‘Here she goes again.’ – I hear you say. Crooning about my credit score and how it is time to do something about it.
You are right I’m on the go again. After all, I did promise you a series of articles on investing. Let me tell you, investing thirty minutes in checking your credit score and taking the steps necessary to improve it, is one of the best investments you could make in such a short time. These thirty minutes invested in paying attention to your credit score will save you thousands of £££s and make seven important areas of your life much easier to tackle.
Before we go any further, let me ask you a question:
How many offers for low interest rate credit cards did you receive last week?
Your answers would likely vary between ‘none’ and ‘several’; it depends.
It mostly depends on whether or not financial organisations consider you good enough risk to throw offers for cheap credit at you and hope that you’d forget when the low interest rate expires. How they assess whether you are a worthwhile risk? By checking your credit score.
We get a lot of offers for cheap borrowing. That is, we receive these offers now. Still, I do remember the time when I applied for a 0% credit card and was rejected; it was only five years ago.
What has changed?
Five years ago we were still paying off debt. Since then:
Having top-notch credit score, I believe, is most important today. Yes, we could debate about the virtues of the methodology; we could question whether it is right to found important judgement and decisions on a suspect number.
This won’t be productive: your credit score is an important measure of how ‘credit worthy’ you are and nothing will change that anytime soon.
Instead of questioning, do something about it. Two things you can do easily in the next 30 minutes are:
- Check your credit score. Once credit scores started being used by major finance industries these were bound to become ‘big’ business. Hence, there are many companies that offer this service. I believe that it’s best to go with the established companies but you can learn more about how to check your credit score, for free, on the Money Saving Expert website or on Clear Score.
- Make a list of actions that will help you improve it. There is much written about ways to improve your credit score. Again, I’ll go with an official service – the Money Advice Service in the UK. Just avoid paying to companies that promise to improve your credit score; you don’t need to pay for something you could easily achieve using free advice.
What makes this effort worth it?
Here are seven areas of your life that are exactly as good as your credit score is; this means that the higher your credit score the better you’d do in them.
#1. Good credit score makes it easier to rent
Landlords are using credit scores to select their tenants and you’d better believe it. This means that a higher (or high) credit score gives you much more choice when it comes to renting and keeps you away from the ‘darker’ side of the accommodation renting business.
So, if you wish to rent a nice house or apartment, in a great part of town start working on this credit score. You will still have to pay a deposit but it may be smaller than if you have no credit history or a low credit score.
#2. Good credit score will get you approved for mortgage
Owning our house is a very basic desire that links to the craving of security and feeling safe. How I remember dreaming of having my own home even if it were the smallest on this planet. (As it happens, I ended up with a large house but you cannot know what is in your future; you can only work towards achieving your dream.)
Buying a house, or an apartment, is usually done using a loan from a bank (or other financial organisation) known as a mortgage.
While there was a time, before 2007, when getting a mortgage was easy (and risky for everyone concerned) now the regulations in the UK have become stricter. To get approved for a mortgage you need a credit history and a good credit score (apart from having secure income and meeting a score of other conditions). Without it the chances of being approved are slim.
This is why, I have been telling our grown up sons to get credit cards, use them and pay them in full every month. They still haven’t done it. So, no home ownership for them, I suppose. Not yet anyway.
#3. Good credit score means lower interest rate on mortgage
Having a good credit score will also affect the interest rate that you’d be offered on your mortgage (and many other loans). On large borrowing, which a mortgage always is, a relatively small difference in interest rate makes a very large difference in repayment.
Couple of weeks back we changed our mortgage to a lower interest rate one (from close to 4% to approximately 2%) and this will save us over £6,000 per year. Think about it! (And get on with checking your credit score and setting in place the ways to improve it.)
#4. Good credit score gives access to low interest rate credit cards
Yep. I already told you about this one. Today, John and I don’t even have to ask for 0% credit card deals – banks sent them to us every week.
Our sons, on the other hand, will have to get a ‘credit builder’ credit cards at 27% interest because they have no credit history.
#5. Good credit score means cheaper insurance
Most insurance companies use your credit score. They mainly look for CCJ (county court judgements) when setting the rate. While your credit score may not affect directly the basic premium that you are offered, it will certainly affect the interest you are being charged were you to pay in monthly installments.
