A study by JP Morgan Asset Management found that 40 per cent of us will make a resolution to get more on top of our finances over the next 12 months, while a poll by LA Fitness found that “saving more money” was the second most common pledge for the new year.
“Addressing your finances by tackling something for the first time can lift a real weight from your shoulders especially as we emerge from an expensive festive period,” says Keith Evins of JP Morgan. “Repaying debts is a great place to start in the short term, and offers a clean slate to start thinking about the broader financial future, such as building up rainy-day savings or planning for retirement.”
Improving your finances takes just a little time and motivation but it can be hugely rewarding. Our 10 easy tips can set you on the way to saving nearly £4,000.
1. Mortgage save £1,566
Mortgage payments are the largest expenditure for many households, so this is an area where some of the biggest savings can be found.
Home owners should ensure they are getting the best deal possible even a
small difference in rate can greatly affect monthly mortgage repayments.
There are some very competitive rates available to those looking to
remortgage or who have a large deposit. According to Moneysupermarket.com,
borrowers who switch a £250,000 mortgage from the average standard variable
rate (SVR) of 4.33 per cent, to the current market-leading two-year tracker
rate from ING Direct at 2.49 per cent, would save £1,566 a year even with
the mortgage fees included.
[Related link: Compare best mortgage deals or speak to an independent adviser]
2. Savings save £416
A record low Bank of England base rate for nearly four years means most savings accounts pay paltry interest. The best deals go to new customers, so if your savings have languished in the same account for more than a year, your interest rate is likely to be less than 0.5 per cent. Your 2013 resolution should be to review your savings regularly and be willing to shift to a better account. Even though rates remain low, the difference between new deals and older accounts can be significant.
The average savings rate is 0.38 per cent, so switching to Marks & Spencer’s Everyday Savings account, which pays 2.35 per cent, could generate an extra £416 in interest based on a savings pot of £20,000. However, bear in mind that this account includes a 1 per cent bonus for the first 12 months, so be sure to make a note in your diary to switch again later.
3. Personal loans save £312
Average rates for personal loans between £7,500 and £15,000 hit their lowest level for more than a decade in November, so for consumers looking to borrow more than £7,500 it pays to shop around. Swapping a £7,500 five-year loan at an average rate of 10.53 per cent to a loan with Tesco Bank, which charges 5.2 per cent, would generate an annual saving of £312 this year alone, although watch out for redemption penalties on your existing loan.
4. Current accounts save £90
Switching your current account provider to one that pays a good rate of interest could earn you some additional cash. The 1st Account from First Direct currently offers £100 if you switch. This would earn you £90 over the year compared with an account that pays an average rate of 0.65 per cent.
However, if you use an overdraft every month, you could save £46 by switching from an account with an average overdraft rate of 19.65 per cent to First Direct’s 1st Account. Its overdraft charges a rate of 15.9 per cent, with the first £250 interest-free.
5. Credit card save £387
cards carry punishing rates of interest, so aim to clear your
balance each month. If that’s not possible, switching the debt to an
interest-free balance transfer card could save you a fortune especially if
you have paid for Christmas on plastic.
By switching £3,000 of debt on a card with the average interest rate of 17.32 per cent to the market-leading Barclaycard Platinum, there would be no interest to pay for 24 months. This card does charge a fee of 2.1 per cent or £63 to shift your debt, but you can still save as much as £387 over the year.
[Related link: Top credit card deals]
6. Insurance save £520
Following a few simple tips could help save pounds on essential insurance cover.
Never just accept your renewal premium shop around for quotes from rival insurers first. Figures from the Association of British Insurers show you can save 35 per cent by comparing as few as five insurance providers, and, with over 140 motor insurance providers and more than 200 policies available, competition is fierce.
Another easy way to reduce costs is to opt to pay your premium in full. Do not
be tempted to pay for insurance monthly simply because it appears to be
cheaper or more manageable you will get charged as much as 25 per cent
more for the luxury.
[Related links: Compare home insurance and car insurance quotes for you]
7. Energy save £182
Shopping around and switching suppliers is one of the easiest ways to cut bills yet the average consumer switches only once every 10 years. This year, the typical household that has never switched could expect to pay £1,302, yet the cheapest online tariff, British Gas’s Online Variable November 2013, comes in at £1,120 for the same usage, wiping £182 from the annual bill.
Energy companies usually change their prices twice a year, and what can be the best deal one year can prove less competitive the next. The cheapest deals are for those who opt for dual fuel (gas and electricity from the same supplier), manage their account online and pay by direct debit. Find the best deal for your circumstances and use a comparison site such as TheEnergyHelpline.com, Moneysupermarket.com or Confused.com.
8. Home entertainment save £91
Bundling your TV, phone and broadband together rather than taking out
stand-alone products could save you £91 a year, and you would benefit from
the ease of dealing with one provider rather than three. For example, Sky
provides an Entertainment TV Pack which includes broadband, line rental and
TV, with unlimited evening and weekend calls, for £32.25 a month.
[Related feature: Pay TV - just not worth it]
9. Mobile phone save £200
Eight out of ten of us on monthly contracts are on the wrong tariff, with just 30 per cent using our full minutes and texts and as a result we’re wasting £200 a year.
The ridiculous number of tariffs, deals and one-off offers can make it difficult to find the cheapest plan, but you can get help from internet services that compare providers’ prices.
BillMonitor.com will compare more than 12 million UK mobile phone deals, and
show you the best contract for your mobile phone usage. The site will run
through every call, text and byte of data on your bill, working out the cost
on each tariff. By taking into account details such as free minutes,
off-peak calling and charge limits, it can identify the 12 tariffs that
could save you the most money.
[Related link: Compare mobile phones and tariffs and switch online]
10. Water save £100
It may seem that there is little you can do when it comes to your water bills, as industry rules do not let you shop around for alternative suppliers. However, by having a water meter installed you could save as much as £100 a year.
Small families in big homes are likely to be better off having a meter put in something that applies to many pensioner households. As a rule of thumb, if you have more bedrooms than occupants, a meter is likely to be cheaper. There is no charge for having a meter fitted and you can switch back to the unmetered charge at any time within 12 months.
If a meter cannot be fitted, water companies can offer an alternative unmeasured tariff, which may be lower than your current bill. However, be aware that some people could be left seriously out of pocket by using a water meter, so do your sums first and visit ccwater.org.uk to use the Consumer Council for Water’s online calculator.