Your new year financial resolutions

By Martin Lewis, January 8, 2009
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inancially, 2009 could be the toughest year most of us will have ever experienced. Yet for many people, taking a deep breath and sorting out the finances will help them fight back. The average person in the UK can give themselves an effective 25 per cent pay rise by cutting bills . Here are my top money-saving resolutions:

1. Do a REAL budget
Most budgets don’t work for two reasons: they tend to just look at a month’s expenditure, which misses out the big annual spends like summer holidays; plus they miss out the little things too, like MOTs, cleaning products and kids’ pocket money.

Yet budget properly and you’ll find out whether you earn more than you spend, or vice versa. Overspending either means you eat up savings or build up debt. A free budget planner to do this for you is at www.moneysavingexpert.com/budgeting

2. Pay off debts with savings
It’s quite simple: if you had £1,000 debt on a typical 18 per cent interest credit card, it’d cost you £180 a year. If you also had £1000 saved, even in the best savings account you would earn 3 per cent a year after tax, or £30 a year. So pay off the credit card with the savings and you’d be £150 a year better off. This even counts if you’ve rainy-day money save; you should use it to pay off expensive credit cards. If you hit an emergency, you could always use your plastic - after that you’d be no worse off than you were at the start. Yet, in the mean time, you’ll save a fortune in interest.

3. Become a Voucherista
There are lots of “money-off vouchers” around at the moment. With many, you simply click and print vouchers offering 2-for-1s, or up to 30 per cent off, which you print out and hand over for a tasty discount. The only thing to be careful of is that these vouchers are legitimate and eligible for you to use. For MoneysavingExpert.com’s daily updated list of all currently valid shop vouchers, go to www.moneysavingexpert.com/discountvouchers. For eating out 2-for-1s, visit www.moneysavingexpert.com/restaurantvouchers.

4. Slash your mortgage costs
The dramatic drop in interest rates has given a lifeline to some of those who have mortgage deals expiring soon. There are three easy steps to getting the best deal. First, ask your existing lender what it offers as a benchmark. Then speak to a “whole of market” mortgage broker to see what it suggests; some are fees-free, others charge. Yet most reputable brokers won’t charge you unless you actually end up getting a new deal through them. As a final check, use the Financial Services Authority’s mortgage comparison service, to find deals brokers can’t access. Then take it back to your broker to discuss how good it is.

5. Cut debts for the long term
If your Chanucah spending has left you with credit card debt and you’ve got a good credit history, apply for a cheap balance transfer card. Most people are better off going for a “Life of Balance card”. Here you shift your debts to a new card and lock-in at a low rate until all the debts are repaid.

6. Do the supermarket downshift challenge
Drop a brand level on everything you buy. If you buy premium brands (eg Tesco Finest), try a normal brand (eg Hovis). If you buy Hovis, try supermarket own. If you buy supermarket own, try the ‘value’ or ‘basics’ range. This alone will cut your bill by a third. The problem is that you may not like all the cheaper things — yet typical family savings without telling the difference are £750 a year.

7. Become a cashback connoisseur
If you’ve got a good credit history and don’t have debts, then get a cashback credit card and put all your spending on it. This way, you’ll get money back every time you spend and can make £100s over the year with no hassle.

Yet it is crucial you set up a direct debit to pay it off in full each month, so you’re not charged a penny. Otherwise, interest costs will dwarf the amount of cashback you get. To find the best cards, go to www.moneysavingexpert.com/cashbackCC.

Also use cashback websites, such as Topcashback, Quidco, or Cashbackkings, to get money back on internet purchases. Though always find the best price first, and then look for cashback, rather than being led by the cashback.

8. DON’T put your pedal to the metal
Think of your car’s accelerator as a money pump. The harder you press it, the more you spend. By keeping the rev lower, speeding up gradually and thinking about road positioning, most people can lower petrol costs by a staggering 20 to 50 per cent.

Just try it for one tank of petrol to see the impact. Surprisingly, it adds very little to journey times, as often we simply accelerate only to brake again a minute later.

9. Try to get paid to have home and car insurance
Never simply auto-renew your car insurance. Outrageously, if you apply to your SAME insurance firm, as a new customer, you often get the deal for a fraction of the cost.

As they don’t reward your loyalty, why be loyal at all? Many people save hundreds in minutes by using a comparison sites like confused.com or moneysupermarket. Yet no one site covers enough companies to give you a fair comparison. It’s all about using the right sites in the right combination.

After that, try cashback sites to get a really big kickback from your chosen insurer. This can have a massive impact: many people who follow the system fully have been PAID to get home insurance; literally the cashback earned is bigger than the insurance cost: the record is being paid £54. For full details go to www.moneysavingexpert.com/insurance

10. I resolve to… prepare for next Christmas NOW
Buy your cheap wrapping paper, cards and even Chanucah presents right now, while they’re cheap. Plus, remember, Christmas costs an average £600 per family. To try and pay this out of one month’s salary is a nightmare. Put aside £50 a month and you’ll have the money ready without any risk of borrowing.

    Last updated: 6:32pm, January 8 2009