Happy New Year everyone! I hope your festive period was full of pleasantries, good food, great family and consisted entirely of recharging, relaxing times? (Who am I kidding… let’s be honest, we’re all glad it’s over for another 12 months!).

Every month there are themes to personal finance. March/April time is the period of tax panic, ISA renewals/hunts and other ‘end of the financial year’ matters. But what of January? There is little changing in the UK world beyond the calendar, but it’s the perfect mental incentive time to do some financial ‘spring cleaning’.

1. Review/Amend/Create Household Budget

In the spirit of New Year’s Resolutions, now is the perfect time to be giving the once-over to your finances. What are you paying for that you can cut, reduce, or review? Even if you’re not in debt any money you don’t spend is money that you can save instead. Does your household budget reflect reality, or is it a pipe dream that is summarily ignored 3 days after payday?

2. Haggle With Providers

Paying £50 for Sky when you only watch 5 channels? Do you need the Sports package they enticed you with 3 months ago with the half price offer? Give them a call, route yourself to “If you’re thinking of leaving Sky…” and plead poverty. Get them to remove unnecessary package(s) you may have, and then beg for a reduction in price. You’ll probably get it and save a fortune over the year. If you really watch that little TV, would you do with FreeView? Click here for 5 specific tips to reduce your TV costs.

Do the same with any recurring contract you have. Landline phone, mobile phones, internet access, gym memberships, and so on. Click here for loads of tips on how to haggle!

3. Shop Around

One of the biggest household expenses after rent/mortgage is food. Supermarkets are at war for our custom as they realise the recession is not abating any time soon, and every foot through the door is an important one. Loss leaders are a dime a dozen, and special offers are all over the store.

If you always shop in Waitrose, try Sainsbury’s. Drop down from the ‘Premium’ brand to store’s-own, and stick to your food budget. Shamefully I have gone from spending £600/month on food down to £150-200 just by a little forward planning and spending 5-10 minutes hunting out bargains. Click here for loads more tips on cutting your grocery spending!

4. Check Your Rate – Savings

Are you getting the best your bank or the finance world in general has to offer on your savings account? Barclays lowest rate of interest on their savings accounts is 0.1% when online you can grab a (still pitiful) 1.5% by shopping around. Check your ISA allowance is full for this year (You have until the end of March), and make sure it is paying a decent rate as well.

5. Check Your Rate – Credit

After Christmas is the ‘guilty moment’. If you have overdone the Christmas spending on presents, travel and gastronomy, see if you can’t get a better interest rate or balance transfer deal than you have right now. Many providers at the moment are offering 0% deals that can be yours for the taking, potentially saving you hundreds.

6. Council Tax Money

For the majority of the country, for the next 2 months there won’t be any council tax to pay. Use this money wisely and put it towards your emergency fund rather than spending it on incidentals. It is money that should be in the monthly budget anyway, so won’t be missed.

7. Sell Your Clutter

Has a new 55″ OLED TV replaced your 40″ Plasma? Sell sell sell, on eBay, Friday Ad or any other method. De-clutter your home, your life, and release extra money for debt reduction, savings or other plans!

Good luck, and here’s to your dreams for 2013

I have a dear friend who I have known since school. She is funny, caring, tough and always the life of any party.

She also never has any money, and is perpetually in debt.

Here’s why.

She is a Dog Owner

I have been down the pet path myself in the past with cats.

While having a pet is a great boost in certain areas of life, they can be a real big money drain. Food, vets, insurance, initial purchasing, sundry items such as carriers, leads, clothes etc. etc. Year on year these prices just go up and up and sap the life out of your finances.

My mother is in a similar situation – with 3 cats with big appetites (and of course, they will only eat premium food), she spends more on them per month than she does on the adults in the house.

My friend has a rather large dog, that costs rather a large sum to feed and insure. To add insult to financial injury, due to the times she works (she is an A&E doctor), she has to pay for someone to come and walk it at least once every day as well.

I hazard a guess that in total she spends over £4,000 annually keeping her four-legged friend.

She Likes Expensive Holidays

Everyone needs to get away for a while to relax and recharge, but it does not need to be to expensive destinations year in year out. For the last 4 years running she has flown to Las Vegas which is expensive enough, but to compound the issue she then spent 2 weeks gambling whilst there (and lost overall, naturally).

I estimate she spends £2,500 a year on each holiday.

She Only Buys Premium Food

If it is not from Waitrose or Marks & Spencer, she doesn’t eat it. For those of you not in the UK, they are the two more ‘upmarket’ supermarkets that cater for the more well-to-do in society (or those who wish to be associated with same). An average microwave meal from either will set you back approximately £5, where the same could be purchased in Tesco for £1.50 or so, or even half of that if you are not averse to buying from the Value range. In other words, these stores are 6 times more expensive for no good reason other than buying into the brand ethos.

As an experiment at the beginning of the year just before I found my frugal self, I shopped exclusively in both stores just as she does for a whole month. I have just dug out my bank statements and added up each visit for the month.

I am shocked.

My food bill rocketed from an average of £97 to £339!

Over £4,000 a year just on food to feed one person. Nearly 3 and a half times my spend then, or nearly 7 times what I spend now.