#6. Good credit score means no security deposit on utilities
Utility companies in the UK have been found to carry out routine credit checks on their customers. If you have a good credit score you are likely to get on a better tariff, you are not going to be asked for a security deposit and you are not going to be offered prepayment meter.
I know; this means that if you have had money trouble and your credit score is low your life becomes so much more expensive. These things are not cheap; our sons still pay much more that we do to heat badly a house that is a third of the size of our house.
#7. Good credit score means cheaper car leasing
You know that here, on The Money Principle, we believe that leasing a car is not abomination and that it can make good financial sense (depending on circumstance, of course).
You may think that you cannot lease a car with low credit score, right? Wrong. You can lease a car; it is just that it will cost you more than it would cost someone who has a good credit score.
When we think about investing we rarely think about our credit score. Still, investing thirty minutes now in checking your credit score, and setting in motion the actions that will help improve it, can save you thousands of pound every year; year after year.
Correct me if I’m wrong but this is seems like a very worthwhile investment to me.
Do you know your credit score? When was the last time you checked it and what have you done to improve it?
photo credit: Be-Younger.com Jumping via photopin (license)
Do you want to know what will save you thousands of pound (dollars) over the next year?
Ah, you may be thinking, here is this old trick. She crests our interest and immediately hits us with the same old cr*p.
You know the kind I mean. All this stuff about the overly familiar ways to save you thousands of pounds that includes ‘buy supermarket own brands’, eat baked beans for the rest of the year and don’t take a shower for the next month.
Let me ask you, friend; when have I done anything like this to you? When was the last time when I offered you banality for dinner?
No, dear; tonight, if not the right time to mention beans or to convince you to lower your hygiene standards. True to my promise to you (to educate, inform and entertain while helping you build sustainable wealth) and to the focus of The Money Principle I’ll tell you what I believe to be the five habits to help save you thousands, instead.
But, Maria, why is it important for me to change my habits? All I want to do is make my money lasts till the end of January (hard one, I know) and, possibly, to save a bit of dosh.
Ah, my dear, now this is a good question. Habits are important, you see. Your habits are what is behind all the technicalities of ‘spend less than you earn’. You develop good, healthy money habits and you can put your feet up and watch your wealth grow.
You continue with your bad habits and…well, here you can fill in the blank with your worst money nightmare.
#1. Indulging in some luxury will save you thousands
Okay, may be not thousands but many hundreds of pounds (dollars). Three is no denying that we all need, and crave, comfort and security. According to a great book I’ve been reading, this strive for comfort and security is embedded in the fairly primitive part of our brains; the part controlled by emotion that he calls the Chimp.
(The book is The Chimp Paradox by Steve Peters and I think that you should read it.)
You can’t let your Chimp run free because this will make you a mega jerk who is intolerable even to yourself. It is the job of your ‘human’, or the rational part of your brain, to manage the Chimp.
One of the most effective ways to manage your Chimp is by bribery, by giving it a bit so that it stops lusting after too much.
This is why, working out your key ‘wants’, and allowing yourself to have these, will in the long run save you a wagon-load of money.
#2. Learn to put your money where your mouth is
Do you know what you want in life? What you really, really want?
Now this is a problem when you try to build your wealth. You see, all throughout your life you can have anything but you can’t have everything.
Work out what makes your life worth living and spend your money on the things, events and activities sustaining it. And you know what? It matters little whether what gives meaning to your life is trainspotting, travelling the world or generosity. Just figure it out and make a habit of spending your money on it.
#3. Buy things only when you need them
When you get the chance, do watch the ways in which the ‘well to do’ and ‘poor’ people shop. Soon you’d notice that the ‘well to do’ buy things when they need them and poor people buy things because they can do.
Develop the habit of buying things when you need them even if you don’t have much money. And as a reader of The Money Principle, you already know better than to think that this has anything to do with the ‘look after your needs’ school of thought; I’ve always believed that we should focus on our want to manage our money properly.
This habit will save you thousands by training yourself not to lust after things while taking maximum pleasure when you get them. You’d also have less clutter in your house as a bonus.
Oh, and I almost forgot. Don’t bookmark sites that offer you deals all the time and ignore shop sales. These are marketing ploy to keep you a consumer.
