This free resource can turn your finances around - if you use it well
The online calculators at CCPC.ie are excellent tools. They can help you turn your finances around by working out simulations, or by becoming aware of your spending.
Imagine somebody had worked out an amazing calculator: one in which you just have to input your numbers, and - voilà! - it will let you know immediately how much you're spending, how much you're saving, and which mortgage or savings account is best for you.
What's more, imagine that calculator could also tell you what to watch out for when planning life's big events.
Wouldn't that be handy? This amazing "calculator" does exist and it will answer your every question: it's the ccpc.ie website.
The ccpc.ie website is a treasure trove of extremely valuable information to help you manage your finances from all points of view. It used to be called consumerhelp.ie (and if you type consumerhelp.ie in your browser, you will be automatically redirected). The CCPC is the Competition and Consumer Protection Commission - a government body that has your best interests very much in focus.
I find the web site hugely practical and you'll see why this post. I recommend that you take a look around it - I'm sure you will use it heavily. I find that there are two main areas that have proven immensely useful time and time again: the online tools and calculators, and the "Life Stages" section. (Read the second part of this article, about the "Life Stages" section, for great checklists that will give you incredible peace of mind)
1. The online calculators
This is one of my favourite sections on the website. On ccpc.ie, under "Tools and Calculators", you will find the following:
Three benefits from using the online calculators
1. Learning how good you are at estimating your finances
It's happened to many of us, myself included: we are surprised to face a very dry January indeed and we wonder where the money went over Christmas.
In years gone by, my problem was that the amount I thought I was spending didn't quite reflect the numbers on my bank account. That's exactly the kind of situation the online calculators can help you with, and they did help me put things right.
Start playing around with the calculators when you don't need them. Input numbers off the top of your head into, say, the Christmas budget planner in July. Just doing simulations in the calculators, especially when you don't need to be thinking about a certain expense, is the best frame of mind: you are less likely to be swayed by your emotions because there is no urgency. You are just playing around.
However, this will give you a level of financial awareness that will come in very handy when it's time to actually make that decision. The best time to do a stress test is, after all, when you don't need to do it at all.
Let's say your hypothetical exercise helps you figure out that you're likely to overspend by €250... Then you know your estimates need a little adjusting, and probably not just for Christmas, but in other scenarios too.
2. Just playing around will make you aware of subtle clues.
Whether you realise it or not, you will learn from the experience and store the learning in your subconscious, because you're applying the calculator to your real experience. If, after trying out the spending calculator, you realise that your groceries receipts are far higher than you think; or that your utilities spending is far above average for your household... that's the kind of situation that makes you go hmmm... This reaction is very precious. You'll think "I must take a look at my receipt the next time I do the shopping - I really need to see where all that extra money is going!"; or "I must shop around for our heating provider, and see if there is a better deal".
And then, life happens and you forget all about it, as we are wont to do...
However, your frame of reference has now been set. You will find yourself checking prices before putting your groceries into the basket, or leaving the heating bill on the counter to remind yourself to check out other providers. That slight increase in your awareness might be the change that snowballs into much, much better finances.
3. You anchor your expectations and set a benchmark to beat
On the next occasion that you try out this exercise and run these simulations, you might have that little competition with yourself to generate a better outcome. As soon as you get your first result or two, you're then building the momentum to make bigger and bigger differences: you might start with saving €30 per month on your mobile phone contract, and end up clearing your entire credit card bill.
Ideally, you would use the calculators with numbers that are as accurate as possible, using receipts after the money is spent, or checking out the prices of what you actually intend to spend. This will allow you to tally up amounts and get a much more precise idea of your spending.
How to use the different online calculators at ccpc.ie
The online mortgage calculator might be the one most of us will make a beeline for. Taking out a mortgage might be the most momentous financial decision people make in their lifetime. And for those who are already in the process of repaying a mortgage, it's always good to be aware of the possibility to switch providers over the course of the loan. This can have a profound effect on the amounts you have to repay.
A €200,000 mortgage at 3% interest, repaid over 30 years, will in fact cost you €303,554, including both the capital (the initial €200,000), as well as the interest. Had you budgeted for that? That's the kind of realisation the mortgage calculator can help you with.
The CCPC online mortgage calculator will help you with the following:
Identifying how much a full mortgage will cost you
Figuring out how much you will need to budget every month, if you fix in your interest rate over a certain period of time
Realising how much of an interest rate increase you could handle before you would need to restructure your payments
Appreciating the impact of increasing your repayments
Making big decisions around re-mortgaging, paying off a mortgage, releasing equity or applying for a topup
Even better, another part of the site allows you to compare several mortgages in the market. The information is updated every working day, is 100% impartial and covers the costs and benefits of financial products.
