Every January most of us vow to improve our lives. By the end of each January most of us consider ourselves to have failed. Why? Because most ‘improvements’ – the likes of diets and gym visits – need to be worked on all year round and we just can’t keep up the momentum.
However, that’s not the case with everything – there are some simple changes to your finances you can make now that will benefit you all year.
1 Make a budget
Draw up a budget that includes all your regular bills (utilities, etc) and the less regular ones (the cost of getting your car serviced, for example). Once you’ve written everything down you can look for areas where you might cut back and see how much you can afford to start saving every month.
2 Switch bank accounts
“If your current account has been a bone of contention for years, use 2010 to do something about it,” says Laura Howard in The Observer. There are some competitive deals out there and it is fantastically simple to switch – the banks do 90% of the work for you – leaving no excuse for sticking with a bad bank.
The best deal available for those in the black is Halifax’s Reward Current Account, which pays £5 a month to you as long as you pay in £1,000 a month. But don’t get it if you regularly fall into the red. Halifax charges a jaw-dropping £1 a day if you go into an arranged overdraft and £5 a day if it is an unarranged overdraft.
Instead, opt for Alliance & Leicester’s Premier Direct Current Account, which offers a free overdraft service for the first year after which there is a usage fee of 50p a day capped at £5 a month. And as an extra bonus, if you are in credit you’ll earn 6% AER on a balance of up to £2,500 in the first year.
3 Sort out your debt
There’s no point sorting out your current accounts and starting to save if you don’t also bring your debt under control. Switch your credit cards to make sure you are paying as little interest as possible.
The best for balance transfers just now is the Virgin credit card, which offers 0% on balance transfers for 16 months. Just be aware that the credit crunch means that it is very difficult to get a high credit limit now, so you may have to take out two 0% cards and split your balance between them.
For purchases, get a 0% on purchases card. The best available is Tesco Bank’s card, which offers 0% for 12 months. But try to avoid building up another balance that you won’t be able to pay off at the end of the year. If you know you will be able to pay off your card in full every month then consider getting a card that offers you some rewards, such as cash back or airmiles.
4 Maximise your savings
It’s going to be a good year for savings. In April, Individual Savings Account (Isa) limits go up across the board (they have already risen for those over 50). From 6 April you’ll be able to put £5,100 in a cash Isa – up from £3,600. Right now the best cash Isa is Newcastle Building Society’s 120-day notice account, which pays 3%. But expect some enticing new deals to appear in April.
5 Switch utility provider
If you have never switched your energy supplier, then do it now. The average electricity and gas bill is £1,200 a year, but shop around and you could cut that down to £886, says Martin Lewis on MoneySavingExpert.com. And even if you have switched before it’s time to switch again. “Anyone who took out a fixed-rate energy deal at the top of the market in 2008, when suppliers were passing on record rises in wholesale prices to customers, is being advised to pay the exit penalty to get out now and sign up to a cheaper tariff,” says Alexandra Goss in The Sunday Times.
For example, householders who signed up to British Gas’s dual-fuel fix in September 2008 are paying an average of £1,428 a year now. Even after you’ve paid British Gas’s £70 exit penalty you would be better off switching. To find the best deal go to a comparison site such as Uswitch.com or Moneysupermarket.com.
6 Make a will
And finally, once you’ve sorted out all your finances, make sure that should the worst happen to you, the right people get their hands on your assets.
There are a number of ways to draw up a will. You can buy DIY kits on the high street from retailers such as WHSmith, or download them from the internet. But be aware that it is easy to make a mistake if your estate is even remotely complicated.
“The DIY route is fine – but only if you are single, with no children or an ex-husband or wife and your assets extend not much further than your home and some savings,” says solicitor Philip Lansberry in The Guardian.
If not, you should get a will drawn up by a solicitor. That will cost you roughly £200 plus VAT outside of London and closer to £400 in the capital. If possible, keep the costs down by going for ‘mirror wills’ for yourself and your partner – have two identical wills drawn up, just with different names at the top.