#4. Always look at the wider picture
Do you know the key difference between extreme frugality that squeezes the living hell out of you and becoming a fugal artist?
Okay I’ll remind you then. Extreme frugality looks at the world, and the things in it, as unconnected. In other words, when trying to save you thousands you’d be looking at lowering the cost of your life with little regard to the quality of life you may lose. Like eating baked beans all the time, staying in the cold and cutting your own hair.
When you are a frugal artist, on the other hand, you see the world as connected. This is very different way of thinking that shift attention from the very narrow and specific (my hair) to the wider picture (what would I lose or gain by having a professional haircut).
Shifting your perspective from the specific to the wider picture is the best way to save you thousands without, or with very little, loss of quality of life.
#5. Automate your savings/investments
It doesn’t matter how much you save if there is nothing to show for it at the end.
Call me naïve but it seems to me that we save wither for the future or because our life is larger than our earnings. In both cases, things will get better financially only if you find a way to build up your savings and investments.
Make saving a habit by automating it. Get up and set up a direct debit payment to your savings account.
You don’t have a savings account?
Open one and do it now. Start putting money away; it may be only £20 per month – do it. You’d be surprised how fast it builds up and how much security it will give you.
I find January a long month for my money and suspect that you do as well. Between you and me, February, March April…and so on, can be longer than your pay as well. Restore the balance by practicing the five habits to save you thousands I shared above.
By developing these habits my months match my pay and I love my investments grow.
Do you have, or know of, any other habits that will save you thousands? Don’t be shy and share.
photo credit: Dey Louis Roederer champagne via photopin (license)
People often ask me how I budget.
Fair game; I am in personal finance and I have a personal finance blog on which I’ve written a fair bit about successful budgeting.
I’ll be completely open with you:
Most of the time my budgeting system looks exactly like the picture above.
Heck; this is a picture of the first stage of my budgeting system that involves putting all receipts in a folder for a month and creating, what looks like, a mighty mess.
I’d even go a step further and tell you that for the first six months or so my budgeting really sucked. Do you know why? It sucked because it didn’t simply start with a mess of receipts and a record of spending; it ended with it.
Things have changed since that time of chaos, missed targets, broken promises and debt. My budgeting system has become a finely tunes instrument making then sounds of perfect money management music.
There are three things I figured out to move from the chaos of receipts to a system that helps me know where our money comes from, where it goes and how to optimise the flows up to the nearest £30.
#1. There are three stages of successful budgeting;
#2. You need the tools to make decisions about your spending, earning and balances; and
#3. Successful budgeting is not about money; it is about the life you live and the life you want.
Today, I’ll tell you about these and I’ll try to keep it straight forward. You really don’t need complexity at this stage. One thing I’d ask though is that you don’t read this post as you’d read a novel: please read it as if you are revising for a test. This means you need a piece of paper, a pen and downloads of the tools I’d be mentioning.
Oh, my successful budgeting also means that I work with proper numbers (which is very good for a woman who comes from a country where people still measure distance by the number of cigarettes you could smoke while getting there).
In our family it is John who says things like ‘yes, it will cost us several hundreds’. If you are like John please stop reading this post now. Go away and learn something about numbers and how to use them; apply this knowledge to your money. Are you ready? Now you can continue reading what I have to tell you about successful budgeting.
All that I’m telling you here was worked out through trial, failure and persistence. My first budget was a failure of major proportions: it not only made me feel like my life has been bundled into a straitjacket but also took me halfway to giving up the whole budgeting and getting out of debt lark. (I’m very happy I didn’t give up but it was very tempting at first.)
Here are the three stages of budgeting and the tools and approaches you’d need to implement them.
Stage One of Successful Budgeting: Get to Know Your Money
This stage of successful budgeting is about describing your money. This means that you need to gain detailed knowledge of what you earn, what you spend and what you spend your money on. Sounds banal and boring – and to a degree it is – but without doing that any attempt to budget becomes akin to writing fiction for delusional adults.
Okay, let me ask you a question: do you know exactly how much money you make per month?
You do? Great. Because you won’t believe this but many people think that they know when they underestimate their monthly (and yearly) income considerably. Sometimes people underestimate their income by as much as 10-15%. This is a lot, you know. If I were you, I’d check again; and I’d make sure that I include all my income while I’m at it.
