e-mail Paul Lewis
on paul@paullewis.co.ukThis piece first appeared in Reader's Digest in June 2003
The text here may not be identical to the published text
Consumers have helped saved Britain from recession. We have shopped our way out of trouble. A lot of what we’ve spent has been on credit. And although interest rates are low, the burden of debt is a problem for many. Of course those without debt suffer from low interest rates and falling stock markets, one way and another, many people are feeling the pinch. So here is your chance to get a bit back with our eight tips to save – or make – money. Each one that applies to you is worth at least £100!
1. The problem: you’re paying too much tax
The Fix: Check your tax code
Tax codes are a way of collecting tax not assessing it. Just because tax is taken off your pay or pension it does not mean it is the right amount. There is no doubt a lot of them are wrong though estimates vary from one in five to one in three.. When you get your code read it and the leaflet that goes with it and if anything doesn’t look right call the helpline number on the document. Several things can go wrong. If you have a company car or any other benefit from your employer, if you agreed to pay tax you owe through your code, or if you have two sources of income always check your codes carefully. If you will be 65 or more before 6 April 2004 you should pay less tax this tax year. Your personal tax-free allowance should be £6610 instead of £4615. It applies for the whole of 2003/04 even if your 65th birthday is as late as 5 April 2004. But the Revenue does not change tax codes automatically to take account of reaching 65. Instead, it writes before your 65th birthday asking your age. But if the letter goes astray or you do not reply to it, your tax code will not be changed. Each year around 245,000 taxpayers reach 65. Many of them end up paying too much tax. That could cost them £438 in 2003/04. If your income is more than around £22,000 you do not get the higher tax allowance so this tip will not work for you.
More information: www.inlandrevenue.gov.uk
2. The Problem: You pay too much for your telephone calls
The Fix: Ditch BT and route your calls through a cheaper carrier.
The real cost of telephone call is fixed and small. So why do they keep charging us by the second? Because we keep on paying! There are lots of ways to cut your phone bill. If you are in an area where ntl or Telewest runs a cable past your home, then changing to cable will save you money. But everyone can keep your BT line but send their calls through another company who will sell you calls cheaper than BT. Because they all want your custom, the cost of calls is always cheaper and if you make lots of non-local or international calls, especially during the day, you can save a lot. How much depends on your own circumstances and bill. But for example someone who makes three calls a day and who has a daughter in America and other relatives around the country will have a BT bill of around £361 a year. Switching to a company called Telco would save them £100 off that. You can put your details into www.uswitch.com and find out what you can save or you can call on 0800 093 0607. Uswitch claims people using its service save on average £200.
3. The Problem: You get points on your credit card for gifts you do not want
The Fix: Switch to a cashback card and get a discount on all you spend
Lots of credit cards offer reward schemes such as airmiles, or points that you can exchange for things like tickets to attractions, clothing vouchers, or discounts on financial products. But would have bought these things anyway? If not, then you are not saving anything. Even airmiles, which you have to sign up for, can be very poor value – to get a really cheap flight to Paris or Amserdam you may have to spend as much as £10,000. and Wouldn’t it be better to have this money yourself, to spend as you like? There are 16 cards that simply give you money back – usually 0.5% of what you spend but you can get 1%. That means if you spend £834 a month and all of it is on the same card, you could get back £100 in the course of a year. Only one general credit card pays 1% - Capital One Circle Mastercard. But several Visa and Mastercards pay 0.5% cashback so you can still make £50 on that annual spend. Remember to pay your bill in full each month and check the payment date carefully – missing it can cost you dear.
More information: www.moneyfacts.co.uk
4. The Problem: You’re paying too much interest on your debts
The Fix: Use a zero percent credit card
There are more than 30 credit cards that offer you zero percent interest for six months or even more. Some offer it on transferred balances from other cards or even from debts with the bank. Apply for one of these cards, you can do it online, then when it comes through, move your debt and pay zero percent! Suppose you owe £2000 on a traditional credit card charging a modest 13.9% interest. That will cost you £278 over the year. Switch to zero percent and save £139 in six months! Do not forget the debt though. Work out what you can afford to repay and then bring that free debt down month by month. If you cannot clear it within six months, then take out another zero percent card then and transfer your debt to that.
