Every year most of us blow a hole in our finances by spending too much on Christmas presents, eating, partying and new clothes. This year, it is estimated that British adults will spend an average of £800 each. But in the back of our minds, we all know there will be a price to be paid for all this indulgence in the New Year.
It’s not MoneyWeek’s business to help you with the after-effects of overeating and drinking, but we have had a look at the simplest ways to get your finances back in shape in a hurry. So, once the New Year hangover has abated, refer back to these ten ways to make things better in 2006.
1. Sort out your debts. The arrival of this month’s credit card bills is likely to be your first wake-up call. If you can’t afford to pay off your balance, switch – fast – to one of the diminishing 0% deals on the market. Mint is offering 0% on purchases and balance transfers until September 2006 and HSBC is offering the same deal for nine months from the date of issue.
2. Return unwanted Christmas presents. An estimated £1.3bn was spent on unwanted gifts in 2005, and many stores have forgiving returns policies. Most big department stores, including Debenhams and John Lewis, exchange items without a receipt over Christmas, provided they are confident they sold them in the first place. And if the giver encloses a gift receipt, you can get a refund. Failing that, flog them on Ebay.
3. Re-mortgage. Remortgaging is the single most important thing you’re likely to be able to do to save money in 2006. It is, as Martin Lewis of Moneysavingexpert.com puts it, “the financial equivalent of liposuction”. Cutting just 1% off a £100,000 mortgage will save you around £80 a month. A fee-free broker, such as London & Country (0800-073 1951), will be able to help you find the best mortgage for your needs.
4. Switch energy suppliers. So far, the cold weather warnings for this winter have proved to be well-founded, and since your heating bills are likely to be higher than usual in any case, with gas and electricity hikes across the board, make sure you aren’t paying over the odds. If you’ve never switched providers, the likelihood is that you’re paying 20% more than you have to. Visit a comparison website, such as Energyhelpline.com (0800-279 4546), USwitch.com (0800-093 0607) or SimplySwitch.com (0800-781 1212) to find out how much you could save.
5. Phone and broadband suppliers. The biggest rip-off comes when you call friends and family overseas, so if you make a lot of foreign calls, try Skype’s free software (Skype.com), or check out tariffs offered by firms such as Telestunt, Telesavers or TeleDiscount, which can cost as little as 1p a minute. Most work the same way: you dial a fixed tariff number, which connects you to the provider’s network. To compare savings, see Moneysavingexpert.com/callchecker, or call a provider.
6. Sort out your pension. The newspapers have been full of doom and gloom about pensions, so make sure you’re not relying on the state to provide you with a comfortable old age. The Association of British Insurers has an online pension calculator to work out what sort of pension you can expect to receive for the amount you save (see Pensioncalculator.org.uk). While there is much to be said against pensions (namely that they give the Exchequer, not you, the ultimate say over your money), the generous upfront tax breaks, advent of low-cost online self-invested pension plans (Sipps) and changes to the pension rules on A-Day mean you should think seriously about how much you could benefit.
7. Change bank accounts. Make sure that you are receiving the best rate of interest on any accounts that are in credit, and that you aren’t being charged a fortune on your overdraft. Alliance & Leceister’s Premier Direct account pays 5% AER on balances up to £2,500 and offers a 0% overdraft rate for 12 months. The rate on your savings account should be nudging 5%. ING Direct’s savings account pays 4.75%; Newcastle Building Society’s Net Savings pays 4.9%.
8. Make your budget go further. Making a monthly budget and sticking to it can avoid financial headaches. Moneysavingexpert.com offers a free, downloadable budget planner.
9. Review your insurance policies. Do you really need to spend £20 a year insuring your mobile phone? Much insurance is a complete waste of money, particularly that which takes the form of extended warranties (typically for household appliances). Think hard about what insurance you really can’t do without, such as household, car, pet, life and possibly health, and then make sure you are getting the best deal on each policy.
10. If you’ve got this far and are reaching for the whisky bottle, don’t. If you are cash-rich but time-poor, you can find someone to do the footwork; sign up for a private banking service, or consult a financial planner. If you’re cash-poor and time-poor, you could always write in to the personal finance section of a newspaper in the hope that your finances are sufficiently chaotic to merit a financial workout in the hands of their experts.