Six ways to beat the cost of living hikes that could cost you £2,417 this year
FAMILIES are likely to be worse off by an average of £2,417 this year – or £200 a month – when the cost of living soars from April.
We are all worried about paying the bills and cutting down on essentials.
But there are ways to fight back and find some extra money.
Rachel Wait explains six easy ways to save thousands of dollars.
1. PAY INSURANCE UP FRONT, NOT MONTHLY
If you pay your car insurance and home insurance on a monthly basis, it could cost you an additional £55 and £13 respectively per year, according to Gocompare.com and Moneysupermarket.com.
Paying monthly means that you are effectively taking out a loan from your provider and interest will be added to your bill.
Brean Horne, personal finance expert at comparison site Nerdwallet, said: “Home insurance premiums can cost 6% or even more if you pay monthly.
Auto insurers can add an average of nearly 12% to your premium, with some insurers charging up to 30% interest.
If you can’t afford to pay for your insurance all at once, a 0% spend credit card could help you spread the cost over several months with no interest.
ECONOMY: £68 PER YEAR
2. USE DEBIT CARD NOT CREDIT CARD FOR CASH
If you are short on cash, resist the urge to pull out your credit card and withdraw cash from the ATM as it will cost you dearly.
In addition to the cash advance fee of approximately 3%, you will be charged interest from the time you receive your money.
Interest rates are generally higher compared to standard transactions, hovering around the 27.9% APR mark.
This means that a cash withdrawal of £80 could cost you £5.98 in fees and interest.
If you withdrew the same amount each month, it would cost you £71.76 per year. Instead, use a debit or prepaid card for withdrawals.
ECONOMY: £72 PER YEAR
3. BE READY TO SWITCH YOUR MORTGAGE AGREEMENT
As soon as your mortgage agreement ends, you are automatically transferred to your lender’s standard variable rate (SVR).
Earlier this week, interest rates rose for the second time in two months to 0.5%.
This will only add to financial misery – so don’t make a common money mistake.
Much cheaper rates can be found by shopping around, so upgrade to a better deal ASAP.
Laura Suter, head of personal finance at AJ Bell, said: “Someone borrowing £250,000 on the average standard variable rate mortgage of 3.63% could save £3,936 a year by switching to current two-year solution.”
4. PAY THE MOST YOU CAN ON CREDIT CARDS
If you make a minimum payment on a credit card, it will take you years more to clear your debt and you will pay hundreds of extra pounds in interest.
Repay as much as you can afford each month.
Jonathan Watts-Lay, director of Wealth at Work, said: “A debt of £3,000 with a rate of 18% APR, could take ten years and ten months to pay off if you pay £50 a month, with interest total paid of £3,495. If that monthly payment were increased to £100 per month, the debt would be paid off in three years and four months, and the interest paid would be just £908.
Consolidating credit card debt onto a 0% balance transfer credit card means more money will be spent paying off the debt, allowing you to pay it off faster.
Compare cards using a comparison website like Uswitch.com or Moneysupermarket.com to find the best deal.
5. BUY SUPERMARKET BRAND ITEMS
BUYING brand names from the supermarket can add hundreds of pounds to your food bill over the course of a year.
But switching to budget own brands or supermarkets could help you save a third (around 33%) on your grocery store, according to Nerdwallet.
On a weekly £70 grocery store, that could save you around £1,200 a year.
Lynn Beattie, Founder of MrsMummyPenny.co.uksays: “The price difference between branded and supermarket products can be huge.
“You can save even more by opting for the supermarket’s basic range rather than its luxury products in fancy packaging.
“Test the cheapest products and if you can’t tell the difference, stick with them.”
ECONOMY: £1,200 PER YEAR
6. CANCEL UNWANTED SUBSCRIPTIONS
Take a look at your bank statements and eliminate unwanted magazine subscriptions, insurance policies and memberships. If it’s been a while, you could be putting £1,000 a year back in your pocket, according to money expert Martyn James.
He says: ‘I did this recently and it only took me an hour to save £1,000 a year. You’ll be amazed at how much you could save too.
“I cut some of the streaming channels I don’t use, gave up my gym membership, stopped repeat orders on Amazon, and spotted billing errors that I recovered from.”
SAVE: £1,000 PER YEAR