All you need to do is input the value of the house, the amount of the loan that you're looking for and the length of time over which you're seeking to repay the loan.
Next, you can rank and sort by what you're looking for and click on the "info" symbols to understand the jargon:
The loan calculator will show you black on white what you should budget for. Say you need to find €10,000 for urgent house repairs that are not covered by your insurance. What loan will you take out? What monthly repayment can you afford? In just a few minutes, you can play around with the loan amount, with the monthly repayment, with the interest rate, with the repayment period of the loan. The calculator will also show you the cost of credit: how much are you paying to "buy" that money from the bank?
You will be much better informed to choose the loan that is right for you: one that will not cripple your finances, and one that you can comfortably repay over the shortest amount of time.
Similarly to the mortgage product comparison, there is a loan comparison tool on the site.
Input the basic details again: the amount that you need to borrow and over what time period. You can then rank and sort the offerings in the market by interest rate, monthly repayments, total cost of credit (the total amount of interest), and you can read the fine print in the account details.
This spending calculator is great - it allows you to extrapolate the total spending on a specific item. For example, do you have a take-away coffee and a scone every day? If you spend €4.55 on that coffee and scone five times a week, this amounts to €98.92 a month and €1187.04 per year.
Having that kind of information is precious - your daily coffee and scone might be your little pleasure on the way to a stressful job, and so you don't want to give it up. It can also be a very joyful ritual: my americano often is my "settle-into-the-day" joy that I have when arriving into the office.
However, €1187.04 could also afford you a rather nice one-week holiday in the sun once a year. Let's take Portugal as an example: a round trip to Portugal with a low-cost airline can cost as little as €150 for one person, or even less; and a one-week stay in a Lisbon flat works out to €500 approximately. This gives you perspective: now you can decide whether to keep the daily cup of coffee, or whether to put €98.92 a month into a savings account for a nice holiday. In the morning when you walk past the café, you will not be thinking about the coffee you are not allowed to have - you will be thinking about the wonderful week you will spend on the beach!
And then that daily coffee and scone might just be a low-value habit that doesn't bring you any inordinate amount of pleasure - it's just something you do for no particular reason. Now you know: something that doesn't add very much value to your day is actually costing you the equivalent of a one-week holiday! Suddenly you have an excellent reason to give it up and not even miss it.
And that's just one use of the spending calculator:
you could use it to check how much you spend on groceries every month and adjust your food budget accordingly;
you could check what a weekly expense adds up to over a year, so that you can start saving in advance, before you need the money;
you could plug in a dream expense and see whether you can actually afford it (like a facial twice a month or a week-end away every month) - and how much more you need to earn to be able to afford it.
The budgeting calculator will be your saviour - it offers several budget planners: one for every day, as well as for Christmas expenses, for back-to-school, for a wedding, for a new baby and for a holiday. Plug in the amounts you think you will need to spend and see how much money you need, total. This calculator will be extra useful to plan your savings: once you know the total amount you need, you can calculate how much you can afford to save each month towards that goal.
I found the wedding calculator exceptionally useful when planning for our own big day. It's such a relief when you don't have to wonder if you've thought of everything, and you can plan for expenses well in advance.
Using the online clearing credit card debt calculator can be quite sobering - and then it might be just the wake-up call you need to get rid of your credit card debt. Say you have an old credit card balance of €5893, racked up over years of bits'n'pieces, holidays and Christmas shopping. Your card's APR (your annual rate of interest) is 10%, and you dutifully pay €100 to clear that balance every month. You feel very virtuous, until you realise, using the calculator, that it will take you over six years to clear that debt! However, if you were to double your monthly repayment to €200, then you would be free of that debt in just over two years. Suddenly you are a lot more motivated to find an extra €100 in your budget to get rid of that hot potato as fast as possible!
That's where you could loop back to the spending calculator. Perhaps you were in a situation where you didn't see any very urgent reason to give up your €98.92-a-month coffee and scone habit, even though it didn't add a lot of value to your day. Now, you might decide to forgo it until you've gotten rid of that old ball-and-chain of a credit card debt - as it turns out, you realise you can totally afford to repay that extra €100 a month. Go you!
Read the second part of this article, about the "Life Stages" section, for great checklists that will give you amazing peace of mind.