She Drives a Lexus SUV

When she bought her four-legged friend, she felt she needed to upgrade her car to not only be able to carry the thing in comfort, but also project a more professional persona in line with her vocation.

She splashed out on a brand new 4×4 – on finance – to do this. Couple the interest payments and horrific mile per gallon calculations for the vehicle concerned, I suspect Sarah is sinking an additional £7,000 a year here compared to if she had just kept her perfectly suitable and fully owned, cheaper to insure, cheaper to run, cheaper to service previous vehicle.

She Carries a Credit Card Balance

You may wonder how I know this, but let’s just say it is amazing what friends will disclose after a few drinks. My attempts thus far to bring her round to financial sense have failed, despite probing questions and long discussions.

Her current credit card balance is around £2,000 at 19.9%. She always pays the minimum amount and by my calculation will be free of this debt around 2036 having paid £3,240 in interest for having done so. If we include the accrued interest, let’s say keeping this revolving balance costs her £1,000 a year.

She Smokes 20-a-day

My thoughts on smoking aside, a packet of her cigarettes currently costs £6.04 for a packet of 20. If she buys a packet every single day as her habit demands, this adds up to £2,204 a year.

She Cannot Resist Clothes Shopping

Remember that carried credit card balance? The majority of it is from her regular romps up to London for clothes shopping. She thinks nothing of spending the entire day traipsing up and down Oxford Street going in all the fancy designer clothes boutiques and coming out with armfuls at a time.

Wow.

Every year, adjusting for the fact she needs to buy some kind of food, my friend is spending £16,000 a year either servicing habits, keeping a companion or trying to inflate her lifestyle.  If instead of spending this she saved it at 4% for 25 years (the amount of time until she will theoretically retire) the effects of compounding would result in her having a retirement fund of her own – excluding the one she pays into with our employer – of – wait for it.

Wait for it.

£731,211.33!

Very nearly three quarters of a million pounds.

Do you have any friends you’d like to hit with a financial clue-stick?

Every Friday I publish “Frugal Friday!”, an open-ended series with some of the simple and best ways to really save you money both now and in the future.

This week I’m focusing on short, sharp tips that could save you hundreds of pounds over the course of a year while food shopping.

Never Shop on an Empty Stomach

You know the drill. It’s early evening, you are tired from work, starving hungry and find no food in the house. By some miracle you resist the temptation to ring the local Indian delivery folks, and instead shuffle back in your car to visit your local supermarket. You have nothing in mind particularly beyond getting home again, and as a result end up massively overspending. Your hunger did your shopping, rather than any conscious plan you may have had.

Eat before you go shopping. If you are not hungry when you go, then tantalising offers that are not already on your shopping list will likely be easily ignored. Which neatly brings me to my next point…

Write a List

Going shopping without a list is a disaster waiting to happen. You buy loads of things you don’t need, forget half the stuff you do, and get loads of “extras” on the side.

To combat this, work out a meal plan for the week ahead and everything you’ll need to buy to make it happen. If you are going to do some batch cooking in the week, see what you already have in the store cupboards before adding them to the list.

If it isn’t on the list – don’t buy it!

And leave the pen at home… adding it to the list afterwards is cheating.

Calculate a Budget

Much like having a list is important for not over-spending, so is having an idea of where ‘overspending’ would be in the first place. Everyone will have their own idea for a budget, but £50 per person per month is not unreasonable to aim for if you have the time to batch cook. That is my own personal food budget, and mostly, I manage to achieve that these days.

Slow Down & Scan

The items on the shelves at eye-level are the most profitable products. You see a jar of pasta sauce the moment you walk into the aisle and grab it, throw it in your basket and zoom off to the next item in the list.

You just fell for the oldest marketing trick in the book. Next time slow down and study the prices. Scan the entire shelf from top to bottom and look at the cost per unit calculations most supermarkets provide in the super-small-print on the shelf labels. If you take a moment to compare prices you can save upwards of 100% on the purchase price of some items.

Try Downshifting

Downshifting isn’t about suffering a cheaper product, it is about finding a cheaper product where you cannot honestly tell the difference between it and a more expensive brand. If you have a habit of always buying “Finest” or “Taste The Difference” or some other premium product, try a brand name instead. If you’re feeling particularly adventurous, try stores-own. You’ll often save pounds per product doing this and likely won’t notice a shred of difference when cooked.

Some premium brands and stores-own are even made in the same factory. The only difference is the packaging and the price.

Shop at Reduction Hour

My father makes a killing doing this. He very rarely goes shopping before 8pm, which is precisely when our local Tesco begins doing the final knock-downs on things that are going out of date the next day or so. It is not uncommon for him to come home with bagfuls of items at 10p here, 20p there where the original cost would have been pounds here and pounds there instead.

Anything that will not be eaten or turned into a batched meal gets frozen until it is needed and remains just as good and just as flavoursome as the full priced equivalent.

Never Turn Down ‘Free’

Quite regularly my mother will include me in meals she makes for herself, or my father will invite me out to lunch to catch up. Never turn down these opportunities, as it’s a great way to spend extra time with friends and family, and shave costs from your food bill as well.

Happy Friday, and Happy (Cheaper) Shopping!