Now, let’s move to something more advanced: do you know exactly how much you spend per month? Do you know what you spend your money on?
Ah, you are not so sure. You should be.
Using my system may help. It consists of three steps:
#1. Collect and keep all your receipts for several months
If in doubt, have a look at the picture above. Don’t panic though: you can stuff all these receipts in a bag somewhere and forget about them until you’ve been through, and completed, the next step on this list.
#2. Look at your bank statement for six months
Are you ready to give up? I know how you feel but please stick with me. This one sounds much worse than it is. Particularly if you have electronic banking (and I’m thinking that most people today bank electronically.)
If you don’t have electronic banking you should do. Go on your bank’s website and check it out. Once this is sorted you can continue working on the successful budget that will transform your finances.
If you already use electronic banking, I can tell you exactly what I did yesterday. Here it is:
- Went on the site with my current (checking) account;
- Downloaded the data of all transactions for the last six months;
- Saved the data as an Excel workbook;
- Saved all monthly expenses as separate sheets in the Workbook;
- Colour coded the main categories like utilities, mortgage, CCs, insurance, food etc.
- Went back to the ‘source’ spread-sheet and mad a note of all income streams.
This took me approximately an hour; and I kid you not.
#3. Use The Money Principle Monthly Budget Planner to record all you spend
Once I had all this data sorted out I entered the numbers in The Money Principle Monthly Budget Planner. (And a big thank you to the good people from Currys-PCWorld for helping making this look much more professional.)
Just as a reminder, TMP Monthly Budget Planner works by bundling up the expenses in three groups: fixed or the expenses that you have to pay and can’t negotiated easily; changeable or the spending that you can negotiate; and variable or the monthly spending that you can change very fast like spending on food, treats etc.
You can download TMP Monthly Budget Planner here.
Now you know your money and are ready to move to the next stage of successful budgeting.
Stage Two of Successful Budgeting: Make Hard Decisions about Your Money
Stage one of successful budgeting is very important but matters very little if you stop there. This was one of my failing when I started budgeting – I knew what we earn and what we spend and…nothing. We continued to earn and spend exactly what we did and the debt was piling up.
This changed when I started making hard but well informed decisions about spending our money. You see, most people would tell you that frugality is the way to go; test yourself and how much deprivation you can take before you fold it.
I don’t do frugality very well. There has always been a part of me believing that life is to be lived to the full and enjoyed. In fact, I believe that our life has one purpose: to leave the world a better place than we found it or, failing that, not to cause damage. Guess what? This is so much easier to achieve if you love your life.
This is why I had a problem when I started out. On the one hand, I had to find ways to reduce our spending and by a lot. On the other hand, I don’t do simple frugality and deprivation for me is as pointless as jumping bare-bottomed in a field of thorns.
Coming up with the ERR system for money management solved my problem; and it can solve your problem with making decisions about your spending as well.
What is the ERR system for money management?
You can read in detail what the ERR strategy is and how to use it to male your money go further here. As a brief reminder, the ERR strategy stands for:
- Eliminate (waste);
- Replace; and
- Reduce (consumption).
You remember the spread sheets that you ended up with at stage one of successful budgeting?
Now it is time to get back to them and look with the eyes of an ERR strategy master.
What are you wasting?
You may find that there are many different kinds of wistfulness in your budget (and your life). Look, for instance, at all your direct debits and standing orders: do you use what you are paying for? (A hint: if you are like most people around, you are paying for services you’ve long forgotten you have access to. Cancel the direct debit because this is waste.)
How much are you paying on insurance? Are you overpaying and under-insured? Are you over-insured? Do this right because it is a waste.
How much are you paying for food? Do you use all you pay for or you throw away most of it?
You already get the drift of how to tackle waste and what to look for. Let me tell you though that when I first did this exercise the waste ran into hundreds of pounds (in the higher hundreds to be more specific).
Next, look for items you can replace. These are usually items for which you are paying more than you should be; or things that you can still get but a lot cheaper. You may wish to have a look into the ways to become a frugal artist as well.
Last but not least, have a look at your spreadsheets with a view to reducing your consumption. Don’t tell me you don’t over-consume – we all do in capitalist societies. After all, we’ve been cast as consumers for well over half a century now and that is what we do – consume. Make sure you don’t consumer more than you feel comfortable with.
