How to take complete control of your cash

Are you frequently fleeced, hoodwinked, sold a pup or regularly ripped off? Of course you’re not; you’re a savvy on-the-ball citizen ahead of the game who knows what’s what. Or are you?

If you trust banks, insurers, credit card companies and all manner of financial services companies without checking, double-checking – nay, treble-checking – each deal, card, account or policy you’re being offered, I’m afraid to say you’re probably onto a loser.

This may well sound heresy for you and your personal finances. After all, you may believe your bank gives you robust support, lends you trouble-free money, provides you with credit and may even offer protection to your health in the shape of insurance too.

But have you really scrutinised each of your finances? And by this, I mean did you properly compare your products with those from rivals, its service levels, check the interest rates, penalties, terms and conditions and scour the small print for exclusions? I thought not.

If this feels very personal and obtrusive on your personal finances, then all well and good: this is a deliberately rude wake-up call.

Time to take responsibility

Never has there been a more critical moment for you to stop in your tracks, reassess your finances and take complete control of your cash.

This isn’t just about your short-term spending, but for something far more crucial: your longer-term future.

After two torrid years of global turbulence, yo-yoing stock markets and commodity price chaos, the consequences of the credit crunch and its fall-out have constantly led back to one concern more important than all others: you and how you handle responsibility for your own money.

Why is this so vital? Because the more you learn and understand about how the financial industry creates, markets, sells and spins its products – the way it behaves and really treats customers – the better prepared you are to stand up to the rolling waves of hype and make better decisions for you and your money.

The more informed you are, the better choices you’ll make – and save yourself a considerable sum by picking those products offering the best rates of interest and lowest charges.

Don’t for a second think any bank or other financial institution is your friend: it isn’t. It’s there instead to make profits from you, and your loyalty is helping it do so.

Knowing your finances inside out – what you spend, how and where; how much you owe and to whom; the size of the interest rate and late payment penalties; when your insurance is due and why you must switch – puts you in charge, not the banks, lenders, credit companies or hire firms.

No matter the financial weather – whether stormy like the recent crunch and recession, say, or sunny after you get a well-deserved pay rise or new job – you can stay sure-footed and plot your own path ahead.

Become a better consumer

Don’t worry if this all sounds like a very tall order: it isn’t. It’s really a case of you simply learning to think differently about the way you run your money and ultimately becoming a better consumer – demanding greater service, more value for money and convincing companies to put you first, not their profits.

It won’t happen overnight but it can start with a shock, as it did with me.

As a cub reporter many years ago – before I specialised in personal finance – I decided it would be a good idea to borrow nearly £1,000 ($1,560) in the shape of a personal loan to pay off an overdraft. It sounds reasonable, but I made two horrendous mistakes.

Firstly, I didn’t check to see if the personal loan was actually more expensive than the overdraft (it was) – so ended up replacing a cheaper debt with a more expensive one. And secondly, I agreed to include what’s known as payment protection insurance (PPI) as part of the deal.

Sold as a way to ‘protect’ my monthly loan repayment if I couldn’t work, fell ill or had an accident, I was corralled by a slick, pushy bank salesman who compelled me to buy this sliver of financial wizardry.

At 27 years of age, I was young, healthy and could have easily afforded to repay the £25 ($39) a month from savings alone if I’d had the misfortune to be taken ill. But it was made clear to me that this expensive insurance was necessary and that I would be taking on an enormous risk if I didn’t take it out.

An expensive mistake

So I did, and boy did I pay for it, shelling out nearly £1,000 over five years for protection I had no earthly need for – paying virtually the same sum on insurance as the loan itself!

It was only a year later, when prompted by an advert at a rival bank offering a similar loan for half the price, that I actually looked for the first time at my own deal – and recoiled in horror at what I’d bought and how I hadn’t been able to say ‘no’ to the bank salesman.

From that moment on, I determined to take control of my own financial decisions rather than have somebody else make them for me.

In fact, in the UK, PPI was subsequently discovered by campaigning consumer groups to have been mis-sold to hundreds of thousands of bank customers. Happily, banks were forced to pay millions in fines for the scandal and, in the UK, its sale is now to be much more heavily regulated.

Yet, it is in the tiny incidences such as my own past mistake that today’s bigger picture emerges.

As ever greater numbers of customers – from banks, shops, credit card companies, lenders, you name it – become active consumers instead who confidently engage with the firms who want their money, so they benefit from better deals and improved service.

You won’t have the wool pulled over your eyes; you won’t waste hundreds of pounds on pointless financial policies; and you won’t be out of pocket.

The key to success is simplicity: stick to a small number of rules, and you’ll be stood in very good stead for the future.

Three top tips

To start you off, here are three of the most effective tips to keep you – and your personal finances – in tip-top condition:

First, don’t ever invest in anything you don’t truly understand how it works – if you don’t know what’s happening to your money, you won’t be able to properly ask for it back if you lose out.

Second, never ever renew any type of insurance policy – whether house, car, travel, pet – without either comparing products online or ringing around brokers for different prices.

Insurers use the cash from lazy customers who renew without thinking to pay for huge discounts to offer to new customers... so, which would you rather be?

And third, never be afraid to stop any conversation you’re having with a financial services professional when you don’t understand what they’re saying: ask them to explain again.

If you don’t follow what they’re saying, it isn’t your fault – it’s theirs. It’s their job to make you feel comfortable and confident about what you’re buying.

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