Top 10 tips for a Money Makeover

After tax changes announced in the mini-Budget and with mortgage and rent rates on the rise, it’s a good time for consumers to evaluate their finances and make sure they’re not spending more than necessary as the cost of living soars.

Transferring debt to a balance transfer credit card, checking for unclaimed benefits and using price comparison websites are all easy ways to reduce spending and tackle rising costs.

To help ensure consumers have access to targeted advice, Which? is launching a free tool that directs users to personalised, expert tips for cutting their living costs. The tool aims to help consumers cut back by encouraging them to answer seven simple questions about their personal spending habits and then signposting relevant content and advice. Here we give 10 tips to help you manage your money in difficult times. 

1. Give yourself a ‘money health check’

The first step to improving your finances is to have a good understanding of your current situation. For instance, it is worth taking note of how many direct debits you have, and the regular loan or credit card payments you need to make each month, to get a good understanding of where and how you can save. The Which? Money Health Check tool can factor in these kinds of financial commitments and will give targeted, helpful advice to consumers looking to improve their finances.

2. Transfer credit card debt

If you are making large interest payments on credit card debt, you may be able to move it all onto a 0% balance transfer credit card. This type of credit card doesn’t charge interest on transferred debts for a set amount of time, so users have an opportunity to repay the balance. For example, a £2,000 debt on a card charging an 18.9% APR that you pay £60 a month towards will take 46 months to clear, and cost you £2,755 to clear. In contrast, a £2,000 debt moved onto a 0% balance transfer card, with the same repayments of £60 a month, will take 34 months to clear and cost £2,000 – saving you £755. However, the interest tends to jump at the end of the promotional period, so be sure to either pay off the balance in full before this happens, or switch to another balance transfer card.

3. Check if you’re eligible for any benefits

More than £15 billion goes unclaimed from the Treasury each year, this equates to an estimated seven million UK households that could be missing out on benefits they’re entitled to, like council tax discounts, pension credit and Universal Credit. 

What you can get depends on your circumstances. For instance, people who are out of work or on low incomes may be able to claim Universal Credit, where you’ll receive regular payments to top up your income. 

It can be tricky to know which benefits you might be able to claim, and how much you’ll get. Which? suggests checking what might be available to claim by entering details about you and anyone else in your household into the Entitled to calculator.

4. Check the overdraft fees on your bank account

Going overdrawn can be costly, especially as some accounts charge up to 39.9% EAR (effective annual rate). If your bank charges a high rate of interest, it could be worth checking to see if you can switch to an account that offers a lower one – particularly if you use an overdraft regularly.

Nationwide currently offers a free authorised overdraft on its FlexDirect account (subject to status) – but this only lasts for the first year. It’s also worth keeping an eye on the best current account switching offers. Many accounts offer switching bonuses – for example, First Direct is offering £175 to new customers and Nationwide is offering £200.

5. Use price comparison websites

Insurance policies, credit cards and broadband bundles usually have huge differences between the cheapest and most expensive. Before signing up for new financial products and policies, Which? suggests browsing the best deals available by using price comparison websites to compare different products, and make sure they choose the best for their individual circumstances.

6. Get a better mobile phone deal 

Which? suggests evaluating phone bills to make sure that call, text, and mobile web use isn’t consistently above or below your monthly allowance – if they are, it could be worth looking for a cheaper deal that matches your current usage. Consumers should also consider haggling to get the best deals. Which? research found customers who haggle saved an average of £35 per year on mobile contracts.

7. Cancel unnecessary direct debits

It is worth checking bank statements regularly to keep an eye on direct debit payments and cancelling anything you’re not using, as unnecessary payments can quickly tot up. Which? recommends consumers get into the habit of logging into their online bank account and checking statements to ensure they’re not shelling out for services they no longer need or use.

8. Use budgeting apps 

Budgeting apps are a great way to get an overview of account activity and spending habits. Many apps allow users to link multiple bank accounts to help keep track of their overall spending. By checking regularly, consumers can keep an eye on unnecessary costs and budget more effectively. Which? has rounded up the best budgeting apps, to help savers choose the best one for them.

9. Sign up for loyalty cards

Many retailers, restaurants and supermarkets offer loyalty schemes to reward customers by allowing them to collect points each time they dine or make a purchase. Often, the points earned can be converted into discount vouchers, or offer one-off discounts and deals. When shopping, it’s worth checking if there is a scheme to sign up to and take advantage of. For example, Tesco shoppers could get one point (worth 1p) for every £1 they spend and access to lower prices with the Clubcard scheme.

10. Reduce your tax bill  

Consumers can keep hold of a bigger chunk of their earnings by claiming all the tax reliefs and allowances they might be entitled to. From marriage allowance to the Rent-a-Room scheme, there are lots of ways to cut your tax bill, yet relatively few people are aware these reliefs exist. For example, those renting out a room, rather than a whole property, can take advantage of the Rent-a-Room scheme, which means they can earn up to £7,500 tax-free.

Says Reena Sewraz, Which? Money Expert: 

“Many people are feeling financial pressure at the moment. However, there are steps you can take to save money and cut back on unnecessary outgoings. Start by taking a look at your finances and giving yourself a ‘money makeover’ in order to save where you can.”