Stage Three of Successful Budgeting: Dream the Life You Want
When talking about budgeting most people will talk to you only about money. This is rubbish, friend. Your budget – as in the decisions you make about what you spend your money on – is not about money; it is about what you want your life to be.
In other words, the third stage of successful budgeting is about putting your money where your mouth is.
Are you dreaming of traveling the world?
Then you should probably stop spending your money on booze and cigarettes. (Not a joke at all. The money you’d spend on drink and smoke for a year will be more than enough for several months traveling around the world. Do the maths!)
It is up to you to decide what you really want in your life though; I can’t help you much there.
I can only urge you to do the dreaming exercise; you know, the one where you close your eyes and allow yourself to dream in great detail. You should do this while keeping out ‘the critic’ and ‘the accountant’. For more on how to use this technique you can read this.
Once you’ve worked out all things you want in your life, place them in three groups: a) things without which your life has no meaning; b) thing which you’d like to have in your life but can wait for; and c) thing that you’d like in your life but they are optional.
You know which list you should hold in hand when you go through your spreadsheets again, don’t you?
(Hint: make sure that all things that are at the top of the first list are still in your life. If your life will be meaningless without running interesting races, make sure that you travel around and race never mind how hard up for cash you may be. Cut out something else to make your budget work.)
Successful budgeting is no rocket science; it is simple. You have to make sure that you earn more than you spend at all times.
In this post, I tackled the spending part of this equation; will tell you about earning some other time. For now, it is important to remember that to budget like a boss you need to:
- Know your money;
- Know how to make decisions about your spending; and
- Know your life since this is what make budgeting make sense.
Now get on and do it! There is nothing stopping you, is there?
With the cost of vacations constantly rising, it can be difficult to know how you’ll be able to take the entire family away during the summer months. But thankfully, there are a number of ways you can start saving up points so you can enjoy the vacation of a lifetime and without breaking the bank.
Below you’ll find some top tips on how you can earn points through your credit card company, how you can earn air miles and where you can stay in hotels for free (yes, free!):
Before You Start, You Need to Plan Your Trip
As soon as you start looking at all of the available plans there are, it’s easy to get carried away and you may soon feel overwhelmed by the choices there are available. That’s why it’s important that you’ve decided exactly where you want to go before you start shopping around for the best reward schemes.
The points available with each credit card and holiday provider will differ dramatically depending on where you’re going. So, before you start planning, make sure you discuss with the family what your top destinations are. This will enable you to narrow down your search results so you can carefully filter through the available options without getting too distracted by other exotic locations!
Opt for Convertible Reward Schemes
Some credit card programs will only provide you with one reward program, so try to find one that’s convertible and offers you more than one scheme. A lot of leading credit card companies like AMEX offer a number of different programs (learn how to redeem AMEX points for maximum value here) which will give you much more scope when planning future vacations as well as this one.
And don’t forget to get your partner to sign up to these schemes too. You’re both entitled to them!
Pay for your Bills with Your Rewards Card
To rack up those points as quickly as possible, it’s a good idea to set up an autopay system with your credit card for all of your bills. Those bills that come out of your account once a month, e.g. cable, cell phone and electric, can all be set up to automatically come out of your credit card account. A lot of companies will let you do this without charging you any additional fees so it’s a great way of earning points without having to think too much about it. And if your bills amount to $2,000 a month, you’ll have earned enough to get a trip within the US with the points you’ve built up as many cards offer you a point per dollar spent.
Check Out Hotel Loyalty Programs
You may be thinking you’ll have to find budget accommodation in order to take your family to their dream location but think again. A lot of top hotels offer great rewards programs which allow you to cut the costs of your stay dramatically. Some hotels will offer you these schemes on their own but it’s much easier to build up points if you’ve got the rewards card that they’re co-branded with.
For example, you can join the Starwood Preferred Guest program which is in conjunction with American Express. This helps you to get fabulous overnight stays in these hotels with your points, and could even see you upgrading to a prestigious suite without it costing you a dollar!
