With the wrapping paper tidied away and the final leftovers from Christmas dinner eaten, thoughts turn to fresh beginnings. There are books to read, marathons to run, courses to take and holidays to organise. All may feature on your list of best intentions for 2019 – along with sorting out your finances. Even though the hangover from Christmas spending may not have cleared, the new year gives an opportunity to ensure you are not paying over the odds for services and that you are getting the best value from your energy provider, are on the best savings rates and are making technology work for you.
So, as 1 January approaches, here is our guide to making sure 2019 is the year you bring your personal finances under control.
Do your tax return
First, the boring but important stuff. The end of January marks the deadline for filing your tax return and if you are late you run the risk of fines. Last year, more than 10.6 million people filed returns on time – more than nine out of 10 of those who were due to – but thousands did not. Although there is always a rush of people doing so at the last minute – 30,000 in the final hour last year, said HM Revenue and Customs – it is best to get the job out of the way in advance to avoid both penalties and stress.
There was little for savers to be happy about in the last decade. Even though the Bank of England raised interest rates for only the second time in 10 years in August, lenders were very slow to pass on the increase to consumers. There is value to be found, however. As ever, the rule is to look hard. For example, while HSBC’s Flexible Saver account offers just 0.15% – which means that if you invest £10,000 you will earn £15 a year – the newly launched Marcus by Goldman Sachs is paying 1.5% on its easy-access Online Saver Account, providing interest of £150 gross over the next 12 months – 10 times more than HSBC. Typically, the high street is not the place to go to get good rates. Fortune favours those prepared to wait, with better rates available to those willing to give a notice period to withdraw. With good rates can come limits and restrictions, such as a minimum amount having to be paid in each month.
Look at your debts
Paying off debt is one of the most frequent ambitions for the new year. Avoiding getting into more debt should be added to that plan. Be aware of how you spend money and reflective of your situation at any one time. Using credit cards for essentials such as groceries is a warning sign that something is not right. Stick to the golden rule of borrowing: don’t go into debt for something that will last for less time than the amount borrowed takes to pay back. In order to deal with credit card debt, try to pay more than the minimum. If you feel you are in trouble, reach for help from organisations such as National Debtline, Citizens Advice, the Debt Advice Foundation, StepChange and PayPlan. Do it sooner rather than later – many wait too long and their situation worsens.
Have the energy to switch
Consumers have long been told that they should switch energy providers, but complaints frequently emerge that the process is more hassle than it is worth. New life has been given to changing this year with a series of companies, dubbed flipping services, that will do it for you automatically, sometimes free and sometimes with a charge. The largest of the new players is Look After My Bills, first featured on Dragons’ Den and launched in January. Flipper was the first of the services, while Migrate and Weflip were launched recently and Labrador has also been building a customer base. Some operate on commission, while other charge a flat fee to households. Consumers should still check whether they can make better savings by themselves before signing up.
Keep your bills mobile
Mobile phone bills are an area where consumers frequently pay over the odds without their knowledge. Research suggests that many are charged for their phone after their contract ends, even though they then own their phone. Set a reminder for when your contract is up and then get the best sim-only deal on the market for your needs. Keep a close eye on how much data you use and don’t be attracted by deals offering enormous amounts that you do not need. Beware of bundled deals – where the phone and the plan come together – as most result in more being paid for the phone than if it is bought outright. In these deals, consumers are in effect taking a loan from the network in order to pay off the device. Buying a new phone outright – if you are sure you need one – is usually the best idea, but not everyone has the money to do so. For those who can get one, an option is an interest-free credit card, setting up a direct debit to pay it off each month. The minimum monthly payments have to be made to ensure interest charges do not kick in.
Use technology to help
With the rapid movement of personal banking via smartphones, particularly among younger consumers, has come a raft of new tools to help organise spending. The newly launched N26 app offers transactions, sub-accounts to organise money, and the ability to instantly lock your card if you lose it. Monzo helps set budgets and gives instant notifications as well as typical banking functions such as setting up direct debits and standing orders. Starling Bank also gives real-time notifications and the ability to split bills, and lock and unlock your card. The apps are particularly popular with people used to carrying out everyday tasks on their phone, but older people, more familiar with using (rapidly disappearing) high street banks, may be more sceptical.
Check your mortgage health
Anyone wanting to make their money work for them and frustrated by the rock-bottom rates being offered on the high street could look at paying more off their mortgage – if it works for them. Many lenders will allow overpayment – usually amounting to 10% of the loan – and after that there could be an early repayment charge. Early repayment means savings on interest and could beat any returns from putting the cash into a high street bank. Santander estimates a £10 per month overpayment on a £200,000 mortgage could result in savings of £1,146 in interest. However, people are advised to clear other existing high interest debts, such as credit cards, before looking at their mortgage.
Beware of broadband
It is estimated that more than 10 million people are on broadband deals in which there is a price increase at the end, but many do not switch providers as there is a lot of “friction” in moving from one provider to another. The service is often tied up with a TV deal. Most providers do not remind people when their contract is up, so they do not move when the minimum time is up. The comparison site Ctrlio suggests you can save between £180 and £200 a year by switching and that there are good deals if you break up TV and broadband packages, looking for deals on each service individually. There are also incentives offered to switch, such as Amazon vouchers and cashback, for those who do not have “stickiness” holding them on to a provider.
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