 percent for essentials such as rent, mortgage and bills, 30 percent for “wants” such as hobbies, shopping or subscriptions, and 20 percent for paying off debt or building savings.
5. Get motoring. Motor insurers are now banned from charging existing customers higher premiums than new ones, but drivers may save £100 on average by shopping around for a cheaper policy at renewal. Someone who hasn’t shopped around for 10 years could save almost £500, according to Confused.com.
6. Cut energy bills. Gas and electricity bills could top £2,000 on average warns Alex Staker at energy comparison site Bionic. Avoid heating unused rooms, turn down your thermostat by one degree, switch off appliances rather than leaving them on standby, switch off lights when leaving the room, and draught-proof doors and windows.”
7. Pay down debts. More than one in five Brits took out credit to pay for Christmas, and 3.5 million reckon it will take them five months to pay it off, according to savings platform Raisin UK.
Co-founder Kevin Mountford said: “Prioritise paying back your debts in 2022, starting with the most expensive such as credit cards, store cards and overdrafts.”
If struggling, seek free advice from charities StepChange, Citizens Advice or National Debtline.
8. Get a cheaper mortgage. Online mortgage broker Trussle.com says its customers save on average £290 a month by remortgaging, which totals £3,480 a year. Talk to a broker to find the right deal for you.
9. Build a cash safety net. Create a pot of rainy day savings to help you cope with life’s nasty little surprises, like your car or washing machine breaking down, Mountford says. “Keep it on easy access so you can get at it in a hurry.”
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10. Invest tax-efficiently. Soaring inflation will destroy cash savings this year, so you may have to take on more risk by investing in the stock market using your Stocks and Shares Isa allowance, said Rob Burgeman, investment manager at Brewin Dolphin. “This will give your money a fighting chance of maintaining value over the medium to long term.”
11. Get the maximum State Pension. Make sure you are getting the maximum state pension, as underpayments are common. If unsure, contact the Pension Service on 0800 731 7898 or visit Gov.uk.
12. Plan now for the next big splurge. One in 10 Brits have already started saving for Christmas 2022, while nearly two thirds have already started saving for holidays and birthdays, or big-ticket items such as home refurbishment.
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