More information www.moneyfacts.co.uk
5. The Problem: You’re paying too much to heat and light your home.
The Fix: Switch your electricity and gas supplier
It is four years since everyone in Britain has been able to choose their gas and electricity supplier. But nearly two out of three of us have not changed even though it can save us £100 a year. Switching is easy and nowadays so is finding out which is the best deal for you. It is nearly always cheaper to switch supplier than stay with the local company or British Gas. Remember too that it is nearly always cheaper to pay for your power by direct debit. You can find details of suppliers and tariffs in your area from Energywatch, the official consumer body for the gas and electricity industry. It also rates companies by the complaints against them to help you avoid bad companies. For example, someone living in London with medium sized annual bills of £314 for gas and £225 for electricity will save more than £100 a year by switching to Atlantic or Amerada. Switching can take around ten weeks but once you’ve switched the savings will start! There are seven independent websites that will help you see how much you can save. You will need your last four gas and electricity bills.
More information:
www.energywatch.org.uk or call 0845
906 0708
www.switchwithwhich.co.uk run by
Consumers Association
6. The Problem: You want the best mortgage deal but don’t want to pay a fee
The Fix: Go to a no-fee mortgage broker.
Finding the best mortgage deal can cut your payments in half. But how to find it? The best way is to use a mortgage broker. There are hundreds of them, but most charge you a fee. That is a bit cheeky because they also get paid by the bank or building society you borrow the money from – one job, two fees. But there are some who just get their money from the lender and do not charge you a fee at all. Brokers’ fees can be as much as 1% of the cost of your home – around £1250 for an average move. As we move on average once every 10 years, cutting that out saves more than £100 a year! So why not pick a no-fee broker and save yourself a lot of money? Make sure you pick one with a good national reputation who is not tied in to particular mortgage providers such as L&C in Bath www.lcplc.co.uk or call 0800 953 0304 or www.charcolonline.co.uk (but Charcol charges a fee if you use a face to face broker).
7. The Problem: You expect a well lit home. But what does it cost?
The Fix: Switch to low energy bulbs and slash your lighting bill.
The light bulb is a Victorian invention. But more than a century later we still use more than 100 million a year in the UK alone. Not only do they need replacing frequently they are very inefficient in the use of energy. Lighting accounts for up to 15% of our electricity bills. But now there are low-energy bulbs that use much less energy, a sixth to a quarter of incandescent bulbs. They are compact versions of fluorescent lamps, but the colour and performance is now equal to regular bulbs. They also last around nine times longer – six years instead of just a few months. So even though they are more expensive at first, they cost less to buy over their life. An 11W low-energy bulb typically costs £4.99. If it lasts six years you would have to buy nine 60W incandescent bulbs at a typical cost of £6.70. So you save on energy and on bulbs. A typical house with 20 light bulbs can save between £100 and £200 over the bulbs’ six year life. And shop around for low energy bulbs – you can get them cheaper. Ikea sells an own brand 11W globe bulb for £3.20.
More information: www.saveenergy.co.uk and www.est.co.uk
8. The Problem: You resent the high cost of travel insurance
The Fix: Take out a competitive annual plan
If you go abroad more than once a year you should make your own insurance arrangements. Travel insurance through a travel agent or as part of a holiday is always expensive – it only covers one holiday and the travel company will not shop around for the best deal. The cost of insurance bought with a two week holiday in the USA can be as much as cover for worldwide travel for a whole year from a direct insurer! A couple taking a two week holiday in Florida would pay £142.50 for insurance with Trailfinders but could get worldwide annual cover from MoneyExtra for £84.99. If they go abroad again, they are saving more than £100. Get insurance quotes on line from www.holidayinsurance.com
June 2003
e-mail Paul Lewis
on paul@paullewis.co.uk