How I learnt to love my bills
Cliff D'Arcy explains why he now can't wait for bills to drop on to his doormat.
When I was a young adult in the Eighties and Nineties I used to hate bills dropping through my letterbox. Each one represented yet another claim on my already stretched finances, so I grew to dread opening those manila envelopes.
However, over time my attitude towards my bills started to change. Since my early thirties I've increasingly viewed bills in a different light. Instead of regarding them as unwelcome demands for prompt payment, today I see bills as a welcome 'call to action'.
Over the past dozen years or so, the way I handle my household bills has changed dramatically.
In an attempt to reduce my 'paper mountain' (and to be more environmentally friendly), I've switched most of my accounts to electronic billing. This means that I receive reminders by email and then check my bills online.
For me, the great benefit of going digital is gaining access to the data behind bills.
Each month, I download data for my household bills, credit cards and bank account into separate spreadsheets for ongoing analysis. Armed with this data on my income and outgoings, I feel much more confident in my ability to manage my outgoings.
For example, in the run-up to last Christmas, I spent at least £500 more on my credit card than in a typical month. Knowing that I faced a big bill in January, I switched to extreme budgeting for the first three weeks of 2012. As a result of spending nothing (not even a single penny!) for 21 days, I was better placed to pay off this hefty bill in full by its February due date.
Another big change is the way I pay my bills these days.
In my younger days, I would settle bills as and when they arrived, giving little thought to budgeting or forward planning. These days, all of my regular bills are paid by direct debit, standing order or via continuous payment authority (CPA) from my credit card.
The bonus of paying bills by CPA is that I have a cashback credit card which pays me a yearly rebate of 1% of my spending. Hence, by paying bills with my credit card, I get a small refund each year. However, this is a winner only if you always pay off your balance in full. For a comprehensive guide to cashback credit cards check out Earn top cashback on your spending.
As for direct debits and standing orders, I much prefer the former, as paying by direct debit can produce big savings on your bills. For example, by paying for gas and electricity by direct debit, I get a 5% reduction from my bill. In fact, over 300 different providers provide discounts to customers paying by direct debit.
What's more, choosing to have a paper bill and not paying by direct debit can be expensive. For instance, Virgin Media charges an extra £21 for paper bills, plus a whopping £60 a year for payment other than by direct debit. Ouch!
You can even earn cashback on your direct debits now in the shape of the Santander 123 current account. For more on this account and how it compares, read Santander 123 current account pays cashback on your direct debits!
The beauty of bills
Probably the main reason I have learnt to love my bills is that -- as well as helping me to monitor and manage my everyday spending -- they enable me to make future savings.
The way this process works is simple: when a bill arrives, I scrutinise it closely. I check it against previous monthly, quarterly or yearly bills, to see whether this expense has risen or fallen. If the cost has gone down, I give myself a pat on the back and try to repeat this feat with the next bill.
However, if the cost has risen (which is usually the case), then I look into the bill in more detail, so as to establish why this expense is rising. On almost every occasion, increases are down to price hikes by providers. In some cases, these price hikes are well ahead of inflation (the general increase in the cost of living).
When one of my bills has gone up for reasons outside of my control, I don't just sit back and take this price hike on the chin. In order to bring this bill back in line, I immediately start shopping around online for cheaper alternatives.
To be honest, this procedure always happens when I receive my yearly insurance renewals. In recent years, my insurance premiums have been rising very steeply, so I have responded by abandoning all notion of loyalty to one company. Instead, as each renewal notice arrives, I start looking around for similar cover at a lower price.
Ten bills to kill
The bills you should keep the closest eye on will vary depending on your own personal circumstances. But in my experience, these ten bills are easy to bash by shopping around for better-value replacements:
- Mortgage (especially if you haven't switched rate or lender in the past three years);
- Credit card (why pay interest at, say, 20% APR, when you could have a 0% balance transfer?);
- Car insurance (premiums are soaring, so never stay loyal to one provider);
- Home insurance (never renew your policy without shopping around and haggling first);
- Travel insurance (The worst policies can cost five times as much as market leaders);
- Gas and electricity (energy bills have risen dramatically in the past two years);
- Home telephone (BT and other providers keep hiking their landline rental and call costs);
- Broadband internet (switching provider could save you £200+ a year);
- Digital television (BT, Sky and Virgin are battling to win your custom); and
- Mobile phone (are you on the ideal tariff for your calls, texts and data usage?)
Ditch dodgy direct debits
While scanning my monthly statements for my bank account and credit card, I'm always on the lookout for 'rogue' payments. Fortunately, I haven't had a dubious payment taken from any account for years. Nevertheless, I keep an eye out for dodgy direct debits and the like.
I'd urge you to do the same by conducting a regular audit of your direct debits and other payments. Be sure to cancel any ongoing payments that you no longer need, such as unwanted gym memberships, magazine subscriptions, old insurance policies and the like.
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