Whatever your circumstances, the world is slowly edging back to normality and there are now more options on the table to spend our cash. With all these new options comes more spending which will bring our finances back in focus.
Lessons will have been learned from the pandemic when it comes to money, but taking those positive lessons and making sure they stay with us will be key.
Spending money on normal day-to-day things has changed a lot over the last year. Lunches were prepared at home when before people may have popped to the local deli for a sandwich on a break from work. Cars were parked up as working from home became the norm. Bread was baked at home. Coffee too was brewed in our kitchen and any pretense at “needing” a new dress for a social event was dropped.
The repeated lockdowns provided many with a great opportunity to put some money away for when society reopened. Of course, not everyone was in the same boat and for many the pandemic brought a lot of financial worry as businesses and shops closed, leaving many thousands out of work.
Recent research carried out by Bank of Ireland found that many people have become “accidental” savers during the Covid-19 crisis. Some of those surveyed said they plan to continue saving once Covid is over.
The research shows that many are keen to use their Covid savings to take a holiday, or are looking to make a “big-ticket” purchase when the shops reopen.
In addition to this new wave of savings, we have had the time to think over the last year. Our eyes have opened up to the world around us. Walking is free and it’s not a bad way to spend an hour or so. Fresh air is free and it’s there for us all to enjoy. Playgrounds and parks are free.
There are elements of lockdown life that will continue, but of course, there will be temptation all around now. Shopping is something we love to do. And there’s even a name for post-pandemic spending – revenge spend.
This is spending on things we feel we were robbed of over the last year. A type of FOMO or ‘fear of missing out’ spending. It is expected that revenge spending will take off now that retail and hospitality is reopened.
However, with this comes a word of caution as people are being warned not to spend beyond their means.
Having been in and out of lockdown for over a year it is possible now that we can take some lessons learned over the last year to help us manage our finances better and spend our money more sensibly or save money where we can.
The latest consumer sentiment index from KBC Bank Ireland said Irish consumer sentiment was at its strongest level in more than a year in April.
KBC chief economist Austin Hughes said Irish consumers are increasingly hopeful but are managing uncertainty about the future.
“As in March, consumer sentiment was boosted by solid data and strong domestic and international forecasts for the Irish economy. With encouraging news also emanating from key trading partners such as the US and UK, the broad economic backdrop seems to be developing in a favourable manner,” said Mr Hughes.
Just over a quarter of consumers surveyed expect a stronger Irish economy in the next twelve months – but almost half expect further weakness.
“While the outlook for economic activity has improved somewhat of late, concerns about lasting ‘scarring’ from the pandemic in the shape of permanent job losses have attracted more attention of late,” added Mr Hughes.
As the economy starts to open back up there will be a lot of fear around what the future holds and this could have a big impact on how we spend our money.
Irish households have a record €127bn on deposit at the moment so some of this money is likely to flow back into the economy when things return to normal.
Daragh Cassidy, head of communications at comparison and switching website Bonkers.ie believes some of this money will go straight into the property market as first-time buyers and movers use their extra savings to outbid each other on a limited supply of homes, while a lot might flood out of the country as half of us rush off to somewhere sunny in Europe for a long-awaited holiday.
“I think we’ll see a huge uplift in spending locally in the short term at least, just after things reopen, as people splash out on restaurants, pubs, staycations and entertainment. How long that uplift will last remains to be seen.
“And of course some won’t be in a position to spend any savings at all. Anyone working in the accommodation, tourism, entertainment and retail sectors in particular will have seen their jobs and savings decimated over the past 14 months or so,” said Mr Cassidy.
At the moment, much of the economy and many thousands of jobs are being artificially propped up by government supports, added Mr Cassidy, who said that we probably won’t see the real impact of Covid until next year at least.
The Central Bank of Ireland said that additional spending from built-up savings in the last year could inject €5bn into the Irish economy post-pandemic.
At the moment, much of the economy and many thousands of jobs are being artificially propped up by Government supports, says Mr Cassidy, adding that we probably won't see the real economic impact of Covid until next year at least.
The Central Bank says that additional spending from built-up savings in the last year could inject €5bn into the economy post-pandemic.
Paul Merriman of consumer website, askpaul offers a word of warning however.
“Earning your money takes a lot of effort. You will most likely work your backside off to get your wages into your current account. Spending it can be too easy, so do yourself a favour and always make sure you save before you spend. It will make those big purchases in life easy in the future. Fail to prepare your money, then prepare to fail with your money,” he said.
To help with all of this we have compiled a guide to spending your money wisely as restrictions lift.
To help with all of this we have compiled a guide to spending your money wisely as restrictions lift. Here are 20 things to consider when managing your money as we emerge from lockdown.
