How to manage your money – bills


What if I’m not ready to open a bank account?

You might not be ready to open a full bank account.  That’s ok.  But it’s important to manage your money.  You can start by getting a prepaid card, which is a debit card that you can get your wages or benefits paid onto.  You can then pay for shopping or withdraw money, but only if you’ve got money loaded onto the card.  It’s like a pay-as-you-go phone, but for your money.

When you do open a bank account, you can start with a basic one that you use to pay your essential bills, like your rent or electric bill.  You could then open another account or get a prepaid debit card for your disposable income.  This is the money that you spend on everyday life and fun things like cinema tickets or a treat for yourself.  That way you can make sure that you’re not going to spend money that you need to save for a bill.  You can only spend the money that you moved into that account.

You can also withdraw cash for things like night outs with friends, if you’re worried about spending more than you can afford.  Then you only have the cash that you take out with you.  

What’s a Direct Debit?

A Direct Debit is an agreement that an essential bill (like your electric bill) is paid from your bank account on the same day each month, or on the same day every third month (quarterly).  Paying by Direct Debit is the best way to pay your bills for the following reasons:

  1. A Direct Debit makes it much easier to plan and manage your money.  You know that the money will automatically be taken from your account on that day.  You don’t have to do it, or worry about forgetting to do it.
  2. It’s cheaper.  You will almost always be offered a cheaper and better deal if you pay by Direct Debit.

You can set a Direct Debit up to be monthly or quarterly.  If your income is a bit up and down, perhaps because you’re on a zero hours contract or do agency work, then paying quarterly (every three months) gives you more time to get the money together.  But because it’s three months worth of bills it could be a lot of money.  Some bills will be bigger at certain times, like your energy bill in winter when you’ve had the heating on more.

What does a normal utility bill look like?

Your utility bill will tell you how many units of energy you’ve used, how much that costs, and when you need to pay your bill by.  It will also tell you the different ways that you can pay that bill.

How much the bill is will depend on how much energy you use, where you live (energy costs are different in different parts of the country), what sort of meter you have and what deal or tariff you are on.

“An average energy bill for a one or two bed flat is £66 per month, but could be more or less.”

Prepayment meter vs standard credit meter

If you have a prepayment meter then you only pay for the electric that you use.  You normally do this using a card that you pay money onto at a Post Office or bank, or by putting pound coins into the meter.  This sounds like a great option but they’re expensive to manage so the electric company charge you more per unit of electricity.  And if your prepayment meter runs out then you have no electricity until you put more money on and that can be a huge inconvenience.

A standard credit meter counts the number of units of electricity that you use and the energy company will ask you to read it at regular intervals and send them the figures.  It’s cheaper and easier for them to run so your electricity is cheaper.  You also have the option to move between different energy companies and tariffs to get the best deal for you.  A fixed rate tariff means that you agree the amount that you will pay for electricity in advance and then make monthly payments.  If you do this by Direct Debit, you can save a lot of money.

How does the type of house I live in affect my bills?

If you are living in rented accommodation then you are usually responsible for organising and paying your own bills.  Sometimes your rent will include your bills.  This can be good because then you don’t have to worry about them.  However it means that you don’t have control over how much you pay and you can’t shop around for a better deal.  If you pay your own bills then you can save yourself money by shopping around on comparison websites.

If you are on a prepayment meter and want to switch to a standard credit meter, or if you want to switch energy supplier or deal, then you should check with your landlord.  Changing the type of meter that you have can be expensive, however in the long run you can save money.  You have the right to switch your energy supplier.  If your contract says that it’s not allowed or if your landlord says no then speak to your local Citizens Advice.

What are comparison websites?

A comparison website allows you to put in your details once and then shows you deals from lots of different suppliers.  They allow you to find better deals, and switch easily.  You can use them to shop around for your energy and for common bills like home and contents insurance or car insurance.  It’s important to know that they don’t always show all of the deals available, and they might not offer the best deal for you.  They might make an assumption about how much electricity you use, for example, but the actual amount that you use could be more or less.  Try to use a “whole of market” comparison site and use more than one comparison site.  Sometimes you will get the same product or tariff cheaper on a different comparison site because of the deal that they can get.

For energy, Martin Lewis’s Money Saving Expert website has a Cheap Energy Club that looks at all of the tariffs available and suggests the best one for you based on the preferences that you put in.  It can then keep checking and at the end of your contract switch you to the next best deal without you having to do anything.