Go Steady with Your Rewards
As mentioned previously, it can be easy to get carried away with all of the points on offer but this could land you in a whole heap of trouble if you’re not careful. A lot of these rewards come from credit cards and if you go too mad spending on these pieces of plastic, you could end up with a mounting debt that you can’t handle. So, be sensible when you’re using your cards, opting for one or two to start with before you add more, if necessary.
And finally, do your research before you spend your points so you know you’re getting the best value for them. Even though you may be able to travel somewhere with the air miles you’ve accumulated, your points may be worth more if you hold onto them for next year’s trip. Equally, don’t just hold onto your rewards “just in case” because they may start to lose value, expire, roll over with changing schemes and so on.
With a little careful planning and research, you and your family could be enjoying the ultimate trip at a fraction of the price!
Editor’s note: Aimee Archer took a round the world trip when she was 18, and since then has always loved the thrill of travel. Now a Mom, she enjoys planning trips for her family; broadening the kids minds as they discover new cultures and strengthening her relationship with her husband.
photo credit: JLS Photography – Alaska Enjoying the winter sun . . via photopin (license)
When I got back from work today a letter from our water company was waiting for me. Rather unexpectedly it said that our bill is going up. Again.
This made me have a good, hard look at the rest of our energy and utility bills and it seems they are all going up.
Now, I know that energy is expensive and I’m informed enough to know that we can only expect it to become even more expensive. Still, we did manage to reduce energy and utility bills once and I really want to do it again.
So, I decided to use the Money Principle ERR strategy for money management to develop a checklist to reduce energy and utility bills.
Here is the list:
Just to remind you that the ERR strategy for money management is about three things:
- Eliminate (waste);
- Replace (change the way in which you do things); and
- Reduce (consumption).
Here is what actions you ought to take, I believe, under each of these to keep your energy bills under control.
Eliminate: 7 easy ways to eliminate waste and save on energy in your home
Here are seven easy and straight forward ways to eliminate waste and save on energy in your home.
Some of these you can implement immediately, others may need to wait; some are cheap to put in action, others not so much.
All are very much worth doing: by eliminating waste of energy you can save hundreds per year. And it feels so great!
#1. Pull the plug. Okay; how many of your electrical appliances are left on standby? My guess will be ‘many’. And this is waste of energy you really don’t need – most appliances will be perfectly fine if you pull the plug (watch for some TVs and recording devices because these may lose their memory if plugged off). Word on the street is that, depending on how many devices you us, you can save between £35 and £50 per year by simply un-plugging. Doesn’t sound much but this is: one week of food, couple of pairs of trousers, a pair of shoes or a nice little chip off your debt (or contribution to your ISA). So, think again.
#2. Put out lights. My Dad used to drive me mad when I was little by sending me back to put out the lights. I thought he is un-necessary stingy. Now I do the same (except when I forget the lights on which annoys John terribly). Leaving lights on when there is no one who needs light is a waste of the worst kind. So, put the lights off; and teach your kids to do it as well.
#3. Get yourself some draught excluders. I know, I know. These look very silly and you can trip in them. They help keep the heat in, though. Which is kind of important during the winter – after all, why would you willingly choose to heat the universe; and pay for it. While you are at it, you may wish to get some heavy curtains as well.
#4. Carpet is better than wood. This is the bane of our marriage: I like wooden floors and John wants to stick with carpets. There is a mixture of flooring in our house but I’ll have to say that carpets do keep the house warmer.
#5. Get some more insulation. I’ve come to believe that insulations is a bit like shoes: one can never have enough of it. We have cavity wall insulation (needs renewing), loft insulation…all kinds of insulation. It makes a very big difference and it not only keeps the heat in: in summer it keeps it out better as well.
#6. Double glazing. Yes, it is true: in the 21st century, some houses in the UK still don’t have double glazing. When it comes to eliminating waste and saving on energy, this is essential.
#7. Check for drips. Sounds trivial, I know. But dripping water can really lead to very large waste of both water and energy (to heat and move it around the house). And it is annoying!
Replace: 7 easy changes to save on energy
You can save on energy a lot by eliminating waste; you can save even more – and more sustainably – if you change the way you do things when it comes to energy use.
Here are seven changes that can lead to large energy saving gains:
#1. Change your light bulbs. Yes, get yourself some energy saving bulbs. They don’t come cheap but they also pay for themselves from savings within several months. This doesn’t mean that you should start leaving the lights on but it won’t be so bad if you occasionally forget them on.
