How to conjure yourself up a £7,500 pay rise
That is how much Paul Lewis, presenter of Radio 4’s Moneybox and author of Money Magic, claims he can save people simply by making them focus.
He said: "Just writing down everything that you spend will act as a brake on your spending.
"In some ways it is like a diet: if you write a food diary, you eat less; if you write a money diary, you spend less."
Lewis advocates writing down daily, weekly and monthly and then multiplying these figures by 225, 50 and 12 respectively. "Add them all up. Then divide the total by 12. Then pick yourself up," he said.
If the figure is more than your income, Lewis says there are two choices: spend less or earn more. But, to borrow a phrase there is a third way, do both. Money Magic will walk borrowers through how to minimise their mortgage, loans and credit cards.
As well as tips like cutting the cost of bills by paying by direct debit, as most utility companies give discounts to customers who pay this way, he also advocates avoiding warranties on electrical goods.
"Extended warranties are no such thing. They are a form of insurance that covers the cost of repairs if an electrical item stops working properly and they are never worth having.
"The commission rates drive the market - people who sell you goods earn as much again or more if they sell you this insurance too."
Ditto payment protection insurance, which is offered with personal loans, credit cards, and buy now pay later deals.
Once the fat has been trimmed, it is a case of making what’s left work harder, by seeking out the highest rate of interest for your current account, if you never go overdrawn.
However, a better option for those who pay by debit card a lot might be to swap to Bank of Scotland’s new cash-back current account, which lets a customer earn pounds for simply using their debit card to pay for things.
The book also covers how to ensure that savings roll up interest in a tax-free wrapper such as an individual savings account and how to check you are making full use of all benefits at work, such as an employer’s contribution to your pension fund and maximising car related tax reliefs.
If you make journeys in your own car, you can be paid up to 40p a mile with out that money counting as part of your pay, so no tax or national insurance is due on it. But it does not stop there. Even if your employer only pays 25p per mile, you can still count the other 15p for the purposes of tax relief.
And from 6 April, 2005 employers will be able to pay 50 per week free of tax and national insurance to employees for approved childcare facilities. So if you have to pay for a nursery or after school club check if your employer is planning to offer this.
If they haven’t thought about it, point out that it’s not just you who will benefit as they won’t have to pay employer’s NI on the money either.
This means that for a higher rate taxpayer the company would get 332 and the employee would get 858 - and that is without the employer paying a penny more in salary.
And it is always worth checking your tax code. The first 395 of salary each month should be tax free.
Lewis said: "If you have a BR code or a OT code, it means that all your income from your job is being taxed with no tax-free allowance, in which case you should find out what’s going on."
He also warns those who have had an erratic work history to check that they have not paid too much tax. For instance, if you only worked ten months in the past 12, the chances are you will have only received 3,950 of income tax free, rather than 4,745. So the Inland Revenue will owe you a cheque for 175 - the tax you have overpaid on the balance.
The message is clear, it is up to individuals to wave their own magic money wand.