A BRAND new year typically stirs thoughts of how you can improve yourself and your lifestyle. While your social diary is quiet and you can’t face any more shopping, January is the perfect time to give yourself a money makeover and ensure you get a grip on your finances in 2017.
1. Pay less on your mortgage
This is likely to be your largest monthly outgoing so it makes sense to start here. Borrowing is pretty cheap these days, and you can look forward to months more cheap money and great mortgage deals, with ultra low interest rates looking set to be here to stay.
There are currently about 3 million homeowners paying standard variable rates (SVRs), which mortgages revert to at the end of a fixed-term deal. However, securing a fixed rate deal now is a good idea for peace of mind that monthly repayments are not going to rise. Speak to a broker and take a look at the sums.
For those still paying a fixed rate loan, even if you are a few months away from the deal ending, you can secure a rate now for the future as mortgage offers are valid for three or six months.
2. Be a budget bore
Spend some quality time with your bank statements. Work out what comes in – and what goes out. If you think there’s too much going out (unnecessarily), identify a few things you could cut out. Perhaps your daily trip to buy a £3 take- away coffee could become a weekly one. Or you might finally give in and cancel the gym membership you never really use. If frittering is a weakness, keep a diary of everything you spend for a couple of weeks and see where you can make cuts. You might surprise yourself on how much you can save.
3. Chase the best savings rates
Savers suffering the ill effects of low interest rates should make sure that any money held on deposit is at least earning the best rates on the market. Many poor paying accounts are closed and no longer being marketed. One of the problems is that institutions don’t always inform customers on the new offers nor rush to offer better deals.
However, the city watchdog, the Financial Conduct Authority, has ordered new rules to help customers which came into effect on December 1 2016. A new summary box will highlight the basics about any account you want and, crucially, spell out the rate you'll earn, rather than hiding it on a website or in branch leaflets. Savers will also be helped by the fact that from January 2017, banks will have to offer seven-day transfers for cash Isas.
Where money is in a low-paying account, savers are losing out every day.
Contact your existing savings provider to ask if it is offering a better rate on any of your savings accounts. The Rate Tracker service from Savingschampion.co.uk can help make sure you’re getting the best return on your cash savings - for free. It simply requires you to select the savings account you hold from the drop down list. It will inform you if you’re getting a good deal, or if you can do better by switching. You can then sign up to its alert service to inform you of any changes to your interest rate.
4. Pay off debts efficiently
If you have overspent on Christmas festivities, you will soon find out. Your credit card statement will be dropping into your letterbox or e-mail inbox any day now. If paying off the full balance is not an option and you need to spread the repayments, consider moving the debt to an interest-free credit card. This will help you pay the debt off quicker because every penny goes towards whittling down the balance rather than towards interest. You can get up to 41 months interest-free giving you plenty of time to get debt-free. But make sure you are prepared to be disciplined about not adding to your debts and remain committed to paying existing ones off.
If your overspending is spiralling out of your control, it might be time to seek help from a professional. Free and impartial advice on money issues including credit cards is available from the charity Step Change.
5. Start a savings habit
Once you are debt-free, it’s important to build up a nest egg. While not everyone can afford to save as much as they’d like each year, putting a little something away every month is better than doing nothing. Crucially, the earlier you save, the more time your money will have to grow.
6. Pay less tax
Love them or hate them, the government offers some generous tax breaks that are not to be missed. Use Isas for stocks and shares to shelter returns from income tax and contribute to your pension which offers unrivalled tax breaks.
Check your tax code too. Even the taxman can get things wrong sometimes. You will find your tax code on your P45, the PAYE Coding Notice sent by HMRC or on your wage slip.
7. Stop being a loyal customer
Renewal insurance quotes conveniently (for the insurer) only include the new premium, and exclude last years’ premium so that for a comparison you need to dig out last years’ papers. Most of the time insurers will add to the premium, and rely on the fact that many people don’t notice and let it automatically renew. Don’t fall into this trap – be ready to compare the price and switch to save money. You should do this every year. Dig out your home and motor insurance documents and check the renewal dates. Even if they’re a few months away yet, put a note in your diary so when the time comes you’re ready for it.
8. Is it time to break up with your bank?
Most people have been with the same bank for decades. If your bank is doing everything right and you’re happy with the service, then stay put. But you can save hundreds of pounds a year by using the right account for you. Have a look at your statements and if you are paying bank charges regularly. Consider switching to a bank with lower fees for dipping into the red if you find you’re regularly going overdrawn.
Website GoCompare.com has an online current account finder which is backed by the government. It will analyse statements – which are downloaded securely to the site - taking into account overdraft charges and the average in-credit balance. It will then present a table, showing in pounds and pence which accounts could be better suited to you.
You can even make some money by ditching your bank, with many offering cash incentives to sign up, such as First Direct which pays £100 - as long as you pay in £1,000 in the first three months. Switching now takes just seven days with a guarantee in place to ensure the transfer is smooth.
If you are paying a monthly fee for a “packaged account” then ask yourself – is it worth the money for the so-called extras? Frequently the extras are cheaper to buy as standalone products and you might not be using them anyway.
9. Check existing investments
As an investor you will pay a fee for the running of your investment, as well as to the company - or platform -responsible for holding it. Investment charges differ between every single fund and the same goes for platforms, also known as fund supermarkets. The annual charges deducted from your investments each year may seem small, but they have a surprisingly large impact on the performance of your investment.
There’s no harm in paying a large fee for the management if it’s achieving huge returns. So just make sure you’re getting value for money.
When it comes to choosing the right fund supermarket, there’s no one-size-fits-all. Compare costs with comparison website Compare the Platform.com which will not only tell you the cheapest brand, it also rates the service.
10. Become a savvy shopper
Becoming a bargain-hunter will save you money throughout the year. And you don’t need to fight your way through the sales every time you want to buy something. The key to finding year-round discounts is to see whether your favourite brand has a factory or outlet store.
Marks & Spencer has a number of outlet stores all over the country. The majority of outlet stock is end of line, often from the previous season, and excess stock. Discounts are usually 30% – 60% off of the original price. For homewares, John Lewis has an outlet at the Swindon Designer Outlet. It offers an assortment of mostly imperfect furniture and large electrical appliances, at reduced prices. Some stock items may also be customer returns. Discounts that can be expected are up to 50% on home items, up to 30% on white goods and up to 20% off audio and TV.
Don’t forget to use money-saving coupon websites, where using an online voucher means you can shop online at greatly reduced prices. Before you buy an item visit websites www.vouchercodes.co.uk or www.myvouchercodes.co.uk and see if you can make a saving.
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Money Means is a news and information series written by independent financial and consumer journalists and experts. FSCS launched Money Means in 2016 to help give people clear and useful information about personal finance, to increase their understanding and confidence when dealing with money.