On Monday 29th October, Philip Hammond - the Chancellor of the Exchequer - stood up in parliament to deliver this year’s Budget statement.
It’s a big showpiece event in the political calendar, and it has a real impact on all of our finances, as this is when the Chancellor outlines everything from changes to the tax regime to where the government is going to be focusing its spending.
Just as the government needs to keep on top of how it is spending the money it raises from taxpayers, so too do we as individuals need to take a firm grip of our own finances.
So what lessons can we take from the Budget when it comes to getting our own affairs in order?
Step one: take time to review
The first section of the Budget speech is where the Chancellor goes over how the economy has performed over the past year, and this is a useful starting point when it comes to our own budgets.
It’s really important to take a look back through your bank and credit card statements over the past couple of months so that you can see exactly where your money is coming in from, and more importantly, where it’s going.
There are loads of budgeting apps available now which can help here, quickly and easily allowing you to categorise your spending. This can make it much clearer if you’re overspending in certain areas which are ripe for cutting back.
This isn’t just about feeling guilty over the odd coffee or takeaway pizza though, it’s also an opportunity to look at your household bills and whether you are on the most suitable deals. With the weather on the turn, now is a great time to look at your energy tariff for example to see whether you can find a cheaper deal.
Step two: what do I want to spend my money on?
The Chancellor has a whole host of competing departments arguing for extra funding, but as there’s only so much money to go around he needs to focus on meeting certain priorities.
It’s the same with our own budgets - there are loads of different things we could spend our money on, but we need to take the time to work out exactly what we REALLY want our cash to go towards.
For example, you might have a big holiday in mind but you know it will be a bit expensive. By getting your finances in better shape, and saving with that specific expenditure in mind, it will be a lot easier to get the money together that you need.
Keeping your savings separate from your day-to-day finances will help a lot here as well.
Not only will it make it harder to spend that cash if you can’t access it through an ATM, but you’ll likely get a better rate of interest than leaving it in your bank account as well.
Step three: how do I keep my borrowing as inexpensive as possible?
Governments are just like the rest of us - there are times when they really need to spend on something important, but they just don’t have the money at hand. As a result they need to borrow.
The key with any form of borrowing is to make sure you don’t end up having to pay a huge amount of interest. So take a look at your own debts - if you’ve got a big outstanding balance on your credit card, could you move it onto a balance transfer card which doesn’t charge interest for a specific period? That way you could pay it off in stages, without paying anything in interest.
Or are you stuck in an expensive overdraft? Could you switch banks to one with a more generous deal for people who are in the red?
Another option here is using a money transfer credit card to get your balance back into the black With these cards you can pay some of your credit limit into your bank account, essentially getting you out of the overdraft, and you can then clear that debt in stages, again free of interest for a set period.
Perhaps most important of all, are you on a decent mortgage deal?
When you come to the end of your initial fixed or tracker deal, you move onto your lender’s standard variable rate (SVR). These are far more expensive, and yet millions of us are sat on them.
A study from mortgage broker Trussle found that as many as two million households are currently on the SVR, paying around £2,500 a year more in interest charges as a result.