#2. Buy new appliances. New white goods are generally much more energy efficient that the ones made 5-10 years ago. The interesting question is, what you do if a very old appliance that sucks energy like a thirsty man on a bottle of cold beer is still working. In such cases, I do the maths: how long would it take for the more energy efficient and new appliance to pay for itself? This helps decide what to do.
#3. Get/use a dishwasher. It is only natural to believe that washing by hand is more energy efficient than using a dishwasher. As most natural beliefs, this is wrong. A full dishwasher load uses 4 gallons of hot water per cycle (and this washes eight full place settings). An average faucet flows at 2 gallons per minute. This means that you can hand wash more economically than a dishwasher if you can wash eight place setting in two minutes. You see?
#4. Change your energy supplier. We’ve been doing this one with some regularity over the last five years or so. It certainly pays off to be an energy shopper – getting cheaper energy complements nicely the other actions you can take to save on energy. Even only moving from a variable tariff to fixed one can save you up to £250 per year. There are three steps to efficient energy shopping. First, you have to take stock of your energy bills; then you have to shop around; and lastly, you have to take control and act on your research.
#5. Install solar panels. Installing solar panels is an important change when you wish to save on energy. This is something that needs an initial investment, though. If you’d like to know more based on our experience with installing solar panels you can read it here. What I want to mention is that out solar panel generate annually over £700 worth of electricity (about 12% ROI) in ‘sunny’ Manchester.
#6. Change your heating controls. We’ll need to do this one – our heating controls are so ancient that we often find the heating on when it shouldn’t be. Sometimes, I’m freezing because the heating has not come on. Now there are advanced heating control systems that allow you to time your heating precisely, heat different parts of the house at different times, etc. Certainly worth a second thought.
#7. Change your shower head. I always suspected that our drench shower is more efficient than the movable head. It turns out I’m right. Look into changing your shower head with a water saving one – this way, you can have a decent shower and save on water and the energy to heat it.
Reduce consumption: 5 things to remember
You will reduce your energy consumption substantially by implementing all the ways to eliminate waste and change your energy use.
Further, you can think whether you are over-consuming.
For instance, you need to remember the following:
#1. You don’t have to wear only t-shirt in the winter. This sound ridiculous, I know, but there are people who’ll have their thermostat on high and the windows opened because they are too hot. You don’t have to walk around your house in a t-shirt in the winter, you know; just put a jumper on.
#2. Your oven doesn’t have to be heated an hour before the meal is ready to go in. Again, sound funny but even I do this one from time to time. I start preparing the meal and put the over on; trouble is the over takes 7 minute to heat and the meal 25 minutes to prepare. You see what I mean? (A variation on this one is heating a kettle when you need a cup and having the heating on in rooms you don’t use.)
#3. Empty rooms don’t need light. This has really started to annoy me. My son leave all lights on, all the time. (It also makes me realise that I’m becoming like my father at his most annoying; still, he had a good point it seems.)
#4. Showers are to get clean. Showers are to get clean and this takes approximately 6 minutes (sorry to sound like Jack Reacher here but this is my limit; I’ve times it). Both my husband and my son tend to use the shower for other purposes like to get warm, or to have some pleasant thinking time. This is over consumption.
#5. Double check the water tabs. Yes, we do this one. John and I forget them on; our son at some point couldn’t be bothered. So much so that I had to resort to non-traditional measures (see photo above).
It seems to me this is a great check list to save on energy and keep our energy bill under control. Are you curious which ones I’m not really good at?
Here they are:
- I keep my appliances on standby.
- I forget (occasionally) the lights on.
- I need to change the heating controls.
How do you manage to reduce energy and utility bills? Which of the points in this post you have implemented and which you intend to implement?
Do you believe that you have mastered the way to control your money?
So did I, so did I. After turning around our financial destiny so dramatically, I developed this sense of personal finance invincibility.
You know the one, surely. This is the feeling when you have the fundamental conviction that you have mastered your spending and are making the best of your earning. This is the satisfaction you feel when you see your monthly cash flow increasing, your savings growing and your investments starting to pay off.
I’m finding that I’ve been wrong, my friends; and you may be wrong as well.
