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.