Money for bills leaves our bank accounts every month and we just take it for granted. Every month direct debits for electricity, gas, bins, TV, broadband all fly from our accounts. People often think of how to save on their day-to-day spending but they should firstly look at ways to save on their household bills.
Bonkers.ie said that a lot of households in Ireland are paying far more than they need to for their energy, broadband, mortgage and insurance because they haven’t taken the time to look for better value.
“I always say that if you’ve been with the same supplier for around two or three years you can almost be guaranteed that you’re overpaying. The longer you stay, the higher the so-called ‘loyalty premium’ you’ll pay,” said Darragh Cassidy.
The best approach is to write down all your bills and what you are paying on each, then explore the ways to save. The first port of call should be your current provider, to see if you can hammer out a better deal. After that, check around and see what’s out there. A little here and there could add up to a lot throughout the year. A €10 saving per month on five bills will add up to €50 per month, or €600 in the year – which could pay for a nice weekend away.
Irish electricity prices are the fourth most expensive in the EU, behind only Germany, Denmark and Belgium. Gas prices here are the eighth most expensive in the EU, according to Eurostat, at 23% above the EU average. According to Bonkers.ie, customers in Ireland could avail of the ninth cheapest electricity in the EU if they switch.
At the moment, someone who is paying standard rates for their gas and electricity and who switches to the cheapest deal on the market could save almost €450 a year, based on average consumption. It’s a lot of money for something that only takes a few minutes to do online, but few of us are inclined to do it.
Mr Cassidy said: “Given the increase in wind generation in Ireland over the past few years, it’s disappointing that electricity prices haven’t fallen and continue to remain way above the EU average. However, what’s more concerning is the net price of electricity here, which is way out of line with the rest of Europe.’
“As many of us still remain working and studying from home, heating and electricity costs are understandably a concern for many people. My advice to anyone who is looking for better value or who is struggling with their energy bills is to look at switching supplier.”
Switching has never been easier and it can be done quickly and easily, saving up to €400 a year.
There are some great phone deals available, if you are prepared to shop around. For example, someone who is currently on a billpay mobile plan but has come to the end of their contract and has paid off their handset could move to a SIM-only deal for a year or so and pay just €10.99 a month with 48 for unlimited calls, texts and 100GB of data. They can keep their number when they switch and it’s a relatively simple process. New providers enter the market all the time, offering attractive new deals. It very much depends on how you use your phone and what you need. Look around and compare prices. For example, GoMo has a very popular deal for €14.99 a month for life.
The general rule when it comes to insurance is to never accept your first offer. All of the advice points to savings that can be made if you shop around or try to bargain with your current provider.
One area where people seem reluctant to move on is health insurance but those in the know say there are big savings to be made by shopping around for health insurance.
Bonkers.ie says that many people don’t switch policies out of fear that they’ll have to re-serve these waiting periods with their new insurer. This is not the case, so long as there hasn’t been a break of more than 13 weeks in cover.
If you have served your waiting periods with one provider and subsequently take out a policy with a new provider, all credit from your previous policy will be carried across.
For home insurance, there are now around 15 providers in the market and added extras such as an alarm can reduce home insurance by around 25%.
Jonathan Hehir of Insuremyhouse.ie and Insuremycars.ie said there is a lot of competition across all markets, which means there is great value out there, but with products like motor insurance, the differential between what is offered by one insurer and another can be huge.
“The key to making these savings is preparation and timing. While most households will already be locked into annual insurance policies the renewal dates roll around quickly and so, rather than letting them creep up, people should actively pull out their policy documents, take note of when they will be due to renew and put a reminder in their phone to start shopping around two to four weeks in advance of this,” he said.
We have all watched a lot of TV this year, relying heavily on our Wifi providers.
Take TV first. Do you really need Sky, Netflix, Amazon Prime, Apple TV, Disney plus and a YouTube subscription? It would be worth sitting down for a few minutes and asking how much of each subscription do you really use. Now that there will be more to do in the outside world it might be worth thinking about scrapping a subscription or two. Having a lot of them can add up to a few hundred euro a month. If you’re a Sky customer, it’s also worth giving them a call every so often to check out what deals they can offer you as a valued customer.
Checking out the latest broadband and TV deals and reviewing what you’re forking out for can also help you save.
ComReg’s website (www.comreg.ie) will help with shopping around for a good broadband deal.
Switching your mortgage provider Switching your mortgage provider can save you money. A health check on your current mortgage, however, can do the same. Take a moment to look at what rate you are paying and what deal you have. If you have a variable rate, there may be better options to fix your rate. The rate could also be lowered by simple things like how much you have left to repay or the energy rating on your home.
It certainly does pay to shop around. Bonkers.ie did some maths on a mortgage of €250,000 with 25 years remaining and found that one of the lowest rates in the market is 2.20%. So for someone on a standard variable rate of 4.50%, switching could result in a saving of €305.43 a month – that’s over €18,326 saved in five years.
