How much richer could you be by this time 2024?

What difference does it really make to upgrade your every day finances? Unless we run the numbers, it’s easy to ignore the changes we could make to how we manage our money. Often these are small actions and the benefits accrue over time, sometimes only after many years.

So, I thought I’d see what I could work out about the difference a few key changes would make in just one year to a typical household in the UK. This was harder than I expected and I had to fudge a few bits here and there. However I think we can get some plausible indicators.

OK, so, an easy one to start off with: cancelling unwanted automated payments. This might be direct debits, standing orders or continuous payment authorities (commonly used for online subscriptions and recurring in-app mobile purchases).

According to NatWest research in 2020 the average wasted on these is £39 a month or £468 a year per household. Coincidentally that’s the same as the cost of signing up to My Year of Action, so if you sign up and we prompt you to take this action, that’s your money back. Everything else is a bonus. Of course, the NatWest number is from before prices started to rise, so it’s probably more now.

What about getting the best buy home insurance instead of just auto-renewing what we’ll assume is a poor deal? At the time of writing, GoCompare reckon they can save at least 51% of their customers £157 a year on a combined policy; Confused.com reckon they can do £163; and Compare the Market reckon they can do £159.

It seems like £160 is a decent ballpark then.

Looking at the same websites for car insurance, a £380 saving seems a realistic figure for this expense.

What about switching a typical balance to a 0% credit card from one charging interest? According to The Money Charity statistics, the average (mean) UK household credit card debt was £2,252 in October 2022. We’ll assume that this is the balance that’s typically carried over each month i.e. that the amount repaid and the additional spending each month are equal and cancel each other out. Apparently, Bank of England data for September 2022 put the average credit card interest rate at 22.2% APR. So shifting that £2,252 to a 0% balance transfer deal saves an estimated £495 if the balance is held at 0% for a whole year. If there’s a 2% fee for transferring, then the saving is £450, which is still nothing to complain about.

How about moving savings from low paying 0.01% AER accounts to a best buy instant access account. Here it gets tricky. I wasted a lot of time trying to get reliable savings figures. The truth is it’s a bit of a minefield because so many households don’t save anything at all that the figures often talk about savings amounts from amongst those who do save. That means the numbers inevitably skew high because savers are on average higher income than non-savers for obvious reasons. If you’re barely making ends meet, you can’t save, certainly not for longer than a few months.

If you look at financial wealth figures that include non-savers, those typically aren’t broken down by product type, so we don’t know how much is held in savings and how much is invested. For example, the median gross household savings in the UK is £12,500 but that includes money invested in shares and other financial assets, so it’s not useful for our purposes. Likewise I found a stat that gave a median amount of £180 per month “saved” per household, but didn’t distinguish between cash savings and investments, so this could be making wildly varying returns from person to person and household to household.

After much trawling around Office of National Statistics surveys, various savings providers and wherever else I could find, the best estimate I could get to was a typical figure of around £5,000 per household in cash savings. If that was being kept in an old instant access savings account of the type often opened automatically with a current account, it could be earnings as little as 0.1% AER or just £5 a year. In which case, moving it to one of the best buy easy access accounts would bring that interest rate up to 3% AER or £150 a year. So that’s a saving of £145 a year.

Shopping around for a better deal on mobile and broadband packages could easily result in savings of £30 a month total, especially if you’re out of contract. That would be £360 a year.

What have we got so far?

£468

£160

£380

£450

£145

£360

£1,963

Cancelling recurring payments

Switching home insurance

Switching car insurance

Transferring a credit card balance (with fee)

Moving savings

Getting deals on mobile and broadband

Grand total

Nearly £2,000 is pretty good going since none of these involves giving up on life’s pleasures. There’s no skipping lattes or declining invitations to brunch on this list. They’re all one and done actions that run in the background of your life just costing less or making you more than they used to do.

The trouble is making the time to actually get these things done.

This is why I created My Year of Action. So you could save your £1,963 and more with just a couple of actions each month that add up to big results. Check it out. I’d love to see you there.

Map your money year

Planning our weekly and monthly spending is how we find the money to repay debts and begin to save and invest. When I’ve talked about this with people in the past, they tell me that they can start to save but “something always comes up”.

