Tag Archives | Saving Money

Cutting costs and saving money – there is an important difference

There’s a huge amount of information out there (newspapers, blogs, magazines and on radio and tv) giving you advice on how to cut your costs and save yourself some money.

You’ll read a lot of similar advice here on ValueIreland.com as well.

However, something I’ve written about here before is that just because you’re not spending money doesn’t mean you’re saving money.

So, if you switch your mobile phone or your electricity provider or move your insurance to a cheaper company, what do you do with the money that you save yourself?

If you’ve reduced your outgoings by €100 per month by shopping around for your groceries, what do you do with the money you’ve saved?

Will your savings account have increased by €1200 for the year? Or will you have paid off €1200 extra off your credit card bill or your mortgage?

I appreciate that in some cases, you may have had to make cutbacks in one place in order to be able to pay increased costs elsewhere.

However, as much as possible, if you’re successful in cutting your costs you should really try as much as possible to put even a little bit of those savings away rather than letting it be spent elsewhere.

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What to do with your mortgage rate reduction bonus?

Irish News of the World

Sunday March 22nd, 2009

Diarmuid MacShane

What to do with your mortgage rate reduction bonus?

One of the better financial news stories over the past few months has been the massive drop in interest rates. The fall in the ECB interest rates has meant that a lot of us have a lot more money in our pockets recently.

Since October 2008, because of the global financial difficulaties, the European Central Bank has slashed interest rates by 2.75% – the last 0.5% drop was in March of this year.

For those with variable or tracker rate mortgages that’s a drop of 60% in the cost of our mortgage repayments – you won’t see too many discounts like that anywhere else.

If you’re on an average size mortgage, all these drops mean that you’ve got over €500 extra each month. That’s a sizeable €6000 per year. And it’s not expected to be the end of it either – it’s thought that there will be another rate cut in May if things don’t get much better before then.

But what are you doing with all that extra cash? I hope you’re not just letting it sit in your bank account where it’s getting slowly spent each month, or even just earning 0.1% interest like most current accounts pay out?

With these tough times upon us at the moment, now is the time to make the best use of that extra cash so that things will be a little easier between now and when things pick up again.

So what should you be doing? In the following order, here are a few things to think about.

Pay off expensive debt first.

While you might think that you could start paying off your mortgage first, remember that it’s only costing you between 3 and 5 or 6%. If you have outstanding balances on your credit card it could be costing you anything up to 24% interest.

Use your extra mortgage money every month to start paying off your credit card bill. By cutting this expensive debt, you’re getting the double benefit of reducing that debt, but also potentially freeing up even more cash every month for yourself.

If you’ve borrowed from a money lender, then this is a debt that you should definitely pay off completely with your extra cash as soon as you can. Interest rates from money lenders, even legitimate ones, will normally be up to 23% and sometimes more. Save yourself the future hassle and clear down this debt.

Pay off personal loans

Next on your hit list should be to pay off any personal loans that you may have. These bank loans are likely to be the next most expensive borrowings that you have – anything up to 14% at the moment. Your overdraft would fit into this same bracket as well – overdrafts can cost anywhere from 9-15%.

Remember though – check the terms of your loans to see if there are any penalties for paying them off early – this is most likely on fixed interest loans. If the charge isn’t too much and you think it’s worth while, clear down these personal loans as early as you can also.

Any more debts?

Do you owe anyone else any more? The credit union? Subs from work? Or do you owe your family or friends any money? See about using your extra cash to clear these debts as well. No one likes having debts hanging over you when it comes to family and friends, so it’ll be in everyones interest to pay these off too.

What comes next?

If you’re now in the happy situation where your higher cost debts are gone, or mostly under control, what happens now?

Well, first of all you should review if, or how, you’re going to borrow in the future. It’s always said that the easiest way to get money from a bank is to prove that you don’t actually need it in the first place.

With your debts under control, maybe now you could apply for a lower rate credit card, or a lower rate overdraft? AIB and Bank Of Ireland now offer credit card rates of 8.5% and 9.5% for qualifying customers – much less than the standard market rate. And National Irish Bank offer some customers an overdraft rate of less than 9%.

Now pay off the mortgage?

I would suggest one final thing to examine before starting to pay off your mortgage. Check out what your upcoming expenses for the rest of the year will be?

What will you spend your money on that you would normally be borrowing for? This could be a holiday in the summer, a car service and NCT, some DIY and garden expenses in the summer, or even back to school expenses for the kids in September – even Christmas.

If you still have a little cash left over – from your mortgage bonus, and reduced repayments on your other loans – maybe you could start to save a little so that you don’t end up going back into debt?

The range of regular savings accounts is still pretty good at the moment, though the falling interest rates mean that some aren’t as attractive as they used to be. Anglo Irish Bank has an account paying 7.3%, and Bank of Ireland has one paying 7%. Some regular savings accounts have minimum monthly amounts ranging from €1 to €100 depending on the institution.

