Here’s how to dust off your finances and make sure they’re nothing less than sparkling in 2010.
The start of the New Year (real or financial) is a great time for taking a long hard look at your lifestyle and seeing how you could improve it. While you might be planning a fancy new diet or fitness regime, giving a thought to how you are going to run your finances this year will also prove to be hugely beneficial.
So to bring your finances back to health, here’s how to give them a complete detox in 2010.
How much are you paying in interest?
If you have a credit card or an overdraft it’s quite possible that you’re paying more interest than you have to on your borrowing. Your first step towards detoxing your finances should be finding out what your interest rate is on any outstanding debt you have – whether it’s on a credit card, on your overdraft, or on a loan.
Of course the ideal is paying off these outstanding balances in one go (any savings you have can come in useful here) so you don't pay a penny more in interest – but if that’s easier said than done, transferring your debt to a cheaper deal is a good place to start.
- If you're paying interest on credit or store cards look at moving your balance to a credit card with a no, or low-interest balance transfer deal.
- If you're paying interest on an overdraft look at your options for cutting the cost and clearing it.
- If you're paying out for a loan, hire purchase agreement or any other form of borrowing look at whether you could get a better deal with an unsecured loan (beware of early repayment charges though).
- If you're paying over the odds on your mortgage look at whether you could remortgage to a cheaper deal, use your savings to cut your mortgage costs, offset your current account balance , make overpayments or even switch deal mid-term to cut your costs.
Are your savings losing money?
Shocking as it may sound, if you have funds stashed away in savings they could be losing money rather than earning it if you don't know the current rate of interest being paid on them.
If your rate is less than the rate of inflation, your savings could in fact be dropping in value. As such it’s really important to check the current rate of inflation and make sure that the interest rate on your savings is at the very least equal to or more than this. If it isn’t, move your savings to a new home with a more competitive rate as soon as possible.
Are you paying for things you don’t need?
You may scoff at the idea, but it’s possible that you’re paying money out every month unnecessarily without even knowing about it.
Perhaps you took out a gym membership months ago and are yet to make use of it, or are paying for an expensive dental insurance plan you thought would be a good idea years ago but has proved to be unnecessary or a magazine subscription you don't make the most of. Or, you might have a package current account whereby you are paying for perks you don’t need, or could get a better deal on elsewhere.
It’s really worth taking a look at your outgoings and all the direct debits or standing orders on your current account, and eliminating any that are siphoning off your money on a monthly basis unnecessarily.
Are you making use of your ISA allowance?
It may be something you mean to do year after year but never get round to, so make 2010 the year for opening an ISA and saving as much as you can in it. This is well worth doing as an ISA is the only kind of savings account that allows you to earn interest without it being taxed. For this reason it’s really worth filling it as much as you can to benefit from tax-free interest.
Are you getting the best deal on insurance and utilities?
If you’re looking to clean out your finances another thing you should be doing is looking at how much you’re currently paying for insurance - whether that’s for your home, car, or travel – as well as if you could cut your energy bills.
It’s quite possible you could get a better deal on any of these commodities if you take the time to shop around and scope out the competition on the market. It only takes a few minutes to find out whether you could cut the cost of insurance, energy or broadband by switching suppliers. If you find a deal that would suit you better at a more competitive price, now is the time to switch.
