How to maximise your monthly budget

A combination of spending again as lockdown restrictions ease and rising inflation, means that many consumers who saw a rise in disposable incomes during the pandemic could start to see their finances being squeezed post-pandemic.

Although the rise in inflation is expected to exceed 3% in the coming months, the Bank of England is expecting above target inflation rises to only be temporary. Still, consumers, especially those already concerned about their finances, may be looking for ways cut back on their monthly spending. Meanwhile, many consumers who were able to save more during lockdowns are keen to continue their savings habits and may be looking for ways to maximise their monthly budget to realise their savings goal.

Whatever reasons consumers have to want to save money each month, these tips on how to maximise monthly budgets will help.

Unsecured debt can be one of the most significant monthly expenses consumers have to pay each month. These debts, such as credit card and personal loans, can take years to pay off, but if consumers are able to lower their repayments and, ideally, clear the debt, it can free up a portion of their income each month.

Credit card debt, for example, can be one of the easiest types of debts to fall into but one in debt, many borrowers find it difficult to pay off their outstanding balance. One way to help clear credit card debt is moving the debt to a 0% balance transfer credit card. For example, those who owe £5,000 on a credit card charging 19.9% APR making monthly repayments of £173 would that three years and three months to repay . If, however, this debt was transferred to a 0% balance transfer credit card and charged a £125 fee to transfer the balance, they would save £1,641.14 in interest. Keeping to repayments of £173 the consumer could repay this debt within 29 months on a 0% balance transfer credit card without paying any further interest. Consumers considering transferring their credit card debt can compare all the 0% balance transfer cards on our 0% balance transfer credit card chart.

Alternatively, those with unsecured debt with various lenders, for example several credit cards and personal loans, can consider consolidating debt using a personal loan to bring down the monthly repayments. Interest rates on personal loans are competitive at the moment, with the lowest APR available on a £10,000 loan to be repaid over five years at just 2.80%. A personal loan at this interest rate on a five-year term, would require monthly repayments of £178.64. Borrowers considering consolidating debts with a personal loan our personal loan chart is a good place to compare all the loans and rates currently available.

A debt consolidation option available to those who have debts of £20,000 or more and who are confident they can meet the monthly repayments is a secured loan. These loans require an asset to be put against the loan, usually the borrower’s home, which is at risk if the borrower fails to keep up with monthly repayments. Although this type of loan carries greater risk than personal loans, in the right circumstances it can be a good option for those with a significant amount of debt as it can lower monthly repayments, manage the debt, and clear it quicker. More information about secure loans can be found here.

Homeowners on their mortgage lender’s standard variable rate (SVR) or coming to the end of a fixed rate deal should consider remortgaging to lower their monthly repayments, especially as right now interest rates are competitively low with several lender’s offering sub-1% rates on two year fixed remortgage deals. For example, someone with an outstanding mortgage of £350,000 on a 20-year term at an interest rate of 3.2% would be making £1,975.32 in monthly repayments . The same mortgage balance on the same term but on 0.94% rate would be making monthly repayments of £1,600.28 - £375.04 lower than the monthly repayments at 3.2%. When considering remortgaging it might be worthwhile speaking to a mortgage broker who will be able to highlight the best deals available for the borrower’s individual circumstances as well as whether remortgaging is the right option for them.

Subscriptions to newspapers and magazines that remain unread or memberships, such as to gyms or golf clubs, that are not used can quickly mount up. As such, a good way for consumers to free-up money each month is by regularly going through their bank statements and cancelling any subscriptions or memberships they do not use. For those who do not want to cancel memberships completely, it might be worthwhile looking around for a cheaper alternative, either by switching to a cheaper membership option or switching to a less expensive club.

Last year saw many banks change their overdraft fees, resulting on some charging customers a higher rate for borrowing via their overdraft. Consumers who regularly use their overdraft, therefore, may want to look at the fees they are being charged and compare it to the rates charged on other bank accounts – which can be done on our accounts with overdrafts comparison chart – and switch bank accounts to one charging a lower overdraft fee. As well as this, consumers may want to switch bank accounts to one that offers additional benefits such as mobile or travel insurance, as this could save having to pay for several difference insurance policies. Meanwhile, those who regularly use their debit card may also want to consider switching bank accounts to an account that offers cashback incentives. Read our guide on how to switch current accounts for more information on the easiest ways to switch bank accounts.

Having insurance is often a good way to protect against unexpected costs but monthly repayments on various types of insurance policies can add up each month. Shopping around for cheaper insurance, such as home, pet insurance and car insurance, can help to reduce the monthly spend on different insurance policies. When shopping around for insurance it is important to not only factor in the cost of the policy, but to also ensure that it offers the right level of cover that is needed in the long-term. For example, those with pets will usually find that accident-only policies are cheaper than lifetime policies, but the level of cover is much less which could result in having to pay out more in vet visits and medical care in the long-term.

Along with shopping for cheaper insurance deals, consumers should regularly look at comparing energy providers to ensure that they are getting the best deal possible. This is particularly important for those no longer, or coming to the end, of a fixed deal as moving off these deals can often result in energy costs increasing.