At least once a year I will go through all my direct debits – from insurance payments to council tax. I make a note of how much I’m paying to each one and create a monthly total. I then extend this total to an annual total. This can be a little scary. It’s a huge number.
I’ll then dedicate a morning, sometimes even a day to cutting them back and seeing where I can save a few pounds. It can seem like a lot of work for little reward – spending 30 minutes to knock £5/month from a direct debit payment. But, when you do the maths that £5 becomes an annual saving of £60. Not bad for half an hours work.
This process is then repeated across every payment. For those payments where a saving can’t be made – for example a loan repayment that cannot be moved (do try and avoid loans generally where possible), I’ll make a note of when I might be able to cut it down and add this to my Google Calendar.
Spend more time working on the larger of the payments. For most people that will be your mortgage. It’s likely your biggest debt and also your biggest monthly outgoing. Even a small saving here can have a huge impact. Even cutting 2% from a monthly payment of £750 would save you £180/year.
Move down your list of outgoings biggest to smallest, this makes sure that you’re maximising your return.
Dangerous Direct Debits
Direct debits are dangerous things – you forget about them and the money just keeps getting taken from your account. Because the amounts taken individually aren’t huge and the fact that you’re used to paying them they end up unnoticed.
Don’t Forget Standing Orders
After you’ve been through your Direct Debits, take a look at your standing orders too. Yes they’ve fallen out of favour in recent years but that can mean that you forget about them.
If your banking app is like mine they will be in a separate section to direct debits, so give them a quick check.
Take half a day to go over your finances. I did mine recently and shaved off over £150/month. That’s a saving of almost £2,000 per year for a morning’s work. If only I got paid that for my actual job!