Square up to your finances in 2011
by Ben Salisbury
A new year brings with it the opportunity to look at your finances with a fresh pair of eyes and renewed determination to get financially squared up in 2011.
Many of us will have overspent during the holiday period, and January is when we take stock and formulate a cunning plan to square our finances.
The message behind many government announcements since the coalition came to power is to prepare for a tough 2011. That is all very well, but just because we have been warned does not make dealing with a reduction in take-home pay in real terms for many people any easier to deal with. This is especially true when bills, petrol and food prices are rising.
So, who do hard-pressed consumers need to square up to in 2011?
Utility suppliers
If you have not switched your gas and electricity supplier for a year or more, it is very likely that you can save over £100 this year by doing so. Energy prices have gone up in December for most people and the harsh winter so far means most of us are using more energy and can expect hefty bills.
Ideally you should analyse your bills for the last 12 months and work out exactly how many units of gas and electricity you have used and at what rate. If you do this, it makes it much easier to use comparison sites to check for a better deal.
Failing that, give your existing supplier a call and try and get on a cheaper tariff. Generally a paperless, web-based tariff will save you at least five per cent and if you pay by direct debit (DD), you will shave off a few more pounds from the cost. By changing to DD billing and an internet tariff you will cut nearly ten per cent from your bill without even cutting down on the power you use.
VAT
The last few weeks have heralded a clarion call from retailers for consumers to 'beat the VAT rise'. If you were already planning on making a big-ticket purchase, then it would have made good sense to get the payment in before VAT increased from 17.5 to 20 per cent, but it doesn't ever make good sense to buy something you don't really need just to save money.
So how can you square up to the challenge of increased VAT? Well, to start with it pays to know which of your purchases have VAT added to them. Most food items, children's clothes and newspapers and magazines are exempt from VAT, so you won't need to worry about the added cost when you buy these products. Take a look at this basic guide to VAT published on the directgov website.
Insurance costs
Insurance is an area that all of us need to get to grips with because the costs have risen faster than any other personal finance area in the last two years. There are a number of reasons for this, the most significant of which are an increase in fraudulent claims and the fact that insurers make a loss of 17 pence for every pound received in car insurance premiums.
To keep the costs as low as possible for all types of insurance you need to make sure that you compare several different providers of the same type of cover to find the cheapest. Don't over-insure yourself as you will pay a higher premium for no extra benefit. Increasing the excess on your insurance policy can result in lower premiums.
Finally, argue, haggle or beg with your insurance company to reduce the premium. It is surprising what a bit of pleading can do!
Pension provision
This is another area of personal finance that is about to undergo major changes as NEST is being introduced. People in the UK are living longer which means the UK's pension pots have to pay out more for longer. Naturally, this means more money needs to be put in the pot, both as a nation and individually.
That is why the government has passed legislation to increase the age at which individuals can draw on the state pension from 2020, by six years for women, from 60 to 66, and one year for men, from 65 to 66. This is a logical consequence of a change in demographics. Don't rule out further increases either.
So, to square up provision for your retirement, you need to take control and start putting some money into a pension. If you are employed try and take any benefit you can from your employer. If they will pay in five per cent of your salary if you match it, then match it. It is a small price to pay to get an extra benefit from your employer and the money should grow in value until your retirement.
Credit cards
If you have a credit card, make it your goal in 2011 to avoid paying any interest on the debt. To do this you may need to apply for a new balance transfer credit card. Choose one that gives you the longest interest free period so that you have longer to pay back the debt without incurring any interest.
Make a budget that divides the amount you owe by the number of interest free months you have to pay off the debt. Once you have calculated the monthly figure you need to repay to the credit card company each month, stick to it and pay off the balance before you have to start paying any interest.
So, don't take the harsh 2011 economic climate lying down. There are things you can do to keep the costs down and if there are lots of issues on your personal finance to-do list, now is the time to do them. Use myfinances.co.uk to help you stick to your financial New Year's resolution list and square up your finances.
Use the myfinances.co.uk comparison site to find the best deal on all financial products.
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