Following our action plan for 2012 could end up saving you lots of cash says John Cradden
New year resolutions usually come and go but you can get your finances off to a positive start in 2012 by sticking with our 10-point action plan.
Protect your savings
As the eurozone crisis rumbles on, savers are understandably worried about the risks to their money in the event of either a euro collapse or Ireland’s departure from the single currency.
Peter Tompkins of My Financial Window, a money coach, urges savers to take precautions. “A sensible saver will look at the risks and make an informed decision,” he said.
Tompkins recommends contingency plans such as moving savings from the euro to other currencies. You need to be careful, though, because the value of your savings would suffer if you switched them to sterling or dollars and these currencies fell against the euro.
“Opening a multi-currency account with your bank is a good starting point,” he said. “You don’t need to rush into taking on currency risk, but you need to have the accounts open and in place should the time arrive to make a phone call and do a foreign exchange deal to reduce your risk from holding euros in an Irish bank account.”
Switch energy providers
Electricity and gas bills increased by as much as 20% from last autumn and will rise again in May when higher carbon taxes are imposed. Switching is easy, requiring only a current meter reading and registration number.
Simon Moynihan of Bonkers.ie, a price comparison site, said: “There are four suppliers and dozens of tariffs. Switching can net substantial savings, especially for those who have never switched before or who are coming off first-year introductory discounts.”
Electric Ireland, Airtricity and Bord Gais supply electricity and gas although Bord Gais’s gas tariff is not competitive because its prices are regulated to give competitors a chance of breaking its dominance. Flogas supplies gas only.
According to Bonkers.ie, an average household could save €160 a year, or €13 a month, by switching from Electric Ireland’s standard rates to the best deals available. For gas, the difference between the Bord Gais standard and and the cheapest deal is nearly €10 a month.
Free banking used to be the norm but, as competition disappears banks are making it harder to qualify.
”Requirements for free banking may involve doing multiple transactions online to keeping a minimum balance of €3,000 at all times said Moynihan. “It’s hardly surprising that a standard current account customer is forking out about €86 per year in fees and charges.”
Moving banks is easier since the Central Bank introduced a switching code which standardizes the process and requires that banks help switch your direct debits and payments. This ensures that payments are not missed or rejected during the changeover to a new bank.
”Of the big Irish banks, AIB has the lowest fee for a standard current account at €4.50 per quarter, and it has the fewest hurdles for free banking,” says Moynihan. “The only bank that really has a fee-free current account is Ulster Bank.”
Switch credit cards
Prepaid cards are becoming more popular because it is getting more difficult to qualify for a ctredit card.
Moynihan said: “We heard from so many customers that couldn’t get regular credit cards that we launched a prepay Visa and Mastercard comparison, which is proviing to be one of our most popular product comparisons.”
If you have a balance on your ctredit card, it is worth switching to an introductory offer that gives a low or even a 0 per cent interest rate for a number of months.
Lock in the best rates
State savings from An Post offer tax-free returns, a valuable benefit after deposit interest retention tax (Dirt) was recently increased to 30 per cent on other forms of saving. You must lock up your savings for at least three years, though, to get the headline rate of return. The money forms part of the national debt and could be at risk if Ireland were to default.
Liam Ferguson of Ferguson and Associates, an advisor, said: “The increase in Dirt makes the tax-free state savings more attractive relative to comparable fixed-rate bank deposits.”
He advises making sure that yo can commit your savings for the long terms to make the most of the returns on offer.
“While you can access your savings at any time, if you cash in early you get a far less attractive return,” Ferguson said.
Savings bonds pay 10 per cent tax-free after three years and savings certificates pay 21 per cent tax-free after five years and six months. The National Solidarity Bond offers a choice – 15 per cent after four years or 50 per cent after 10 years. Some of this return is liable for Dirt.
Use new technologies
Many of us received smart-phones for Christmas, so it’s worth finding out about mobile apps that can help you manage your money.
Ulster Bank and National Irish Bank have app features that show your balance and recent transactions. They also send text alerts if your balance drops below a certain level.
Jim Ryan, the head of branch banking, private and financial planning at Ulster Bank said: “Helpful technology like this could save you unnecessary fees and charges in the long run.”
Seek safe havens
Gold has many detractors but it is likely to consolidate its reputation as a safe haven.
Mark O’Byrne of Goldcore, a bullion dealer said: “Gold is a proven safe haven and one of the few assets to have protected people in recent years and again in 2011.”
He warned that no more than 20 per cent of your portfolio should be invested in gold. “Research shows that an allocation of 5 – 10 per cent to gold protects in periods of inflation, stagflation and deflation.”
Even if you don’t have a lump sum to invest, you can now open regular saving accounts in gold.
Review home insurance
Falling building costs mean that you could be over insured. According to the Society of Chartered Surveyors, rebuild costs fell by an average of 4 per cent in 2011 and by almost 10 per cent for three-bedroom, semi-detached properties, the most common house type.
Many homeowners may be under-insured when in comes to contents, because they assume incorrectly that items are included in the cover for buildings. Brian McNelis, the director or general services at the Irish Brokers Association, said: “A good rule of thumb as to what constitutes contents is that if you were to turn your house upside down, whatever would fall out is considered contents.