Ah yes, the something-always-comes-up effect, or as it’s otherwise known, the occasional spending issue.

If your spending plan only covers the day-to-day expenses that occur every month, then it will seem like “something always comes up” because many months have additional expenses that only occur once a year. If you don’t plan for these, they will always derail you.

So how can you get on top of your occasional spending? Well, occasional expenses can be categorised as fun vs boring types and predictable vs random types.

We’ll start with the predictable expenses because these are where the map of the year comes in. Get a calendar and write in each month any big expenses and also any times when your income changes. For example, if your employer pays a bonus (and you can be very confident you will be getting this bonus) when would that come? Is there seasonal variation in your hours, commission or profits? Mark that in.

This is your money map of the year. It could look something like this*:

Using the map will help you to see if there are particular crunch points in your year when several expenses come at once. You can then work out if any of these could be paid early or delayed to smooth out your costs. It can also help you to be clear during the “good” months how much you need to save for upcoming costs and how much is actually available for a bit of fun.

The random expenses are a bit trickier. You need to think about roughly what you expect them to cost and how often you expect them to happen e.g. if you’re in your mid-late twenties you can expect quite a few of your friends to be getting married and having babies, so it’s a good idea to put a small amount of money aside each month, so you can really enjoy these celebrations when they happen without worrying how much you’re spending.

If you’re a homeowner, you can probably expect one significant repair or replacement every year, so consider how much you’d expect to spend on a new appliance, item or furniture or repair call-out and divide by 12.

Mapping your money year and having a pot of savings (or two) for random costs, brings a strong sense of control and peace of mind. There’s nothing like knowing you’re not going to have to borrow for Christmas and you won’t be caught short by a blocked pipe or a bricked phone.

What is on your map? Can you take a photo and send it to me on Twitter @marthalawton?

*This is not my actual map of the year, it’s loosely based on UK averages.

Money isn't food - do you treat your pay like it has an expiry date?

I have a long-held theory that, on some level, many of us secretly treat money like it’s food. We don’t do it on purpose, but our poor old monkey brains struggle with the concept that we keep a stock of otherwise useless tokens in order to trade them for the things we need later. Why would anyone give you a thing you want in exchange for a useless token? Make money even more abstract (just a number on a screen) and the monkey mind gets completely fuddled. Why are we keeping the numbers high? What use are they? They are only useful when they get us stuff. Stuff is real. Numbers on a screen are not real.

I think for some (read many) people our subconscious minds try to make sense of money by deciding it’s just another type of food that we ‘eat’ by spending it.

It’s well-documented that people whose eating is disordered also often have money issues. This is not only because some eating disorders are expensive, but because the same attitudes of perfectionism, self-denial and shame and around pleasure and self-care that drives much disordered eating, also affects our feelings about money.

So, if we unknowingly, secretly believe money is food and we get the value of it (eat it) by spending it, of course we don’t want to save it. If you save food for too long it goes off. I think some of us deep in some part of our brains believe money will too! This goes double if we’ve never saved successfully before. Until you have saved successfully you have no evidence that money can be stored and not decay.

Of course, the rising cost of living does, to some extent, reduce the value of money saved over time. To make sure money keeps pace with inflation and ideally outgrows it, that money must be put to work, i.e. invested. Here I think we can come to an analogy that might be ancient enough to allow our under-evolved brains to grasp it.

Money isn’t food, or at least it isn’t just food, money is seeds. If you can convince yourself that money is grain you can start to get a feel for what you need to do.

When you get your grain harvest (pay cheque) you don’t grind and eat too much of it, because you need what you can get for future crops. You plant it (invest) in the best locations you find, but maybe not all in the same field in case something goes wrong in that one field and you lose all your crop (diversify). You also hold a bit back in case the crop fails and you need to sow again or in case you miscalculated and your food stores run low (save).

Seeing yourself as a money farmer, instead of a consumer, makes it easier to remember what you have to do to shift away from living pay cheque to pay cheque, and start saving and investing for your future.

Now go out and tend your crops!

Does this post sound like you? Or someone you know? Share it and tag me in @marthalawton on Twitter or @squanderlustpod on Twitter, Facebook or Instagram.

The first time talked about this idea was on the Seize The Moment podcast and you can watch the whole show here or jump to 3:25 where I talk about treating money like food.