Making money go as far as possible is a key challenge for many as times continue to get tougher as the recession drags on. With inflation climbing and the cost of key ingredients such as energy and food taking an even greater share of disposable income, making every penny count is vital.
Savings rates are low, so finding a home for any cash where its value is not diminished over time by inflation is key. Making use of any tax free savings products can help although the gross rates on these are not a great deal better. But at least no tax at source is payable on these.
There are several homes where money can still yield a reasonable return. Use a comparison website such as moneysupermarket to check which savings vehicles offer the best return.
Investing in term deposits is one way to improve the interest earned. It may mean tying up money for a lengthy period, so only choose these types of product if you reasonably expect not to need the cash in the medium term.
For many, the issue is not where to keep savings, but how to manage borrowings and optimise monthly cashflow.
Finding second jobs to supplement a main income may be an option, but it is not always feasible. It can also be very demanding on home life and relationships if continued over an extended period.
Knowing what cash is available to spend each month is key. Prepare a detailed analysis of where your money is spent so that you get a clear picture of where savings may be made.
This will also give you a good picture of any borrowings and debts so a plan can be formulated to help reduce the monthly outgoings.
In tough times, reducing unnecessary spending can generate good free cashflow for the family. Cancelling club memberships, eating out less and giving up smoking are all easy options.
But restructuring finances can also yield good results. Whilst the total amount owed may remain the same, having it repayable over a longer period on lower rates can ease financial pressure in the short term.
Credit and store cards are great ways to buy goods and services, but not a great way to borrow money. Rates tend to be at least twice those that can be achieved on an unsecured loan, so paying off the balances by taking out a new loan could actually save money.
Short term existing loans with high monthly payments may also benefit from being refinanced. Spreading the balance over a longer period may increase the total interest payable, but greatly reduce the monthly payment, as the capital repaid each month is less.
Check out a comparison website to see what type of terms are available for your credit profile. Remember that the best credit history will attract the best terms, but even bad credit customers can benefit from refinancing.
If finances are squeezed, then something has to change to make things better. You may consider getting some impartial debt advice from one of the many debt management companies, although expect to pay a fee for their services.
But as they deal every day with borrowers like you, they know what can work and how to put proposals to lenders that would be acceptable.
This was written by Sam. Sam is a writer specialising in finance.
