Saving

How to save cash on your home energy

If you happen to be renting or a home owner, one outgoing (hopefully you’ve got your SSBS together) you’re not going to get out of paying for are utilities (gas/electric/water).  I must admit, this isn’t the most exciting topic but this is definitely worth your time, as its going to save you from parting with more of your hard earned cash than you need to. This will only apply if you’re on a standard meter for your gas and electric, so not a prepaid meter or an economy 7 meter.

The Basics

You’ll have an energy supplier (i.e British Gas, EDF, Ovo, Scottish Power) who provide the gas and electric to the house/flat. You will have a gas and electric meter, this allows the utility company to calculate how much energy you’ve used and how much you owe them. If you don’t already, I highly recommend you submit meter reading(s) each month to make sure the bills are not wildly inaccurate.

So what do you need to look out for when wanting to get the best deal possible? Here are costs to look out for:

  • Electricity – Standing Charge (this is a fixed cost per day)
  • Electricity – Unit Rate (this is the price per kWh used)
  • Gas – Standing Charge (this is a fixed cost per day)
  • Gas – Unit Rate (this the price per kWh used)

These are likely to be a little hard to find (the supplier doesn’t really want you knowing this) and if you’re finding it too difficult to find these for a given supplier, ditch the supplier and choose one who is open about the amount they charge.

Here’s the tariff example from Bulb, the current supplier of energy to the HTSC household.

As we can see, Bulb clearly show you their tariff information. Lets take another example from a different supplier and work out the difference.

Supplier: Scottish Power

Tariff Name: Online Fix and Save January 2019 v2

Tariff breakdown can be found here (they don’t make is easy for you). These are for the monthly direct debit payments for the ScottishPower supply area.

Standing Charge Per kWh
Electric 32.88p 15.164p
Gas 32.88p 3.616p

Now we’ve got our prices lets look at a month’s worth of energy usage. Lets take the month of December as it’s probably one of the most expensive.

First off, the number of days in December = 31, next is the energy used for the month of December.

Energy kWh Used
Electricity 248
Gas 1947

Now for the incredibly complicated maths (just kidding). We multiple the standing charge for each supplier by 31 and the unit prices are multiplied by the number of kWhs used.

So for the electricity from Bulb we have the following calculations:

Standing Charge

31 * 0.2456 = 7.61

kWh Used

248 * 0.12257 = 30.40

Standing Charge kWh Used
Bulb
– Electricity £7.61 £30.40
– Gas £7.61 £48.09
Sub Total £15.23 £78.49
Total   £93.72
Scottish Power
– Electricity £10.19 £37.61
– Gas £10.19 £70.40
Sub Total £20.39 £108.01
Total £128.40

Hopefully you’ve homed in on the totals and can see that in this comparison, Bulb comes out cheaper by a whopping £34.68! Now just think, it’s the same gas and electricity that is coming through your wires and gas pipes regardless of supplier so why pay more than you have to?

As I’ve mentioned Bulb are the supplier of energy to the HTSC household and do a fantastic job of providing green energy to other homes across the UK. They provide 100% renewable electricity, which gives you a warm fuzzy feeling when switching on a light. You’ll get £50 credit if you sign up and switch to Bulb from here, who can say no to free energy?!

If this all seems too much, no problem, there are services like uSwitch – Gas & Electricity who allow you to search for the cheapest deal with minimal information, just your home address, the type of meter(s) you have and how much you spend/use energy wise each month. If you see a deal you like on there, they also provide a service where they take care of informing your current supplier that you want to move to a new supplier, which means you have to do even less!!!

See, I told you it would be worth your time. Just think, if you can save £34.68 in one month, what could you save over a year?

 

 

Ahh I’m drowning in ISAs

ISA (Individual Saving Account)

Up until about 5 years ago ISAs seemed pretty straight forward. There were 2 options (as far as I’m aware), there was either a Cash ISA, which your local bank or building society would offer or a Stocks and Shares ISA, which would be offered by brokerages. However, over the last 5 years it appears these ISAs have multiplied like rabbits and now it feels like untangling a bowl full of spaghetti when attempting to figure out which ISA right for what job.

Well if the conundrum of which ISA to open or contribute to this tax year has been keeping you up at night (and I’m taking a wild guess that it probably hasn’t), then don’t worry, we’ll go over what is currently available and when which ISA is best for what job. Now come on, together, we’ll get through this.

ISA Advantages

At the moment it’s simple, any gains on the money within an ISA (sometimes also referred to as a tax-wrapper, this isn’t someone who raps about tax) are currently protected from the tax man. There are other advantages which we’ll go over in the table below.

ISA Type Restrictions Best For Yearly Limit Benefits
Cash ISA Building up cash savings. 20,000 Interest earned on savings is not taxed.
Lifetime ISA Can only withdraw money for house purchase or retirement.

If using this for retirement savings, money cannot be withdrawn until age 60.

Saving for a house or retirement. 4,000 Government tops up amount by 25%. So you put in £4,000 and the Government will add £1,000.

 

Help to Buy ISA Can only be used for buying your first home. Saving for a house deposit.

2,400*

Maximum of £200 per month contributions.

In the first month of opening you can deposit £1,200.

The Government will top up the ISA when the ISA is closed for purchasing a house. The government top up by 25% of what is in the ISA up to a maximum of £3,000.
Stocks and Shares ISA Building up a shares/bonds/funds portfolio. 20,000 Any gains in value of shares or bonds are tax free. As are the dividends or interest which is paid to you.
Innovative Finance ISA Peer-to-peer lending 20,000 The money earned from peer-to-peer lending is tax free.

 

Scenario: Saving for a house

So you’ve got two options here, either the Lifetime ISA or the Help to Buy ISA, which is going to be best for you? Well you’re reading a HTSC post so we’ll get to the example.