Finally, pay down your mortgage early

Once you’ve the rest of your debt covered, you can now look to overpaying your mortgage repayments. If you chose this option, make sure you clarify (in writing if possible) with your bank that any overpayments are to be knocked of your principle loan amount. There have been cases where disagreements have arisen over this, and the customer can lose out if they’re not clear on their requirements.

There is a huge attraction to paying off your mortgage early. Say you have €200,000 mortgage for 20 years at 4.5%. If you overpay by about €100 each month, you could save yourself up to €15,000 in interest payments and cut your mortgage by nearly 2 ½ years.

But this is really only best done once you’ve addressed your other higher costing debt first!

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Have you saved money after following our Top Tips?

As you may know, I’m now writing a weekly money saving column for the Irish News of the World every Sunday.

If you’ve been reading that, or reading the top tips here on the website site, and have actually put them into practice and saved yourself some cash along the way, I’d love to find out.

Drop me an e-mail via the Contact Page to let me know what you’ve done, and how much money you’ve saved.

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Go green by being mean

A bit of a “green” theme here on ValueIreland.com today – here’s the first of 3 articles.

When it comes to your carbon footprint and being green, the Irish consumer on average spends up to €5000 per year on gas, electricity, petrol and heating oil that all have an impact on our environment. How much better would we all feel if we could both lessen the impact we’re having on the environment while also saving ourselves some cash as well?

The primary principle of “being green” is to reduce – reducing what we buy, reduce what we use and reduce what we waste or throw out.

ValueIreland.com provide a series of cost free Top Tips checklists at www.valueireland.com/top-tips/ that will help you identify where you might be wasting money on your gas, electricity, petrol and heating oil usage. It will ultimately help you save you money.

The ESB website has an “Appliance Calculator” that everyone should check out to see the cost of their electricity usage. Do you leave your computer on all the time, even though you’re not using it? That’s nearly €35 on your bill. Or do you have the coffee “on” during the day? That’s nearly €60 every two months.

In the last week alone, Eamonn Ryan TD, Minister for Communications, Energy and Natural Resources announced that the price of electricity will drop by 10% in the coming year. This was quickly followed by announcements from Airtricity and Bord Gais that they will start supplying electricity to Irish consumers in competition to the ESB – finally, 4 years after the market was deregulated.

For the double whammy, using Airtricity means that up to 80% of your electricity comes from renewable resources – compared to a measly 9% from the ESB.

If you use gas, your only option is to reduce your usage and shop around for the lowest price, but the choice is even more limited. Flogas Natural Gas is the only residential competitor to Bord Gais (a fact not known by many people). However, since Flogas Natural Gas is only marginally cheaper on price, they’re not really competing.

One option you do have if you’re using Bord Gais is to investigate their alternative tariffs introduced in 2008. These include not paying the ridiculous standing charge (in exchange for a slightly higher usage rate) or a special tariff for high winter users, or especially high residential users.

If you’re a home heating oil user, an independent online service called BoilerJuice.ie could be for you. This site as created to bring oil users and suppliers together to get better prices by instantly getting you the lowest price for central heating oil delivered to you from their list of suppliers in your local area. ValueIreland.com has received a number of positive reviews about this money saving service.

But what other things can you do to help save the planet and save money at the same time?

The first and simplest thing you can do is to invest in CFL energy efficient light bulbs. These bulbs are 4 times more efficient and last 10 times longer than normal light bulbs. Though Minister John Gormley hasn’t banned normal light bulbs yet, given that these bulbs could save you 25% on your lighting costs for a year, they’re worth checking out.

If you don’t even know where to start spending on improvements to your house, you could get an Energy Audit carried out on your house. This will get your home a Building Energy Rating (BER) which you will need if you want to sell your house in the future (way in the future the way things are going).

More immediately, it will also help identify potential heat loss in your house, the efficiency of your heaters and boilers and will get you recommendations on what you could do. Be sure to shop around for the best price for a rating as the cost can vary from €250 to over €500, even though the BER is the same no matter who does it.

While many issues identified could be easily fixed with a little DIY, or with the help of a plumber or handyman, for larger expenses, the Government provides a series of incentives and grants for Irish home owners to invest in upgrading their homes to become more green and energy efficient.

Phase 3 of the Greener Homes Scheme came into effect in July last year. The aim of this scheme is to assist home owners who wish to invest in renewable technologies as well as promoting the increased usage of renewable energy in Irish homes. The ultimate then is to decrease the countries reliance on fossil fuels such as gas, oil and coal and to reduce the impact of harmful CO2 emissions on the environment.

The website of Sustainable Energy Ireland provides all the details at www.SEI.ie provided the details but what can you get?

Grants are available for anyone who wants to install solar heating on their roof for heating either their hot water or their whole house.

Alternatively, you could get assistance in installing a “heat pump” – these essentially take heat from the ground under your lawn or your house and release it at a higher temperature into your central heating system.

