Your 5 Step Emergency Budget

25-Jun-2010

The Coalition Government's first Budget has outlined plans to kick the country's finances into shape.  However, it seems that whilst 42% of us are now more confident about the country's finance, more than half of us (51%) feel less confident about our own finances (uSwitch, 2010). Here we present a five-step plan to help you get your finances back on track.

Shake up your Savings Accounts

Many current accounts give you a linked savings account when you become a customer, but be wary of using these for the bulk of your savings, as these accounts can often offer low interest rates.   Instead, consider an Individual Savings Account (ISA).  Everyone has an annual tax-free ISA allowance of 10,200 GBP, which means that you can save up to this amount each year in an ISA account without paying a penny of tax on the interest that you earn.  

Therefore it's advisable to make use of this allowance before you do anything else with your money.  Do some research on the best ISA rates on the market, and get ready for some tax-free saving!  For additional savings it might be time to shop around, because if you've had the same savings account for a number of years, it's unlikely to be as competitive now as it was originally.  Shop around and find out how your savings account stacks up against the competition because there is no point keeping your money in an account where it isn't doing anything.  

The Great Switch

With household bills set to rise, you cannot afford to be overpaying on your utilities or your home phone, broadband or television subscriptions.  There may be a number of different providers in your local area all offering different deals on essentially the same service, so it pays to look around.  Some providers offer a better deal if you buy a bundle of services, such as cable television alongside broadband.  Click on the link to compare your current utilities spend with other deals in your local area, or click here to find a better deal on your broadband, phone or television service.

You may be surprised to know that you can probably improve on your monthly insurance premiums - and not a moment too soon as the Insurance Premium Tax is also set to rise next January.  This increase will lead to more expensive premiums across the board but particularly for those in 'higher-risk' categories such as younger drivers or thrill-seeking travellers.  Rather than ditching your home insurance, motor insurance or travel insurance, visit our comparison pages (follow the links) and see whether you can find a cheaper deal.  Health insurance is another area where you can potentially make big savings, so request a callback from an adviser today.

Be Supermarket Savvy

Financial Advisers Grant Thornton estimate that the VAT increase will cost the average family an extra 500 GBP per year.  You can counteract this rise by ensuring that you are not overspending on your essentials.  Firstly, don't be persuaded into thinking that expensive, branded items are more effective than the own-brand versions - they usually contain exactly the same ingredients.  For example, you can find hayfever medication containing the same active ingredients as your normal brand for as little at 99p per packet at Boots, Lloyds Pharmacy or in supermarkets, and own-brand painkillers at a fraction of the cost of brands such as Nurofen and Anadin.

Where it comes to grocery shopping, some find that doing the weekly shop online actually saves them money because they are less likely to pick up 'extras' on the way to the counter.  This could also save you on petrol if you normally have to drive quite a distance to your supermarket.  Also, use vouchers to save money.  Over this recession, vouchers have become more popular than ever - you can make savings on clothes and food shopping, eating in restaurants and taking your kids out for the day, so that saving money doesn't have to mean staying in and doing nothing.  Savoo.co.uk and save.co.uk are just two of the UK's many voucher sites, where you can find deals on everything from electronics to fashion and holidays.

Give Yourself Some Credit

It's time to give yourself a bit of breathing space where it comes to your loan and credit card repayments.  Firstly, check your credit report with one of the UK's credit reference agencies, Experian (Credit Expert), Equifax or CallCredit.  You can do this for a couple of pounds or for free if you take out a subscription and cancel after the initial trial period.  This is a full record of your financial history, borrowing, banking and all.  

Seeing your credit report will give you two advantages: firstly, it will show you what a credit card, personal loan or mortgage provider will see about you when you apply to borrow money, and secondly it will give you the opportunity to correct any errors on the report and show you where improvements need to be made. Read our article about the 'Credit Report 7 Deadly Sins' for some easy-to-follow ways of improving your credit rating.

Shed Pounds from your Monthly Bills

Now that you have checked your credit report, it's time for some cuts.  Credit cards are the worst culprits for eating into your monthly disposable income, so your credit card interest payments are the first thing that you need to address.  If your credit rating is good enough, you can look at switching to a new card that offers a 0% balance transfer rate for an introductory period.  This will enable you to actually start making a dent in your credit card debt, rather than just paying off the interest.  

If your credit rating is not looking its best, you can still move to a credit card with a lower APR (APR is just a fairer version of the interest rate, with all additional fees and charges taken into account).  As an added bonus, by making your monthly payments in full and on time you'll also improve your credit rating for the future.   Next look at the repayments on any personal loans you have taken out, because it's quite possible that you'll be able to move your loan to a different provider and pay a more competitive rate.  Speak to a loan adviser to find out if you can improve on your loan deal and start paying back more debt and less interest.

Congratulations! You have reduced your monthly outgoings, paid down your deficit and introduced a healthier spending approach for the future.  George Osborne would be proud.