When it comes to paying off your mortgage early, however, Paul Merriman says that you really need to consider if you have all other areas of your financial life squared off.
“There is no point in paying €20,000 off a mortgage interest rate of 2.7% then going back to the same bank for a car loan in three years and paying 8% interest. It does not make sense. Usually I recommend not to pay the banks back too early when it comes to your mortgage as you will usually need access to capital again in the future. Instead people should consider investing that money.”
We hear it all the time — get rid of your credit card. The interest rates are generally very high and the temptation to spend with them is always lingering. Paul Merriman says people should use all of their spare cash to get rid of personal loans, credit card debt, car loans, and credit union loans.
“Use the debit snowball effect which is paying off the smallest loan first, then the next smallest. Don’t go for the highest paying interest loan first as this could take too long to clear and will reduce your chances of success,” he says.
Using a credit card as an ongoing form of credit can ensure that your purchases cost up to an extra fifth of the cost, according to Kevin Johnson, chief executive of the Credit Union of Development.
“While mortgage debt and home repossessions have dominated the media of late, lesser attention has been given to the dangers of expensive revolving debt such as credit cards. Credit cards are an extremely expensive form of credit, the use of which has been to the financial detriment of many people.
“Credit cards are useful for those who have the financial discipline to operate them correctly. However, unfortunately a huge number of people do not.”
There are many tax reliefs you can claim. Don’t be afraid of doing so either. Revenue has, over the last few years, made some great advances in making their online systems easier to use for all non-accountants. As with anything, start at the beginning by creating an account on Revenue.ie and go from there.
Many people may be unaware but if you work in a certain occupation, you may be entitled to flat-rate expenses. The aim of these is to cover some work-related expenses like equipment and uniforms.
For example, if you are a shop assistant you are entitled to flat-rate expenses of €121; if you are a hotel waiter or waitress, you are entitled to €80 in flat-rate expenses.
The flat-rate expenses deduction is not automatic, so you must claim it.
Medical and dental expenses can also be claimed as tax relief.
If you are a PAYE or self-assessed worker, you are entitled to claim tax relief on qualifying medical and dental expenses you have paid for, according to Taxback.com.
Working from home can have benefits too that stretch beyond a shorter commute and casual wear every day.
By working from home you can reclaim partial costs on things like electricity, heating, and broadband.
Revenue can be daunting, but the process has been streamlined a lot in recent years — a little effort goes a long way.
First of all, you will need to keep copies of all your bills and expenses as proof of expenditure. If claiming the e-worker relief, you should also get written correspondence from your employer to state that you were working from home and are thereby eligible to claim it.
To claim relief you must first complete an income tax return after the end of the tax year by signing into Revenue's myAccount. So 2020 tax relief can be claimed from January 2021 provided all your tax affairs are in order. When completing your tax return you can then claim for any additional reliefs or credits. Bonkers.ie has a handy guide to claim.
For medical expense relief, you can claim back 20% on most professional medical and health expenses that you’ve incurred over the past year. Lots of expenses, such as GP visits, consultant fees, prescribed physiotherapy and counselling sessions, acupuncture, routine maternity care, hearing aids, and IVF are all covered.
If you have health insurance which covered some of the costs, you can apply for tax relief on the balance. For example, if you spent €150 on three doctor’s visits last year and got €50 back from your insurer, you can apply for tax relief of 20% on the remaining €100.
- 1. Medical expenses
- 2. Tuition fees
- 3. Flat-rate expenses
- 4. Working from home relief
- 5. Home carers credit
- 6. Nursing home relief
- 7. Rent a room relief
- 8. Employing a home carer tax relief
- 9. Dependant relative credit
- 10. Home renovation incentive and rent relief (both have now been phased out but can still be claimed for retrospectively in certain circumstances)
Supermarket loyalty cards are getting even more valuable as they try to hold on to your custom. The supermarkets are placing a lot more focus on offers and deals associated with loyalty cards and we can expect to see much more advancement in this area over coming years as supermarkets battle for customers.
SuperValu, for example, has a useful app that customers can use as their loyalty card is built into it and updated with regular money-off vouchers. Lidl also recently launched its app in Ireland and each week updates it with new offers. There is certainly money to be saved by using the loyalty cards — even if you have one for every supermarket.
Your home can make you money if you are in a position to do so. Revenue offers ‘rent a room relief’ which means you can rent a room in your home tax free for up to a limit of €14,000 per year. This could be anything from someone looking for a room for a night or two in college or someone travelling for work. It wouldn’t necessarily mean full-time either.
This is really not as hard as you think it might be. If you have a garden or a plot, you could try growing a few vegetables. Take it slow if you are starting out and start with a few herbs perhaps. You can build up to more vegetables and even fruit. It’s a great way to avoid buying something like lettuce in the shop and throwing away half of it. If it’s growing in your garden you can pick as you go. Some of the best foods to start with are potatoes, onions, peas, thyme, parsley, chive, rosemary, and sage.
