Small changes make a big impact on finances

Liam Croke


Liam Croke

Small changes make a big impact on finances

Want to improve your finances? Follow Liam's five tips including reading more financial articles. This one is a good place to start!

When it comes to making small changes to our finances, sometimes we can be quick to discount what impact they will make.

But, when it comes to money, small changes actually work better than big, once-off ones. This is because you can continuously perform small actions, stick with them and they become a habit; that is the key to improving your finances. So here, I am going to give you some examples of how small changes can have a major impact on your finances.

1. Overpay on your mortgage

You don’t have to keep your mortgage for the term on your original loan offer. Your bank would like it if you did though, because they will make a fortune from you. For example, if you took out a €250,000 mortgage over 35 years, the amount of interest you would pay back using 4% as an average rate is €214,913.

But, if you overpaid this mortgage by an extra €2 per day, you would take three years eight months off the term and save yourself €26,150 in interest payments. Think of those 44 months you are not paying €1,107. That could be directed to other areas of your finances, and all this for an overpayment of just €2 per day.

2. Save more into your pension

The majority of people don’t make the maximum contributions they are allowed to for tax relief purposes and a client I wrote about recently who was putting in 5% was no different. She could put 20% of her salary into her pension but she couldn’t afford that much. But I asked could she afford an extra 1%?

She could, but she thought this small increase would make no difference to her fund.

She was wrong because that extra €60 each month was going to add €210,877 to her pension pot when she is 65. And that fund will pay her €8,435 per year more than what she would have received if she had done nothing.

The minute she found out about this, she made the change that very day with her employer, and is now paying that extra €60.

3. Pay less in management fees

Most people don’t know the annual management fee on their pension fund. Does it matter? It matters a lot actually.

If you overpay by 0.5% for example, it could cost you five years worth of retirement income. This difference is a simple calculation which assumes two people starting with the same investment amount, earning equal returns over the same term, but one pays 0.75% in fees and the other 1.25%. Assuming an equal withdrawal amount at retirement, the investor paying 1.25% in fees will run out of money five years sooner.

4. Pay more than the minimum payment on your credit card

If you owe €3,500 and you pay the minimum payment it will take you 10 years to repay it in full and €4,890 in interest payments.

If you pay €35 more each month which is just €1.15 extra per day, you will have the debt paid off in four years three months and repay €1,798 in interest payments.

You wouldn’t buy a bar of chocolate for €1.15 but yet this small amount could save you six years of credit card repayments and in my example save €3,092 in interest payments.

5. Cutting wasteful spending

If you spend too much it’s impossible to save. Again you might think, what real difference to your finances can, cutting back on spending money each day on a coffee, or a sandwich, or whatever it is really have? Quite a big difference is the answer.

If you were able to save €4 every day by making a small adjustment to your daily spend and if your partner was able to match this, the amount you would save between you would be as follows: One year - €3,289; 2 years - €6,454; 5 years- €16,745; 10 years - €36,888; 20 years -€91,511; 30 years - €172,946.

The key to making those small changes is if you link the amount you are saving to something meaningful for you, like using the money to go on a holiday, pay down debt etc. Because if you do, it makes the task of making that sandwich for lunch the night before all the easier because you know why you are doing it and what the outcome will be, if you do.

6. Read more financial articles

I read a lot and I make sure I read one finance -related book every month. I do this because I want to continue to learn because I know some of the insights I get from others will last me a lifetime and some of the things I have discovered and acted on from reading a book have made a big impact on my own finances.

I have just finished reading Tony Robbin’s terrific book, Unbreakable. There are a number of chapters where he talks about what the best investors in the world do, to make and protect their money, and what’s great about this is that they have told him themselves.

Some of the insights they provide are fantastic. For example, they don’t have to be great at picking stocks, in fact they can be wrong 80% of the time and still make millions, and in this book they explain how this can be achieved.

So, if you take five or 10 minutes out each day to read or reread a finance-related topic, it will increase your knowledge and could transform how you think, and what you do. Ultimately that is what all of the areas I just referred to have in common, you can achieve so much, even it’s doing something very small.

Liam Croke is MD of Harmonics Financial Ltd,

based in Plassey. He can be contacted at or