How to get “free money” when you are clever with your personal finance
Step 2 of The Money Plan is to be financially well organised , and part of that is understanding your income and expenditure. What’s going out? Are you making the most of it? Are there opportunities to save money?
I’ll show you some of the things I look at with my clients and you can see if any might work for you. Below are four broad categories where you may be able to get ‘free money’ depending on your circumstances.
These principles are the same whether you’re earning £1m or £10,000 per year, the structures are equally valid, so they’ll work for you too if you take them on board.
Cut regular expenditure
I have a Bank Accounts System where you have all your regular payments going out of one bills account, which automates as many of those payments as you can. We do this because it takes routine thought out of everyday actions.
The idea is to go through every regular payment you have, from rent/mortgage to utilities, subscriptions and so on. For each of them, ask yourself: do you need this, do you want this, can you get a similar experience for less elsewhere?
If you sit down and do this, you’re likely to find a lot of ways to reduce your expenditure. Your utilities are a good example, most people could save a lot of money by switching suppliers. Insurances are another, they’re easily compared online to get the best deal. You might also have old direct debits for things you no longer use.
Similarly, a while ago I scrapped my satellite TV package and went over to Freesat and Netflix because I can get a similar experience but for a lot less money.
You can also use cashback sites for a whole host of your purchases, and you may not even have to change your normal shopping habits to get a small percentage of your spending back – just go through their sites first to earn a rebate on what you spend. Top Cashback and Quidco are just two of the most popular such schemes to check out.
If you sign up to be a member of the site you’ll find an expenditure spreadsheet in the members area which you can work through, including hyperlinks to some of the comparison sites I use to ensure I’m getting the best deal I can.
Control variable spending
There’s something called spending creep where we spend these little bits of money here and there every day and every week, which over a month can add up to a lot. Try and control your variable spending, the simplest way to do this is by giving yourself a WAM allowance – walkabout money.
Every week on a Wednesday – so there’s not long to wait after a weekend – from your bills account you pay yourself too, into a separate personal spending account. This gives you a fixed weekly allowance to spend.
We do weekly rather than monthly because it means you’re not waiting for a long time for your next allowance: once the money’s gone, it’s gone, so a few days isn’t too long to wait again. You’re more likely to stick to something if it’s for a week than you are for a month.
Personally I use a Monzo card, which comes with an app that stores your receipts too, but you can use any personal account that works for you. Just make sure you stick to your WAM, don’t transfer money more than once a week!
Check any benefits entitlements
Especially if you’re on a lower income, it’s worth checking out if there are any valid benefits you can claim, such as working tax credits or childcare vouchers. For married couples, if one of you earns less than the personal allowance and the other is a basic rate taxpayer, you can also claim marriage allowance.
There’s a great website called entitledto.co.uk which takes about 15-20 minutes to fill out your information, after which you’ll get a summary of what you can and can’t claim, and what those benefits will do for you.
Make sure your tax code is correct
Look at your personal tax code and make sure you’re paying the right amount. If you’re an employee then you most likely should be on tax code 1185L, if you’re not then you should check with payroll of whoever processes wages at your company to check and explain why – there may be other benefits in kind that affect it.
If you’re self-employed then have a chat with your accountant and make sure that they’re explaining your tax code. You can also sign up for a personal tax account on the gov.uk website, by going there you can see different information about your tax and make sure you’re paying the right amount.