A Plan to Look After The Pennies

LeeSouthEast

After being financially responsible for 18 months and debt free for 5, I've been thinking about how to maximise every penny I get. I suddenly realised on the way home from work today that I sit a lot of cash in my current account just waiting for bills to come out. This account earns 0% interest, so it is effectively dead money.

I work out the month's outgoings, then transfer the remainder to savings already (ING Direct, 3%).

I was thinking of doing the following... does this make sense/sound sensible? I realise it'd need work on my part, but I am not adverse to keeping on top of it. I check online banking every day or so, and my budget lists when things come out.

1) My current account provides a £250 interest-free overdraft. Use -£250.00 as my new 'empty' rather than £0.00, and stooze the cash at 3% in ING Direct. This won't exactly pay for my holiday with the girlfriend, but it's still free money.

2) Put all spending on my 1% cashback credit card. This will effectively give me a 1% reduction on everything I buy anyway, without changing the way I do things. Given I know pretty much what I will be spending in a given month down to a few pounds, I shall then:

3) Transfer the next credit card payment direct to ING from THIS month's pay (effectively meaning the cash to pay the next statement is always allocated and available). When the bill is coming due, transfer it back to my current account to pay the bill.

4) For my Direct Debits - which are spread out across the month - transfer those to an easy access savings account with the same provider as my bank (so transfers are instant). This will 'only' provide 1.26% interest, but that's considerably better than the 0% paid by just having it sat in the current account.

The end goal is to have my current account 'sat' virtually continuously at -£250.00.

As I say I realise this will take effort on my part, but does this seem as good an idea to everyone else as it did to me on the drive home? If I get it wrong, there is still a £1,250 interest-bearing overdraft beyond my £250 freebie, so a few pence in interest would be the only 'penalty' to forgetting what date it is, or having a bill bigger than expected.

I'm struggling to see a reason not to do this. Have I missed anything major? Other than the fact it's a lot of work for probably a maximum of £50 benefit in a given year. But dammit, it's £50 I wouldn't otherwise have, and it won't cost me anything beyond time and diligence to get it.

opinions4u

LeeSouthEast wrote: »

I was thinking of doing the following... does this make sense/sound sensible? I realise it'd need work on my part, but I am not adverse to keeping on top of it. I check online banking every day or so, and my budget lists when things come out.

It all makes sense.

1) My current account provides a £250 interest-free overdraft. Use -£250.00 as my new 'empty' rather than £0.00, and stooze the cash at 3% in ING Direct. This won't exactly pay for my holiday with the girlfriend, but it's still free money.

3% on £250 = £6 a year after tax. I'd still work to zero and not take advantage of the free money. But your logic is right.

2) Put all spending on my 1% cashback credit card. This will effectively give me a 1% reduction on everything I buy anyway, without changing the way I do things. Given I know pretty much what I will be spending in a given month down to a few pounds

Great idea, as long as it doesn't make you buy more than you would have done anyway.

3) Transfer the next credit card payment direct to ING from THIS month's pay (effectively meaning the cash to pay the next statement is always allocated and available). When the bill is coming due, transfer it back to my current account to pay the bill.

Yup - get ahead of the bill sounds good to me.

4) For my Direct Debits - which are spread out across the month - transfer those to an easy access savings account with the same provider as my bank (so transfers are instant). This will 'only' provide 1.26% interest, but that's considerably better than the 0% paid by just having it sat in the current account.

If you have to do this manually, there is a risk that you might miss a payment and incur a bank charge (or, more likely, full overdraft interest). I used to work a similar way with Halifax who allow internal standing orders from savings account to current account. That worked a treat. (In fact, I used to have my salary paid in to a savings account in order to earn a few days interest on the whole wage).

I'm struggling to see a reason not to do this. Have I missed anything major? Other than the fact it's a lot of work for probably a maximum of £50 benefit in a given year. But dammit, it's £50 I wouldn't otherwise have, and it won't cost me anything beyond time and diligence to get it.

£50 and keeps you close to your money. Sounds good to me.

(Do you have a contingency plan for getting a nasty illness and ending up in hospital, unable to access a laptop?)

partlydave

Open a Halifax Reward account and put in and take out a total of £1k a month and get the fiver a month, then your £50 a year will be £110 a year, otherwise your plan looks good as long as you keep an eye on it closely as youve said you will.

LeeSouthEast

Good points, opinions4u. My overdraft would comfortably handle 3 months of expenses, so although it may incur interest, there would be no penalties as such. Assuming I'm conscious and with it enough to get someone to drop my laptop to the hospital, it wouldn't be a big issue. If I'm not conscious or cannot operate a laptop, I think the state of my bank account is going to be the least of my worries

partlydave: Good idea..! I'm going to look into that tonight!

Thank you both.

ajharris

LeeSouthEast wrote: »

After being financially responsible for 18 months and debt free for 5, I've been thinking about how to maximise every penny I get. I suddenly realised on the way home from work today that I sit a lot of cash in my current account just waiting for bills to come out. This account earns 0% interest, so it is effectively dead money.

I work out the month's outgoings, then transfer the remainder to savings already (ING Direct, 3%).

I was thinking of doing the following... does this make sense/sound sensible? I realise it'd need work on my part, but I am not adverse to keeping on top of it. I check online banking every day or so, and my budget lists when things come out.

1) My current account provides a £250 interest-free overdraft. Use -£250.00 as my new 'empty' rather than £0.00, and stooze the cash at 3% in ING Direct. This won't exactly pay for my holiday with the girlfriend, but it's still free money.

2) Put all spending on my 1% cashback credit card. This will effectively give me a 1% reduction on everything I buy anyway, without changing the way I do things. Given I know pretty much what I will be spending in a given month down to a few pounds, I shall then:

3) Transfer the next credit card payment direct to ING from THIS month's pay (effectively meaning the cash to pay the next statement is always allocated and available). When the bill is coming due, transfer it back to my current account to pay the bill.

4) For my Direct Debits - which are spread out across the month - transfer those to an easy access savings account with the same provider as my bank (so transfers are instant). This will 'only' provide 1.26% interest, but that's considerably better than the 0% paid by just having it sat in the current account.

The end goal is to have my current account 'sat' virtually continuously at -£250.00.

As I say I realise this will take effort on my part, but does this seem as good an idea to everyone else as it did to me on the drive home? If I get it wrong, there is still a £1,250 interest-bearing overdraft beyond my £250 freebie, so a few pence in interest would be the only 'penalty' to forgetting what date it is, or having a bill bigger than expected.

I'm struggling to see a reason not to do this. Have I missed anything major? Other than the fact it's a lot of work for probably a maximum of £50 benefit in a given year. But dammit, it's £50 I wouldn't otherwise have, and it won't cost me anything beyond time and diligence to get it.

What a great idea, it will take a bit of planning and monitoring but you seem to be half way there already. Why not try and arrange for all direct debits to come out on the same day of the month so that you can keep hold of the all the money for longer and then transfer the money to the relevant account all in one go.

Over all your idea is A1. All the best.