The Money Doctor's A-Z of Saving: Part One

Wanting to save money and actually doing it are two very different things. Billionaire JP Getty’s formula for success was “rise early, work late and strike oil”  but few of us will reach that utopia so it’s back to the nitty gritty: save.

Before you can start putting away money for a rainy day, you need to make savings in your day-to-day spending. The key to saving is breaking old habits and fostering new ones, so you must be willing to adopt a new approach to spending to start seeing savings.

Remember, personal finance is 20% knowledge and 80% behaviour. Doing a budget first to determine how much you are spending and how much you can save is essential.

Here, John Lowe the Money Doctor in the first of two parts on saving gives his A to L of the saving mentality.

A is for assessing the situation

Before you can start getting your financial house in order, you need to identify the cracks.

Do you frequently run out of money just before payday? Do you tend to splurge on things you never use? The only way to identify your financial foibles is to record them. Write down what you spend and track the trends.

B is for budget

Once you have identified what you actually spend, calculate what you should spend.

First, make a list of all your monthly bills and deduct the total from your income. It’s a rough estimate but should give you an idea of whether you are living within your means or not.

Now look a month ahead – what expenses are coming up? Apart from the basic costs, including less frequent bills, like insurance, school fees and so on, when working out your budget. A successful budget is a realistic one and includes all your expenses.

Once you have identified what you actually spend, calculate what you should spend.

C is for comparing

Not only do you need to cut out purchases you can’t afford, but also you need to make the right choices on necessary purchases.

Arm yourself with the maximum Information before making a purchase. Where is the item available? How much does it cost elsewhere? Are there any special deals or discounts? Can you buy it more cheaply online?

Shopping around might seem like a cliché but by comparing the options before you buy, you can ensure you get the best possible deal. The Competition and Consumer Protection Commission (CCPC) produces regular cost comparisons and price surveys on www.consumerhelp.ie. Or look for similar if you are outside Ireland.

D is for dealing with your debt

If you have a big balance on your credit card or are crippled with other debts, look at these areas first to halt the build-up of more debts.

If you are struggling to repay your loans, let your lenders know and engage with them to devise alternative payment plans. Credit cards especially have very high interest rates, and failing to chip away at that debt can have major consequences for your pocket.

E is for energy

Does your gas or electricity company offer good value?

If not, consider using a different tariff to reduce your bills, or switch to a new provider. Electric Ireland, formerly ESB, recently announced a range of new price plans and dual fuel offers and quickly followed by competitors. The company said its electricity price cuts would save households about €120 a year.

Recent changes in the gas and electricity markets mean more choice for consumers. Typically, utility firms will give a small discount if you opt for online billing and pay by direct debit.

Does your gas or electricity company offer good value?

F is for fares

Some travel spending, such as the commute to work, is hard to avoid. If you use public transport to get to work, buying your travel tickets via the government’s Tax saver scheme can reduce your annual bill by more than half.

Similarly, the ‘bike to work’ scheme can reduce costs for cyclists, by allowing them to buy a bike in a tax-efficient manner. Before you take a national train or bus service, check the offers available on the bus or rail operator’s website.

When booking a flight, beware the fees and charges that can add a hefty chunk to what initially seemed like a good deal. Baggage charges, taxes, and priority boarding can all inflate the cost.

John Lowe ©