Make Feb 29 A Day To Remember!
2008 is a leap year, so why not use the extra day to improve your personal financial fitness? These seven tips will get you started.
As 2008 is a leap year, we get 366 days this year instead of the usual 365. Of course, the extra day is always 29 February -- a day when tradition allows women to propose to their partners instead of the men doing the honours.
Of course, I'm not suggesting that you pop the question on Friday, as my line of work is finance, not romance (although if you are popping the question, you might want to check out this article on the cost of weddings).
Instead, what I propose is that you make use of this extra day to improve your future financial security. So, you may not end up with a fiancé/fiancée, but you will have nicer finances!
Without further ado, here are seven tips which will help you to monitor and manage your money better:
1. Make the most of online banking
One of the great features of online banking is that it gives you the ability to download previous statements and transactions. For example, my bank's website allows me to download three months of statements in a variety of different formats. By grabbing an entire quarter's data and pasting this into Excel, I can see exactly where my money goes from month to month.
More: Passwords, PINs, Bank Accounts And Fraud2. Reconcile your receipts
At the moment, my wallet is absolutely bursting at the seams. Sadly, it's not stuffed with cash; instead, it's packed with receipts. In order to keep a close eye on my spending, I make sure that I get a receipt for every card transaction. So, at the cash machine, I always practise "CCR": card, cash and receipt, in that order.
When I have some spare time, I check off my receipts against my bank and credit-card statements. This helps me to keep track of expenses and it also allows me to identify spurious or fraudulent transactions before they become a problem. Then again, it's always a dull-but-worthy task!
3. Try spending only `pocket money'
For my everyday expenditure, I use a cashback credit card which pays me 1% of my spending. So, every purchase of £3+ is paid for using plastic. However, I find that it's easy to get carried away when spending on plastic, even though I always pay off my bill in full every month.
Thus, for the whole of next month, I'm going to put my credit card on ice. In its place, I will have a weekly cash allowance to live on. Although this pocket money will be enough for me to enjoy a few small luxuries in life, it won't be very high. I guess that £80 a week should be enough to enjoy life, yet limit my spending to a reasonable level. I'll let you know how I get on in April.
More: Learn how to budget4. List your debts -- and then tackle them
After more than a decade of `easy credit', a large chunk of the population has become adept at spending tomorrow's money today. Spending on credit has become so ingrained in British life that the savings ratio has fallen to record lows. Indeed, with £1,185 billion of mortgages and £224 billion of other personal debts, the UK's burden has never been greater.
So, if you want to dig yourself out of debt, begin by bringing together all of the paperwork relating to your debts. Find the latest documents regarding your credit and store cards, car and personal loans, overdrafts, store finance agreements, and so on. List them all on paper or in a spreadsheet, with the highest interest rate at the top and the lowest at the bottom. Then throw a snowball at them!
More: Visit our Get Out of Debt centre
5. Get discounts with Direct Debit
One easy way to bash your bills is to pay them by monthly, quarterly or annual direct debit (DD). There are 100,000 organisations willing to give discounts for paying by DD, because DDs are far cheaper to collect than standing orders, cheques, cash, etc. Paying by DD can save the average household over £200 a year, according to the BACS website.
6. Dodge those deadly fines
If you miss a payment, pay late or exceed your credit limit, then your credit-card company will fine you for misbehaving. Until 2006, these fines were as high as £25 per offence. However, following intervention by the Office of Fair Trading (OFT), no card firm is allowed to fine cardholders more than £12 per offence. However, the penalties for exceeding your overdraft limit or going overdrawn without permission remain far, far higher. Going into the red without permission, `bouncing' a payment, or allowing a transaction to increase your overdraft can lead to fines of up to £40 per slip-up.
Thus, I'd urge you to keep a close eye on your account balance, perhaps by using online or mobile-phone banking. Also, it is far cheaper to organise an approved overdraft than it is to go overdrawn without permission. So, it may make sense to pay an annual fee for an overdraft to tide you over when you have more month than money.
(While we're on the subject of fines, parking fines are guaranteed to put motorists in a bad mood. Read We Pay Your Parking Fines to find out how to appeal and win!)
7. Start saving automatically
As I mentioned above, the savings ratio -- the percentage of our disposable income which we save -- has fallen to record lows. Indeed, in the first half of 2007, this proportion fell to a feeble 2.1%, which is its lowest level since 1960. Oops!
If you find it hard to save in a disciplined way, then you may benefit from enforced saving using a monthly standing order or direct debit. The good news is that if you can save a fixed sum each month for a year, then you can enjoy sky-high rates of interest. The trick is to open a Best Buy regular-savings account which pays a table-topping rate on monthly contributions of, say, £10 to £300. The best of these accounts pay a yearly interest rate of between 7% and 12% a year.
That's it from me for now. Enjoy your Leap Year Day!
More: Find Best Buy credit cards, current accounts and saving accounts via the Fool | A Foolish Take On Money And Love | The Ugly Side Of Current Accounts