Finally, these grants will assist you in installing wood chip or pellet stoves or boilers. These units can either be used to heat rooms (stove), your hot water or your entire house (boiler).

While these grants are great for home owners who might want to do their bit for the environment as well as their pockets, its unfortunate that schemes aren’t available to the many of us in the country who live in apartments.

A final note of caution – these higher cost alternatives should primarily be seen as helping you go green rather than saving you money as the payback period for your investment could be anything between 5 and 20 years.

The Irish energy efficiency website, www.powerofone.ie, is the place to go to find out more about saving energy and going green.

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How to save even more money in the January sales?

This post from Nicholas Bate is a few days old, but it’s worth bearing in mind during the January sales season:

  1. Don’t  go.
  2. Don’t even think about it.
  3. Absolutely definitely don’t go.
  4. If you are asked, you can’t go because you are fishing/at the gym/building an extension/sleeping/writing a novel/in surgery/doing surgery/surfing/meditating/making cheese& pickle sandwiches….
  5. You know it makes sense.
  6. Don’t go.
  7. Just don’t.

The full post is available here.

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Save money on your Dublin Bus tickets

I blogged about this very same subject this time last year as well, and the timing is important, so here we go again.

Dublin Bus have increased their fares again for 2009, by up to 10c per ticket for adults. For me, my bus fare will go from €1.70 to €1.80 – an increase in my travel costs for the year of €50. It’s not all that much in the greater scheme of things, but still, with all the other price rises we’re experiencing these days, it’ll all add up.

So, to avoid this Dublin Bus price rise, at least for a short time, go to Ticketmaster and buy up any remaining tickets that they still have available at the old prices. That I can see, all the tickets currently on sale for Dublin Bus on the Ticketmaster website are still available at the old prices. Get them while you can.

Not sure about Irish Rail prices, but the same thing might be the case for the train tickets that are on sale via Ticketmaster also.

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Save money on your Ulster Bank Credit Card interest rate

I know I’m supposed to be on holidays at the moment, but here’s a quick tip if you’re reviewing your finances as we’re heading into the New Year, 2009.

If you have a credit card with Ulster Bank the advertised interest rate is 17.9% (or 15.9% on the Zinc card that I have had).

I rang this morning to close my account having paid off the balance and they immediately offered me their “staff only rate” of 7.5% – a full 10% less than their basic rate and 8% better than their Zinc rate – more than a 50% reduction straight off.

So, if you’ve an Ulster Bank credit card, and don’t always pay off the balance monthly, give them a ring straight away, tell them you’re closing your account because you’ve got a better deal elsewhere, and see if they offer you the same rate.

I guess a lot of service providers (financial and otherwise) will be similarly keen to keep our business in 2009. It’ll probably be worthwhile ringing all of them that you deal with in the coming weeks to see what they can do to keep your business.

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More on Buying Irish

My post last Friday, Buying Irish requires a bit of work, generated a few comments on the merits or otherwise of focusing our purchasing considerations on only buying from Irish retailers and service providers.

I had wondered if it it could be possible for Irish consumers to support the country in its time of need by re-starting a Buy Irish campaign again by frequenting Irish retailers and service providers. I asked what the problems might be if we were to do that – questions brilliantly answered by the commenters.

One reader sent an e-mail over the weekend which showed exactly why we, as consumers, couldn’t possibly do ourselves justice by going hell for leather on such a Buy (from) Irish campaign.

What would you pay for 1.75l of Tropicana Smooth Orange Juice?

  • UK Retail Chain – Tesco Ireland Navan = €4.99
  • Irish Retail Chain – SuperValu Trim = €5.19
  • Local Corner Store – Gillan’s Summerhill = €6.75
  • Irish Retail Chain – Eurospar, Meakstown Dublin 11 = €7.99

As pointed out in a comment over the weekend, why would Irish consumer reward the uncompetitive Irish retailers when they could save up to €3 by going to a non-Irish retailer.

We in ValueIreland.com have always advocated that consumers must look after themselves by going after price and service. If an Irish retailer or service provider manages to beat the foreign competition on those aspects, then all the better. If not, they’ll at some point in time either wake up to the competition or close down for lack of business.

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What are you doing with your ECB interest rate windfall?

Okay, so it’s only €30 for every €100,000 borrowed on your mortgage. The average mortgage, according to RTE news this evening is €250,000 so that’s a saving of €75 based on todays reduction.

But, added to the recent previous further ECB rate reduction, you’re now €150 per month better off. And potentially you’re even better off following the changes to the mortgage interest rate relief in the Budget.

Lots of numbers, but the question is – what are you going to do with that extra money?

How’s your “rainy day” savings looking? Or are you planning a big Christmas and going to need a bit extra? Do you need to pay down other debts – credit cards, car loans, etc? Or could you overpay on your mortgage to reduce the term?

Whatever you do, don’t let this welcome extra money to be assimilated into your day to day spending. This money should be seen as a bonus, and should be treated differently to your “normal money” – make sure you get a decent longer term benefit from it.

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