Consumer champion Save it, spread it, re-jig it: how to control your family finances
I ALWAYS see back-to-school time as a moment to re-group, and this year it's even more so.
Having some time to yourself with the kids gone and without Christmas debt to contend with makes it a great time to plan for the rest of the year.
With money even tighter in 2020, it's an opportunity to reassess your spending, and there's plenty of help available.
The Competition and Consumer Protection Commission's (CCPC) Money Skills for Life programme, which is free to companies and community groups, examines lots of different areas where we can save a bit, spread a bit and re-jig a bit.
Getting your family finances under control is a bit like improving diet and exercise - what really works are small, consistent steps, not running a marathon on the first day.
With no end of ways to spend your money, it's far harder to keep control of what you spend. Good budgeters check their bank balance(s) every day.
Knowing what you have makes it much harder to impulse buy or overspend. It only takes a second online, but it sits in your brain for the day. That's a great first habit.
Keep a simple spending diary and always ask for receipts.
If you're avoiding handling cash these days, using the same debit card for every single transaction makes it easy to see where your money's going - it's all recorded automatically. Print off your statement each week and examine spending categories.
You can break this down by groceries, school and clothing, for example. Many banks have nice apps to help you: KBC and AIB's are particularly good, but all of them have video guides, budget planners and good information about controlling your outgoings (see panel).
If your local credit union has a budget account (it's free or very low cost), it will manage all your bills for you - you simply agree how much each month and debit it in.
Print off one month's bank statement and highlight every direct debit. Can you identify them all, where they're going and what for? If not, find out. People often end up paying twice for the same service or simply don't notice a defunct insurance policy or subscription.
I always see savings as essential, like paying your mortgage - not something you do with 'left-over' money, because who ever has any? Savings deposits should be made on pay day, same as your other bills.
Setting up some deposit accounts (free of charge) and naming them for different goals works from lots of angles. Forget interest: think of them as money minding baskets.
- 0-6 months: this is quick, liquid stuff - Christmas, emergency fund for the house, a weekend away.
- 6-48 months: saving for a new car, a trip of a lifetime or college fees.
I have one called New Car 2022, for instance. I hate borrowing. Popping in €150 a month (or what- ever I can afford) means I save €5,400 in three years - that's a big dent in my change of car.
Naming one Sean's College Fund, for example, means that if you fancy a new pair of shoes, you're less likely to 'steal' from it.
Leaving extra cash languishing in your current account makes it more likely you'll spend it and not remember why.
Good debt, like a mortgage, is for something you could never buy simply by saving. It's also cheap debt.
Bad debt, such as credit cards, is stuff you could have saved for or planned but didn't. It's really expensive.
Getting rid of it is always harder than building it up. Debt servicing should never eat up more than 35pc of your net income or you're in trouble. There are two ways to cut it back.
The first is the snowball system. Write down your loans in ascending order, the smallest one first. Your mortgage will be last, with personal loans, credit cards and overdraft somewhere in the middle.
Aggressively paying off the small one (by going without, if necessary) saves you that outgoing, which you roll into the next one on the list. It gets cleared even faster, and so on.
The other way is the interest rate method. List your loans with the highest interest-bearing one (credit card) at the top and the cheapest (mortgage) at the bottom.
The top ones are eating your money, the mortgage is slow and low. Wasting money on interest- only makes banks profitable, not their customers.
I have three rules: Shop by List, Shop by Needs, Save for Wants.