Assumptions

  • Saving for 3 years (36 months)
  • Maximum contributions are made
ISA Type Contributions Total Contributions Bonus Total
Help to Buy ISA 1,200 x 1 Month

200 x 35 Months

8,200 2,050 10,250
Lifetime ISA 4000 each tax year 12,000 3,000 15,000

If maximum contributions can be made, the Lifetime ISA is the one to go with and even if you cannot make the maximum, it’s still the Lifetime ISA and here’s why. The Lifetime ISA has an age limit of 50 for when the 25% bonus stops being paid, where as the Help to Buy ISA will only pay a maximum bonus of £3,000. So there’s no point in saving into the Help to Buy ISA once you’ve saved £12,000.

If you open a Lifetime ISA and contribute the same as you would have if you opened a Help to Buy ISA, the bonus and total will be the same. It’s just the Lifetime ISA allows you to save more and in turn earn a bigger top up.

 

Scenario: I’ve budgeted like a pro and I’m sat on spare cash I want to get to work

So you’re not happy with the Cash ISA return (of a pitiful 1%) and you’re happy to take on a little more excitement (read risk) in the hope of greater returns.

Now the Stocks and Shares ISA and the Innovative Finance ISA are not directly comparable as they are out there to satisfy different needs but here’s a quick rundown.

ISA Type Pros Cons
Stocks and Shares ISA Any gains in the value of shares and bonds bought is tax free.

Any dividends or interest paid is tax free.

There is an ongoing fee for having a Stocks and Shares ISA.
Innovative Finance ISA Any money received from peer-to-peer lending activities is tax free. There is an ongoing fee for having an Innovative Finance ISA.

Not many platforms currently offer this ISA.

The Innovative Finance ISA is the new kid on the block and it’s out there to satisfy the growing demand of people wanting to loan out their spare cash to other people or businesses. This is known as peer-to-peer lending or crowd funding. More information can be found here: MoneySavingExport – Peer-to-peer lending

There are not a lot of platforms out there that offer the Innovative Finance ISA but one list I’ve found is: https://innovativefinanceisa.org.uk/isa-providers/ 

So I hope that clears a few bits and pieces up and you’re able to determine which ISA is best for you. I’m sure in years to come there will be even more ISA options out there, which will no doubt add to the confusion but don’t be afraid, as we’ll tackle each ISA as it is released into the wild.

As always, please do further reading when it comes to finance. The topic of ISAs is a large one and cannot be fully understood by reading one blog post by a guy on the internet. Happy hunting!

Saving

So you want to increase the amount of cash you’re saving each month. The quickest way to achieve this is by cutting down on your spending. It’s as simple as that. The tricky part is knowing which bits of your spending to cut down on.

In the example SSBS you’ll see in the outgoing column items you may be familiar with. Just in case you can’t remember, here it is again.

The easiest way to see what could be chopped off your monthly spending is by prioritising what you need to live and go from there. So my approach would be to start with the basics and work your way back.

The Basics

  • Mortgage/Rent
  •  Utility
    • Electric
    • Gas
    • Water
  • Council Tax
  • Food
  • Phone line/Internet

Now, ‘The Basics’ are going to different for different people. You may decide that your mobile phone or contact lenses are items that you cannot do without and that’s fine. For me, anything that comes after the above is a luxury and the cost should be watched like a hawk, if not cut out all together.

So going back to the SSBS example. One outgoing that I would certainly consider ditching is Sky TV. By cancelling Sky TV you’re already able to save £50 per month without making any other lifestyle changes. Over 12 months, that’s £600!

If I’m about to make a monthly commitment for the foreseeable future, the quickest way to decide whether it’s worth it for me is to times the monthly amount by 12.

For example:

Product Monthly Cost Annual Cost
Amazon Prime £7.99 £95.88
Netflix Premium £8.99 £107.88
Total £16.98 £203.76

The yearly total on these two services would be £203.76. Now to me, I would prefer to have saved that £203.76. However, if you’re a film/TV buff and enjoy these services, that’s fine. So long as you are aware of the potential savings that can be made by cutting out the non-basics from your outgoings.

So now you’ve reviewed your outgoings and are happy that you’re saving enough but you may be saying to yourself ‘but what am I saving for?’. For me, it’s piece of mind. Having a cash pile in the bank will reduce those anxiety inducing situations like having a car problem or needing to replace a boiler at home. A savings target of between 6 to 12 months of your take home monthly salary will put you in a very comfortable position.

There are many, many more ways in which to reduce your monthly outgoings. If for example you commute to work by car with a journey that is less than 4 miles and you live in a town or city, consider cycling or taking the bus. If you happen to live in a very expensive part of a town/city. Considering moving to a cheaper part or closer to work in order to reduce those commuting costs. Cook more at home instead of eating out. Cook larger portions of food when you do cook so you can take them to work instead of buying lunch. Get into the habit of multiplying the cost by the number of times you do it. Last example, I promise. Lunch at the sandwich shop each working day of the week.

Lunch £5

£5 x 5 (Monday – Friday) = £25

£25 x 4 (roughly the number of weeks in a month) = £100

And just to hit this home £100 x 12 (yep, the number of months in a year) = £1200.

Now is that shop bought lunch really worth 1200 of your hard earned pounds? O.k admittedly this is extreme but I’m hoping it’s helping with demonstrating where you can save and how even saving small amounts can have a big reward.

Fantastic, so now you’re budgeting like a pro, the debts going or gone, the non basic outgoings have been exterminated and you’re on your way to having a nice pile of cash just smiling at you when you check your bank account. You may be wondering what happens when you’ve hit your saving target, well I’m glad you asked. Up next we will look at what you can do with this extra cash to make it do more than just smile at you from your bank account.