Save £2,082 By Ditching These 5 Bad Financial Habits

1. Got savings? Pay off more of your credit card debt

It's important to have savings, and ideally everyone would have the equivalent of three or six months' salary. But saving beyond this is unlikely to be a good idea if you have debts.

The logic is simple: debts usually cost more in interest than savings earn.

There are of course exceptions. Those who have the discipline to manage their debts and not pay any interest through introductory 0pc credit card offers can, by boosting their savings instead of reducing debts, earn interest on "free" money.

Mr Fahy said: “The trouble is that most people save money while making minimum monthly repayments on their existing credit card debts.

“With credit card rates typically as high as 18pc and savings accounts typically paying around 2pc, consumers are literally paying to save money. If instead you clear debts with savings, you could save as much as 16pc interest a year."

With the average credit card debt per household standing at £2,346, £422 in annual interest payments could be shaved off.

2. Switch savings to a current account

Some of the best interest rates are available on high-interest current accounts rather than standard savings accounts.

Some current accounts pay as much as 5pc on your savings, whereas the best easy-access savings accounts pay just 1.6pc.

“You will need to pay a regular amount into the account each month to qualify and the interest rate is usually paid only on the first couple of thousands of pounds,” Mr Fahy said.

“Even so, you could make around an extra £68 a year in interest before tax by thinking differently."

Banks increasingly rely on cash incentives to attract new current account customers, so money can be made simply by switching your everyday banking. Clydesdale Bank pays £150, while First Direct offers £125.

3. Pay car insurance annually not monthly

Paying bills every month by direct debit is normally a good habit to get into. But it can sometimes mean that you end up paying more, particularly when it comes to car insurance.

Research by comparison website MoneySupermarket.com last summer found that paying for car cover in monthly instalments added 11pc to the typical premium.

This is because the insurer is essentially lending you the money to pay for the policy - and you pay interest on the loan.

“Given that the average car insurance bill is around £670, paying upfront could save you £73 a year,” Mr Fahy said. "But other services, such as utilities, are cheaper to pay for monthly direct debit."

4. Ditch branded goods

Several "taste tests" have found that shoppers cannot really tell the difference between well known brands and cheaper supermarket versions.

Those who make the switch can typically save around a third.

For example, Tesco’s Everyday Value baked beans cost £0.24 (420g), while Heinz's version costs £0.75 (415g). Other examples include Kellogg's Special K at £3.99 (750g) versus Asda cornflakes for £1.48 (750g) and Sainsbury's digestive biscuits basics at £0.35 (400g) compared with McVitie's digestive biscuits for £1.15 (500g).

According to the latest figures from the Office for National Statistics, families spend an average of £58.80 a week on food. Cutting out branded goods from the entire weekly shop could therefore save households around £1,020 a year.

5. Stop hoarding

Pancake Day, Shrove Tuesday, is traditionally a day when families use up ingredients in their cupboards before the start of Lent.

Why not apply a similar principle to the contents of your attics and garages?

According to research by Confused.com, another comparison service, the average value of forgotten goods in Britons’ attics comes to £348.

“The average penny jar contains about £41, while we also have an average of £110 in unused foreign currency," Mr Fahy said.

 

http://www.telegraph.co.uk/finance/personalfinance/12147953/The-bad-financial-habits-to-ditch.html

17th

February 2016


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