Save Thousands by Doing These 3 Things

Has anyone ever told you you’re weird? If you call me weird, I wouldn’t be offended at all; in fact I definitely describe myself as weird and I’m proud of it. And when it comes to how we handle money in our society, it’s definitely good to be weird!

In this episode we’re going to look at three ways to be weird, to go against what most people are doing, but things that could save you big time. The first one will save you hundreds of pounds, the second one thousands, and the last one tens of thousands.

Phones

First up, I want to talk about phones. The way most people buy their phones in this country is based on one of the greatest marketing strategies of our time, but it’s costing us big time.

Most people get a new phone every two to three years, and most people buy their phones brand new as part of a contract. There’s something very clever about how phone carriers have positioned this to make it feel like you’re getting a good deal, like the phone is somehow free and you’re just paying every month to use the network. But that’s not true at all. You’re paying for the phone on finance over the course of your contract. Some of these high end devices now cost well over £1000! If you had £1000 in your wallet, would you choose to spend it on a phone that’s ever so slightly better than your current one? Maybe you would, but if you wouldn’t do it with cash, why on earth would you do it with debt?

A lot of people will say when they come to the end of their contract that they’re “due an upgrade”. What coming to the end of your contract actually means is that you’ve finally cleared the debt on your phone and you can now move to a much cheaper SIM only contact, saving you hundreds of pounds a year. Imagine if you bought a new fridge freezer on finance, paid it off over 24 months, then when it was finally paid off you went to take out a loan for a new one and got rid of the old one even though it still worked — you just miss having that monthly payment and you loved being in debt so much that you had to buy a new fridge. You wouldn’t do it, would you? And yet that’s what normal people do with their phones all the time.

So what does weird look like? Well, I used to be normal and upgrade my phone every two years, but I stopped doing that and kept my last phone for almost ten years. It still works fine, but I needed a newer one for my job as an app developer, so I’ve just bought a new one.

Except it wasn’t really new. It’s about four or five years old, and while it would have cost £1000 new, it cost me £170. It’s still a great phone that is more than adequate for what I need, but I’m not paying for all that depreciation, someone else is.

So when it comes to phones, being weird and keeping your old phone or buying used can save you hundreds of pounds a year.

Cars

Next, let’s talk about cars. The average price of a used car in the UK last year was £18,000. Many people will use finance to buy their car, whether it’s new or used, and the average car payment is approaching £300 per month.

Cars are expensive. They’re also depreciating assets, meaning you’ll almost certainly lose money on your car purchase.

But most people need a car, right? And you want something that’s going to be reliable and safe, so how can we save money when it comes to cars?

Let’s chat to Jivko.

Houses

Lastly, let’s talk about something that’s not a depreciating asset — your house. A house can be a great investment, but if you treat your mortgage like most people do, instead of being a great asset, it can rob you of your financial future.

The problems come when you over extend yourself with borrowing to buy a house and the payments end up taking away so much of your monthly income that it’s hard invest and grow your money for the future. If you’re taking out the biggest mortgage the bank will give you, you might have too much mortgage.

Good advice is take out a fifteen year mortgage and to make sure the monthly mortgage payments don’t exceed 25% of your household tax home pay.

Having a fifteen year mortgage rather than a twenty-five or thirty year mortgage is weird, but it will save you tens of thousands in interest over that time. Plus, paying off your house sooner frees up your income to really get serious about building wealth through investments of different kinds.

Not letting your mortgage payment exceed 25% of your income will create margin in your life. Margin for when interest rates rise, or your income fluctuates, or the cost of living increases. And margin to be investing for the future.

Too many people make an emotional decision when it comes to buying a house and spend more than they can afford because they fall in love with what they see. While it’s nice to like where you live, it’s not a building that will make you happy.

There’s also the disconnect because it’s such a large sum of money, it almost doesn’t seem real. When else do you deal in the hundreds of thousands? An extra ten or twenty thousand pounds over your budget might not seem that much compared to cost of the property, but to most people ten or twenty thousand pounds is a big amount of money. Don’t forget you’ll need to pay it all back, and with interest.

So don’t let emotions rule when it comes to buying a house. Instead, stay well within your means, and you’ll be setting yourself up for a far better financial future.

Conclusion

I hope that has given you some things to think about when it comes to saving money. Remember, in our society, being normal means not being intentional with money. When we really consider carefully where our money is going, it can have a huge impact on our financial future.

If you have any questions or suggestions for future episodes, please get in touch. You can email us at finance@proclaimers.com. Thanks!