January is the perfect time for giving your finances a New Year makeover, but where exactly should you start? Moneywise takes a look at different ways you can help get your finances under control for the year ahead
From organising your finances to switching banks, here are some proactive ways to make sure you are on top of your finances in 2019.
First of all, you want to get organised. Get on top of everything and make sure you know exactly what is coming in and going out.
By starting a spending diary, you can see exactly where your money is going.
Once you have identified all of your outgoings you can then draw up a budget and spot places where you may be able to cut back. Also, set a reminder in your diary for some time each month to review your finances so that you stay in control.
Research from Citizens Advice suggests that people are spending an average of £160 every three months on services they don’t use, so go through your bank statements and check all your direct debits.
It can be easy to lose track of them and you could be paying for things that you don’t use such as gym membership or credit rating subscriptions.
Save money and cut costs
There are plenty of things you can do to help yourself save money. Set yourself an achievable target and then stick to it.
Think about habits that you could change to help you shave off a few pounds here and there – for example, brands that you buy when there are cheaper alternatives or eating out when you could bring something from home if you planned ahead.
If you are looking to make some savings, you can also go to a website such as MySupermarket.co.uk, which can help you compare the prices between supermarkets.
You can also save money on fuel by shopping around for the best price. One way you can find out the cheapest prices locally is to enter your postcode at PetrolPrices.com. However, make sure that you’re not spending more by driving further to get cheaper prices.
Get pension savvy
While auto-enrolment means almost everyone with an employer automatically gets a pension now, around 15 million people still do not have one.
If you have opted out or are self-employed and don’t have a pension, now is a good time to start thinking about getting one. If not, you could end up having to rely on just the state pension when you are older.
If you have already got a pension, you might want to consider paying in more to boost your retirement income.
You also might want to track down your old pensions if you changed jobs. One way of doing this is by contacting your old employers.
For people who lose track of their pensions, the government provides a free online pensions service that allows you to search for lost workplace pensions. To use it, all you need is the name of an employer or a pension provider. Visit Gov.uk/find-pension-contact-details.
Alternatively, you can contact the Pension Tracing Service by post or via your former employer.
When you have tracked down all your funds, you may want to consider combining your pensions into a single plan if it makes them easier to manage and reduces fees.
Remortgaging can save you hundreds of pounds every year if you have slipped on to your lender’s standard variable rate.
The most common time that people remortgage is when their fixed introductory tracker or discounted rate mortgage ends.
Another reason you might want to remortgage is to protect yourself from interest rate rises.
The Bank of England has raised interest rates twice in the past 12 months, going up to 0.75% in August.
It has hinted that it could raise interest rates if the UK manages a smooth exit from the European Union, with its latest forecasts suggesting rates could rise to 1.5% over the next three years.
While fixed-rate mortgages tend to be more expensive, they can provide you with security against a rate rise.
By fixing, you can keep your repayments the same so that any future rate changes won’t catch you off-guard.
Switch your energy supplier
Recent figures from Ofgem highlight how millions of households are still paying too much for their energy bills.
According to the regulator, 54% of households remain on poor-value default deals, meaning over 15 million people are paying hundreds of pounds more than they need to for energy.
Meanwhile, there is as much as a £352 difference in the cost between a dual-fuel standard variable tariff (SVT) and the cheapest available tariff if you get your energy from one of the Big Six.
Prices are also rising. British Gas customers have seen prices go up twice in the past year, taking the typical standard tariff bill to £1,205 a year. Eon, SSE, Npower, EDF, and Scottish Power have also introduced price rises.
Get on a comparison website such as uSwitch or GoCompare where you can compare energy providers and tariffs to find a better deal.
According to energy switching rules, anyone on a fixed-term tariff has a right to switch to a new deal without paying exit fees when there are 49 or less days before the fixed-term ends.
Millions are still paying too much for their energy bills
Loyal customers don’t necessarily get the best deals. Research from Citizens Advice has found that consumers who remain loyal to companies that provide broadband, home insurance, mortgages, and mobile phone contracts are being ripped off by up to nearly £1,000 a year.
The so-called loyalty penalty occurs when customers of a business pay higher costs year on year for staying with the same product, while new customers of the same business pay significantly less.
Whether it is energy, insurance, broadband or your mortgage, shopping around can help you find the best deal out there.
If you are coming up to the end of your contract, check out the prices of rivals online. Alternatively, you can contact your provider to try to negotiate a better deal than the one you currently have.
Change your bank account
With interest rates so low at the moment switching to a new account could give you a much-needed cash boost.
Switching banks has never been easier, with the process taking no more than seven days.
If you are looking for a higher interest rate, the Nationwide FlexDirect account pays 5% interest on balances up to £2,500, which drops to 1% after one year. The overdraft is free for the first year, but you will also need to pay in at least £1,000 a month.
The TSB Classic Plus also pays 5% AER on balances up to £1,500. To earn interest on this you will have pay a minimum of £500 a month.
There are also plenty of incentives from banks. The First Direct 1st Account offers you the choice of a £150 Expedia voucher, an Amazon Echo Spot or an online development course. To qualify, you must deposit at least £1,000 in the first three months. It will pay another £100 if you are unhappy with the bank and leave after the first six months.
With the M&S Bank Current Account, you will get a £125 voucher, plus a £5 voucher each month for a year, as long as you pay in at least £1,250 a month. The deal is also available on the £10-a-month M&S Bank Premium Current Account.
Reduce your debt
It is easy to fall behind with your finances in January after overspending during the Christmas period.
National Debtline, run by the Money Advice Trust, is expecting demand for debt advice to rise significantly in the New Year.
Laura Mostaghimi, money adviser at National Debtline, says: “At Christmas time people can feel pressured to spend more money, which can cause worry and have an impact on their longer-term finances. January is often a very busy month at National Debtline, as many people try to deal with the effect of festive spending.”
Some debts are more important to deal with than others, so make sure you prioritise those first.
Although credit card interest might be higher than your mortgage, missing mortgage payments can have more serious consequences as you could lose your home.
Credit card debt can be expensive, so it makes sense to pay this off as quickly as possible.
Balance transfer cards allow you to consolidate all your debt in one manageable payment. Transferring over to a credit card that offers 0% interest on purchases can make debt repayments easier. Some of the best deals will allow you to borrow for more than two years, giving you extra breathing space to pay off your debt.
If you are worried about debt you should seek help from a debt advice charity such as Citizens Advice or National Debtline.
Ms Mostaghimi says: “Setting a budget is often the first step to help you get on top of your finances. Knowing how much you have coming in every month and what you need to spend helps you work out the best way to deal with your debts.
“I would also encourage anyone struggling to make ends meet to seek free-debt advice as soon as possible from an organisation such as National Debtline.
“By waiting longer to take action, debts can quickly grow and make a difficult situation worse.”