Even small changes can make a difference here. Are you still putting food waste in your normal bin? If the answer is yes, then stop. Use your food waste bin or get a compost bin or biodigester for your garden — it’s better for the environment and cheaper.
There are also plenty of grants available from the Sustainable Energy Authority of Ireland (SEAI), which provides Government funding for support in areas like insulation and installing heat pumps for older houses.
Many financial planning experts will talk about the 30-day rule, especially when it comes to larger purchases. The advice is that you take 30 days to consider the purchase before you buy it and when the 30 days are up you decide if you still want it or if you are happy to live without it.
Don’t knock it until you try it. There is a method to the budget madness. Especially now that ‘revenge spending’ is on the cards. Budgeting can take many forms but it generally starts with a pen and paper or an Excel spreadsheet. Bring it back to basics and look at what goes in and what goes out. Plan ahead and set goals for that big purchase. Set targets and limits.
Revenge spending doesn’t have to be a bad thing and it can be fun — but planning ahead is vital.
Don’t rule it out. Do not skip over this one and think it's not for you. Bank of Ireland says that investment plans can begin from as little as €100 a month. It says investments are becoming a more attractive option for some people currently with increased savings and earning very little from their deposit accounts.
For many Irish people, investments seemed like something you needed a lot of money to be able to do. According to Bank of Ireland research, knowledge of investments is low at present, with only 23% of people claiming they have enough know-how in this space to make the right decisions. Also 86% of respondents cited a fear of losing their money as the main reason for steering clear, which is understandable given the all too recent history of Irish people with banking shares. In a low-interest rate environment, however, investments are becoming more appealing. If you are risk-averse, this is not for you.
Paul Merriman of askpaul says investing is the only way to make your money work hard for you. “Most investment accounts are linked to the stock markets. Stock and shares are the best way to make money over the long term.”
He says that usually investments in stocks and shares would target a 6% return over the long term. Investment accounts will go down and up, so in order to give your money the best chance to grow, you will usually need to leave your money invested for five years.
“Remember most banks are offering less than 1% interest on deposits so people owe it to their hard-earned money to invest it wisely,” he says.
Plan, plan, and plan when it comes to eating. It’s a very simple process to plan out your meals for the week and stick with the plan. Try and plan them around the ingredients: Have meals that use fresh vegetables closer to the start of the week when you have the veg in from the weekly shop.
The advice from experts is to stop paying money for things like bottled water and coffee. Again this is where planning comes in. And Paul Merriman estimates you could save €1,000 per year cutting out bottled water and takeaway coffees. Just three takeaway coffees in a working week will set you back €360 per year.
You could be spending around €1,200 per year buying a daily €5 roll in the local shop. By planning ahead and bringing a packed lunch to work, you can save a lot of money.
Think before you splash the cash. Once January rolls around, some of us take it as an opportunity to join a gym and get healthy - or do we just think we do?
Paul Merriman urges people to not start a gym membership, unless they are 100% committed.
“Losing weight can be as easy as stopping eating and walking — once you have mastered this for the month of January, then invest in gym membership in February. Plus it will be easier to find a treadmill in February.”
When it comes to things like school costs, make a list of what you need in early August and spend a few weeks shopping around for the best-value items.
According to Kevin Johnson, “There are some really good bargains out there — and while it may take you a little bit more time — the savings you make could be well worth it,” he says.
“Also remember that not everything has to be brand new. If your child has siblings, cousins, or even friends who are a year or two ahead in school, then it might be an idea to speak to their parents about maybe buying some second-hand items for a low price."
Getting a second bank account can prevent you from spending money you need elsewhere.
Paul Merriman advises that this second account should be used weekly to lodge money from your main (working account) into it.
“Your second account is going to be called an acorn account. This is where you will act like a little squirrel and take money from your main account and hide it in your acorn account,” he says.
So if you usually buy a cup of coffee for €2.50 a day going to work (€600 per year) at the end of each week of not buying coffee, you will put €12.50 in your acorn account. If you were going to start a gym for €50 per month, don’t, instead set up a standing order for €50 to go from account one to your acorn account. You’re already on track to save €1,200. Every time you think of an impulse buy, but don’t do it you can transfer the money to this second account.
The best way to build up some rainy-day money is by putting a little away regularly. Do it on payday and do it by direct debit.
Be conscious of the little things in life. Turn lights off, cut down on using the tumble dryer. Join a library instead of buying books. Turn down the thermostat and put on a jumper. Buy in bulk. Wait for sales.
By making small changes and being open to what’s available in the world around you, you can certainly save a lot and carry some of the lessons learned in lockdown into ‘normal’ life as it resumes.