With interest rates supposedly on the rise before the end of 2015, it’s important to get prepared to avoid your finances taking a hit should they increase. Although any interest rises are likely to be gradual, up to 47% of people would find it hard to cover an increase of up to £150 per month. Whilst this is yet to be confirmed by the UK banks, below are our tips on how to get your household and business ready for an interest rate rise.
One of the most effective ways to get your finances in check is to start a budget sheet either online or in an excel spreadsheet. Simply list how much money you have coming in each month and compare them to your monthly outgoings. Remember to include the following costs plus any extras that apply; mortgage or rent payments, transport, insurances, utilities bills, food, savings, clothing, toiletries, entertainment. Don’t forget to breakdown each category, for example transport may also include MOTs, breakdown cover and petrol. Once you have a clear understanding of your monthly outgoings it should become easier to see where you can cut back and where you can spend.
Budget for the seasons
When creating a budget sheet it can be easy to forget the big seasonal events such as birthdays, summer holidays, Christmas and home or life improvements. Save up for bigger events over a longer period of time or if you’re really organised shop in the Janurary sales or take advantage of Black Friday on the last Friday in November. Many stores will be offering huge discounts on everything from electricals to everyday items and Christmas gifts. If you’re feeling brave then hold out on booking a summer holiday until the last minute and keep your fingers crossed for savings.
Use price comparison sites
Use a price comparison site to see where you can save on car, home, life and travel insurances, compare energy companies and cut your credit cards. By comparing all your current service providers against the latest competitive rates you’ll ensure you’re up to date and aren’t losing out.
Small changes equal big savings
Remember often the smallest changes to your daily routine and spending habits can add up over the year and equal big savings. Cut back on your daily coffee, look at your gym membership usage or perhaps you can car share to work? All these changes can add up over time and free up money to be spent elsewhere.
Whether you’re able to save £10, £100 or even £1000 a month it’s always best to keep a savings account topped up. With a rise in interest rates predicted anytime soon you don’t want to get caught out and be left short on your monthly outgoings. Whilst interest rates on savings accounts won’t do much to boost your savings, at present a rise in interest rates mean borrowers will lose and savers will win. Also, consider a cash ISA, the 2015/2016 allowance is currently set at £15,240 and you’ll earn a bigger reward than a standard savings account.
For business owners the predicted interest rate rise will either be a help or a hindrance. Some businesses may choose to use the period to either boost or pull back. If interest rates rise so will the cost of business loans and in turn reduce a company’s profitability. If you own a business consider whether it’s worth holding back on investing in a large project or expansion until interest rates remain steady. With less money to spend on big projects it may be worth starting small and investing in those with slightly less risk or perhaps boost company morale with a revamped company culture.
Speak to an accountant
Sometimes looking over your own finances can seem like a daunting prospect but by enlisting the help of an accountant you can be sure all your finance needs will be ticked off. An accountant will be able to advice you on business planning and growth, tax advice to ensure you’re claiming the maximum allowance, plus lots more.
Whether interest rates will rise remains to be seen but hopefully these tips will help get your finances ready for battle.