While all the talk right now – or at least most of it – is focused on Christmas and how to find the perfect present, cook the perfect turkey and watch the perfect Christmas movie, the curtain will come down on the festivities soon enough. And then the financial hangovers (and all the other ones) will kick in.
Talk will shift to a new year and a new you and all the resolutions that we will make – and inevitably break – before the first larks of spring have sung.
But we are here to talk money.
So too is Nick Charalambous, managing director at Alpha Wealth. He reckons the post-Christmas period is “a great time to reset your finances and take stock. Think of your financial plan as a roadmap, understanding what’s coming in, what’s going out and where you can improve.”
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The first thing many people will have to tackle is debt and the trick, he says, is to “focus first on paying down high-interest debt”. “The faster you reduce debt, the sooner you regain financial control.”
Once debt is tackled – or at least once that process starts – it will be time to manage your savings better. That is something the Irish are not great at: we have more than €160 billion resting in accounts earning little or no interest right now.
Charalambous says people would do well to explore online banks like Raisin, Trade Republic or Bunq, which offer rates above 2 per cent, even on demand deposits. “Also by availing of term deposits over six, 12 or 24 months, you can get enhanced rates,” he says.
Another thing many people overlook is their mortgage rate.
It is, he says, “one really big cost-saving... By checking first with your current provider [about] their lowest rates, and in some cases refixing, [it] can save you thousands of euro. If that fails, possibly switching your mortgage [to another provider] could make a massive difference.”
One reason many people are so reluctant to even consider doing this is because they think switching mortgage provider will be as hard as getting the mortgage in the first place. It won’t be. Contacting a broker is the first step. The call won’t cost you a bean but it might save you a mountain of them.
Finally, Charalambous suggests, “consider boosting your pension contributions. Even small increases can have a big impact over time, especially with compound growth, where your interest earns more interest. Plus, pension contributions attract up to 40 per cent tax relief, making them one of the most efficient ways to save.”
So what else can we do to help us have a wealthier new year?
Here are just five steps you might consider.
1. Personal audit: Carry out an audit of yourself. Write down all your income and then tot up all your outgoings and see where you stand.
Once you have done that, go through your bank statements and pinpoint all the subscriptions you have for gyms and streaming services and podcasts and all the rest. Ask yourself some hard questions: how much do you use them all and what value do you actually place on them? Even cancelling a couple of subscriptions or memberships can save you a few hundred euro a year. And it comes with the added bonus of financial empowerment.
2. Switching: Resolve to have at least one switching day before the end of March. Despite the fact that there are hundreds of euro on the table for people who routinely change their utility provider, fewer than 30 per cent of people ever shop around for better value.
By switching from a gas or electricity provider charging the standard rate to one offering a discounted rate, you could save at least €300 over the next 12 months. And if making the calls sounds like too much hassle, you can use the likes of bonkers.ie and switcher.ie to do a decent chunk of the work for you.
3. Health cover: Many hundreds of thousands of people with health insurance will see their policies come up for renewal in the weeks ahead and it is likely that well over half of them will end up wasting money because they don’t shop around and ask the right questions of their providers.
Anyone who has been on the same policy for three years and who stays put will probably end up paying about 25 per cent more than they need to over the next 12 months.
Before renewal, phone your provider and simply ask them: do you have a lower cost equivalent plan to what I have that’s similar and I am happy to take on some minor reductions, depending on the savings?
When you get some options phone the other providers and make comparisons and use the Health Insurance Authority website to do the same thing. It might take a bit of effort but it could save a family as much as a grand a year.
4. Be more tax efficient: A few budgets back, the then minister for finance Michael McGrath unveiled a mortgage interest relief that is worth as much as €1,250 a year to people who had seen their loan repayments climb dramatically as a result of 10 successive interest hikes from the European Central Bank. More than 200,000 people could have benefited from the scheme but a significant percentage have yet to do anything about it.
It is the same with other tax credits and reliefs, including medical and dental expense relief, rent tax credit, remote working relief, marriage relief, third level tuition fees relief and flat rate expenses.
5. Savings: There are a great many people out there who are living from pay cheque to pay cheque but, even when things are tight, it’s important to set aside some money for yourself. How much will depend on your income obviously, but do whatever it takes to pay yourself something each month.
It might only amount to €10 a week, but if you could set aside even that amount and put it into a not-readily-accessible account, you’d be that little bit better off at the end of next year than you are now.
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.