Yesterday, I was casually looking through our bank statements, as you do on a sunny Sunday afternoon if you are a personal finance nerd, when I notices something interesting.
I already knew that our spending has gone up a bit. What I noticed yesterday was quite a few small spends; these are all under £10 and many are below £5. These spends were made in the café at work, at airports or in supermarkets. What they have in common is they were all made electronically.
It adds up, you know.
What is important here, more important than the increase in spending, is why my trusted system to control money has broken down; and why the system you use to control your money may be outdated as well.
If you are still overspending and failing to control your money this is not because you have neglected important rules of personal finance but because these rules have been rapidly changing.
Let me explain.
For some time now, I used a combination of two approaches to control every day spending.
First, for my personal spending – small amount of ‘blow’ money and a bit to spend on going to work – I’ve been using cash for the last five years or so.
Second, to control household spending we’ve transformed planning into a cult. We plan weekly menus, visits to concerts and the theatre, breaks, holidays and school trips.
Where did I go wrong?
Well, my increased spending is mainly from not using cash any longer for work related spending.
I stopped doing this several months back: I find that carrying around cash is rather risky and using contactless payment is all too easy.
You see, before contactless I would have had to keep to cash: after all, getting your card in a reader, remembering your pin code and entering it is too much work for small purchases. Hence, the problems with carrying cash are more than matched by the bother of using the card.
Contactless payments are a different ball game all together. They are easy: you just wave your card at the card reader. With the introduction of ApplePay (and similar payment systems) it became even easier bypass cash.
Change here is mainly technological. Still, contactless technology has made it very easy to spend relatively small amounts of money.
When spending is easy, there is little time to reflect on what we spend and what we get. It is a bit like scoffing food: somehow your brain doesn’t register eating when you do it very fast and don’t really enjoy it.
This is why, I started this post by telling you that if you are like me and you are still overspending, it is not because you lack discipline or because you don’t know better. It is because, how you spend has changed.
Which only means that you have to match this change with changing the way to control your money.
Here are three ways to help you improve how you control your money.
#1. Control your money: keep planning…
Planning what you spend and what you spend it on is the key to good money management.
Remember that planning your spending is not about thrift and deprivation: it is about increased control.
What this means is that your planned spending should not be restricted to necessities and ought to include your preferred entertainment, sports and holidays. (Naturally, the kind of fun you plan would depend very much on your current financial situation; still, there should always be some of this planned.)
#2. Control your money: make time…
There was time when shopping was a ‘slow lane’ activity and it naturally allowed time for decisions.
Today, we shop in the fast lane – we can buy furniture by pressing a button on an internet site. Only the other day, plagued by jetlag and insomnia, I bought a pair of shoes at five o’clock in the morning using ‘one click’. Yep, this is what I’m talking about!
And just like your body knows that you’ve been scoffing – even if your brain refuses to recognise it – your bank account would know you’ve been shopping in the fast lane even if you try to forget.
To avoid debt and disappointment always make sure you give yourself time to decide on your purchase.
One trick I’ve started using is the following:
When I feel the urge to buy something on Amazon (one click) I make myself get up, walk about and count to 100. If I still want it after that I press the button.
#3. Control your money: learn to control your ‘wants’
Anything you want, wand don’t get, can easily become an obsession and a temptation much greater than it should be.
I’ve written about this before but it is so important that I feel the need to mention it again.
Most personal finance counsels you to identify your needs and look after these. Most personal finance is about supressing your ‘wants’.
I’ve always believed that money mastery comes from learning to control your wants. This means the following:
- Learning to distinguish between the ‘wants’ that are important to you and the ones that are not that important.
- Making sure that you allow yourself the wants you see as important; you can ignore the ones that are not important.
This is also known as essentialism and I’ll be wring about it more in the future.
If you find that you are still overspending, as I’ve been doing over the last six months or so, this may be because the way in which you spend your money has changed.
Long gone is the time when ‘cash was king’. Today, using internet shopping sites and advanced electronic means to pay, we spend our money in the fast lane.
To avoid debt and disappointment you need to change the way in which you control your money by planning your life and spending, always allowing yourself time to decide on a purchase and learning to control your wants.
photo credit: TheTruthAbout Apple Pay via photopin (license)